Child Benefit Fund - OD[1]

8/7/2019 Child Benefit Fund - OD[1]

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OFFER DOCUMENT

(An Open Ended Balanced Scheme)

The terms of this Offering have been prepared in accordance with the Securities & Exchange Board of India (Mutual Funds) Regulations, 1996 as amended from time to time including by way

of Circulars, Press Releases, or Notifications issued by the Securities & Exchange Board of India (SEBI) or the Government of India to regulate the activities and growth of mutual funds. This

Offering Circular has been filed with SEBI. The Units being offered for public subscription have not been approved or disapproved by SEBI. Further, SEBI has not certified the accuracy or the

adequacy of the Offering Circular. Any changes made to this Offer Document are subject to approval by the Trustees/SEBI/ Unitholders, as may be required.

This Offer Document sets forth concisely, necessary information about the Scheme(s) for a prospective investor to make an informed investment decision in the Scheme(s) described herein.

Investor should carefully read the Offer Document prior to making a decision to invest in the Scheme and retain the Offer Document for future reference. No person has been authorized to give

any information or to make any representations not confirmed in this Offer Document in connection with the offer or the issue of units, and any information or representations not contained

herein must not be relied upon as having been authorized by the Mutual Fund or the AMC.

All Schemes are open-ended Schemes. This Offer Document is dated December 13, 2004. The Offer Document shall be fully revised and updated atleast once in two years. Till the time the

Offer Document is revised and reprinted, an addendum giving details of each of the changes shall be attached to the Offer Document. The addendum shall be circulated to all the distributors/

brokers so that the same can be attached to all Offer Documents already in stock. The addendum shall also be sent to the existing unitholders.

In this Offer Document, all references to “dollars” or “$” refers to United States dollars, and “Rs” refers to Indian Rupees. A “crore” means “ten million” and a “lakh” means a

“hundred thousand”.

[Offer of units at NAV based prices on continuous basis]

Principal Mutual Fund: Apeejay House, 5th floor, 3 Dinshaw Vachha Road, Churchgate, Mumbai 400 020 , India.

Sponsor: Principal Financial Services Inc., USA

Trustee: Principal Trustee Company Private Limited

Investment Manager: Principal Asset Management Company Private Limited

Apeejay House, 5th floor, 3 Dinshaw Vachha Road, Churchgate, Mumbai 400 020 , India. Tel.: 2204 4988. Fax: 2204 4990

PRINCIPAL

Child Benefit Fund

CMYK

CMYK



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PRINCIPAL MUTUAL FUND

Apeejay House, 5th Floor, 3 Dinshaw Vachha Road, Churchgate, Mumbai 400 020, India.

Phone: + 91 22 2204 4988 Fax: + 91 22 2204 4990.E mail: [email protected] Website: www.principalindia.com

SPONSORS

Principal Financial Services Inc.

(acting through its wholly owned subsidiary Principal Financial Group (Mauritius) Limited)

711 High Street, Des Moines,

Iowa, 50392-0200, USA

CO-SETTLORS

Principal Financial Group (Mauritius) Limited

10, Frere Felix de Valois Street,

Port Louis, Mauritius

Punjab National Bank

7 Bhikhaiji Cama Place, New Delhi

Vijaya Bank

41/2 Mahatma Gandhi Road, Bangalore.

TRUSTEE

Principal Trustee Company Private Limited

Apeejay House, 5th Floor, 3 Dinshaw Vachha Road, Churchgate, Mumbai-400 020, India.

INVESTMENT MANAGER

Principal Asset Management Company Private Limited

Apeejay House, 5th Floor, 3 Dinshaw Vachha Road, Churchgate, Mumbai-400 020, India.

REGISTRAR AND TRANSFER AGENT

Karvy Computershare Private Limited21, Avenue 4, Street No. 1, Banjara Hills, Hyderabad-500 034.

CUSTODIAN

Citi Bank N.A.

Ramnord House,

77 Dr. Annie Besant Road, Worli, Mumbai-400 018.

AUDITORS

Haribhakti and Co., Chartered Accountants

42 Free Press House, 4th Floor,

215 Nariman Point, Mumbai-400 021.

LEGAL ADVISORS

CRAWFORD BAYLEY & CO.,

4th Floor, State Bank of India Bldg.,

Fort, Mumbai-400 023.



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I. Highlights .....................................................................................3

II. Risk Factors .................................................................................. 3

III. Special Considerations ................................................................ 4

IV. Due Diligence Certificate ............................................................6

V. Abbreviations & Definitions ....................................................... 6

VI. Scheme Features .......................................................................... 7

VII. Constitution of the Mutual Fund................................................ 9

The Fund ........................................................................................ 9

The Sponsors ................................................................................. 9

Principal Financial Services, Inc. ......................................... 9

The Co-Settlors .............................................................................. 9

Trustee of Principal Mutual Fund ............................................... 10

Directors of Trustee Company ............................................ 10

Duties and Responsibilities of Trustees ............................... 11

Unitholders Consent......................................... ................... 12

Trusteeship Fees .......................................................................... 12

VIII Management of the Fund .......................................................... 12

Investment Manager – PrincipalAsset Management Company Private Limited ............................ 12

Share holding pattern of Principal

Asset Management Co.Private Ltd. ..................................... 12

Investment Management Fees ............................................. 18

Duties and Responsibilities of AMC .................................... 12

Board of Directors ............................................................... 13

Key Personnel and Their Relevant Experience ................... 13

Custodian ..................................................................................... 14

Registrar & Transfer Agent .......................................................... 14

Statutory Auditors ........................................................................ 14

IX. Investment Policy and Strategy ................................................14

Investment Policies ...................................................................... 14

Investment Strategies ................................................................... 15

Investment Process ...................................................................... 15

Investment Limitations ................................................................ 15

Depository ................................................................................... 16

Underwriting ................................................................................ 16

Policy and Special Consideration on Investment inDerivative and Hedging Products ................................................ 16

Investment by AMC ..................................................................... 17

Investment by the Fund ............................................................... 17

Portfolio Turnover Rate ............................................................... 17

Inter Fund Transfers ..................................................................... 18

Borrowing by the Mutual Fund ................................................... 18

Stock Lending by the Mutual Fund ............................................. 18

Investment in Overseas Financial Assets ..................................... 18

X. Transacting in the Units of Child Benefit Fund ...................... 18

The Offer ..................................................................................... 18

Investment Options ...................................................................... 19

Investment Plans .......................................................................... 19

Flexible Target Period .................................................................. 19

Continuation in the Scheme ......................................................... 19

Unitholder’s Specimen Signature ................................................ 19

Minimum Application Amount .................................................... 19

Minuimum Repurchase Amount .................................................. 19

Special Benefit: Life Risk Cover to Applicantunder Future Guard Plan under .................................................... 19

Both Options ................................................................................ 19

Limit of Insurance Cover ...................................... .............. 20

Exclusion Clauses ............................................................... 20

Assignee for Insurance ........................................................ 20

Who Can Subscribe ..................................................................... 21

How to Subscribe ......................................................................... 21

Subscription by Residents ......................... .......................... 21

Subscription by NRIs ........................................................... 21

Mode of Payment on Repatriation basis ............................. 22

Mode of Payment on Non-Repatriation basis ..................... 22

Rejection of applications ..................................................... 22

Unitholder’s Bank Account Details ............................................. 22

Unitholder’s Permanent Account Number (PAN) ....................... 22

Documents to be Submitted ......................................................... 22

Sale of Units on Ongoing Basis ................................................... 22

Ongoing Sale Price ......................................... .................... 22

Allotment & Account Statement .................................................. 23

Allotment ............................................................................. 23

Account Number .................................................................. 23

Common Account Number .................................................. 23

Account Statement .................... ........................................... 23

Unit Certificates .................................................................. 23

Refunds ................................................................................ 23

Units with Depository .................................................................. 23

Rematerialisation of Demat Units ............................................... 23

Dematerialisation of Existing Physical Units .............................. 23

Systematic Investment Plan (SIP) ............................................... 23

Systematic Investment Plan (SIP) for

Corporate Employees .......................................................... 23

Switch Facility ............................................................................. 24

Gift Facility .................................................................................. 24

Mode of Holding ......................................................................... 24

TABLE OF CONTENTS



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Nomination Facility ..................................................................... 24

Appointment of Beneficiary ........................................................ 25

Pledge of Units ............................................................................ 25

Listing .......................................................................................... 25

Transfer ........................................................................................ 25

Repurchase of Units ..................................................................... 26

Repurchase Procedure ........................................................ 26

Repurchase Price ............................................................ .... 26

Repurchase by NRI’s/FII’s ................................................... 26

Payment of Repurchase Proceeds ....................................... 26

Electronic Credit Clearing Services (ECS) ......................... 26

Systematic Withdrawal/Switch Plan(S)/(SWP)/(SSP)................. 27

Closure of Unitholder’s Account ................................................. 27

Right to Limit Repurchases ......................................................... 27

Possible Deferral of Redemption/Repurchase Request ............... 27

Suspension of Sale/Repurchase/Switching Optionsof The Units ................................................................................. 27

Suspension of Sale/Repurchase of Demat Units .................. 28

Issue of Bonus Units .................................................................... 28

Split in the Face Value of Units ................................................... 28

XI. Sale and Repurchase of Demat Units throughDesignated Stock Exchanges ..................................................... 28

Procedure for Purchase of Demat UnitsOver the Stock Exchange(s) ........................................................ 28

Purchase of Demat Units by Investors ................................ 28

Sale Price of Demat Units by Investors .............................. 28

Allotment of Demat Units .................................................... 28

Procedure for Repurchase of Demat Units .................................. 29

Minimum Amount/Units for Repurchase of Demat Units ........................................................................ 29

Repurchase of Demat Units ................................................. 29

Repurchase Price of Demat Units .............................. ......... 29

Payment of Repurchase Proceeds ....................................... 29

Other Information ............................................................... 29

XII. Valuation Policy and Determination of Net Asset Value (NAV) ............................................................... 29

Traded Securities ......................................................................... 29

Thinly Traded Securities .............................................................. 29

Non Traded Securities .................................................................. 29

Valuation of Non-Traded/Thinly Traded Securities ..................... 29

Valuation of Unlisted Equity Shares ............................................ 31

Valuation of Rights ...................................................................... 32

Expense and Income Accrual ...................................................... 32

Changes in the Securities and Units ............................................ 32

Determination of NAV ................................................................. 32

Determination of NAV for Demat Units .............................. 32

Accounting Policies and Standards.............................................. 32

XIII. Loads, Expenses and Fees ......................................................... 34

Load ............................................................................................. 34

Right of Accumulation ................................................................. 34

Expenses ...................................................................................... 34

Initial Issue Expenses .......................................................... 34

Annual Recurring Expense.................................................. 35

XIV. Unitholders’ Rights and Services ............................................. 35

Fundamental Attributes ................................................................ 35

Rights of Unitholders ................................................................... 35

Dividends and Distributions ........................................................ 35

Voting Rights of the Unitholders ................................................. 36

Disclosures ................................................................................... 36

NAV Information ......................................................................... 36

Financial Results .......................................................................... 36

Portfolio Disclosure ..................................................................... 36

Unclaimed Distribution Amount .................................................. 36

Scheme Amendments/Load Structure.......................................... 36

Duration of the Scheme and of Winding Up ............................... 36

Effect of Winding Up ........................................................... 36

Procedure And Manner of Winding Up ............................... 36

Services to Unitholders ................................................................ 37

Investor Services ................................................................. 37

Facilitating Enquiries and Transactions ............................. 37

Telephone Transaction Services .................................................. 37

Signature Verification/Indemnity................................................. 37

Register of Unitholders ................................................................ 37

XV. Historical Information ............................................................... 38

Existing Schemes of the Mutual Fund ......................................... 38

Condensed Financial Information................................................ 39

Investor Complaints and Redressal ............................................. 48

Associate Transactions................................................................. 49

Borrowing by the Mutual Fund ................................................... 51

XVI. Tax Treatment of Investments in Mutual Funds.....................51

XVII. General Information ..................................................................53

Utilisation of Services of Associates ........................................... 53

Scheme Rights and Additions/Amendments to the Scheme ........ 53

Power to Remove Difficulties ..................................................... 53

Power to Make Rules ................................................................... 53

Documents for Inspection ............................................................ 53

Penalties and Pending Litigations ................................................ 53

Miscellaneous Clause .................................................................. 53



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I. HIGHLIGHTS

Sponsor and Settlors

The Mutual Fund is sponsored by Principal Financial Services Inc. USAthrough its wholly owned subsidiary, Principal Financial Group (Mauritius)Limited with Punjab National Bank and Vijaya Bank as its co-settlors.Principal Financial Services Inc. is a member of the Principal Financial Group– a leading provider of financial products and services globally to businessesand individuals including retirement and investment services, Mutual Funds,life and health insurance, annuities and mortgage banking. Established in1879, the Principal Financial Group has more than $152.10 billion in assetsunder management and serves over 15 million customers worldwide throughoperations in the United States, Asia, Australia, Europe and Latin America.

• Choice of One time investment under Future Guard or RecurringAnnual Investment under Career Builder

• Choice of target period of 7, 10 and 15 years for receiving lumpsumat the end of the chosen period

• Life Insurance Cover to first applicant under Future Guard.

Liquidity

• Anytime repurchase at NAV based prices – (with exit load before chosentarget period and without exit load after the chosen target period)

• Facility to move from/to other open ended Schemes of the Fund (withexit load before chosen target period and without exit load after the chosentarget period)

Transparency

• Announcement of NAV on all Business Days

• Portfolio disclosure semi-annual basis

Unitholder Service

• Repurchase proceeds paid by at-par cheques/demand drafts/pay orders

• Systematic Investment Plan (Future Guard for recurring annualinvestment and career builder is for one time lumpsum investment.) forplanned and regular investment

• Systematic Withdrawal Plan for planned and regular withdrawal afterexpiry of relevant target period

• Systematic Switching Plan for planned and regular shifting betweenvarious open ended Schemes within the Fund after expiry of relevanttarget period

• Trigger facility available after expiry of relevant target period

• Updated Account Statement ordinarily mailed within three Business Daysfor new financial transactions

• Investor Service Centres at major cities across the country

• Investment by NRIs /FIIs fully repatriable

• Facility for nomination after expiry of relevant target period.

II. RISK FACTORS

• Mutual Funds and Securities investments are subject to market risks andthere can be no assurance and no guarantee that the objectives of theMutual Fund will be achieved.

• As with any investment in securities, the NAV of the units issued underthe schemes can go up or down depending on the factors and forcesaffecting the capital markets.

• Past performance of the Sponsor /AMC/ Mutual Fund does not indicateor guarantee the future performance of the Schemes of the Mutual Fundand may not necessarily provide a basis of comparison with otherinvestments.

• Principal Child Benefit Fund is only name of the scheme and does not in

any manner indicate either the quality of the scheme, its future prospectsor the returns. Investors therefore are urged to study the terms of theoffer carefully and consult their Investment Advisor before they investin the Scheme.

• The Sponsor or any of its associates including co-settlors is notresponsible or liable for any loss or shortfall resulting from the operationsof the Scheme. The sponsor’s contribution towards the corpus of PrincipalMutual Fund is Rs 25 lakh .

• Investors in the Scheme are not being offered a guaranteed or assuredrate of return and the actual returns of an Investor will be based on theactual NAV which may go up or down depending on the marketconditions.

• The Fund proposes to invest in equity, fixed income and money marketsecurities. Trading volumes, settlement periods and transfer procedures

may restrict the liquidity of some of these investments. Differentsegments of the Indian financial markets have different settlement periods,and such periods may be extended significantly by unforeseencircumstances. The length of time for settlement may affect the schemein the event it has to meet an inordinately large number of redemption orof restructuring of the Scheme’s investment portfolio.

• The AMC has the right to limit repurchases, under certain circumstances.Please read the Section of the Offer Document titled “Right to LimitRepurchases”.

• Investments made by an unitholder in foreign currency in the Schemeare subject to the risk of fluctuation in the value of the Rupee.

• An unitholder may invest in the scheme and acquire a substantial portionof the scheme’s units. The repurchase of units by the unitholder mayhave an adverse impact on the units of the scheme, because the timing of such repurchase may impact the ability of other unitholders to repurchasetheir units.

• In case of Fixed Income Investment, changes in the prevailing rates of interest will likely affect the value of the Scheme’s holdings and thus thevalue of the Scheme’s Units. Increased rates of interest, which frequentlyaccompany inflation and /or a growing economy, are likely to have anegative effect on the value of the Units. The value of securities held bya Scheme generally will vary inversely with changes in prevailing interestrates.

• The Scheme may also invest in overseas financial assets. To the extentthat the assets of the Scheme will be invested in securities denominatedin foreign currencies, the Indian Rupee equivalent of the net assets,distributions and income may be adversely affected by changes in thevalue of respective foreign currencies relative to the Indian Rupee. Therepatriation of capital to India may also be hampered by changes in theregulations concerning exchange controls or political circumstances aswell as the application to it of other restrictions on investment.

• The capital gains arising on the transfer/redemption of units, when theBeneficiary is minor, shall be included in the income of the parent whosetotal income (excluding the income included under this section) is greater.

• The securities lending activity by the Scheme will have the inherentprobability of collateral value drastically falling in time of strongdownward market trends or due to it being comprised of tainted/forgedsecurities, resulting in inadequate value of collateral until such time asthat diminution in value is replenished by additional security. It is alsopossible that the borrowing party and/or the approved intermediary maysuddenly suffer severe business setback and become unable to honor itscommitments. This along with a simultaneous fall in value of collateralwould render potential loss to the Scheme.

• The Scheme may invest in derivative instruments which carry a high

risk return ratio. In case of investments in derivative instruments likeindex futures, the risk/reward would be the same as investments inportfolio of shares representing an index. However, there may be a costattached to buying an index future. Besides in case of IRS and FRA,there exists credit and market risks. Further there could be an element of settlement risk, which could be different from the risk in settling physicalshares and there is a risk attached since the Indian market for derivativeinstruments is untried and untested.

• Life risk cover to first applicant under Future Guard Plan is effectiveafter the payment of three recurring installment of the amount atleastequal to the amount of original investment made while opening theaccount. Amount of the insurance cover is restricted to Rs.50000/- perapplicant whether invested in the plan through one or more applicationfavouring one beneficiary or more beneficiaries. On demise of the firstapplicant after the payment of three recurring installment as mentionedabove, aggregate amount of balance outstanding annual installment(restricted to Rs.50,000/-) will be invested upfront in the scheme out of

the insurance proceeds. If aggregate amount of balance installment ismore than Rs.50000/-, only Rs.50000/- will be invested in the scheme.In case of investment in the Future Guard Plan by Applicant throughmore than one application favouring one or more beneficiary, aggregateamount of insurance proceeds (not exceeding Rs.50000/-) will beappropriated upfront in lieu of balance unpaid installment towards allthe applications in the ratio of aggregate outstanding installment underall applications/beneficiaries. In case of demise of first/sole applicantbefore the payment of third recurring installment, no life insurance coverwill be available.

• In case of non-payment of the annual subscription (of the amount atleastequal to the amount of original investment while opening the account inthe Future Guard Plan) for any year within the specified time schedulethe investor would no longer be covered under the insurance policy from/ for that year.



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• Investors /unitholders are also urged to read the detailed clause(s) titled“Special Considerations”.

• The demat Units being offered/sold/repurchased/redeemed through theMutual Fund Service System (MFSS) facility provided by National Stock Exchange of India Limited / NSCCL or any other system of DesignatedStock Exchange(s) have neither been approved/disapproved by NSEIL/ NSCCL and/or the Designated Stock Exchange/Designated ClearingCorporation nor has NSEIL/NSCCL and/or the Designated Stock Exchange/Designated Clearing Corporation certified the accuracy oradequacy of this Offer Document. NSEIL/NSCCL and/or the DesignatedStock Exchange/Designated Clearing Corporation does not provide anyassurance that the demat Units will continue to be offered/sold/

repurchased/redeemed on MFSS of NSEIL/NSCCL and/or on theDesignated Stock Exchange(s) in the future. The investment risk of thedemat Units offered/sold/ repurchased/redeemed through MFSS of NSEIL/NSCCL or through the Designated Stock Exchange/DesignatedClearing Corporation shall solely rest with the investor and the investorshall have no claim against NSEIL/NSCCL and/or the Designated Stock Exchange/Designated Clearing Corporation in respect thereof.

• A prospective investor purchasing/repurchasing/redeeming demat Units,which are offered /sold/repurchased/redeemed through MFSS of NSEIL/ NSCCL or through the Designated Stock Exchange/Designated ClearingCorporation shall be dealing with the concerned participants (Trading/ Clearing Member/Broker) and not with the representative of the Fund orNSEIL/NSCCL and/or the Designated Stock Exchange / DesignatedClearing Corporation.

• For the demat Units purchased through MFSS of NSEIL and/or throughthe Designated Stock Exchange, the investor pays the Participant/ TradingMember/Broker, and relies on the Participant/ Trading Member/Broker

for receiving the credit of demat Units into his/her/its demat account.For demat Units offered for repurchase/redemption through MFSS of NSEIL and/or through the Designated Stock Exchange, the Investortransfers the demat Units from his/her/its demat account to the Participant/ Trading Member/Broker’s demat account, and relies upon the Participant/ Trading Member/ Broker for receiving payment of the repurchase/ redemption proceeds received by the Participant/ Trading Member/Brokerthrough NSEIL/NSCCL and/or the Designated Clearing Corporation of the Designated Stock Exchange.

• Neither NSEIL/NSCCL and/or the Designated Stock Exchange or theDesignated Clearing Corporation nor the Fund guarantees or assuresperformance of the aforesaid obligations of the Participant/ TradingMember/Broker either for delivery of demat units purchased by theInvestor through MFSS of NSEIL and/or through the Designated Stock Exchange or of payment of repurchase/redemption proceeds to theinvestor in respect of demat Units repurchased/redeemed through NSEIL/ NSCCL and/or the Designated Stock Exchange / Designated ClearingCorporation. Investor Grievance Redressal in the case of NSEIL /NSCCL.The Fund and its Trustee shall stand discharged of their sale/repurchaseobligation to the unitholders on credit of demat Units/payment of funds,as the case may be, to the NSCCL of NSEIL and/or the DesignatedClearing Corporation of the Designated Stock Exchange, and for thispurpose, the Investor shall have constituted the Participant/ TradingMember/Broker of NSEIL and/or the Designated Stock Exchange ashis/her/its authorised agent.

• The sale/repurchase of units through NSE is different from the normalsecondary market (equity) transaction executed through the participant(broker) in as much as different settlement cycle, no protection underInvestor Protection Fund/Trade Guarantee Fund or from any other fundof NSEIL/NSCCL. Any dispute between the investor and such TradingMember in respect of orders for sale / repurchase of demat Units shall besubject to the arbitration mechanism available with NSCCL and/orNSEIL. NSCCL/NSEIL may also take such disciplinary action, as deemsfit, against the Participant who fails to perform his obligations in respectof units purchased/ repurchased/ redeemed by Investors through MFSS.

The order confirmation slip generated by the system and issued by theTrading Member to the investor shall be conclusive evidence of the orderbeing put on the system on behalf of the Investor by the Trading Memberin this regard.

• Prospective investors should consider utilising the facility for sale andrepurchase of demat Units through Designated Stock Exchanges onlyafter fully understanding and comprehending the aforesaid risks of dealingthrough Brokers as repurchase facility through the AMC would not bepossible . Demat units shall be repurchased / redeemed only through theMutual Fund Service System (MFSS) facility provided by National Stock Exchange of India Limited / NSCCL or any other system of DesignatedStock Exchange(s).

• As per SEBI circular dated December 12, 2003 (reference SEBI/IMD/CIRNo. 10/22701/03), the Scheme(s) are required to comply with the followingconditions as soon as possible but not later than December 31, 2004:

(a) Each Scheme and individual Plan(s) under the Scheme(s) shouldhave a minimum of 20 investors and no single investor should account for more than 25% of the corpus of the Scheme/Plan(s); (b) Ineach subsequent calendar quarter thereafter, on an average basis,the Scheme(s)/Plan(s) should meet with both the conditions i.e. aminimum of 20 investors and no single investor should account formore than 25% of the corpus of the Scheme/Plan(s);

In case of non-fulfillment with the above terms and conditions byany of the Scheme(s) /Plan(s), those shall be wound up by following the guidelines prescribed by SEBI and the units of the respective Scheme(s)/Plan(s) would be redeemed at applicable NAV within

10 days of the winding up of the Scheme(s)/Plan(s).

• Investors/unitholders are also urged to read the detailed clause(s) titledspecial considerations.

III . SPECIAL CONSIDERATIONS

Investment in the Scheme should be viewed by an Investor/unitholder as amedium to long term investment as Mutual Funds carry normal market risksand there can be no assurance and no guarantee that the Scheme will achieveits objective. It is recommended that an investment in the Scheme shouldnot constitute a substantial proportion of an investment portfolio and maynot be appropriate for all, as investment decisions made by the InvestmentManager will not always be profitable or prove to have been correct. As withany investment in stocks, shares and securities, the NAV of the Units underthe Scheme can go up or down, depending on the factors and forces affectingthe capital markets. Past performance of this Scheme, of the previousSchemes, the Sponsors or its Group affiliates is not indicative of and doesnot guarantee the future performance of the Scheme. The name of the Scheme

does not in any manner indicate either and quality of the Scheme, its futureprospects or the returns. Investors are urged to study the terms of this offercarefully and consult their Investment Advisor before they invest in theScheme. Investors’/ unitholders’ attention is drawn to the risk factors set outin the beginning of this Offer Document and also to the following specificrisks:

Regulatory Risks: Neither this Offer Document nor the Units have beenregistered in any jurisdiction. The distribution of this Offer Document incertain jurisdictions may be restricted or subject to registration requirementsand, accordingly, persons who come into possession of this Offer Documentare required to inform themselves about, and to observe, any such restrictions.No persons receiving a copy of this Offer Document or any accompanyingapplication form in such jurisdiction may treat this Offer Document or suchapplication form as constituting an invitation to them to subscribe for Units,nor should they in any event use any such application form, unless in therelevant jurisdiction such an invitation could lawfully be made to them andsuch application form could lawfully be used without compliance with any

registration or other legal requirements. Accordingly this Offer Documentdoes not constitute an offer or solicitation by anyone in any jurisdiction inwhich such offer or solicitation is not lawful or in which the person makingsuch offer or solicitation is not qualified to do so or to anyone to whom it isunlawful to make such offer or solicitation. It is the responsibility of anyperson in possession of this Offer Document and any persons wishing toapply for Units pursuant to this Offer Document to inform themselves of andto observe, all applicable laws and Regulations of such relevant jurisdiction.

Prospective investors should review / study this Offer Document carefullyand in its entirety and shall not construe the contents hereof or regard thesummaries contained herein as advice relating to legal, taxation, or financial/ investment matters and are advised to consult their own professional advisor(s)as to the legal or any other requirements or restrictions relating to thesubscription, gifting, acquisition, holding, disposal (sale, transfer, switch orredemption or conversion into money) of Units and to the treatment of income(if any), capitalization, capital gains, any distribution, and other taxconsequences relevant to their subscription, acquisition, holding,

capitalization, disposal (sale, transfer, switch or redemption or conversioninto money) of Units within their jurisdiction / of nationality, residence,domicile etc. or under the laws of any jurisdiction to which they or anymanaged Funds to be used to purchase/gift Units are subject, and (also) todetermine possible legal, tax, financial or other consequences of subscribing

/ gifting to, purchasing or holding Units before making an application forUnits.

No person has been authorized to give any information or to make anyrepresentations not confirmed in this Offer Document in connection with theInitial Offer or the Offer of Units, and any information or representations notcontained herein must not be relied upon as having been authorized by theMutual Fund or the AMC or the Trustees. Statements made in this OfferDocument are based on the law and practice currently in force in India and aresubject to change therein. Neither the delivery of this Offer Document nor anysale made hereunder shall, under any circumstances, create any impression



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that the information herein is correct as of any time subsequent to the datehereof.

Performance Risk: The value of and income from, an investment in theScheme can decrease as well as increase, depending on a variety of factorswhich may affect the values and income generated by the Scheme’s portfolioof securities. The returns of the Scheme’s investments are based on the currentyields of the securities, which may be affected generally by factors affectingcapital markets such as price and volume, volatility in the stock markets,interest rates, currency exchange rates, foreign investment, changes ingovernment and Reserve Bank of India policy, taxation, political, economicor other developments and closure of the stock exchanges. Investor’s should

understand that the investment composition indicated, inline with prevailingmarket conditions, is only a hypothetical example as all investments involverisk and there can be no assurance that the Scheme’s investment objectivewill be attained nor will the Scheme be in a position to maintain the modelpercentage of investment pattern/composition particularly under exceptionalcircumstances such that the interest of the unitholders are protected.

The Investment Manager will endeavor to invest in highly researched growthcompanies, however the growth associated with equities is generally high asalso the erosion in the value of the investments/portfolio in the case of thecapital markets passing through a bearish phase is a distinct possibility.Changes in the prevailing rates of interest is likely to affect the value of theScheme’s investments and thus the value of the Scheme’s Units. The valueof Money Market/debt instruments held by the Scheme generally will varyinversely with the changes in prevailing interest rates. AMC, while investingin fixed-income instruments like debt, etc., shall consider and evaluate therisk of an issuer ’s ability to meet principal and interest payments (credit risk)and also the price volatility due to such factors as interest sensitivity, market

perception or the creditworthiness of the issuer and general market liquidity(market risk). While it is the intent of the Investment Manager to investprimarily in more highly rated debt securities and highly researched growthcompanies, the Scheme may from time to time invest in high yielding / growth, lower rated and / or privately placed / unlisted /securitised securities.Lower rated or unrated securities are more likely to react to developmentsaffecting market and credit risk than highly rated securities. The credit risk factors pertaining to lower rated securities also apply to lower rated zerocoupon, deferred interest bonds.

It is envisaged that different portfolio of securities and other investmentsheld under both the plans (i.e Career Builder & Future Guard) of both theoptions (Super Saver & Super Saver Plus) of the Scheme may be similar,although they would not exactly match each other which may result ingenerating different returns. Further, the two plans of both the options underthe Scheme will have separate unit capital, NAV investments and separatebalance sheets and profit and loss account. Also, the units outstanding underboth the plans may be different due to varying subscriptions, while the

investment strategy would be similar there may be dissimilarities in the assetcomposition in terms of securities.

Notwithstanding anything stated aforesaid, the Trustees/AMC reserves theright to have one common portfolio with similar asset allocation for eachplan under any option with a Common Corpus, Balance sheet etc. for theplans, should the reasons of expediency, cost, interest of unitholders and othercircumstances make it necessary for the Fund to do so. Composition of units/ assets under each plan within the Option(s) will keep on changing with thesubscription / redemption and/or periodical income distribution (if any) inthe respective plan. Accordingly the investment strategy for both the plansunder any Option as a whole may be changed from time to time according tothe change in asset/unit composition of each plan. In case of higher unitcapital /assets under one plan, investment strategy may be changed to investassets under the respective plan of the option(s) of the scheme primarily insecurities that provides better returns with possible higher costs. Investorshould note that there might be a cost associated with change in the investmentstrategy which may affect the performance of the scheme. The use of common

portfolio involves possible impediments to the ability of the Scheme to meetrepurchase / redemption requests or other short term obligations of one planand may have an adverse impact on the value of the assets for the other plan.

Forex Risk :The Scheme may also invest in overseas financial assets as andwhen permitted by the concerned regulatory authorities in India. To the extentthat the assets of the Scheme will be invested in securities denominated inforeign currencies, the Indian Rupee equivalent of the net assets, distributionsand income may be adversely affected by changes in the value of respectiveforeign currencies relative to the Indian rupee. The repatriation of capital toIndia may also be hampered by changes in regulations concerning exchangecontrols or political circumstances as well as the application to it of otherrestrictions on investment. In addition, country risks would include events suchas introduction of extraordinary exchange controls, economic deterioration andbi-lateral conflict leading to immobilisation of the overseas financial assets.

Techniques Risk: The Scheme may use techniques (including derivatives,futures and options, warrants, etc.) and instruments that may be permittedand / or that may become permissible under SEBI/RBI Regulations and / or

Regulations and / or statutory modification or re-enactment thereof forefficient portfolio management and to attempt to hedge or reduce the risk of such fluctuation. However, these techniques and instruments, if imperfectlyused have the risk of the Scheme incurring losses due to mismatchesparticularly in a volatile market. The Fund’s ability to use these techniquesmay be limited by market conditions, regulatory limits and tax considerations

(if any). The use of these techniques is dependent on the ability to predictmovements in the prices of securities being hedged and movements in interestrates. There exists an imperfect correlation between the hedging instrumentsand the securities or market sectors being hedged. Besides, the fact thatskills needed to use these instruments are different from those needed toselect the Fund’s / Scheme’s securities. There is a possible absence of a liquidmarket for any particular instrument at any particular time even though thefutures and options may be bought and sold on an organized exchange. Theuse of these techniques involves possible impediments to effective portfolio

management or the ability to meet repurchase /redemption requests or othershort-term obligations because of the percentage of the Scheme’s assetssegregated to cover its obligations.

Liquidity and Settlement Risks: The liquidity of the Scheme’s investmentsmay be inherently restricted by trading volumes, transfer procedures andsettlement periods. From time to time, the Scheme will invest in certainsecurities of certain companies, industries, sectors, etc. based on certain

investment parameters as adopted internally by AMC. While at all times theTrustees and the AMC will endeavor that excessive holding/ investment incertain securities of industries, sectors, etc. by the Scheme be avoided, the

assets invested by the Scheme in certain securities of industries, sectors, etc.may acquire a substantial portion of the Scheme’s investment portfolio andcollectively may constitute a risk associated with non-diversification and thuscould affect the value of investments. The Scheme may have difficulty indisposing of certain securities because the security may be unlisted, due togreater price fluctuations there may be a thin trading market, different

settlement periods and transfer procedures for a particular security at anygiven time. Settlement if accomplished through physical delivery of stock certificates is labour and paper intensive and may affect the liquidity. It shouldbe noted that the Fund bears the risk of purchasing fraudulent or tainted papers.The secondary market for money market/debt securities does exist, but isgenerally not as liquid as the secondary market for other securities. Reducedliquidity in the secondary market may have an adverse impact on market

price and the Scheme’s ability to dispose of particular securities, whennecessary, to meet the Scheme’s liquidity needs or in response to a specificeconomic event, such as the deterioration in the creditworthiness of the issuer,etc. or during restructuring of the Scheme’s investment portfolio. Furthermore,

from time to time, the AMC, the Custodian, the Registrar, any Associate, anydistributor, dealer, any company, corporate bodies, trusts, any scheme / Mutual

Fund managed by the AMC or by any other AMC may invest in the Scheme.While at all times the Trustees and the AMC will endeavor that excessiveholding of Units in the Scheme among a few unitholders is avoided, however,

the amounts invested by these aforesaid persons may acquire a substantialportion of the Scheme’s outstanding Units and collectively may constitute amajority unitholder in the Scheme. Accordingly, redemption of Units heldby such persons may have an adverse impact on the value of the redemptionand may impact the ability of the unitholders to redeem their respective Units.

Securities Lending Risks: It may be noted that Securities Lending activitywould have the inherent probability of collateral value drastically falling intimes of strong downward market trends or due to it being comprised of tainted/forged securities, resulting in inadequate value of collateral until suchtime as that diminution in value is replenished by additional security. It isalso possible that the borrowing party and /or the approved intermediary

may suddenly suffer severe business setback and become unable to honor itscommitments. This alongwith a simultaneous fall in value of collateral would

render potential loss to the Scheme. Besides, there can also be temporaryilliquidity of the securities that are lent out and the Scheme may not be ableto sell such lent out securities.

Political Risk: Whereas the Indian market was formerly restrictive, a process

of deregulation has been taking place over recent years. This process hasinvolved the removal of trade barriers and other protectionist measures, whichcould adversely affect the value of investments. It is possible that future

changes in the Indian political situation, including political, social, oreconomic instability, diplomatic developments and changes in laws orregulations could have an effect on the value of investments. Expropriation,confiscatory taxation, or other relevant developments could also affect thevalue of investments.



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or such other events as the AMC may specify from time to time.

The AMC reserves the right to declare any day as a Business Day or otherwiseat any or all collection centres.

Calendar Year : A Calendar Year shall be full English Calendar months viz.12 months commencing from 1st January and ending on 31st December.

Collection Centre : Branches of Banks and/or Registrar’s/AMC’s servicecentres/ISC are authorized to receive application forms for subscription tothe Units of the scheme and also redemption/switch requests as mentioned inthis Offer Document or appointed from time to time. These centres shall beregarded the “Official Points” of acceptance of transactions for subscription/ redemption/switch and the Cut-Off timing for various transactions shall bereckoned at these Official Points.

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

Custodian : Means a Custodian appointed for holding of the securities andother assets of the Fund which for the time being is Citibank N.A.

Day : Any day (including Saturday, Sunday and holiday) as per EnglishCalendar viz 365 days in a year.

Debt Instruments : Government securities, corporate debentures, bonds,promissory notes, money market instruments, pass – through obligations,asset backed securities/Securitised debt and other possible similar securities.

Depository : Depository as defined in the Depository Act, 1996 (22 of 1996).

Dividend : Income distributed by the Mutual Fund on the units.

Entry Load : Load on sale of units.

Exit Load : Load on repurchase of units.FII(s) : Foreign Institutional Investor(s), registered with SEBI underSecurities and Exchange Board of India (Foreign Institutional Investors)Regulation, 1995.

Financial Year : A Financial Year shall be full English Calendar months viz.12 months commencing from 1st April and ending on 31st March.

Fund / Mutual Fund / Principal MF : Mutual Fund, a trust set up under theprovisions of the Indian Trust Act, 1882 and registered with SEBI bearingRegistration No. MF/019/94/0 dated December 13, 1994 under the namePrincipal Mutual Fund.

Gilts/Government Securities : As defined under Section 2 (b) of theSecurities Contract (Regulation) Act, 1956, Government Security means asecurity created and issued, whether before or after the commencement of the Act, by the Central Government or a State Government for the purpose of raising a public loan and having one of the forms specified in clause (2) of Section 2 of the Public Debt Act, 1944 (18 of 1944) including any amendments

thereto or any replacement or re-enactment thereof/clarification and guidelinesin the form of notes or circulars etc. issued from time to time; Treasury bills,such other instruments as may be declared by Government of India and/orSEBI and /or RBI and /or any other regulatory authority to be securities; andrights or interest in the securities

GOI : Government of India.

Group : As defined in sub-clause (EF) of clause 2 of MRTP Act.

Investment Management Agreement/IMA : Investment ManagementAgreement dated November 25, 1994 as amended from time to time, betweenthe Trustees and AMC.

ISC : Investor Service Centre of the Mutual Fund.

Load : A sum of money deducted from the value received or paid to theunitholder towards Sale / Repurchase of units.

Money Market Instruments : Commercial Papers, Commercial Bills,

Treasury Bills, Debt/ Government Securities having an unexpired maturityup to one year, call, notice or term money, certificate of deposit, billsrediscounting scheme, repos/ reverse repos and any other like instruments asspecified from time to time.

NAV : Net Asset Value of the units of the Scheme calculated in the mannerprovided in this Offer Document by dividing the net assets by the number of outstanding units (on any valuation day) or as may be prescribed by the SEBIRegulations from time to time. NAV will be calculated upto 2 decimal points.

Net Assets : Net Assets of the Scheme at any time shall be the total value of the Schemes’ assets, less its liabilities taking into consideration the accrualsand the provision.

OCB : Overseas Corporate Bodies, partnership firms and societies whichare held directly or indirectly but ultimately to the extent of at least 60% by

IV. DUE DILIGENCE CERTIFICATE

It is confirmed that:

1. The Offer Document forwarded to SEBI is in accordance with the SEBI(Mutual Funds) Regulations, 1996 and the guidelines and directivesissued by SEBI from time to time.

2. All legal requirements connected with the launching of the Scheme asalso the guidelines, instructions, etc., issued by the Government and anyother competent authority in this behalf, have been duly complied with.

3. The disclosures made in the Offer Document are true, fair and adequateto enable the unitholders to make a well informed decision regarding

investment in the proposed Scheme4. According to the information given to us, Citibank N.A., the Custodians

to the Scheme and Karvy Computershare Pvt. Ltd., the Registrar andTransfer Agents to the Scheme are registered with SEBI and till datesuch registration is valid

5. The contents of the Offer Document including figures, data, yields etchave been checked and are factually correct.

for Principal Asset Management Co. Pvt. Ltd.

Place: Mumbai Sonali BendkeDate : December 13, 2004 Compliance Officer

Note : The Due Diligence Certificate as stated above was submitted toSecurities and Exchange Board of India on December 14, 2004.

V. ABBREVIATIONS AND DEFINITIONS

Age: Age to the nearer birth date

AMC/Asset Management Company/Investment Manager/Principal: PrincipalAsset Management Company Private Limited

APPLICABLE NAV

i) For Subscriptions / Switch-in:

In respect of valid applications received upto 3 p.m. by the Fund along witha local cheque or a demand draft payable at par at the place where theapplication is received, the closing NAV of the day on which application isreceived shall be applicable.

In respect of valid applications received after 3 p.m. by the Fund along witha local cheque or a demand draft payable at par at the place where theapplication is received, the closing NAV of the next business day shall beapplicable.

However, in respect of valid applications with outstation cheques/ demand

drafts not payable at par at the place where the application is received, closingNAV of the day on which cheque/demand draft is credited shall be applicable.

ii) For Redemptions/Switch-out

In respect of valid applications received upto 3 p.m. by the Mutual Fund,same day’s closing NAV shall be applicable.

In respect of valid applications received after 3 p.m. by the Mutual Fund, theclosing NAV of the next business day shall be applicable.

Cut off time as mentioned above shall be reckoned at the COLLECTIONCENTRES which are the official points of acceptance of transactions asdisclosed in this offer document and the web-site, www.principalindia.com

Applicant / Investor : Means any person whether individuals or not (legalentity), resident or non resident, who is eligible to gift units under the laws of his/her/their state / country of incorporation, establishment, citizenship,residence or domicile and under the Income Tax Act, 1961, includingamendments thereto from time to time & who has made an application forgifting the units to Beneficiary under the scheme. Under normalcircumstances, a donor shall be deemed to be the investor.

Beneficiary / Unitholder : Means any individual person whether major ornot, resident or non-resident who is eligible to receive gift of units under thescheme & to whom units has been allotted based on the valid application of the Investor. An unitholder till attaining majority will be represented by parent/ guardian. Beneficiary will be the unitholder of the scheme.

Business Day : Business Day is a day other than : (i) Saturday and Sunday,(ii) a day on which the Banks in Mumbai and /or RBI are closed for business

/ clearing, (iii) a day on which the Bombay Stock Exchange and/ or NationalStock Exchange are closed, (iv) a day which is a public and/or bank holidayat a collection centre where the application is received, (v) a day on whichsale and repurchase of units is suspended by the AMC, (vi) a day on whichnormal business could not be transacted due to storms, floods, bandhs, strikes



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non-resident individuals of Indian nationality or origin, as also an overseastrust in which at least 60% of the beneficial interest is irrevocably held bysuch persons.

Offer Document: This document issued by Principal Mutual Fund, invitingto subscribe to the units of Principal Child Benefit Fund.

Permissible Investments or Investments : Collective or group investmentsmade on account of the unitholders of the Scheme in Securities and otherassets in accordance with the SEBI Regulations and amendments thereto.

Portfolio : Portfolio at any time shall include all Permissible Investmentsand Cash.

RBI : Reserve Bank of India, established under the Reserve Bank of IndiaAct, 1934, as amended from time to time.

Registrars / Registrar and Transfer Agent : Registrar for the time being of the Mutual Fund which, at present, is Karvy Computershare Privare Ltd., orsuch agency appointed by the AMC.

Regulations : Regulations imply SEBI Regulations and the relevant rulesand provisions of the Securities and Exchange Board of India (Depositoriesand Participants) Regulations 1996; Public Debt Act, 1944; The Income TaxAct, 1961; Wealth Tax Act, 1957; Gift Tax Act, 1958, the Foreign ExchangeManagement Act, 1999, the Indian Trusts Act, 1882 as amended from timeto time and shall also include any Circulars, Press releases or Notificationsthat may be issued by SEBI or the Government of India or the Reserve Bank of India

Repo / Reverse Repo : Sale/ Purchase of Securities as may be allowed byRBI from time to time with simultaneous agreement to Repurchase/resell

them at a later date.Repurchase / Redemption : The units of Scheme under -Principal ChildBenefit Fund which will be bought back by the Fund on an ongoing basissubsequent to the expiry of the applicable target period.

Sale / Subscription : The units of Scheme under -Principal Child BenefitFund which will be offered for sale to the unitholders on an ongoing basis.

Scheme : Principal Child Benefit Fund being offered by Principal MutualFund.

SEBI : Securities and Exchange Board of India, established under theSecurities and Exchange Board of India Act, 1992, as amended from time totime.

SEBI Regulations / Mutual Fund Regulations : The Securities andExchange Board of India (Mutual Funds) Regulations, 1996, or such otherRegulation in force from time to time including any amendment thereto orany replacement or re-enactment thereof / clarification and guidelines in the

form of notes or circulars or notifications etc. issued from time to time forregulating Mutual Funds in India, by SEBI.

Securities : Include shares, scrips, stocks, etc., Debt instruments like notes,bonds, debentures, debenture stock, warrants, etc., futures, options, derivativesetc. or other transferable securities of a like nature in or of any incorporatedcompany or other body corporate, Gilts/ Government securities, Mutual Fundunits, Money Market Instruments like Call Deposit, Commercial Paper,Treasury Bills etc. such other instruments as may be declared by GOI and/orSEBI and /or RBI and/or any other regulatory authority to be securities; andrights or interest in securities, mortgage/Asset backed securities, securitisedreceivables, auto loans, etc.

Sponsor : The Sponsor of Principal Mutual Fund – Principal FinancialServices Inc.USA..

Switch : Transfer of units of Principal Child Benefit Fund to another schemeof Principal Mutual Fund.

Tax Act : Income Tax Act, 1961, Wealth Tax Act 1957 and Gift Act, 1958, orsuch other legislation in force from time to time including any amendmentthereto or any replacement or re-enactment thereof / rules, regulations anyclarification and guidelines issued from time to time by the GOI.

Total Assets : Total Assets of the Scheme at any time shall be the total valueof the Scheme’s assets, taking into consideration the accruals.

Trust Deed : The Trust Deed of the Mutual Fund dated November 25, 1994made by and between the Sponsor and the Trustee as amended from time totime or any replacement or substitution thereof.

Trustee : Principal Trustee Company Private Limited incorporated underthe Companies Act, 1956.

Units : Undivided Share of a unitholder in the assets of the Scheme (& of theoption(s) (if any) within the plan(s), if any) as evidenced by any letter/adviceor any other statement/certificate/instrument.

Year : A Year shall be full English Calendar months viz. 12 months.

VI. SCHEME FEATURES

Name of the scheme : Principal Child Benefit Fund

Type of scheme : Open ended Balanced scheme

Investment Objective : The investment objective of the Scheme is to generateregular returns and / or capital appreciation / accretion with the aim of givinglumpsum capital growth at the end of the chosen target period or otherwiseto the Beneficiary.

Investment Options : At present the Scheme is having one option i.e. SuperSaver Option. However, at a later date Trustees may introduce Super SaverPlus Option.

Investment Plans (Under both the Options) :

(a) Future Guard Plan

Under this plan investment has to be made on a recurring basis, annually forthe entire chosen target period of 7 or 10 or 15 years. Investor may note thatthe maximum age limit of the applicant for investing for 7 and/or 10 yeartarget period is 45 years and for 15 year target period is 40 years. The applicant(first applicant) under this plan will also be covered by a Life InsurancePolicy.

(b) Career Builder Plan

Under this plan investor is not required to make recurring annual subscriptionbut can make investment at any point of time for the chosen target period of 7,10 or 15 years. Applicant under this plan will not be covered under the LifeInsurance Cover.

Target Period : 7, 10 or 15 years from the date of allotment under bothOptions/Plans

Scheme Duration & Maturity : The scheme’s duration would be perpetual,as there is a continuous sale of units under the scheme. The units under thescheme can be redeemed by the unitholder on any business day on expiry of relevant target period of 7, 10 or 15 years. The unitholder has also the optionto continue in the scheme after expiry of the relevant target period. However,the unitholder can prematurely redeem / repurchase the units before expiryof target period. In case of premature repurchase unitholders may have topay exit load/higher exit load.

Investment Strategy :

Super Saver Option

Investments will be in equity and equity related instruments as well as fixedincome bearing instruments rated investment grade or higher or otherwisecomparable. The scheme shall not take high risks in managing the equity

portion of the portfolio. For the equity portion of the portfolio, companieswould be selected after research covering areas such as quality of management,competitive position and financial analysis.

Super Saver Plus Option : The scheme will invest its assets in a portfolio of equity and equity related instruments. The focus of the investment strategywould be to identify stocks which can provide capital appreciation in thelong term. Companies selected for the portfolio would possess some of thecharacteristics mentioned below :

- superior management quality

- distinct and sustainable competitive advantage

- good growth prospects and

- strong financial strength

The aim will be to build a diversified portfolio across major industries andeconomic sectors by using “Fundamental Analysis” approach of research,valuation and stock selection.

Investment Composition :

Super Saver Option

Instruments / Risk Profile % of Net Assets

Equities / Equities Related 40% - 60%(Medium to High)

Debt (including securitised Debt) 60% - 40%and Money Market instruments(Low to Medium Risk)

Amount mobilised during the initial public offer and during ongoingsubscription till Super Saver Plus Option is introduced will be treated asamount received under the Super Saver Option.



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Super Saver Plus Option (as and when introduced by Trustees at laterdate)

Instruments / Risk Profile % of Net Assets

Equities / Equities Related 60% - 80%(Medium to High)

Debt (including securitised Debt) 40% - 20%and Money Market instruments(Low to Medium Risk)

Life Insurance Cover to first applicant under Future Guard Plan (underboth the Options) : The basic aim of the scheme and the plan there under isto provide lumpsum capital growth to the Beneficiary on maturity. To achievethis objective, a comprehensive life cover policy agreement has been enteredinto with the Life Insurance Corporation of India (LIC) for the sole/firstapplicant under the Future Guard Plan. Accordingly, only the applicant underFuture Guard Plan is insured for life after the payment of the third recurringannual subscription on joining the Plan (life cover will be available onlyafter payment of three annual installment of the amount, atleast equal to theamount of original investment while opening the account under Future GuardPlan). The insurance cover will be determined on the basis of installmentpaid at the time of opening of account. However maximum insurance coverwill be limited to aggregate of balance outstanding installment amount orRs.50,000/- whichever is lower per individual applicant (whether investedthrough one application or more). On demise of the first applicant after thepayment of three recurring installment as mentioned above, aggregate amountof balance outstanding annual installment (restricted to Rs.50,000/-) will beinvested upfront in the scheme out of the insurance proceeds. In case of investment in the Future Guard Plan by Applicant through more than one

application favouring one or more beneficiary, aggregate amount of insuranceproceeds (not exceeding Rs.50000/-) will be appropriated upfront in lieu of balance unpaid installment towards all the applications in the ratio of aggregateoutstanding installment under all application/beneficiary. To be eligible forinsurance cover, the investor under Future Guard Plan will have to pay theannual subscription (atleast equal to the amount of original investment) tothe fund regularly every year within the specified time schedule.

Minimum Application /Resale Amount : Rs. 5000 and any amount thereafterwith subsequent investment of Rs.500 & any amount thereafter under eachoption/ Plan.

Minimum Repurchase : Amount Rs. 500 or 50 units

The Trustee /AMC may, however, change and or stipulate a different minimumamount per application for resale &/or repurchase for group investment etc.

Annual Recurring Expenses :

The annual recurring expenses will be subject to the following regulatory

limits:Upto 2.50% of weekly average Net Assets for the first Rs. 100 crore.

Upto 2.25% of weekly average Net Assets for the next Rs.300 crore

Upto 2.00% of weekly average Net Assets for the next Rs.300 crore

Upto 1.75% of weekly average Net Assets on the balance Net Assets.

Investments by NRI’s /FII’s : Investments by NRI’s/FII’s are allowed onfull repatriation basis, if invested through NRE/FCNR A/C.

Switch Option : Unitholders are allowed switching into/from other selectopen ended Scheme(s) managed under the Fund, either currently in existenceor Scheme(s) that may be launched in the future at NAV based prices.

Liquidity : Liquidity will be available through sale and repurchase of unitson an ongoing basis. Unitholders can subscribe to and get their unitsrepurchased on all business days at NAV related prices. The Fund willordinarily dispatch the repurchase proceeds, as per the Regulations, withinten business days. Further, the Fund will endeavor to dispatch the repurchase

proceeds within 3 business days from the date of acceptance of a validrepurchase request.

Transparency : The NAV of each plan under both the options of theScheme will normally be determined on all business days. The Fund shallalso make available to AMFI for publishing the Scheme NAV, Sale/ Repurchase price in at least one (if not two) daily newspaper/s (of all Indiacirculation) on all business days. In addition, the ISC and/or collectioncentre would also display the NAV’s and the NAV related prices. TheFund would publish half yearly results as per SEBI Regulations.

Systematic Investment Plan : Systematic Investment Plan is available forplanned and regular investments. Under this plan, specified rupee amountscan be periodically invested for a continuous period. This concept is calledRupee Cost Averaging. This program allows investment of fixed amount of rupees every month / quarterly by purchasing additional units of the Scheme(s)

for the Benefit of the Beneficiary or otherwise by the unitholder on expiry of the relevant target period.

Example : Let us take an example of a unitholder who invests Rs. 100 permonth into a scheme that had a unit price of Rs. 10 initially. Over the nextfew months, the market falls (causing the unit price to drop) before recoveringto its original value.

At the end of 5 months the unitholder would have 65 units each worth Rs. 10.He would therefore have Rs. 650 worth of units after investing Rs. 500 andtherefore have a profit of Rs. 150.

Month NAV Investment (Rs.) No. of Units Average Cost

1 10 100 10.00 10.00

2 8 100 12.50 8.89

3 5 100 20.00 7.06

4 8 100 12.50 7.27

5 10 100 10.00 7.69

TOTAL 500 65.00 7.69

Rupee cost averaging does not guarantee a profit or protect against a loss.Rupee cost averaging can smooth out the market’s ups and downs and reducethe risk of investing in volatile markets.

The unitholder can select which day the sale is to be made from a set of dates (if no date is selected, the sale will be made on the 15th of the month).If the selected date is not a business day, the sale will take place on the nextbusiness day.

Systematic Withdrawal Plan : After the expiry of relevant target period the

unitholder who have opted to continue in the scheme, may set up a SystematicWithdrawal Plan on a monthly, quarterly or semi-annual or annual basis to:

- Redeem a fixed number of units

- Redeem enough units to provide a fixed amount of money

Once the unitholder sets up a Systematic Withdrawal Facility the planwould continue until:

- the unitholder instructs the Fund to stop periodic withdrawal inwriting;or

- the unitholder’s account balance is zero

The unitholder can select which day the repurchase is to be made from aset of dates (if no date is selected, the repurchase will be made on the11th of the month). If the selected date is not a business day, the repurchasewill take place on the next business day.

Withdrawal payments will be endeavored to be sent within 3 business daysafter the repurchase date.

Systematic Switching Plan : Anytime after expiry of target period, theunitholder, who have opted to continue in the scheme may set up a SystematicSwitching Plan on a monthly, quarterly or semi-annual or annual basis toexchange a fixed number of units and/or amount in this scheme to anotherscheme of Principal Mutual Fund (the Fund).

Once the unitholder sets up a Systematic Switching Plan, the plan wouldcontinue until:

• The unitholder instructs the fund to stop periodic switching in writing; or

• The unitholder account balance is zero.

The unitholder has the option to select either 5th, 15th, 25th day of the monthon which the sale is to be made (if no date is selected, the sale will be madeon the 15th of the month). If the selected date is not a Business Day, therepurchase will take place on the next Business Day.

A switch by any joint owner is binding on all joint owners, if any. All switchesare subject to minimum investment and eligiblity requirements of the scheme

being acquired. If a certificate has been issued, it must be returned to theFund before the switch can take place.

The switch privilege is not short-term trading. Excessive switching activitymay interfere with portfolio management and have an adverse impact on allunitholders. In order to limit excessive switching activity, interest of the fund,the Fund reserves the right to revise or terminate the exchange privilege,limit the amount or number of exchanges, reject any exchange or close anyaccount. The unitholder would be notified of any such change to the extentrequired by law.

The switch will be at applicable NAV based price of the respective schemeplus load, if any.

Triggers : Under this facility, the unitholders after expiry of relevant targetperiod may opt for withdrawal and/or switch either in the normal manner or



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under systematic manner based on the unit balance attaining/on minimumbalance, capital appreciation/ gains realisation, events, dates etc (with orwithout lock in for a particular period). Trigger thus acts as a financialplanning tool for information and the unitholder may subsequently continuein the Scheme or otherwise withdraw/ switch. For e.g. an account maybe monitored and no redemption permitted (if under lock-in) and theunitholder either informed or account redeemed as and when the balancereaches a desired value or after certain period of time etc. In case of triggers linked with events/dates, on realisation of gains, a specifiedamount/full amount/gains/appreciation etc would be redeemed and paideither on the investment attaining a particular value or after a particular periodof time

In case of triggers linked with gains/appreciation, at the option of the unitholdereither the amount equivalent to gains/appreciation would be redeemed or thefull original investment amount would be redeemed and the gain/appreciationcomponent paid to the unitholder/switched into other scheme, and the originalinvestment amount would be reinvested either in the same scheme or anyother scheme.

Special Facilities/Plans : The Fund reserves the right to amend or terminateor introduce the special facilities in this Offer Document. Such facilities forthe time being include Systematic Investment Plan, Systematic WithdrawalPlan, Systematic Switch Plan, Dividend Reinvestment Option, DividendSweep Option, Switch Facility, Triggers, and any such facility/plan that maybe introduced in the future.

Main Risk :

Super Saver Option

The value of the equity securities owned by the Scheme under this optionchanges on a daily basis. Equity securities prices reflect the activities of individual companies and general market and economic conditions. In theshort term, equity security prices can fluctuate dramatically in response tothese factors.

Debt security values change daily. Their prices reflect interest rates, marketconditions and announcements of other economic, political or financialinformation. When interest rates fall, the price of a debt security rises andwhen interest rate rise, the price declines.

As with all Mutual Funds, the value of the scheme’s assets under this optionmay rise or fall. If the units are redeemed when their value is less than theprice paid for money may be lost by the unitholder.

Super Saver Plus Option

Prices of equity securities rise and fall in response to a number of factorsincluding events that impact entire financial markets or industries (forexample, changes in inflation or consumer demand) as well as events

impacting a particular issuer (for example, news about the success or failureof a new product). The Securities purchased by the Scheme under this optionpresent greater opportunities for growth because of high potential earningsgrowth, but may also involve greater risks than securities that do not havethe same potential. The Scheme under this option may invest in companieswith limited product lines, markets or financial resources. As a result, thesesecurities may change in value more than those of larger, more establishedcompanies. As the value of the securities owned by the Scheme changes, theScheme unit price changes. In the short-term, the price can fluctuatedramatically.

As with all Mutual Funds, as the value of the assets of the scheme under thisoption rise and fall, unit price of the scheme under this option changes. If the units are redeemed when their value is less than the price paid for, moneymay be lost by the unitholder.

Investor Profile:

Super Saver Option

This option under the Scheme is generally a suitable investment for an investorseeking long-term growth & accumulation of capital for the beneficiarythrough controlled exposure in equities & generation of fixed income throughbalanced exposure to debt, but is uncomfortable accepting the risks of investing entirely in Equities. This option under the Scheme is also generallya suitable investment for any investor who has sought voluntary retirementfrom his service and who is seeking long-term growth for the Beneficiarywithout accepting excessive risks of investing in equities.


This option under the Scheme is generally a suitable investment for an investorseeking long-term growth & accumulation of capital for the beneficiary. Theinvestor must be willing to accept the risks of investing in equities that mayhave greater risks than stocks of companies with lower potential for earningsgrowth.

VII. CONSTITUTION OF THE MUTUAL FUND

The Fund

Principal Mutual Fund (formerly known as IDBI-PRINCIPAL Mutual Fund)has been constituted as a Trust in accordance with the provisions of the IndianTrusts Act, 1882 (2 of 1882). The Mutual Fund is registered with SEBIunder Registration No. MF/019/94/0, dated December 13, 1994. Theunderlying objective of Principal Mutual Fund is to mobilise savings fromthe public, provide investment expertise to achieve optimal returns on theirinvestments.

The Fund was initially set up by Industrial Development Bank of India (IDBI)

in 1994 by execution of a Trust Deed dated November 25, 1994, under whichIDBI was the sole Settlor, Sponsor and Principal Trustee and an initial amountof Rs.1 lakh and additional amount of Rs.24.99 crore was settled as the trustcorpus.. Subsequently, on March 31, 2000, Principal Financial Services Inc.USA became the deemed sponsor (along with the IDBI) by acquiring 50%stake in IDBI-PRINCIPAL Asset Management Company Limited. On June23, 2003, Principal Financial Services Inc. USA became the sole sponsor byacquiring 100% stake in IDBI-PRINCIPAL Asset Management CompanyLimited, through its wholly owned subsidiary Principal Financial Group(Mauritius) Limited (Principal Mauritius). Principal Mauritius has becomethe sole settlor of the Fund. Name of the Asset Management Company haschanged to Principal Asset Management Company Private Limited, to reflectthe change in ownership. In tune with the industry standards and practices,Principal Mauritius, the Settlor, maintains a corpus of Rs.25 lakh in theTrust in place of the original contribution of Rs. 1 lakh and additionalcontribution of Rs.24.99 crore vide execution of a supplemental trust deeddated April 16, 2004.

On April 30, 2004, Punjab National Bank (PNB) and Vijaya Bank (VB) have

become equity shareholders and they hold equity shares to the extent of 30%and 5% respectively of the equity capital of both Principal Asset ManagementCompany Private Limited and Principal Trustee Company Private Limited.Pursuant to this change in ownership, certain amendments have been madeto the Principal Mutual Fund vide Supplemental Trust Deed dated 5th May2004, to reflect, amongst other amendments, the addition of PNB and VB asthe new co-settlors to the Fund. Accordingly, Principal Mauritius, PNB andVB have 65%, 30% and 5% respectively of all the rights, title, interest andobligations as co-settlors to Principal Mutual Fund.

Principal Mutual Fund (formerly known as IDBI-PRINCIPAL Mutual Fund)has been notified under Section 10(23D) of the Income Tax Act by CentralBoard of Direct Taxes (Gazette Notification No.S.O.52 (E) dated January18, 1995) vis-a-vis exemption from income tax of the entire income of theFund in India and therefore all such income received by the Fund will bewithout any deduction of tax at source.

THE SPONSOR /SETTLORS

The Mutual Fund is sponsored by Principal Financial Services Inc. USAthrough its wholly owned subsidiary, Principal Financial Group (Mauritius)Limited with Punjab National Bank and Vijaya Bank as its co-settlors.Effective May 5, 2004, Principal Mauritius, PNB and VB have 65%, 30%and 5% respectively of all rights, title, interest and obligations as co-settlorsof Principal Mutual Fund. Principal Financial Services Inc. is a member of the Principal Financial Group – a leading provider of financial products andservices globally to businesses and individuals including retirement andinvestment services, Mutual Funds, life and health insurance, annuities andmortgage banking. Established in 1879, the Principal Financial Group hasmore than $152.10 billion in assets under management and serves over 15million customers worldwide through operations in the United States, Asia,Australia, Europe and Latin America. The business of Principal FinancialGroup (Mauritius) Limited, is to carry out business activities which are notprohibited under the Laws of Mauritius and the laws of the countries wherethe Company is transacting business and to do all such things as are incidentalor conducive to the attainment of the above objects.

Condensed Financial Position of Principal Financial Services, Inc.(holding Company of Principal Financial Group (Mauritius) Ltd.)

(Amount in millions, U.S.$)

Particulars 2003 2002 2001

Total Revenue 9,404 8,823 8,593

Operating earnings 751 749 722

Net Income 746 142 359

Total Assets 107,754 89,861 88,351

Total Stockholders Equity 7,400 6,657 6,820

Both PNB and VB are scheduled commercial banks. PNB has a network of over 4,000 branches and 400 extension counters throughout India and offers



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a wide variety of banking services. VB has built a network of over 800branches that span all 28 states and 4 union territories in the country. Withthe proposed change, Principal Asset Management Company Private Limitedwould be in a position to leverage the combined and far-reaching distributionnetworks of PNB and VB, including more than 5,000 combined retail andcommercial banking branches and over 40 million customers throughout India,along with Principal’s international expertise and its position as a recognizedand prominent manager of mutual funds in India.

Migration of Scheme of PNB Mutual Fund and Sun F&C Mutual Fund

Pursuant to an agreement for sale entered into between the AMC and theTrustee Company of Principal Mutual Fund of One Part and the AMC and

Board of Trustees of the PNB Mutual Fund of the Other Part, effectivefrom the date of completion of sale viz. April 30, 2004, the followingscheme of PNB Mutual Fund has migrated to Principal Mutual Fund on receiptof the necessary regulatory approvals and consequently, Principal TrusteeCompany Private Limited and Principal PNB Asset Management CompanyPrivate Limited have become the Trustee and the AMC respectively for thisscheme

Former Name New Name

PNB Debt Fund Principal PNB Debt Fund

Pursuant to an agreement for sale entered into between the AMC and theTrustee Company of Principal Mutual Fund of One Part and the AMC andBoard of Trustees of the SUN F&C Mutual Fund of the Other Part, effectivefrom the date of completion of sale viz. May 14, 2004, the following schemesof Sun F&C Mutual Fund have migrated to Principal Mutual Fund on receiptof the necessary regulatory approvals and consequently, Principal Trustee

Company Private Limited and Principal PNB Asset Management CompanyPrivate Limited have become the Trustee and the AMC respectively for theseschemes:

Former Name New Name

Sun F&C Resurgent India Principal Resurgent IndiaEquity Fund Equity Fund

Sun F&C Personal Tax Saver Principal Personal Tax Saver

Sun F&C Money Value Fund Principal Money Value Bond Fund

Sun F&C Balanced Fund Principal Balanced Fund

TRUSTEE OF PRINCIPAL MUTUAL FUND

Principal Trustee Company Private Limited (formerly IDBI-PRINCIPALTrustee Company Limited), a company incorporated under the CompaniesAct, 1956 is the Trustee to the Fund with effect from October 18, 2002. Priorto October 18, 2002 Board of Trustees discharged the Trusteeship function

of the Fund. The Trustee has the exclusive ownership of the Trust Fund andis vested with the general powers of superintendence, direction andmanagement of the affairs of the Trust.

On June 23, 2003, Principal Financial Services Inc. USA acquired 100%stake in IDBI-PRINCIPAL Trustee Company Limited, through its whollyowned subsidiary Principal Financial Group (Mauritius) Limited. Name of the Trustee Company was changed to Principal Trustee Company PrivateLimited, to reflect the change in ownership. On April 30, 2004, PunjabNational Bank and Vijaya Bank became equity shareholders of the TrusteeCompany and post this, Principal Financial Group (Mauritius) Limited, PunjabNational Bank and Vijaya Bank hold 65%, 30% and 5% respectively of thepaid up equity capital of the Trustee Company.

The Trustee has appointed Citibank NA as the Custodian and KarvyComputershare Private Ltd as the Registrar for the Schemes being offeredthrough this Offer Document.

Directors of the Trustee Company are:

Name of Director Other Directorships

Mr. B.G. DESHMUKH - Siporex India Limited41, Buena Vista Apartments , - Venky’s(India) LimitedGeneral J. Bhosle Marg, - Venkateshwara hatcheries LimitedOpp. Chavan. Prathistan, - Finolex Cables LimitedColaba, Mumbai 400 021Former cabinet Secretary,Government of India

Mr. NORMAN SORENSEN - Principal Insurance Company539, Burgundy Circle, (Hong Kong)Waukee, Iowa, USA. - Principal International ArgentinaPresident - Principal RetiroPrincipal Financial Inc. USA - BrasilPrev Previdencia PrivadaCompany Executive (Brazil)


- Principal Vida Chile- Principal Pensiones- Andeuza and Principal (Chile)- Principal AFORE (Mexico)- SIEFORE Principal- ING-Principal Pensions Co., Ltd- Principal Mexico Seguros- International Insurance Society- U.S Coalition of Service Industries- Brazilian Insurance and Pensions

Academy (ANSP)

Dr. S. A. DAVE - CRISIL Ltd.17/13, MHB Colony, - Escorts Ltd.Bandra Reclamation, - Spice Net Ltd.Mumbai 400050 - SBI Gilts Ltd. Independent Director - Modicorp Global Pvt. Ltd

- Future Software Ltd.- Phoenix Township Ltd.- Discount and Finance House Ltd.- Quantum Financial Services- Centre for Monitoring Indian Economy- HDFC Ltd.- Indo National Ltd.- Shrenuj & Co. Ltd.- Merchant Media Ltd.

MR. S. RAVI - IFCI Ltd.D-296, Sarvodaya Enclave, - Corporation Bank New Delhi-110017 - IDBI Capital Market Services Ltd.Chartered Accountant - Garware Chemicals Ltd.

- Mahindra Ugine Steel Co. Ltd.

- PNB Mutual Fund- Canbank Investment Management

Services Ltd.- Uniflex Cables Ltd.- Batliboi Ltd.

Mr. D. L. Rawal* - PNB AMC Ltd.General Manager,Punjab National Bank 7, Bhikaji Cama Place,New Delhi-110066Company Executive

Mr. H. M. Singh –A-164,New Friends Colony,New Delhi-110065 Independent Director

* Associate directors in terms of SEBI (Mutual Funds) Regulations 1996, amended

from time to time.

The Trustee discharges the supervisory role by having a number of checks and balances besides having continuous feedback from the AMC onmatters of importance and a review of the Mutual Fund’s operations at theperiodical meetings of the Board of Directors of the Trustee Company whichare required to be held at least once in two calendar months as per theRegulations.

Six Board Meetings of the Trustee Company were held in the previousfinancial year ended March 31, 2004 and five meetings have been held forthe period from April 1, 2004 to November 30, 2004.

The performance reports of all the schemes are placed before the Board of

the Trustee Company at such meetings. The reports on statutory complianceand investor servicing are also regularly placed at such meetings by AMC.

The quarterly compliance test report in respect of the Fund, which is filedwith SEBI by the AMC is also placed/adopted before/after, by the Board of

the Trustee Company. An Audit committee comprising a few Directors of the

Trustee Company has been constituted to review the internal audit systemsand the recommendations of the internal and statutory auditors and to ensure

that the measures as suggested by internal and external auditors are actedupon.

Obligations of Trustees

As per the Trust Deed, the Trustee shall have the following obligations:

1. The Trustee shall take reasonable care to ensure that the schemes floatedunder the Fund and managed by the AMC are in accordance with theTrust Deed and SEBI Regulations.

2. The Trustee shall not acquire nor allow the AMC to acquire any assetsout of the Trust Fund and/or unit capital, which involves the assumptionof unlimited liability or results in the encumbrances of Trust Fund, and/ or Unit Capital in any way.



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3. The Trustee and its Directors shall maintain arms’ length relationshipwith companies, institutions, financial intermediaries or bodies corporatewith which the Trustee/its Directors may be associated in any capacityin carrying out their responsibilities as the Trustees of the Mutual Fund.

4. The Trustee shall not participate in any decision-making process/ resolution of its Board for any investment in which they may be interested.

5. All of the Directors of the Trustee shall furnish to SEBI, the interestwhich they may have in any other company, or institution or financialintermediary or any corporate by virtue of his/her position as Director,partner or with which he/she may be associated in any other capacity.

No amendments to the trust deed shall be carried out without the prior

approval of SEBI and unitholder’s approval would be obtained where itaffects the interests of unitholder.

Duties and Responsibilities of Trustees

1. The Trustees and the AMC shall, with the prior approval of SEBI, enterinto an Investment Management Agreement.

2. The Investment Management Agreement shall contain such clauses asare mentioned in the fourth Schedule of SEBI Regulations and such otherclauses as are necessary for the purpose of making investments.

3. The Trustees shall have a right to obtain from the AMC such informationas is considered necessary by the Trustees.

4. The Trustees shall ensure before the launch of any scheme that the AMChas -

- systems in place for its back office, dealing room and accounting;

- appointed all key personnel including Fund manager(s) for theScheme 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;

- appointed auditors to audit its accounts;

- appointed a compliance officer to comply with regulatory requirement and to redress investor grievances;

- appointed registrars and laid down parameters for their supervision;

- prepared a compliance manual and designed internal control mechanisms including internal audit systems;

- specified norms for empanelment of brokers and marketing agents.

5. The Trustees shall ensure that an AMC has been diligent in empanellingthe brokers, in monitoring securities transactions with brokers andavoiding undue concentration of business with any broker.

6. The Trustees shall ensure that the AMC has not given any undue orunfair advantage to any associates or dealt with any of the associates of the AMC in any manner detrimental to interest of the unitholders.

7. The Trustees shall ensure that the transactions entered into by the AMC

are in accordance with the SEBI Regulations and the scheme.8. The Trustees shall ensure that the AMC has been managing the Mutual

Fund schemes independently of other activities and have taken adequatesteps to ensure that the interest of investors of one scheme are not beingcompromised with those of any other scheme or of other activities of theAMC.

9. The Trustees shall ensure that all the activities of the AMC are inaccordance with the provisions of the SEBI Regulations.

10. Where the Trustees have reason to believe that the conduct of businessof the Mutual Fund is not in accordance with the SEBI Regulations andthe scheme, they shall forthwith take such remedial steps as are necessaryby them, and shall immediately inform SEBI of the violation and theaction taken by them.

11. Each Trustee shall file the details of his transactions (exceeding Rs. 1lac) 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 property

of the respective schemes and shall hold the same in trust for the benefitof the unitholders in accordance with the SEBI Regulations and theprovisions of trust deed.

13. The Trustees shall take steps to ensure that the transactions of the MutualFund are in accordance with the provisions of the trust deed.

14. The Trustees shall be responsible for the calculation of any income dueto be paid to the Mutual Fund and also of any income received in theMutual Fund for the holders of the units of any scheme in accordancewith the SEBI regulations and the trust deed.

15. The Trustees shall obtain the consent of the unitholders -

a) whenever required to do so by SEBI in the interest of the unitholders;or

b) whenever required to do so on the requisition made by three-fourthsof the unitholders of any scheme; or

c) when the majority of the Trustees decide to wind up or prematurelyredeem the units;

15A. The trustees shall ensure that no change in the fundamental attributesof any scheme or the trust or fees and expenses payable or any otherchange which would modify the scheme and affects the interest of unitholders, shall be carried out unless, -

a) a written communication about the proposed change is sent to eachunitholder and an advertisement is given in one English dailynewspaper having nationwide circulation as well as in a newspaperpublished in the language of the region where the Head Office of the Mutual Fund is situated; and

b) the unitholders are given an option to exit at the prevailing Net Asset Value without any exit load.”

Explanation: For the purposes of this clause “fundamental attributes” meansthe type of a scheme, investment objective and terms of a scheme.

16. The Trustees shall call for the details of transactions in securities by thekey personnel of the AMC in his own name or on behalf of the AMC andshall report to SEBI, as and when required.

17. The Trustees shall quarterly review all transactions carried out betweenthe Mutual Fund, AMC and its associates.

18. The Trustees shall review the net worth of the AMC on a quarterly basisand in case of any shortfall, ensure that the AMC make up for the shortfallas per clause (f) of sub-regulation (1) of regulation 21 of SEBI Regulations

19. The Trustees shall periodically review all service contracts such ascustody arrangements, transfer agency of the securities and verify itthat 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 AMC and the interest of the unitholders.

21. The Trustees shall periodically review the investor complaints receivedand the redressal of the same by the AMC.

22. The Trustees shall abide by the Code of Conduct as specified in the FifthSchedule of SEBI Regulations.

23. The Trustees shall furnish to SEBI on a half yearly basis -

d) a report on the activities of the Mutual Fund;

e) a certificate stating that the Trustees have satisfied themselves thatthere have been no instances of self dealing or front running by anyof the Trustees, directors and key personnel of the AMC;

f) a certificate to the effect that the AMC has been managing theschemes independently of any other activities and in case any activities of the nature referred to in sub-regulation (2) of regulation24 have been undertaken by the AMC and has taken adequate stepsto ensure that the interest of the unitholders are protected.

24. The independent Trustees referred to in sub-regulation (5) of regulation16 of SEBI Regulations shall give their comments on the report receivedfrom the AMC regarding the investments by the Mutual Fund in thesecurities of group companies of the sponsor.

25. Trustees shall exercise due diligence as under:

General Due Diligence

a) The Trustees shall be discerning in the appointment of the Board of Directors of the AMC.

b) The Trustees shall review the desirability of continuance of AMC if substantial irregularities are observed in any of the schemes andshall not allow the AMC to float new schemes.

c) The Trustees shall ensure that the trust property is properly protected, held and administered by proper persons and by a propernumber of such persons.

d) The Trustees shall ensure that all service providers are holding appropriate registrations from SEBI or concerned regulatory author

ity.

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

f) The Trustees shall immediately report to SEBI of any special developments in the Mutual Fund.

Specific Due Diligence

The Trustees shall

a) Obtain internal audit reports at regular intervals from independentauditors appointed by the Trustees

b) Obtain compliance certificates at regular intervals from the AMC.

c) Hold meeting of Trustees more frequently.

d) Consider the reports of the independent auditor and compliance reports of AMC at the meetings of Trustees for appropriate action.



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e) Maintain records of the decisions of the Trustees at their meetingsand of the minutes of the meetings.

f) Prescribe and adhere to a code of ethics by the Trustees, AMC andits personnel.

g) Communicate in writing to the AMC of the deficiencies and check ing the removal of deficiencies.

26. Notwithstanding anything contained herein above from points (1) to (25)the Trustees shall not be held liable for acts done in good faith if theyhave exercised adequate due diligence honestly.

27. The Trustees shall pay specific attention to the following as may beapplicable, namely -

a) The Investment Management Agreement and the compensation paidunder the agreement.

b) Service contracts with affiliates whether the AMC has charged higherfees than outside contractors for the same services.

c) Selection of the AMC independent directors.

d) Securities transactions involving affiliates to the extent such transactions are permitted.

e) Selecting and nominating individuals to fill independent directorsvacancies.

f) Code of ethics must be designed to prevent fraudulent, deceptive ormanipulative practices by insiders in connection with personal securities transactions,

g) The reasonableness of the fees paid to the sponsors, AMC and anyother for services provided.

h) Principal underwriting contracts and the renewals.

i) Any service contract with the associates of the AMC.

Unitholders’ Consent

Pursuant to clause 15 of regulations 18 of the SEBI Regulations, theTrustees shall obtain the consent of the unitholders of the Scheme, entirely atthe option of the Trustees, either at a meeting of the unitholders or throughpostal ballot or any other mode of communication in conformity with theRegulations and /or SEBI Regulations, in the interest of unitholders.Unitholders are entitled to one vote per unit held on all matters to be votedupon by unitholders.

Trusteeship Fees

Pursuant to the Deed of Trust constituting the Mutual Fund, the Mutual Fundis authorized to paytrusteeship fees.

Trusteeship fees payable is as under:

Trustee Fee: A sum of 0.01% p.a. of the daily average net assets of the TrustFund and all the schemes with a minimum of Rs. 5 lacs.

VIII. MANAGEMENT OF THE FUND

INVESTMENT MANAGER - PRINCIPAL ASSET MANAGEMENTCOMPANY PRIVATE LIMITED

Principal Asset Management Company Limited is the Investment Managerto Principal Mutual Fund. As investment manager to the Fund, the AMC willframe, float and issue schemes from time to time after seeking approval fromthe Trustee and SEBI as well as manage the Funds mobilized under the variousschemes, in accordance with the investment objectives of the respectiveSchemes, the provisions of the Trust Deed and the SEBI Regulations. TheAMC is also responsible for coordination with the registrar, brokers, andagents, ensuring compliance with regulatory and statutory provisions andsubmitting necessary compliance reports to regulatory bodies.

In terms of the Investment Management Agreement dated November 25,1994 the Trustees appointed IDBI Investment Management Company Limited(IIMCO), as the AMC to manage the Mutual Fund. Previously IIMCO was awholly owned subsidiary of IDBI. Principal Financial Services Inc. USA,acquired 50% stake in the paid up equity capital of IIMCO on March 31,2000 through its subsidiary Principal Financial Group (Mauritius) Limited.Subsequently the name of the AMC was changed to IDBI-PRINCIPAL AssetManagement Company Limited.

Principal Financial Services Inc. USA, acquired 100% stake in the paid upequity capital of IDBI-PRINCIPAL Asset Management Company Limited,through its subsidiary Principal Financial Group (Mauritius) Limited on June23, 2003. Subsequently the new name of the AMC was changed to PrincipalAsset Management Company Private Limited, to reflect the change inownership.

On April 30, 2004, Punjab National Bank and Vijaya Bank have becomeequity shareholders of the AMC. The present share holding pattern of the AMC is as follows:

Name of the share holder % of equity capital

Principal Financial Services, Inc. USA through its 65Mauritius based subsidiary Principal Financial Group(Mauritius) Limited and its nominees

Punjab National Bank 30

Vijaya Bank 5

Both Punjab National Bank and Vijaya Bank are Scheduled CommercialBanks . PNB has a network of over 4,000 branches and 400 extension countersthroughout India and offers a wide variety of banking services. VB has builta network of over 800 branches that span all 28 states and 4 union territoriesin the country.With the proposed change, Principal Asset ManagementCompany Private Limited would be in a position to leverage the combinedand far-reaching distribution networks of PNB and VB, including more than5,000 combined retail and commercial banking branches and over 40 millioncustomers throughout India, along with Principal’s international expertiseand its position as a recognized and prominent manager of mutual funds inIndia.

The AMC can be terminated by a majority of the Trustees or 75% of theunitholders in the Fund opting so, subject to scrutiny and approval of SEBI.The AMC at present is managing 19 schemes of Principal Mutual Fund asfollows:

1. Eight Equity Schemes: Principal Growth Fund, Principal Equity Fund,Principal Tax Savings Fund, Principal Index Fund, Principal Global

Opportunities Fund, Principal Resurgent India Fund, Principal DividendYield Fund & Principal Personal Tax Saver.

2. Two Balanced Schemes: Principal Balanced Fund, Principal Child BenefitFund

3. Nine Debt Schemes: Principal Income Fund, Principal Cash ManagementFund, Principal Government Securities Fund, Principal Monthly IncomePlan, Principal Deposit Fund, Principal Trust Benefit Fund, PrincipalPNB Debt Fund and Principal Money Value Bond Fund and PrincipalFloating Rate Fund.

The total assets under management from all these schemes as of November 30, 2004 were over Rs 5000 crore.

AMC has been granted approval by SEBI to function as an AssetManagement Company of the Mutual Fund, and shall be responsible,inter alia, for the following:

1. Launching and operating the various schemes of the Mutual Fund

2. Performing Investment Management functions for various schemes of

the Fund.3. Ensuring that the investment of the assets pertaining to any scheme is

made in accordance with the provisions of the SEBI Regulations and theTrust Deed.

4. Ensuring that adequate disclosures are made to the unitholders and toSEBI regarding the performance of the Fund, in accordance with SEBIRegulations.

Besides the offering and management of Schemes offered by Principal MutualFund, the AMC may undertake activities in the nature of management andadvisory services to any entity, pension Funds, venture capital Funds;administration and record keeping of provident Fund; developing andmarketing pension and pension related products and financial consultancyand exchange of research on a commercial basis.

Investment Management Fees

The AMC shall be entitled to fees as permitted under SEBI Regulations which

is presently as under:

- 1.25% of the weekly average net assets outstanding in each accounting year for the scheme concerned as long as the net assets do not

exceed Rs. 100 Crores, and

- 1% of the excess amount over Rs. 100 Crores, where net assets ex

ceed Rs. 100 Crores.

Duties and Responsibilities of the AMC

1. The AMC shall take all reasonable steps and exercise due diligence toensure that the investment of money pertaining to any scheme is not

contrary to the provisions of the SEBI Regulations and the Trust Deed.

2. The AMC shall exercise due diligence and care in all its investment

decisions as would be exercised by other persons engaged in the same

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3. The AMC shall be responsible for the acts of commissions or omissionsby its employees or the persons whose services have been procured bythe AMC.

4. The AMC shall submit to the Trustees quarterly reports of each year onits activities and the compliance with SEBI Regulations.

5. The Trustees at the request of the AMC may terminate the assignment of the AMC at any time. Provided that such termination shall becomeeffective only after the Trustees have accepted the termination of assignment and communicated their decision in writing to the AMC.

6. Notwithstanding anything contained in any contract or agreement of termination, the AMC or its Directors or other officers shall not be

absolved of liability to the Mutual Fund for their acts of commission oromission, while holding such position or office.

6A. The Chief Executive Officer of the asset management company shallensure that the mutual fund complies with all the provisions of SEBIRegulations and that the investments made by the fund managers are inthe interest of the unitholders and shall also be responsible for the overallrisk management function of the mutual fund.

6B. The fund manager/s shall ensure that the funds of the schemes are investedto achieve the objectives of the scheme and in the interest of the unitholders.

7. a) The AMC shall not through any broker associated with the Sponsor, purchase or sell securities, which on an average is 5% or moreof the aggregate purchases and sale of securities made by the Mutual Fund in all its schemes.

Provided that for the purpose of this sub-regulation, aggregate purchase and sale shall exclude sale and distribution of units issued bythe Mutual Fund.

Provided further that the aforesaid limit of 5% shall apply for a block of any three months.

b) The AMC shall not purchase or sell securities through any broker(other than a broker referred to in clause (a) of sub-regulation (7))which is on an average of 5% or more of the aggregate purchase andsale of securities made by the Mutual Fund in all its Schemes, unless the AMC has recorded in writing the justification for exceedingthe limit of 5% and reports of all such Investments are sent to theTrustees on a quarterly basis. Provided that the aforesaid limit of 5% shall apply for a block of 3 months.

8. The AMC shall not utilize the services of the Sponsor or any of itsassociates, employees or their relatives, for the purpose of any securitiestransaction and distribution and sale of securities: Provided that an AMCmay utilize such services if disclosure to that effect is made to theunitholders and the brokerage or commission paid is also disclosed inthe half yearly annual accounts of the Mutual Fund.

Provided further that the Mutual Fund shall disclose at the time of

declaring half-yearly and yearly results:- any underwriting obligations undertaken by the schemes of the Mutual

Fund with respect to issue of securities of associate of companies,

- devolvement, if any,

- subscription by the schemes in the issues lead managed by associatecompanies.

- Subscription to any issue of equity or debt on private placementbasis where the sponsor or its associate companies has acted asarranger or manager.

9. The AMC shall file with the Trustees the details of transactions insecurities by the key personnel of the AMC in their own name or onbehalf of the AMC and shall also report to SEBI, as and when requiredby SEBI.

10. In case the AMC enters into any Securities transactions with any of itsassociates a report to that effect shall be sent to the Trustees at its nextmeeting.

11. In case any company has invested more than 5 percent of the NAV of ascheme, the investment made by that scheme or by any other scheme of the Mutual Fund in that company or its subsidiaries shall be brought tothe notice of the Trustees by the AMC and be disclosed in the half yearlyand annual accounts of the respective schemes with justification for suchinvestment, provided the latter investment has been made within oneyear of the date of the former investment calculated on either side.

12. The AMC shall file with the Trustees and SEBI :

- Detailed bio-data of all its directors along with their interest in othercompanies within fifteen days of their appointment; and

- Any change in the interest of Directors every six months.

- A quarterly report to the Trustees giving details and adequate justification about the purchase and sale of the Securities of the groupcompanies of the sponsor or the AMC as the case may be, by theMutual Fund during the said quarter.

13. A statement of holdings in securities of the Directors of the AMC shallbe filed with the Trustees with dates of acquisitions of such Securities atthe end of each financial year. As per the SEBI Circular no. MFD/CIR/ 10/039/2001 dt February 9, 2001, the directors of AMC shall file thedetails of transactions exceeding Rs. 1 lac in securities with the trusteeson a quarterly basis.

14. The AMC shall not appoint any person as key personnel who has beenfound guilty of any economic offence or involved in violation of securities laws.

15. The AMC shall appoint Registrars and Share Transfer Agents who areregistered with SEBI. Provided if the work relating to the transfer of

units is processed in-house, the charges at competitive market rates maybe debited to the scheme and for rate higher than the competitive marketrates, prior approval of the Trustees shall be obtained and reasons forcharging higher rates shall be disclosed in the annual accounts.

16. The AMC shall abide by the Code of Conduct as specified in the FifthSchedule of SEBI Regulations.

Board of Directors

The Board of Directors of the AMC consists of eminent persons from thefields of finance, investments, civil service, law and economics.


Mr. ARPAN. N. THANAWALA –Thanawala Consultancy Services101, Swagatam,S.V. Road, Opp. Khar Police Station,Khar (W), Mumbai 400 052.Consulting Actuary

Mr. SANJAY SACHDEV* - Principal Consulting (India) MD & CEO Private Ltd.5th Floor, Apeejay House, - Principal Financial Group3 Dinshaw Vachha Road, (Mauritius) LimitedChurchgate, Mumbai 400 020. - Association of Mutual Funds inConsulting Actuary India (AMFI)

Dr. AMIT MITRA - Steel Authority of India Ltd.Secretary General - Gas Authority of India Ltd.Federation of Indian Chambers of - Advisory Board, UTI India FundCommerce and Industry (FICCI) - Sriram Centre for IndustrialFederation House, Tansen Marg, Relations and Human ResourcesNew Delhi 110 001.Professional Director

Mr. RUSTAM. J. GAGRAT - Potash Fertilisers (India) Pvt. Ltd. Advocate - Indo Aden Salt Manufacturing andGagrat & Co. Trading Co. Pvt. Ltd.Alli Chambers, N. Master Road,Fort, Mumbai 400 001 Advocate

Mr. RAJAT JAIN * –Chief Investment Officer 5th floor, Apeejay House,3 Dinshaw Vachha RoadChurchgate, Mumbai – 400 020Company Executive

MR. ARUN KAUL* - PNB Gilts LtdGeneral Manager - National Multi-commodityPunjab National Bank - Exchange of India Ltd.7, Bhikhaiji Cama PlaceNew Delhi-110 066Company Executive.

* Associate directors in terms of SEBI (Mutual Funds) Regulations 1996, amendedfrom time to time.

Key Personnel and their Relevant Experience

Sr. Name, Qualification, Past Experience

No. Designation, Age1. Mr. Sanjay Sachdev Mr. Sachdev has a rich international experi-

LLB, F.L.M.I. (USA), ence of over 20 years, eleven of which haveMIM (USA), L.L.I.F., CFP been spent working with the Pension and MD & CEO Mutual Fund operations at the Principal41 years Financial Group. Prior to that he served as

Regional Finance Manager with a largemultinational company, Pioneer.

2. Mr. Rajat Jain Over 14 years experience in InvestmentB.E. PGDM Management. In his previous assignmentsChief Investment Officer with SBI Funds Management Ltd., he has41 years handled investment functions in various

capacities including Chief InvestmentOfficer, Fund Manager, Head of Research and Equities Dealer.



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Sr. Name, Qualification, Past ExperienceNo. Designation, Age

3. Mr. Rajan Krishnan Around 18 years of experience in the areaBA (Hons) Economics, of sales & marketing. Of which the lastPGDBM nine years have been in the area of mutualVice President – funds. Latest assignments include those asSales & Marketing Vice President – Sales at Kothari Pioneer41 years and as Vice President – Sales & Marketing

at Zurich India Mutual Fund. Experienceprior to that includes Client Servicingstints at advertising agencies includingLintas, Ogilvy & Mather and MAA Bozell.

4. Mr. Sudhin Padhye Over 15 years experience in the fields of B.Com., A.C.A., ope rations, finance, a ccounts, audit andGrad. C.W.A., CISA administration. In his previous assignmentsVice President – Operations he worked with BNP Paribas and Peregrine40 years Capital as Head-Operations for their equity

broking business. Prior to that, he workedin the Finance and Accounts departmentsof Apple Industries and Goodlass NerolacPaints in managerial capacity.

5. Mr. Binay Chandgothia Over 10 years Experience in Investment andB.Com, PGDBM Treasury Management. In his previous Deputy Chief Investment assigments he worked with SBI FundsOfficer and Management Ltd. as Fund Manager (Fixed Head - Fixed Income Income) and with State Bank of India as34 years Dealer (Fixed Income Securities)

6. Mr. Shyamsunder Bhat Over 10 years experience in equity fundB.E., M.M.S. management. In his previous assignmentsSr. Fund Manager - Equity he worked with Tata Mutual Fund as Fund32 years Manager - Equity.

7. Mr. Ritesh Jain Over 10 years experience in areas of B’Com, ACA, finance, treasury, tax and audit. In hisGrad. CWA, CS previo us assig nment he worked withChief Financial Officer Morgan Stanley, for their asset management31 years and custody business as Financial

Controller and with JM Morgan Stanley fortheir securities business as Treasurer.

(All key personnel based at Mumbai)

The research team comprising following members will support the FundManager.

Sr. Name, Qualification and ExperienceNo. Designation

1. Ms. Vaneeta Bhojwani Over nine years experience inB.Com, MMS (Finance) Equity Research & Financial Investment Analyst Service

2. Ms. Pallavi Deshpande Over four years experience in

B.Com, MMS (Finance) Equity Research Investment Analyst

3. Mr. Pankaj Tibrewal Over one year experience inMBA debt market analysis Manager - Fixed Income

Fund Manager

Mr. Rajat Jain whose details are given above shall be the Chief InvestmentOfficer. Mr. Rajat Jain will be assisted by Mr. Shyamsunder Bhat and Mr.Binay Chandgothia (whose details are also given above), who shall managethe Scheme.

Compliance Officer

Ms. Sonali BendkePrincipal Asset Management Company Private LimitedApeejay House, 5th Floor, 3 Dinshaw Vachha Road, Mumbai 400 020Telephone No: 56590333

CUSTODIAN

Citibank NA,

The Trustee has appointed Citi Bank NA, as the Custodian to the scheme.Citibank N.A is registered as a custodian with SEBI under number IN/CUS/ 004 dated April 7, 1998. The Custodian shall hold the custody and possessionof the securities and investments of the scheme and will discharge all functionsas are ordinarily discharged by a depository institution. It does not have anypower or authority to sell or dispose of or deal with the securities/investmentsheld by it on behalf of the Fund except as instructed by the AMC.

The AMC reserves the right to change the custodian, if required.

The salient features of the Custodian Agreement with Citibank are as under:

• Keeping in safe custody all the securities and such other instrumentsbelonging to the Scheme segregated from the other assets of the custodian

and from the assets of other clients of the Custodian and shall be held inthe name of the Trustee(s) a/c Fund or Scheme or custodian a/c Schemeor in such other manner as may be mutually agreed.

• Ensuring the smooth inflow/outflow of securities and such otherinstruments as and when necessary, in the best interests of the unitholders.

• Ensuring that the benefits due to the holdings are recovered.

• Responsibility for loss of /or damage to the securities due to fraud, badfaith, negligence, willful neglect, default or willful default on its part oron the part of its approved agents.

The Custodian will charge the Fund a fee in accordance with the terms of theCustodian Service Agreement entered into between the Custodian and the

Mutual Fund. The Custodian Agreement may be terminated upon 60 daysprior written notice or earlier upon certain breaches.

REGISTRAR AND TRANSFER AGENT

Karvy Computershare Pvt. Ltd.

Karvy Computershare Pvt. Ltd., Hyderabad has been appointed as theRegistrar and Transfer Agent for the Fund. The Registrar is registered withSEBI vide registration no. INR000000221.

The AMC and the Trustees have satisfied themselves that the Registrar hasadequate Capacity to discharge responsibilities with regard to processing of applications and despatching Account Statement, etc. to unitholders withinthe time limit as per SEBI Regulations and can also provide other servicesrequired, including handling investor complaints and have adequate facilitiesto do so and discharge responsibilities. As Registrar to the Scheme, theRegistrar will accept and process unitholders applications and advise the AMCas to the amounts received for subscriptions (duly reconciled) during theongoing subscription period. They will also handle communications with

unitholders, unitholder’s grievances, perform data entry services and dispatchAccount Statement, or any instrument, received on processing redemption/ repurchase/switch requests on a continuous basis. They will also maintain anupdated, accurate form for the register of unitholders of the Fund and otherrecords as may be required by SEBI Regulations and the laws of India.

The Registrar is thus responsible for carrying out the functioning of Registrarand Transfer Agent set out in the agreement entered into with it and as perany modifications from time to time. The Registrar will be entitled toremuneration for its services as per the terms of the Registrars’ Agreement.The AMC reserves the right to change the Registrar. The unitholders willthen be informed accordingly. The Registrar Agreement may be terminatedupon 90 days prior written notice or earlier upon certain breaches.

STATUTORY AUDITORS

M/s. Haribhakti & Co.

M/s. Haribhakti & Co., Chartered Accountants, 42 Free Press House, 4 th

Floor, 215 Nariman Point, Mumbai – 400 021 have been appointed as the

auditors for all the schemes of Principal Mutual Fund. The Trustee has theright to appoint, or change the Auditors for any or all of the Schemes thatmay be floated by the Fund.

IX. INVESTMENT POLICIES AND STRATEGY

INVESTMENT POLICIES

PRINCIPAL Child Benefit Fund is a Scheme within the family of Scheme(s)of Principal Mutual Fund managed to a separate investment objective. TheScheme will be managed through a separate investment portfolio. Allinvestments will be made in accordance with SEBI regulations.

Any change in the investment composition of the Scheme and amounting toa change in the fundamental attributes of the Scheme will be in accordancewith sub regulation 15A of regulation 18 of SEBI Regulations. However,the AMC may from time to time, for a short term, alter the asset compositionon defensive consideration and may also invest upto 100% of the assets inovernight bank call, the primary motive being to protect the Net Asset Value

of the Scheme and protect unitholders interest so also to earn reasonablereturns on liquid assets maintained for redemption of units.

In the normal course all income earned & realized profits in respect of a unitwill continue to remain invested until repurchased & shall be deemed tohave remained invested, which will be reflected in the NAV.

The two Plans under each option of the Scheme will have separate unit capital,NAV investments and separate balance sheets and profit and loss account.Also, the units outstanding under both the Plans may be different due tovarying subscriptions, while the investment strategy would be similar theremay be dissimilarities in the asset composition in terms of securities.

Notwithstanding anything stated aforesaid, the Trustees/AMC reserves theright to have one common portfolio with similar asset allocation for eachplan of the option(s) under the Scheme with a Common Corpus, Balancesheet etc, should the reasons of expediency, cost, interest of unitholders and



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other circumstances make it necessary for the Fund to do so.

Short-term surpluses, pending deployment can be deployed in the inter-bank call money market, repurchase obligations (repos) or short term corporatepapers. The inter-bank call money market sees daily volumes of more thanRs.10,000 crore. In longer-term assets, sovereign bonds (governmentsecurities and treasury bills) which are the most liquid instruments dominatethe market. Banks, Institutions, Primary Dealers and Mutual Funds are thedominant participants in this market. Some corporations also deal actively tomanage their treasury positions. As of date, daily volumes in this segmentrange between Rs.400-1000 crore on an average. Other instruments availablefor investment are commercial papers, certificates of deposits, promissorynotes, non-convertible debentures, securitised instruments etc. Most of these

instruments are listed on NSE by the issuers. Deals in corporate papers havegone up in the last one year with increased issuance and trading. Withdematerialisation of corporate debt now possible it is expected that the segmentwould be even more liquid in the future.

Change in Investment Pattern:

The asset allocation pattern for the Super Saver option under normalcircumstances would clearly attempt to keep the equity component of theportfolio between 40%-60% & debt component between 60% - 40%. Suddenand sharp movements in equity markets may cause these limits to be violated.AMC will be endeavor to immediately bring these violations under control.It is expected that the violations shall not exceed 3% on either side.

The asset allocation pattern for the Super Saver Plus option under normalcircumstances would clearly attempt to keep the equity component of theportfolio between 60%-80% & debt component between 40% - 20%. Suddenand sharp movements in equity markets may cause these limits to be violated.AMC will be endeavor to immediately bring these violations under control.

It expected that the violations shall not exceed 3% on either side.The overall portfolio structuring would aim at moderate to low levels of risk while there is no assurance that the objective of the Scheme may be achieved.The Trustees may from time to time modify the investment compositionprovided such modification is in accordance with the Scheme objective andRegulations and as amended from time to time including by way of Circulars,Press Releases, Notification issued by SEBI or the Government of India toregulate the activities and growth of Mutual Funds, the intention being toprotect the Net Asset Value of the Scheme and unitholders’ interest. Pendingdeployment of the funds in terms of the investment objectives of the Scheme,100% of the Scheme’s assets may be invested in money market instruments.

INVESTMENT STRATEGIES

The scheme is part of the family of Scheme(s) of Principal Mutual Fund,having a distinct investment strategy. The scheme will be managed with astrategy best suited for the Scheme and investing in securities as stated in theclause “SCHEME FEATURES”. As the Scheme would be investing insecurities having distinct features as regards to its position in the market

availability, listing, yields, liquidity, risk etc., Unitholders are requested torefer to the various clauses under “Special Considerations” before takingany decision for investment in the Scheme.

Super Saver Option

Under this option, investment would be primarily in equity and equity relatedinstruments besides debt securities. In selecting equities the InvestmentManager looks for companies that have predictable earnings and which basedon growth prospects, it believes are undervalued in the market place. Theinvestment Manager would buy securities with the objective of long-termcapital appreciation. Equity securities in which investment would be madeshall normally generate dividend income. From time to time, the AMC shallpurchase securities with the expectation of price appreciation over the shortterm. In response to changes in economic conditions, the Investment Managermay change the make-up of the portfolio and emphasize different marketsectors by buying and selling the portfolio’s securities.

This option under the scheme shall generate interest income by investing indebt securities. Debt securities are also purchased for capital appreciationpurposes when the Investment Manager thinks that declining interest ratesmay increase market value. Deep Discount debt securities may also bepurchased to generate capital appreciation/income.


Under this option the Scheme seeks to achieve its objective by investing inequities and other equity related securities. In selecting securities forinvestment, the Investment Manager would look at securities it believes haveprospects for above average growth over an extended period of time. TheInvestment Manager uses an approach described as “fundamental analysis”as its selection process.

The three basic steps of fundamental analysis are:

1) Research – consideration of economic prospects over the next one totwo years rather than focusing on near term expectations. This approach

is designed to provide insight into a company’s real growth potential.

2) Valuation – use of the research to allow the Investment Manager toidentify segments of the market for investment. The Investment Managerwould consider various factors including sustainable, superior earningsgrowth and above average or accelerating rates of growth.

3) Securities selection – The Investment Manager would buy and sellsecurities using its research and valuation as the basis. It attempts toidentify the individual issuers that it considers to have high growthpotential, that are market share leaders and/or have high qualitymanagement with consistent track records and solid balance sheets.

INVESTMENT DECISIONS MAKING PROCESS:

There is a separate team for investment in fixed-income instruments andequities. The team works under the supervision of CIO. The CIO is overall incharge for the Fund’s investment.

Debt – Decision making process :

The debt team comprises the Fund Manager, Credit Analyst and Dealer. TheFund Manager holds charge of the schemes under his management. He isresponsible for the performance of the schemes under him. The role of CreditAnalysts is to study all companies in which the fund is investing for creditquality. The Dealer executes the trading mandates that are passed onto himwith a view to getting the best execution in terms of price and quantity.

A Credit Committee (CC) comprising Chief Executive Officer, Chief FinancialOfficer, Chief Investment Officer and the Debt Fund Manager has beenconstituted to approve the investment in Securities having credit risks. Thedecision making in the committee is by majority vote and the quorum is twomembers. The investment proposals in specified format are put up before thecommittee for their approval. The fund manager can invest only in those

credits that have been approved by the committee. Minutes are being kept torecord the decision taken at the credit committee meeting. In case of unratedpapers, same are circulated to Board of Directors of AMC and TrusteeCompany for their approval before making an investment. No specificapproval is required for investment in government securities andtreasury bills.

Equities – Decision making process :

Equity team comprises of Fund Manager, Equity Analysts & Dealer. TheFund Manager holds charge of the schemes under his management. He isresponsible for the performance of the schemes under him. Analysts haveresponsibilities for specific sectors and it is their duty to provide the fundmanagers with well researched opinions on the companies and the sectorsthey track. The dealer executes the trading mandates that are passed ontohim with a view to getting the best execution in terms of price and quantity.The analysts/fund managers meet companies, if possible at one on onemeetings or at analyst/fund manager meets. Equity group meets once a week to discuss the following;

1. Presentations on all the companies met during the past week;

2. Review of the portfolio and action to be taken

3. Review of the sectors by the analysts.

The analysts/fund managers/CIO prepares a report (research report) inspecified format on the companies they have covered during the past week.The trade mandates are given to the dealer by the fund manager. The mandate,once approved is valid for a week and will lapse automatically if not executed.

The AMC has been recording investment decisions since the receipt of instructions from SEBI.

Review by Board of AMC and Trustees

A detailed review of the schemes of the fund is placed before the Board of Directors of the AMC and to the Board of Trustees on a quarterly basis. Thereview talks about the portfolio of the fund and the composition of the portfolioand the directors and the trustees are in a position to monitor the same.

Benchmark for comparison of performance

Performance of Super Saver Option would be compared against suitable benchmark comprising 60% weightage of NIFTY and 40% of I-Sec Bond Indexand/or other similar schemes in the industry. In case of Super Saver PlusOption its performance will be compared against NIFTY and/or against theperformance of other similar schemes in the industry.

INVESTMENT LIMITATIONS

Pursuant to SEBI Regulations the following investment limitations areapplicable:

1. A Mutual Fund scheme shall not invest more than 15% of its NAV indebt instruments (of any residual maturity period) issued by a singleissuer which are rated not below investment grade by a credit ratingagency authorized to carry out such activity under the Act. Suchinvestment limit may be extended to 20% of the NAV of the scheme



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with the prior approval of the Board of Trustees and the Board of theAMC. Provided that such limit shall not be applicable for investmentsin government securities and money market instruments (other thandebentures).

Provided further that the debentures irrespective of any residual maturityperiod (above or below one year) shall attract restriction as applicableunder clause 1 and 1A of Seventh Schedule to SEBI (Mutual Funds)Regulations 1996.

2. A Mutual Fund scheme shall not invest more than 10% of its NAV inunrated debt instruments(of any residual maturity) issued by a singleissuer and the total investment in such instruments shall not exceed 25%of the NAV of the scheme. All such investments shall be made with theprior approval of the Board of Trustees and the Board of the AMC.

3. No Mutual Fund under all its schemes taken together should own morethan ten per cent of any company’s paid up capital carrying voting rights.

4. Transfers of investments from one scheme to another scheme in the sameMutual Fund shall be allowed only if -

- Such transfers are done at the prevailing market price for quotedinstruments on spot basis.

Explanation - “Spot basis” shall have same meaning as specifiedby stock exchange for spot transactions.

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

5. A scheme may invest in another scheme under the same AMC or anyother Mutual Fund without charging any fees, provided that aggregateinterscheme investment made by all schemes under the same managementor in schemes under the management of any other AMC shall not exceed

5% of the NAV of the Mutual Fund.6. The initial issue expenses in respect of any scheme may not exceed six

per cent of the Funds raised under that scheme.

7. Every Mutual Fund shall buy and sell securities on the basis of deliveriesand shall in all cases of purchases, take delivery of relative securitiesand in all cases of sale, deliver the securities and shall in no case putitself in a position whereby it has to make short sale or carry forwardtransaction or engage in badla finance.

Provided that the Mutual Funds shall enter into derivatives transactionsin a recognized stock exchange for the purpose of hedging and portfoliobalancing in accordance with the guidelines issued by SEBI.

8. Every Mutual Fund shall get the securities purchased or transferred inthe name of the Mutual Fund on account of the concerned scheme,wherever investments are intended to be of long-term nature.

9. Pending deployment of Funds of a scheme in securities in terms of investment objective of the scheme a Mutual Fund can invest the Fundsof the scheme in short term deposits of scheduled commercial banks.

10. No Mutual Fund scheme shall make any investment in :

- any unlisted security of an associate or group company of the sponsor; or

- any security issued by way of private placement by an associate orgroup company of the sponsor; or

- the listed securities of group companies of the sponsor which is inexcess of 25% of the net assets

11. No Mutual Fund scheme shall invest more than 10% of its NAV in theequity shares or equity related instruments of any company.

Provided that the limit of 10% shall not be applicable for investments inindex scheme or sector or industry specific scheme.

12. A Mutual Fund scheme shall not invest more than 5% of its NAV in theunlisted equity shares or equity related instruments in case of open endedscheme and 10% of its NAV in case of close ended scheme.

13. Aggregate value of “Illiquid Securities” of the Scheme, which are defined

as non-traded, thinly traded and unlisted equity share, shall not exceed15% of the total assets of the Scheme.

14. The Scheme may also use various hedging and derivative products fromtime to time as available and permitted by SEBI, in an attempt to protectand enhance the interests of unitholders at all times.

15. The Mutual Fund having an aggregate of securities which are worthRs.10 crores or more as on the latest balance sheet date, shall subject tosuch instructions as may be issued from time to time by SEBI, settletheir transactions entered on or after January 15, 1998 only throughdematerialised securities.

These investment limitations/parameters (as expressed/linked to the net asset / NAV / capital) shall in the ordinary course apply as of the date of the mostrecent transaction or commitment to invest, and changes do not have to beeffected merely because, owing to appreciation or depreciation in value, or

by reason of the receipt of any rights, bonuses or benefits in the nature of capital, or of any scheme of arrangement, or for amalgamation, reconstructionor exchange, or at any repayment or repurchase or other reason outside thecontrol of the Fund, any such limits would thereby be breached. If theselimits are exceeded for reasons beyond its control, the AMC shall adopt as apriority objective the remedying of that situation, taking due account of theinterests of the unitholders.

In addition, certain investment parameters (like limits on exposure to sectors,industries, issuers, etc.) may be adopted internally by the AMC, as amendedfrom time to time, to ensure appropriate diversification / security for theFund. The AMC may alter these above stated limitations from time to time,and also to the extent the SEBI Regulations change, so as to permit the Fund

to make its investments in the full spectrum of permitted investments forMutual Funds to achieve its investment objective. As such all investments of the Fund will be made in accordance with SEBI Regulations includingSchedule VII thereof.

Depository

Securities of the Scheme will be held either in physical or dematerialisedform. In case the securities are held in dematerialized (electronic) mode, therules of the Securities and Exchange Board of India (Depositories andParticipants) Regulations 1996 would apply. The service charges payable tothe Depository Participant will form a part of the annual recurring expenses.

UNDERWRITING

The scheme may also undertake underwriting and sub-underwriting activitiesin order to augment its income, after complying with the approval andcompliance process specified in the SEBI (Underwriters) Rules andRegulations, 1993 and/or Reserve Bank of India and further subject to thefollowing norms:

• The capital adequacy of the Mutual Fund for the purposes of SEBI(Underwriters) Rules and Regulations, 1993 shall be the net assets of the Scheme.

• The total underwriting obligation of the Scheme shall not exceed 50%of the total net asset value of the Scheme, or such limit as may bestipulated by the AMC and/or Trustees from time to time.

• The decision to take up any underwriting commitment shall be made asif the Scheme is actually investing in that particular security.

• As such, all investment restrictions and prudential guidelines relating toinvestments, individually and in far as may be applicable, apply tounderwriting commitments which may be undertaken under the Scheme.

These underwriting norms/parameters (as expressed/linked to the net asset/ net asset value/capital) shall in the ordinary course apply as at the date of themost recent transaction of commitment to underwrite, and changes do nothave to be effected merely because, owing to appreciation or depreciation invalue or by reason of the receipt of any rights, bonuses or benefits in the

nature of capital or of any scheme of arrangement or for amalgamation,reconstruction or exchange, or at any repayment or redemption or other reasonoutside the control of the Fund, any such limits would thereby be breached.If these limits are exceeded for reasons beyond its control, AMC shall adoptas a priority objective the remedying of that situation, taking due account of the interests of the unitholders.

As such all underwriting and sub-underwriting activities of the Fund will beundertaken in accordance with SEBI (Underwriters) Rules and Regulations,1993, and the norms as laid down by SEBI Circular dated June 30, 1994, andas amended from time to time.

POLICY AND SPECIAL CONSIDERATION ON INVESTMENT INDERIVATIVE AND HEDGING PRODUCTS

As part of the Fund management exercise, Trustees may permit the use of any hedging techniques, including trading in derivative products, futures andoptions, warrants, swaps etc. which are permissible or in the future maybecome permissible under SEBI / RBI Regulations. The Fund shall adhere tothe following guidelines of the SEBI Regulations etc. for trading inderivatives:

• Use of derivatives by the Mutual Fund shall be restricted to hedging andportfolio balancing purposes.

• The Mutual Fund shall be required to fully cover its positions in thederivative’s market by holding underlying securities / cash or cashequivalents / option and / or obligation for acquiring underlying assetsto honour the obligations contracted in the derivative’s market.

• Separate records shall be maintained for holding the cash and cashequivalents / securities for this purpose.

• The securities held shall be marked to market by the AMC to ensure fullcoverage of investments made in derivative products at all time.

• The Scheme may also use various derivatives and hedging productsfrom time to time, as would be commensurate with the scheme



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objectives, in an attempt to protect the value of the portfolio andenhance unitholders interest. Derivative and hedging strategies maybe used:

(a) for the purpose of hedging against a decline in value of the scheme’(s)NAV, and / or

(b) to seek to enhance the returns

The Scheme may write (sell) and purchase call and put options in securitiesin which it invests and on securities indices based on securities in which thescheme invests. Through the purchase and sale of futures contracts and relatedoptions on those contracts, the Fund would seek to hedge against a decline insecurities owned by the Fund or an increase in the prices of securities which

the Fund plans to purchase. The Fund may sell futures contracts on securitiesindices in anticipation of a fall in stock prices, to offset a decline in the valueof its equity portfolio. When this type of hedging is successful, the futurescontract increase in value while the Fund’s investment portfolio declines invalue and thereby keep the Fund’s net asset value from declining as much asit otherwise would. Similarly, when the Fund is not fully invested, and anincrease in the price of equities is expected, the Fund would purchase futurescontracts to gain rapid market exposure that may partially or entirely offsetincrease in the cost of the equity securities it intends to purchase. The fundshall follow SEBI circular no. SEBI/IMD/ CIR No. 4/2627/2004 datedFebruary 6, 2004 regarding the guidelines for participation by Mutual Fundsin derivatives trading. Accordingly, the scheme shall have a maximum netderivatives position upto 50% of the portfolio.

Example 1. Hedging against an anticipated rise in equity prices

The scheme has a corpus of Rs.100 crores and has cash of Rs.15 croresavailable to invest. The Fund may buy index futures of a value of Rs.15crores. The scheme may reduce the exposure to the future contract by taking

an offsetting position as investments are made in the equities, the schemewants to invest in. Here, if the market rises, the scheme gains by havinginvested in the index futures.

Example 2. Hedging against anticipated fall in equity prices:-

If the Fund has a negative view on the market and would not like to sellstocks as the market might be weak, the scheme of the Fund can go short onindex futures. Later, the scheme can sell the stocks and unwind the futurepositions. A short position in the future would offset the long position in theunderlying stocks and this can curtail potential loss in the portfolio.

The Fund’s successful use of futures contracts is subject to the Fund Manager ’sability to predict correctly the market factor affecting the market value of theFund’s portfolio securities. For example if a Fund is hedged against a fall inthe securities using a short position in index futures, and the market insteadrises, the Fund loses part or all of the benefit of the increase in securitiesprices on account of the offset losses in index futures. Imperfect co-relationbetween the price movements in the securities index on the one hand and thestocks held by the Fund or the futures contracts itself on the other hand mayresult in trading losses. The Fund may not be able to close an open futuresposition due to insufficient liquidity in the futures market. Under suchcircumstances, the Fund would be required to make daily cash payments of variation margin in the event of adverse price movements. If the Fund hasinsufficient cash, the Fund may be required to sell portfolio securities tomeet daily variation margin requirement at a time when it may bedisadvantageous to do so.

Interest Rate Swaps (IRS)

An IRS is an agreement between two parties to exchange stated interestobligations for an agreed period in respect of a notional principal amount.The most common form is a fixed to floating rate swap where one partyreceives a fixed (pre-determined) rate of interest while other receives a floating(variable) rate of interest.

Forward Rate Agreement (FRA)

A FRA is basically a forward starting IRS. It is an agreement between twoparties to pay or receive the difference between an agreed fixed rate (the

FRA rate) and the interest rate (reference rate) prevailing on a stipulatedfuture date, based on a notional principal amount for an agreed period. Theonly cash flow is the difference between the FRA rate and the reference rate.As is the case with IRS, the notional amounts are not exchanged in FRAs.

Example

Let us assume that a scheme has an investment of Rs.10 crore in an instrumentwhich pays interest linked to NSE Mibor. Since the NSE Mibor would varydaily, the scheme is running an interest rate risk on its investment and wouldstand to lose if rates go down. To hedge itself against this risk, the schemecould do an IRS where it receives a fixed rate (assume 10%) for the next 5days on the notional amount of Rs. 10 crore and pay a floating rate (NSEMibor). In doing this, the scheme would effectively lock itself into a fixedrate of 10% for the next five days. The steps would be.

1. The scheme enters into an IRS on Rs. 10 crore from April 1, 2000 to

April 6, 2000. It receives a fixed rate of interest at 10% and the counterparty receives the floating rate (NSE Mibor). The Scheme and the counterparty exchange a contract of having entered into this IRS.

2. On a daily basis, the NSE Mibor will be tracked by the counterparties todetermine the floating rate payable by the scheme.

3. On April 6, 2000, the counterparty’s will calculate the following;

• The scheme will receive interest on Rs.10 crore at 10% p.a. for 5days i.e. Rs. 136986/-

• The scheme will pay the compounded NSE Mibor for 5 days

• Effectively, the scheme has earned interest at 10% p.a. for 5 days byconverting its floating rate asset into a fixed rate through the IRS.

• If the total interest on the compounded NSE Mibor rate is lower thatRs. 136986/-, the scheme will receive the difference from thecounterparty and vice-versa. In case the interest on compoundedNSE Mibor is higher, the scheme would make a lower return thanwhat it would have made had it not undertaken IRS.

The Scheme will not invest more than 50% of its assets in the purchase of securities indices, financial futures contracts, etc. The Fund shall take exposureon a non-leveraged basis.

A hedge is designed to offset a loss on a portfolio with a gain in the hedgeposition. The Scheme may use derivative instruments primarily to hedge thevalue of portfolio against potential adverse movements is securities prices.At the same time, however, a properly correlated hedge will result in a gainin the portfolio position being offset by a loss in the hedge position. As aresult the use of derivatives could limit any potential gain from an increase invalue of the position hedged. In addition, an exposure to derivatives in excessof the hedging requirement can lead to losses. IRS and FRAs do also have

inherent credit and settlement risks. However, these risks are substantiallyreduced as they are limited to the interest streams and not the notional principalamounts.

INVESTMENT BY AMC

The AMC, and investment companies managed by the Sponsor, its affiliates,

its associate companies and subsidiaries may invest either directly or indirectlyin the Scheme. The money managed by these affiliates, associates, the Sponsor,

subsidiaries of the Sponsor and/or the AMC may acquire a substantial portionof the Scheme’s units and collectively constitute a major investment in the

Scheme. Accordingly, repurchase of units held by such affiliates/associatesand Sponsor may have an adverse impact on the units of the Scheme, becausethe timing of such repurchase may impact the ability of other unitholders to

repurchase their units. The AMC reserves the right to invest its own funds in

the Scheme as may be decided by the AMC form time to time and in

accordance with SEBI Circular no. SEBI/IMD/CIR No. 10/22701/03 datedDecember 12, 2003 regarding minimum number of investors in the Scheme/ Plan. The AMC shall not charge any fees on investment by the AMC in the

units of the Scheme in accordance with Sub Regulation 3 of Regulation 24of the Regulations and shall charge fees on such amounts in future only if the

SEBI Regulations so permit.

INVESTMENT BY THE FUND

The Scheme may invest in another scheme under the management of the

AMC or any other AMC. The aggregate inter-scheme investment by the Fundunder all its schemes [including the present Scheme] taken together, in another

scheme managed by the AMC or in any other scheme of any other MutualFund, shall not be more than 5% of the Net Asset Value of the Fund. The

AMC shall not charge any fees on the investment by the scheme in another

scheme under the management of the AMC or any other Asset ManagementCompany.

PORTFOLIO TURNOVER RATE

“Portfolio Turnover” is the term used by any Mutual Fund for measuring theamount of trading that occurs in a Scheme’s portfolio during the year.

The Scheme is an open-ended scheme. It is expected that there would be anumber of subscriptions and repurchase on a daily basis. Consequently, it is

difficult to estimate with any reasonable measure of accuracy, the likely

turnover in the portfolio. However, a high turnover would not significantly

affect the brokerage and transaction costs. This will exclude the turnovercaused on account of :

- investing the initial subscription,

- subscriptions and redemption undertaken by the unit holders.

The AMC will endeavor to balance the increased cost on account of higherportfolio turnover with the benefits derived thereof. A high portfolio turnover

rate is not necessarily a drag on portfolio performance and may be representativeof arbitrate opportunities that exist for scrips/securities held in the portfolio

rather than an indication of a change in AMC’s view on a scrip, etc.



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INTER FUND TRANSFERS

Transfers of investments from one Scheme to another Scheme in the sameMutual Fund shall be allowed only if -

- Such transfers are done at the prevailing market price for quotedinstruments on spot basis.

Explanation - “spot basis” shall have same meaning as specified bystock exchange for spot transactions.

- The securities so transferred shall be in conformity with the investment objective of the scheme to which such transfer has been

made.

BORROWING BY THE MUTUAL FUND

In terms of Regulations as presently prevailing, the Scheme shall have power

to borrow up to 20% of its net assets outstanding as on the date of borrowingfor a period of up to six months or as may be permitted by the prevailing

regulations. This borrowing shall be used only for the purpose of payingrepurchase proceeds or payment of interest or dividend to the unitholders.

The Mutual Fund may tie up with various banks / institutions for the above

mentioned facility for which it may have to give a guarantee or the deliveryof the shares/other securities held by it as collateral. The limit of 20% may be

revised by the Fund and to the extent the Regulations hereafter permit.Borrowing by the Fund on account of the Scheme will tend to increase the

impact of investment gains and losses on the NAV of the Scheme.

The borrowing limitations/parameters (as expressed/limited to the net assets/

NAV/Capital) shall in the ordinary course apply as of the date of the mostrecent transaction or commitment to borrow and changes do not have to

effected merely because, owing to appreciation or depreciation in value or at

any repayment or repurchase or other reason beyond the control of the Fund,any such limit would thereby be breached. If the limit is exceeded for reasons

beyond its control, the AMC shall adopt as a priority objective the remedyingof that situation, taking due account of the interests of the unitholders.

STOCK LENDING BY THE MUTUAL FUND

The Scheme may have to augment revenue generation, lend the securities

held by it to eligible brokers, dealers, financial institutions through approved

intermediaries, in amounts up to 75% of its total net assets at the time of lending, in accordance with the terms of the Securities Lending Schemeannounced by SEBI. The Fund may enter into an agreement with the approved

intermediary for depositing the securities for the purpose of lending throughthe approved intermediary on satisfactory terms as to security.

The Scheme would limit its exposure, with regard to securities lending, for a

single intermediary, other than the National Securities Clearing CorporationLtd (NSCCL), to the extent of 25% of the total net assets of the Scheme at

the time of lending. For NSCCL such exposure limit would be up to 75% of the total net assets of the Scheme. Collateral must be obtained by the approvedintermediary for the lending transactions and this collateral must exceed in

value, the value of the Securities lent. The collateral can be in the form of cash, bank guarantee, govt. securities or certificate of deposits or othersecurities as may be agreed upon with the approved intermediary.

It should be noted that any default/delay by the parties to return the securities

lent to them may have an adverse impact on the net assets (and consequentlythe performance) of the scheme.

INVESTMENT IN OVERSEAS FINANCIAL ASSETS

In accordance with RBI Policy announced in October 1997 and the guidelinesof SEBI announced on September 30, 1999 and March 2002 (including any

subsequent instructions/guidelines that may be issued by SEBI and/or RBI

in this regard) on overseas investment, it is the AMC belief that overseasmarkets offer new investment and portfolio diversification opportunities into

multi-market and multi-currency products. The Scheme shall (after obtaining

approval from RBI) invest in ADR’s, GDR’s, foreign equity, foreign debtsecurities etc and other overseas financial assets including securities issued

by Governments of the G-7 nations, units of mutual funds managed byoverseas Asset Management Companies/Investment Managers and registered

with overseas regulators etc, which in the judgement of the AMC is eligiblefor investment as part of the Scheme(s) portfolio and is consistent with the

investment strategy. The investment in such overseas Financial Assets shallnot exceed the limit as may be imposed by SEBI/RBI from time to time and

shall be within the investment composition. As per guidelines of SEBI

announced on September 30, 1999, March 30, 2002, November, 2002 andApril 4, 2003 investments in ADRs/GDRs/Foreign Equity and Debt Securities

by all the Mutual Funds are permitted within an overall limit of US $ 1 billionwith a sub-ceiling for individual mutual fund not to exceed 10% of the net

assets managed as on January 31 of each relevant year. e.g. the reference

date upto January 30, 2005 shall be January 31, 2004., subject to a maximum

of US$50 mn. As at the date of the offer document , the maximum available

limit with the Fund for investment in overseas financial assets is Rs 226.50Crore (US $ 50 million) and this may change depending on regulations existing

from time to time.

RBI has vide its letter no. EC.CO.OID.MF. 4914/19.09.233/2001-2002 dated

January 30, 2002, has given approval for investments in ADRs/ GDRs andForeign Debt Securities. The said RBI approval, inter alia, also gives

permission to the Mutual Fund to open one or more foreign currency accounts

abroad either directly, or through the custodian / sub custodian, to facilitate

investments and to enter into/deal in forward currency contracts, currency

futures, index options, index futures, interest rate futures/swaps, currencyoptions for the purpose of hedging the risks of assets of a portfolio or for its

efficient management provided:

a) the aggregate value and the maturity of such contracts does not exceed

the underlying overseas assets under management;

b) the use of such derivatives are meant only for hedging the exposure;

c) all fees/premium paid/ payable on such contracts, which will be deemed

as capital in nature, are within the overall limit allowed for investment

abroad;

d) for hedge contracts where option elements are built in there is no net

inflow of premium, direct or implied; and

e) in case hedge deals are booked abroad, the overseas entity is the branchof a bank operating in India.

The AMC reserves the right to increase or decrease the maximum availablelimit with the Fund based on the overall limits that may be imposed by SEBI/

RBI from time to time.

In case of foreign debt securities, the investments shall be in foreign debt

securities in the countries with fully convertible currencies, short term as

well as long term debt instruments with highest rating (foreign currency credit

rating) by accredited/registered credit rating agencies, say A-1/AAA byStandard & Poor, P-1/AAA by Moody’s, F1/AAA by Fitch IBCA, etc. and

also invest in government securities where the countries are AAA rated. Theinvestment shall also take into consideration the county rating assigned bycredit rating agencies of international repute such as Standard and Poor or

Moody, etc. The Fund may also invest in the units/securities issued by overseasmutual funds or unit trusts which invest in the aforesaid securities or are

rated as mentioned above and are registered with overseas regulators. Aspart of investment strategy, the scheme may choose to cover the currencyrisk fully or partly or may even leave the currency risk uncovered.

To manage risks associated with foreign currency and interest rate exposure

the Fund may use derivatives for efficient portfolio management including

hedging and in accordance with conditions as may be stipulated by theRegulations/RBI. The Fund may also utilize services of a global custodianand/or consultant to manage such investment, the costs of which would be

within the expense limits laid down under SEBI Regulations.

Investment in foreign debt instruments, with the right risk controls, can

enhance portfolio yields and at the same time provide credit diversification.The key lies in timing the decision, such that the local investors benefit from

the yield differentials that exist between domestic assets and AAA rated

overseas assets. The major benefit of investing in overseas market isavailability of wide range of quality debt instruments and high liquidity.

Like domestic securities, investment in overseas financial assets is subject tomarket risk, credit risk, interest rate risk and liquidity risk as explained in the

clause “SPECIAL CONSIDERATION” which exist in the domestic securities.To the extent that the assets of the Scheme(s) will be invested in securities

denominated in foreign currencies, the Indian Rupee equivalent of the netassets, distribution and income may be adversely affected by changes in the

value of certain foreign currencies relative to the Indian Rupee. Therepatriation of capital to India may also be hampered by changes in regulationsor political circumstances as well as the application to it of other restrictions

on investment.

Investments will only be made in instruments denominated in US Dollar,Singapore Dollar, Japanese Yen, Euro or Sterling Pound or in any other liquidcurrency as may be decided by the AMC from time to time

X. TRANSACTING IN THE UNITS OFPRINCIPAL CHILD BENEFIT FUND

THE OFFER

Principal Child Benefit Fund (earlier called Child I-Nit’97 Scheme) waslaunched as an open ended Scheme on October 27, 1997. The offer is being



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made for subscription of units on an ongoing basis at applicable NAV basedprice. The Fund shall issue units each of the face value of Rs.10/- by meansof Account/Transaction statement to the unitholders in accordance with therules framed thereunder, at the prevailing NAV based unit price.

INVESTMENT OPTIONS

At present the Scheme is having one Option i.e. Super Saver Option. Howeverat later date Trustees may introduce Super Saver Plus Option.

INVESTMENT PLANS

The scheme has following two investment plans under both the options

(a) Future Guard PlanUnder this plan investment has to be made on a recurring basis, annually forthe entire chosen target period of 7 or 10 or 15 years. Investor may note thatthe maximum age limit of the applicant for investing in the plan for 7 and/or10 year target period is 45 years and for 15 year target period is 40 years.The applicant (first applicant) under this plan will also be covered by a LifeInsurance Policy.

On demise of the applicant under this plan after payment of three installments(of the amount atleast equal to the amount of original investment), Unitholderwould be exempt from making balance annual subscription payment. Theclaims under the insurance cover as and when received by the fund will becredited to the account of Unitholder (Beneficiary) in lieu of remaining annualsubscription (Restricted to Rs.50000/-). In case of investment in the FutureGuard Plan by Applicant through more than one application favouring oneor more beneficiary, aggregate amount of insurance proceeds (not exceedingRs.50000/-) will be appropriated upfront in lieu of balance unpaid installmenttowards all the applications in the ratio of aggregate outstanding installment

under all application/beneficiary. The benefit that will accrue to the Unitholderwill be limited to the annual subscription already paid plus the insuranceclaim plus appreciation, if any.

(b) Career Builder Plan

Under this plan investor is not required to make recurring annual subscriptionbut can make investment at any point of time for the chosen target period of 7,10 or 15 years. Applicant under this plan will not be covered under the LifeInsurance Cover.

FLEXIBLE TARGET PERIOD

Target period can be chosen as per the need of Beneficiary. The investor canchoose a period of 7, 10 or 15 years or a combination of different periods formore than one investment.

In case of valid applications received indicating target period but withoutindicating any choice of Plan, it will be considered as for Career BuilderPlan and processed accordingly. In case of valid applications receivedindicating the choice of plan but without indicating target period, it will beconsidered as for 7 years target period. In case of valid applications receivedwithout indicating the choice of plan and without indicating target period, itwill be considered as for 7 years target period under Career Builder Plan.

In case of additional investment and/or subsequent installment received forman applicant (who has already invested in favour of one beneficiary for morethan one target period) indicating choice of plan but without indicating thetarget period, same will be allocated to the different target periods in the ratioof original investment made / installment paid (or the revised installmentamount after partial redemption) by that applicant (donor).

In case of additional investment received form an applicant (who has alreadyinvested in favour of one beneficiary for more than one target period underboth the plans) without indicating choice of plan and without indicating thetarget period, same will be allocated to the different target periods underCareer Builder Plan in the ratio of original investment made / installmentpaid (or the revised installment amount after partial redemption) by thatapplicant (donor).

CONTINUATION IN THE SCHEME

After the expiry of the target period, the beneficiary has an option of withdrawing units at the applicable NAV based price or may choose tocontinue in the scheme & request for repurchase of units at any time thereafter.Beneficiary under Future Guard Plan of both the options should note that onexpiry of the relevant target periods i.e. 7, 10 or 15 years, life insurancebenefit to Applicant as mentioned under clause “ SPECIAL BENEFIT -LIFE RISK COVER UNDER FUTURE GUARD PLAN “ (page 19 of theoffer document) shall cease to exist.

UNITHOLDER’S SPECIMEN SIGNATURE

On expiry of relevant target period Unitholder shall submit a his/her specimensignature duly attested by the applicant or a bank manager or by a notarypublic or by a magistrate or by post master or any other party acceptable to

the Fund/AMC. In absence of duly attested specimen number request forGift Form, Nomination Form, Request for pledge, Request for Joint holding,Systematic Investment Plan etc will be accepted.

MIMIMUM APPLICATION AMOUNT

Rs. 5000 and any amount thereafter with subsequent investment of Rs.500& any amount thereafter under each option/ plan.

MINIMUM REPURCHASE AMOUNT

Rs. 500 or 50 units.

The Trustee /AMC may, however, change and/or stipulate a differentminimum amount per application for resale and/or repurchase for group

investment etc.

SPECIAL BENEFIT : LIFE RISK COVER TO APPLICANT UNDERFUTURE GUARD PLAN OF BOTH THE OPTIONS

The basic aim of the scheme and the plan there under is to provide lumpsumcapital growth to the Beneficiary on maturity. To achieve this objective, acomprehensive life cover policy agreement has been entered into with theLife Insurance Corporation of India (LIC) for the sole/first applicant underthe Future Guard Plan of both the options. Accordingly, only the applicantunder Future Guard Plan is insured for life after the payment of the thirdrecurring annual subscription (life cover will be available only after paymentof three annual installment of the amount, atleast equal to the amount of original investment while opening the account in the Future Guard Plan).The insurance cover will be determined on the basis of 1st installment paid atthe time of opening of account. No insurance cover will be available duringfirst two years from the date of allotment.

Limit of Insurance Cover

In case of Future Guard Plan for new and the existing unitholders, on demiseof the applicant, the balance annual subscriptions would be paid out of theinsurance claim proceeds after charging a load not exceeding 3% of ApplicableNAV for the balance period of the plan. However maximum insurance coverwill be limited to aggregate of balance outstanding installment amount orRs.50,000/- whichever is lower per individual applicant (whether investedthrough one application or more). On demise of the applicant, proceeds of the insurance cover will be invested in the scheme and Beneficiary will beallotted units against the same. On demise of the first applicant after thepayment of three recurring installments as mentioned above, aggregate amountof the balance outstanding recurring installment (restricted to Rs.50,000/-)will be invested upfront in the scheme out of the insurance proceeds. In caseof investment in the Future Guard Plan by Applicant through more than oneapplication favouring one or more beneficiary, aggregate amount of insuranceproceeds (not exceeding Rs.50000/-) will be appropriated upfront in lieu of balance unpaid installment towards all the applications in the ratio of aggregateoutstanding installment under all application/beneficiary.

In case applicant has invested in the Future Guard Plan through one or moreapplication in favour of one beneficiary or more, the proceeds of the insurancecover upto Rs.50000/- will be appropriated towards the respective investmentin the ratio of aggregate balance outstanding installments.

This is illustrated below:

For eg. Investor is opening account under Future Guard Plan with Rs.15000/ - on April 1, 2001 (date of allotment) for 7 years target period. Insurancecover on year to year basis will be as under:

Year No. of Installment Balance Insurance Remarkinstall- Amount Out- Cover

ments paid Paid (Rs) standing

Installment

April 1, 2001 1 15000 6 Nil Insurance cover

to not available

March 2002 during first two

years

April 1, 2002 to 2 15000 5 Nil Insurance coverMarch 2003 (Cumulative not available

30000) during first twoyears

April 1, 2003 to 3 15000 4 Rs.50000/- Date of March 2004 (Cumulative (Minimum of commence

45000) [15000*4] ment of or insurance

Rs. 50000/-) cover

April 1,2003 on

payment of

third annual

installment.



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Year No. of Installment Balance Insurance Remark

install- Amount Out- Cover

ments paid Paid (Rs) standingInstallment

April 1, 2004 to 4 15000 3 Rs 45000/-March 2005 (Cumulative (15000*3)

60000)

April 1, 2005 to 5 15000 2 Rs.30000/-

March 2006 (Cumulative (15000*2)

75000)

April 1, 2006 to 6 15000 1 Rs15000/-

March 2007 (Cumulative (15000*1)90000)

April 1, 2007 to 7 15000 0 Nil NoMarch 2008 (Cumulative outstanding

105000) installment

If investor has invested on April 1, 2001 in the Future Guard Plan throughtwo applications say A & B favouring one or more beneficiary for 7 yeartarget period for recurring installment of Rs.5000/- under application A andRs.10000/- under application B, life risk cover under each application willbe as under.

Year No. of Installment Balance Insurance Remarkinstallments Amount Paid Outstanding Cover

paid (Rs) Installment (No -

aggregate amount)

A B A B A B Total

April 1, 5000 10000 6 - 6 - Nil Nil Nil Insurance cover not

2001 to Rs. Rs. available during first1 March 2002 30000/- 60000/- two years

April 1, 5000 10000 5 - 5 - Nil Nil Nil Insurance cover not2002 to (Cumula (Cumula Rs. Rs. available during first2 March 2003 tive 10000) tive 20000) 2 5000/- 50000/- two years

April 1, 5000 10000 4 - 4 - Rs. Rs. Rs. Date of commencement

2003 to (Cumula (Cumula Rs. Rs. 16667/-* 33333/-* 50000/- Minimum of 3 March 2004 tive 15000) tive 30000) 20000/- 40000/- ([5000*4 + 1, 2003 on payment of

10000*4] or third annual installment.Rs. 50000/- ) Insurance proceeds

allocated on the basisof aggregate amount

of balance installment.

April 1, 5000 10000 3 - 3 - Rs. Rs. Rs. –2004 to (Cumula (Cumula Rs. Rs. 15000/- 30000/- 45000/-4 March 2005 t ive 20000) t ive 40000) 15000/- 30000/-

April 1, 5000 10000 2 - 2 - Rs. Rs. Rs. –2005 to (Cumula (Cumula Rs. Rs. 10000/- 20000/- 30000/-5 March 2006 t ive 25000) t ive 50000) 10000/- 20000/-

April 1, 5000 10000 1 - 1 - Rs. Rs. Rs. –

2006 t o (Cumula (Cumula Rs. Rs. 5000/- 10000/- 15000/-

6 Mar ch 20 07 t iv e 3 00 00 ) t iv e 6 00 00 ) 5 00 0/ - 1 00 00 /-

April 1, 5000 10000 0 0 0 0 0 –

2007 to (Cumula (Cumula7 March 2008 t ive 35000) t ive 70000)

* Insurance proceeds restricted to Rs.50000/- has been allocated towards Application A & B as

under

Application Aggregate amount Insurance Coverof balance (Restricted toOutstanding Rs.50000/-)installment(s)

A Rs. 20000/- = 20000 * 50000/60000

= Rs.16667/-B Rs.40000/- = 40000 * 50000/60000

= Rs.33333/-

Total Rs.60000/- Rs.50000/-

Investors under Career Builder Plan are not being covered under the LifeInsurance Agreement with LIC and no additional benefits will accrue to them.

Note 1 : Investors may kindly note that the life risk cover will be effectiveafter the expiry of two years from the date of allotment of units and afterpayment of third year’s subscription and will be renewed from year to year.To be eligible for insurance cover the investor under Future Guard Plan willhave to send the annual subscription (atleast equal to the amount of originalinvestment) to the Fund regularly. The amount for which the first applicantwill be covered will be on a diminishing scale for each subsequent year.

Note 2 : The demise of the first applicant has to be reported to PrincipalAsset Management Co. Private Ltd., either before the payment of subsequent annual subscription or 30 days from the demise of thefirst holder, whichever is earlier. In case of non-compliance of this clause, LIC (or other service provider as the case may be) maynot settle the claim and unitholder may lose to that extent.

Note 3 : To be eligible for the Life Cover, investors may kindly note thatthe maximum age limit of applicant for applying to the scheme inFuture Guard Plan is as under;

Target Period Maximum Ageat the time of application(initial or subsequent)

For 7 & 10 year target period 45 years

For 15 year target period 40 years

The insurance cover will be available only to the following categories of resident investors:

1. First applicant only, in case of individual applicants

2. Karta in the case of HUF

3. NRIs applying on non-repatriable basis

The insurance arrangement is with Life Insurance Corporation of India(LIC).

• The cover will commence after the payment of the third annualsubscription amount. The insurance cover will be available not later thanthree months from the date of payment of third annual subscriptionamount in the Future Guard Plan of the respective option of the Scheme.Hence during first three months from the date of payment of third annual

subscription amount, benefit of life insurance cover may not be availableto the donor. However the Fund will endeavor to cover the donor underthe insurance policy within three months from the date of payment of third annual subscription amount.

• The Amount of Insurance cover will vary from year to year dependingon the amount of investment, the balance period to maturity and balancedoutstanding installment amount. The maximum insurance cover will belimited to aggregate of balance outstanding installment amount orRs.50,000/- whichever is lower per individual applicant (whether investedthrough one application or more).

• The cover is worldwide on 24 hour basis.

• All insurance claims will be settled in India and shall be payable in IndianRupees only.

• This cover will be over and above other life insurance covers held by thefirst applicant.

The modalities and procedures for making claim under the above provision

will be advised to the unitholders at the time of mailing membership advice.The rules and regulations of the insurance company regarding insurance coverand claims shall be binding on the applicants.

Exclusion Clauses :

Investors are advised to note that in the case of demise of the first applicantdue to any of the following reasons, Insurance Cover will not be applicableto them :

• death due to AIDS (HIV+)

• death due to natural calamities like famine, earthquake, epidemic, floodetc and because of war and insurgency.

• death due to suicide at any time during the tenure of the scheme/cover.

• death while committing any anti-social or illegal act.

Assignee for Insurance

To facilitate settlement of insurance claims, applicant (First Holder) mustassign a person for claiming the insurance proceeds. The Assignee for the purpose of life insurance cover has to be compulsorily Principal Asset

Management Co. Private Ltd. Settlement procedures will be as stipulatedby insurance company. On demise of the first applicant after the payment of three recurring installments as mentioned above, aggregate amount of balanceoutstanding annual installment (restricted to Rs.50,000/-) will be investedupfront in the scheme out of the insurance proceeds and unitholder will notbe required to pay annual subscription for rest of the target period. If aggregateamount of balance installment is more than Rs.50000/-, only Rs.50000/-will be invested in the scheme. In case of investment in the Future GuardPlan by Applicant through more than one application favouring one ormore beneficiary, aggregate amount of insurance proceeds (not exceedingRs.50000/-) will be appropriated upfront in lieu of balance unpaid installmenttowards all the applications in the ratio of aggregate outstanding installmentunder all application(s)/beneficiary. The benefit that will accrue to theunitholder will be limited to the annual subscription already paid plus theinsurance claim plus appreciation, if any.



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The insurance premium will be paid by AMC every year. AMC will chargepayment of annual premium to the Future Guard Plan. Premium will bereviewed on an annual basis by the Insurance Company depending on theclaims ratio. Accordingly charges to be levied by AMC on the plan shallchange in line with changes in the premium fixed by the Insurance Companyfrom time to time. Fees charged by AMC towards insurance premium willform a part of annual recurring expenses of the Future Guard Plan which aresubject to a ceiling of a maximum of 2.25%-2.50% of the weekly averagenet assets, as specified by SEBI.

WHO CAN SUBSCRIBE ?

Any resident / non-resident legal entity or person whether individual or not,

who is eligible to invest and also gift Units under the laws of his / her State / Country of incorporation, establishment, citizenship, residence or domicileand / or under the Income Tax Act, 1961, including amendments theretofrom time to time, can make an application for gifting Units for the benefitof a Beneficiary (minor or otherwise) under the Scheme.

Non-Resident Indians / Persons of Indian Origin residing abroad (NRIs)(repatriable or non-repatriable), Foreign Institutional Investors (FIIs),International Multilateral Agencies etc., can also invest in Units under thescheme for the benefit of the beneficiary.

Note 1. Minors cannot apply directly as the applicant. They can be namedonly as the Beneficiary.

Note 2. Beneficiary need not necessarily be a minor. However, minorBeneficiary has to compulsorily mention his/her guardian’s nameand address in the application form.

Note 3. Applicant under Future Guard Plan have a maximum age limiton entry of 45 years for 7 & 10 year target period and 40 yearsfor 15 year target period.

Unitholder who is a person resident of India at the time of subscriptionbecomes a person resident outside India subsequently, shall have the optionto either be paid repurchase value of Units prior to expiry of relevant targetperiod, or continue into the Scheme if he/she so desires and is otherwiseeligible. However, the person who desires to continue in the Scheme shallnot be entitled to any interest or any compensation during the period it takesfor the Fund to record the change in Address and the Residential Status.Notwithstanding the aforesaid, the Trustees reserve the right to close theunitholder account prior to expiry of relevant target period and to pay therepurchase value of Units, subsequent to his becoming a person residentoutside India, should the reasons of expediency, cost, interest of unitholdersand other circumstances make it necessary for the Fund to do so. In such anevent, no resident Beneficiary who has subsequently become residents outsideIndia shall have a right to claim the growth in capital and /or incomedistribution.

Scheme has not been and will not be registered in any country outside India.To ensure compliance with any Laws, Acts, Enactments, etc. including by

way of Circulars, Press Releases, or Notifications of Government of India,the Fund may require/give verification of identity/any special/additionalsubscription-related information from /of the Unitholders(which may resultin delay in dealing with the applications, Units, benefits, distribution, etc./ giving subscription details, etc). Each Unitholder must represent and warrantto the Trustees /AMC that, among other things, he is able to acquire Unitswithout violating applicable laws. The Trustee Company will not knowinglyoffer or sell Units to any person to whom such offer or sale would be unlawful,or might result in the Fund incurring any liability or suffering any otherpecuniary disadvantages which the Fund might not otherwise incur or suffer.Units may not be held by any person in breach of the law or requirements of any governmental, statutory authority including, without limitation, exchangecontrol Regulations. The Trustees may, compulsorily redeem any Units helddirectly or beneficially in contravention of these prohibitions. In view of theindividual nature of investment portfolio and its consequences, eachUnitholder is advised to consult his/ her own professional advisor concerningpossible consequences of purchasing, holding, selling, converting or otherwisedisposing of the Units under the laws of his/her State/country of incorporation,

establishment, citizenship, residence or domicile.

HOW TO SUBSCRIBE

There is only one application Form for Residents, Non-Resident Investorsand NRIs/FIIs on repatriable/ non-repatriable basis. However, if for reasonsof expediency, interest of unitholders and other circumstances make itnecessary for the Fund, separate application forms may be made for Residentsand for Non-Resident Investors (based on repatriation parameters). Applicantsshould clearly specify their status and indicate name of the Beneficiary,investment option, investment plan, target period etc for which the subscriptionis made by marking the appropriate choice provided for such purpose in theApplication Form. Unless the applicant has ticked the appropriate NRI box,the application shall be treated under Resident category. Investor may opt toinvest in both the investment plans and various target period subject to theminimum investment requirements (per plan). Applicant can gift units to

various Beneficiaries by filing the separate application forms and similarlyBeneficiary can receive gifts from various donors (Applicants).

No receipt will be issued for the application money. The collection centrewho receives the application form shall stamp and return the“Acknowledgement slip” of the application form, thereby acknowledgingreceipt of the application form.

KINDLY RETAIN THE ACKNOWLEDGEMENT SLIP OF THEAPPLICATION FORM /STAMPED BY THE COLLECTIONCENTRE.THIS SHALL BE SUBJECT TO FINAL VERIFICATION ANDSCRUTINY BY THE BANKERS/TRUSTEES/AMC THAT THE CHEQUEAND APPLICATION FORM ARE IN ORDER /VALID.

Subscription by Residents

- The application form for the sale of units of the Fund will be available atthe office of the Collection Centres/ISC /Registrar/ AMC etc. Investorscan gift units to the Beneficiary(s) by completing the application form.Existing unitholders (on continuation in the scheme on expiry of therelevant target period) may use the relevant tear off section of theTransaction Slip that may be enclosed with the Account Statement foradditional subscriptions or a new application form. Unitholders underany of the existing scheme(s) can also gift by way of switch from otherscheme(s) to the scheme.

- Applications must be completed in Block Letters in English.

- Signatures should be in English or in any Indian Language. A Magistrate/ Notary Public/Post Master under his/her official seal must attest Thumbimpressions.

- Payment should be made in cheque or bank draft on any bank, which issituated at and is a member of the Bankers’ Clearing House, located at

the place where the Application is submitted. In respect of validapplications with outstation cheques/ demand drafts not payable at parat the place where the application is received, closing NAV of the day onwhich cheque/demand draft is credited shall be applicable. Money ordersand postal orders may be accepted in selected locations. Cash if accepted would be as per section 269SS of the Income Tax Act 1961.

- All cheques ,bank drafts and payorders must be drawn in favour of “Principal Child Benefit Fund” and crossed “Account Payee only”.A separate cheque or bank draft must accompany each application. Incase the Fund has separate application forms for Resident & Non-ResidentInvestors, the cheques may be drawn in the above manner and the Non-Residential status may be added, on the cheque.

- Applications not complete in any respect are liable to be rejected.

- Applicants located in a place where there is no designated collectioncentre, may send their application, accompanied with a separate bank draft crossed “Account Payee only” in favour of “Principal Child BenefitFund” to the the office of the AMC/Investor Service Centre/Collection

Centre superscribing the envelope as “Principal Child Benefit Fund”.All demand drafts are to be made payable at Mumbai or at such centresas declared by the AMC from time to time. The bank charges /commissionas per IBA guidelines for the demand draft may be deducted from theamount of investment. Such bank charges/commission will be treated aseligible expenses debited to the Scheme(s) within the expense limitslaid out under SEBI Regulations.

- Please state the application form number and name on the reverse of thecheque/bank draft/ payorder.

Subscription by NRIs

In terms of Schedule 5 of Notification no. FEMA 20/2000 dated May 3,2000, RBI has granted general permission to NRIs to purchase, on repatriationbasis units of domestic mutual funds. Further, the general permission is alsogranted to NRIs to sell the units to the mutual funds for repurchase or for thepayment of maturity proceeds, provided that the units have been purchasedin accordance with the conditions set out in the aforesaid notification.

For the purpose of this section, the term “mutual funds” is as referred to inClause (23D) of Section 10 of Income-Tax Act 1961.

However, NRI investors, if so desired, also have the option to make theirinvestment on a non-repatriable basis.

Subscription by FIIs

In terms of Schedule 5 of Notification no. FEMA 20/2000 dated May 3,2000. RBI has granted general permission to a registered FII to purchase ona repatriation basis units of domestic mutual funds subject to the conditionsset out in the aforesaid notification. Further, the general permission is alsogranted to FIIs to sell the units to the mutual funds for repurchase or for thepayment of maturity proceeds, provided that the units have been purchasedin accordance with the conditions set out in the aforesaid notification.

For the purpose of this section, the term “mutual funds” is as referred to inClause (23D) of Section 10 of Income-Tax Act 1961.



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Mode of Payment on Repatriation basis

NRIs

In case of NRIs and persons of Indian origin residing abroad, payment maybe made by way of Indian Rupee drafts purchased abroad and payable atMumbai or by way of cheques drawn on Non-Resident (External) (NRE)Accounts payable at par at Mumbai. Payments can also be made by meansof rupee drafts payable at Mumbai and purchased out of funds held in NRE / FCNR Accounts.

In case Indian rupee drafts are purchased abroad or from Foreign CurrencyAccounts or Non-resident Rupee Accounts an account debit certificate fromthe Bank issuing the draft confirming the debit shall also be enclosed.

FIIs

FIIs may pay their subscription amounts either by way of inward remittancethrough normal banking channels or out of funds held in Foreign CurrencyAccount or Non-resident Rupee Account maintained by the FII with adesignated branch of an authorized dealer with the approval of the RBI subjectto the terms and conditions set out in the aforesaid notification.

All cheques/drafts should be made out in favour “Principal Child BenefitFund ” and crossed “Account Payee Only”. In case Indian Rupee draftsare purchased abroad or from FCNR/NRE A/c. an account debitcertificate from the Bank issuing the draft confirming the debit shallalso be enclosed.

Mode of payment on Non-Repatriation basis

In case of NRIs/Persons of Indian origin seeking to apply for Units on a non-repatriation basis, payments may be made by cheques/demand drafts drawnout of Non-Resident Ordinary (NRO) accounts/ Non-Resident Special Rupee(NRSR) accounts and Non Resident Non-Repatriable (NRNR) accountspayable at the city where the Application Form is accepted.

Refunds, interest and other distribution (if any) and maturity proceeds/ repurchase price and /or income earned (if any) will be payable in IndianRupees only. The maturity proceeds/repurchase value of units issued onrepatriation basis, income earned thereon, net of taxes may be credited toNRE/FCNR account (details of which should be furnished in the spaceprovided for this purpose in the Application Form) of the non-resident investoror remitted to the non-resident investor. Such payments in Indian Rupeeswill be converted into US dollars or into any other currency, as may bepermitted by the RBI, at the rate of exchange prevailing at the time of remittance and will be dispatched through Registered Post at the unitholdersrisk. The Fund will not be liable for any loss on account of exchangefluctuations, while converting the rupee amount in US dollar or any othercurrency. Credit of such proceeds to NRE/FCNR account or remittance thereof may be permitted by authorized dealer only on production of a certificatefrom the Fund that the investment was made out of inward remittance orfrom the Funds held in NRE/FCNR account of the investor maintained with

an authorized dealer in India. However, there is no objection to credit of suchproceeds to NRO/NRSR account of the investor if he so desires.

Rejection of Applications

Applications not complete in any respect are liable to be rejected. The decisionof the Board of Trustees in regard to any representation arising from thedisqualification of any application shall be final and binding. In the event of non allotment of units due to invalid application or other reasons no interestwill be payable by Principal Mutual Fund on the money refunded.

Unitholder’s Bank Account Details

As a matter of precaution against possible fraudulent encashment of redemption Cheques due to loss/misplacement, unitholders are requested togive the full particulars of their Bank Account i.e. nature and number of account, name, branch address of the bank at the appropriate space in theapplication form. It shall be mandatory for the unitholders to mention theirbank account numbers in their applications/requests for redemption.Redemption Cheques and /or any other instruments will then be made out in

favour of the Bank for crediting the respective unitholder’s account sospecified.

The normal processing time may not be applicable in situations where suchdetails are not provided by unitholders. The AMC will not be responsible forany loss arising out of fraudulent encashment of cheques and delay/loss intransit.

Unitholder’s Permanent Account Number

Quoting Permanent Account Number in application form is mandatoryfor subscriptions of Rs.50000 or more

Wherever an application is for a total value of Rs. 50,000 or more, the applicantor in the case of application in joint names, each of the applicants, shouldmention his/her permanent account number (PAN) allotted under the IncomeTax Act, 1961 or where the same has not been allotted, the GIR number and

the income-tax Circle/Ward/District should be mentioned. In case whereneither the PAN nor the GIR number has been allotted, the fact of non-allotment should be mentioned in the application form.

Documents to be submitted

In case of applications under power of attorney .

If any application or any request for transmission is signed by a person holdinga valid Power of Attorney, the original Power of Attorney or a certified copyduly notarized should be submitted with the application or the transmissionrequest, as the case may be unless the Power of Attorney has already beenregistered with the Fund/Registrar.

In the case of applications by limited Company, a corporate body, an eligibleinstitution, a registered society, a Trust, a Fund, a FII etc.

In the case of applications by limited company, a corporate body, an eligibleinstitution, a registered society, a trust, a Fund, a FII, a certified true copy of the Board resolution of the Managing Body authorizing investments in Unitsincluding authority granted in favour of the officials signing the applicationof Units and their specimen signature etc. along with a certified copy of theMemorandum and Articles of Association and/or bylaws and/or trust deedand/or partnership deed and Certificate or Registration should be submitted.The officials should sign the application under the official designation. In thecase of a trust/fund, it shall produce a resolution from the Trustee(s) authorizingpurchases.

The above mentioned documents or duly certified copy thereof must be lodgedseparately at the office of the Registrar to the Offer, quoting the serial numberof the application and also with the collection centre where the applicationform has been submitted simultaneously with the submission of theApplication form.

In addition to the above, in the case of applications by, firms and societies,which are held directly or indirectly, but ultimately to the extent of at least60% by non-resident individuals of Indian nationality/origin and trust in whichat least 60% of the beneficial interest is similarly held irrevocably by suchpersons, details such as name, address, percentage of ownership by non-resident individuals of Indian nationality/origin, and certificate in originalfrom overseas auditors on form OAC/OAC-1 (as per RBI proforma)must belodged separately at the office of the Registrar to the Offer, quoting the serialnumber of the application and also with the collection centre where theapplication form has been submitted, simultaneously with the submission of the Application form.

All NRI applications by mail should be sent to the address(es) of the Registrarand/or AMC along with the relevant foreign inward remittance certificates toindicate the status of the Account debited and the relevant approvals if required.

In case of non-submission of the above-mentioned documents, the Trusteesare entitled, in its sole and absolute discretion, to reject or accept any

application. Besides the normal processing time may not be applicable insituations where such documents /details are not provided by unitholders.The AMC will not be responsible for any loss arising out of non-allotment / rejection of such application. It is expressly understood that the investor / unitholder has the express authority from the relevant constitution to investin units of the Fund and the AMC/Trustee/Fund would not be responsible if the investment is ultravires the relevant constitution.

SALE OF UNITS ON AN ONGOING BASIS

Units of the Scheme would be available at NAV based prices, subject to theapplicable sales load, on any business day from any of the designatedcollection centre(s). The AMC may appoint additional collection centres (mayalso close) from time to time.

Ongoing Sale Price

Ongoing subscription of units will be at the applicable NAV plus a load notexceeding 7% of the applicable NAV. The sale price to the existing applicantsinvesting under Future Guard Plan, will be applicable NAV plus a load not

exceeding 3% of the applicable NAV.Note : The difference between the repurchase and resale price will notexceed 7% , calculated on the sale price.

The sale price will be calculated using the following formula:

Sale Price = Applicable NAV*(1 + entry load, if any)

Example for calculation of Sale Price

If the Applicable NAV is Rs. 12 and the entry load applicable is 2%, in thiscase the sale price will be calculated as follows:

Sale Price = Rs. 12 + 2% of Rs. 12

= Rs. 12 + Rs. 0.24

= Rs. 12.24 per unit

The AMC reserves the right to modify the entry load or levy a different entry



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load as regards the amount / tenure of investment etc. However, any suchchange in the load structure shall be only on a prospective basis. The unitholderis requested to confirm the applicable entry load at the time of investmentfrom the collection centre / AMC.

The target period for fresh subscriptions from the resale would be calculatedfrom the Date/Month/Year of entry of the investor. The recurring annualsubscription has to be made at an interval of every 12 months from the dateof entry of the investor till the completion of the target period, which will benotified.

Subscriptions on an ongoing basis will be made only by specifying the amountto be invested and not the number of units to be subscribed. The total numberof units allotted will be determined with reference to the applicable sale priceand fractional units may be created. A new account/transaction statementwill be dispatched reflecting the updated holding of the unitholder after everytransaction. However, a lien on the units so allotted on the day of transactionwill be created and such units shall not be available for redemption until thepayment proceeds are realized by the Scheme. In case the Cheque/draft isdishonored by the Bank, the transaction shall be reversed and the units allottedearlier shall be cancelled and the unitholder informed accordingly.

ALLOTMENT AND ACCOUNT STATEMENT

Allotment

Allotment of units in the Scheme would be at the discretion of the Trustees.Allotment is assured to all Beneficiaries provided the applications, are receivedduring business hours; and the cheque accompanying the application form isrealized; are complete in all respect and are in order. The allotment dateunder normal circumstances, is deemed to be the same date as the applicableNAV.

Units will be allotted up to three decimals to all valid applications. The decimalunits in no way will cause any difficulty for repurchase of units. An offer topurchase units is not binding on, and may be rejected by AMC, until it hasbeen confirmed through an Account/Transaction Statement and payment hasbeen received.

Account Number

Each unitholder will have an account number. The number of units allottedto a unitholder or repurchased by a unitholder will be reflected in his or heraccount and a statement/advice to this effect will be issued to the unitholder.

Common Account Number:

As a unitholder friendly measure, (unless otherwise requested by theunitholder,) one Common Account Number will be assigned for one entityinvesting in different schemes of the Fund. In such a case, one consolidatedaccount statement will be provided. The AMC reserves the right to assign theexisting Common Account Number against multiple applications and/orsubsequent purchases under a new application form by an existing unitholder,

with identical mode of holding and address. The Fund is also in the processof assigning a Master Account Number for a “Qualified Purchaser” to monitorthe “Right of Accumulation” of the said purchaser, besides facilitating issuanceof one consolidated account statement (unless otherwise requested by theunitholder) for all the members of a Family investing in different schemes of the Fund.

Account Statement

An Account or Transaction Statement reflecting the unit balance of theunitholder, name of the applicant, applicable loads and other relevantinformation will be mailed to the unitholder by ordinary post, after everyfinancial transaction is effected. The Account Statement shall not be construedas a proof of title and is only a computer-printed statement indicating thedetails of transactions under the scheme and is a non-transferable document.The Account Statement shall normally be dispatched within five businessdays or after clearance of Cheque, whichever is later.

Existing unitholders (applicants during initial offer) shall note that thename of the applicant as unitholder will be replaced by the name of Beneficiary. Beneficiary will be treated as unitholder under the schemefrom the date of this offer document. New Account Statement will alsobe dispatched to the Beneficiary in cancellation / lieu of existing accountstatement.

Unit Certificates

Normally no unit certificates will be issued under this Scheme. However, if the unitholder so desires, the AMC shall issue a unit certificate to the unitholderwithin 6 weeks of the receipt of request for the certificate. The cost of stampduty paid for issuing the unit certificate will form part of the annual ongoingexpenses and/or may be recovered from the unitholder.

Refunds

Refund of subscription money to investors whose applications are invalidfor any reason whatsoever, or whose applications have not been accepted in

full will be without incurring any liability whatsoever for interest or othersum.

REMATERIALISATION OF DEMAT UNITS

Investors have the option to rematerialise their existing demat Units. Therequest for rematerialising the demat Units may be given to the respectiveDepository Participant (DP) of the investor. On receiving the confirmationof demat Units balance, account statement for the physical Units shall beissued. The same number of Units held in the demat mode shall be continuedin the physical mode. Rematerialisation of demat Units shall be processedwithin the stipulated thirty days under SEBI (Mutual Funds) Regulations,1996 from the date of receipt of such a request, provided it is complete and

valid in all respects.

DEMATERIALISATION OF EXISTING PHYSICAL UNITS

Existing Unitholders having an account statement may dematerialise theirUnits. Necessary request for this may be submitted to the investors DP alongwith the account statement issued by the Fund. The same number of Unitsheld in the physical mode shall be continued in the demat mode. Requestsfor dematerialisation shall be processed within the stipulated fifteen days,under SEBI (Mutual Funds) Regulations, 1996 from the date of receipt of such a request, provided it is complete and valid in all respects.

SYSTEMATIC INVESTMENT PLAN (SIP)

This facility enables investor to save and gift periodically over a long periodof time. It is a convenient and systematic way to gift and provides the investoran opportunity to gift regularly, thereby averaging the acquisition cost of units. Any investor can avail of this facility subject to certain terms andconditions in the SIP application form. The application forms can be obtainedfrom the collection centre. The fundamental attributes and other terms and

conditions regarding purchase/ repurchase, price and related matters will besame as contained in this Offer Document.

The investor has an option to select either 5th, 15th, or 25th day of the monthon which the sale is to be made. However, if no date is selected, the sale willbe made on the 15th of the month at applicable NAV related price. The AMCmay change the date for group investors or on demand from a section of theinvestors or otherwise to offer benefits to the unitholders.

Specified rupee amounts can be periodically invested every month/quarterfor a continuous period. This program allows investment of fixed amount bypurchasing additional units of the scheme for the benefit of Beneficiary orotherwise by the unitholder on expiry of the relevant target period. Theminimum amount of periodical investment under this facility shall be similarto the minimum application amount applicable for a investor who is makingan investment subsequent to his opening of the account with the Fund. Fornew investors the facility is available after opening a new account with theinitial minimum investment. This minimum balance amount needed for theSystematic Investment Plan may be altered from time to time at the discretion

of the AMC.The AMC based on cheque authorization received from the investor shallapproach the investor’s bank for setting up standing instruction for remittanceof the stated amount at stated intervals in favor of the Fund. In case the bank fails to take cognisance of the cheque authorisation, the investor may berequested to send post dated cheques. The investor has to give a minimum of 4 or more post-dated cheques for a minimum application amount or more. Incase any particular date of the post dated cheque falls on a holiday or fallsduring a book closure period the immediate next business day will beconsidered for this purpose. The unitholder’s account will be credited withthe number of units at the day’s applicable Sale Price, subject to realizationof cheque. Investor may also leave a standing instruction with his/her bank to periodically remit a fixed sum from his/her account into the Scheme.

Investor should note that the market value of the Scheme’s units is subject tofluctuation. Before going in for the Systematic Investment Plan, the investorshould keep in mind that such a program does not assure a profit or protectagainst a loss.

Systematic Investment Plan (SIP) for corporate employees.The SIP for corporate employees seeks to provide convenience and value of investment to salaried individuals. The application amount would beforwarded by the employer on specific request from the employee who desiresto invest in the Scheme. The concerned employee has to authorize theemployer to deduct the application amount from his salary and remit thesame to the Fund. The employer would then deduct the requested applicationamount at regular intervals (monthly or otherwise) and forward the same tothe Fund.

ALTERNATE BENEFICIARY AND DEATH CLAIMS DURING THETARGET PERIOD

The investor may name an alternate resident beneficiary (only during relevanttarget period) to avoid legal procedures in the unfortunate event of the deathof the beneficiary. The name of the alternate beneficiary can be mentioned



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while making the application or can be registered subsequently. In the eventof unfortunate death of the Beneficiary during the currency of the Schemebut before expiry of target period, Alternate Beneficiary will be entitled to allthe benefits of deceased Beneficiary under the scheme. In the event of unfortunate death of the Beneficiary during the currency of the Scheme beforeexpiry of target period and where no alternate beneficiary has been named,the value of Units at the beneficial credit of the deceased Beneficiary will bepaid by the Fund to the parent / guardian / legal heir of the Beneficiaryaccording to the Personal Law by which the Beneficiary was governed. If the amount has been invested by / if the investor is any non-individual (i.ecompanies, body corporates, registered societies or any other eligibleinstitutions or legal entity), and where no alternate beneficiary has been named,

the value of Units at the beneficial credit of the deceased Beneficiary will bepaid by the Fund to the parent / guardian / legal heir of the beneficiaryaccording to the Personal Law by which the Beneficiary was governed. Inthe event of simultaneous death of the Beneficiary and the alternatebeneficiary, the parent/ guardian / legal heir of the Beneficiary alone shallhave the right to claim the value of Units at the beneficial credit of the deceasedunitholder. If the investor is any non-individual as stated above the parent/ guardian / legal heir of the i.e. the beneficiary) alone shall have the right toclaim the value of units at the credit of the deceased beneficiary.

SWITCH FACILITY

The unitholders under a Scheme can opt to switch units for units of the otherselect open ended Scheme (existing and /or to be launched in the future) of the Fund at applicable NAV based prices of the respective units to beexchanged.

In the case of NRIs, OCBs, FIIs, etc. this will be subject to necessary approval(if any) from the Reserve Bank of India and any other approval as applicable.Tax deduction at source, if any, will be effected at the appropriate rate in caseof a switch and the balance amount would be utilized to exchange units tothe other Scheme.

Unitholders should note that each switch option represents the simultaneousrepurchase of units from one scheme (which may result in a capital gain orloss) and the subscription of units in another scheme.

A request for switch may be specified either in terms of amount or in termsof the number of units of the scheme from which the switch is sought. Suchinstructions may be provided in writing by completing the switch form orusing the relevant tear off section of the Transaction Slip that may be enclosedwith the Account Statement and lodging the same on any business day at anyof the designated collection centres or office of the Registrar. The switchwill be effected by redeeming units from the scheme in which the units areheld and investing the net proceeds in the other Scheme, subject to theminimum balance applicable for the respective Scheme.

The price at which the units will be switched out of and into the Scheme willbe at applicable NAV based prices subject to the repurchase price not being

lower than 93% of the NAV of the scheme being exited from; this would of course be subject to the difference between the repurchase price (of the unitsof the scheme being exited from) and sale price not exceeding 7% calculatedon the sale price; and at a price not higher than 107% of the NAV of thescheme being entered into. The price at which the units will be switched outof the scheme / into the scheme will be based on the applicable NAV of therelevant Scheme and after considering any exit / entry loads and/orcombination of entry and exit loads that the AMC may charge from time totime. The AMC reserves the right to charge a load on switching at any time.The Switch request will be subject to the minimum application amount andother terms and conditions of the scheme for which the Switch request hasbeen made.

GIFT FACILITY

Unitholder can request for the Gift Form to gift the Units (by way of transferof Units to the donee), to the extent provided under any law. The Fund may,subject to compliance with such requirement as it deems necessary and maystipulate, arrange to transfer the Units, on account of a gift made by the

Unitholder out of his Unit balance as per the provisions of applicable law.Gift in favour of Non-Residents will also be subject to permission, general orspecific under Foreign Exchange Management Act. All payments andsettlements made to such donee and a receipt thereof shall be a valid dischargeby the Fund. However, it should be noted that if the Unitholder has an UnitCertificate, such a transfer by way of gift shall attract stamp duty and the costof stamp duty will form part of scheme’s/plan’s annual recurring expensesand/or may be recovered from the unitholder.

JOINT HOLDERS

On expiry of target period the unitholder can write to collection centres orAMC requesting for the prescribed form to introduce upto two additionalpersons as joint holders. The unitholer shall also specify the mode of holding.In such cases the mode of holding may be “joint” or “either/anyone orsurvivor”

Where Units are jointly held, the person first-named in the prescribed formwill receive all notices and correspondences with respect to the Account, aswell as any distributions through dividends, redemptions or otherwise. Suchperson shall hold the voting right, if any, associated with the Units. However,all documentation / purchase applications / redemptions requests/ enrollmentforms shall necessarily be signed by all the holders. All payments andsettlements, etc made to such first named holder shall be a valid discharge bythe Fund and the liability of the Mutual Fund in this regard shall be only tothe first –named holder.

When Units are held as either / anyone or survivor, the person first-named inthe Application Form will receive all notices and correspondences with respectto the Account, as well as any distributions through dividends, redemption’s

or otherwise. Anyone of the Joint holders (in case of either/ anyone orsurvivor) shall hold the voting right, if any, associated with the Units and alldocumentation/purchase applications/redemption requests/enrolment formsmay be signed by any one of the joint holders ( in case of either/ anyone orsurvivor) and the Mutual Fund will act on the instructions of the first holder

/anyone of the joint account holders. However under all the cases (“ joint” or“ “either / anyone or survivor ”), the Fund shall recognise the first named

joint holder as the unit holder and all payments and settlements, etc. made tosuch first-named holder shall be a valid discharge by the Fund and the Fundshall not be liable to any other joint applicants in this regard.

However, it should be noted that if the Unitholder has an Unit Certificate,such introduction of joint holders shall attract stamp duty and the cost of stamp duty will be borne by the Scheme/plan itself and will form part of itsannual ongoing expenses and / or may be recovered from the unitholder.

After the expiry of target period,Unitholder if applying for introducing jointholders, can specify the percentage of investment that can be allotted to eachof the joint holder(s) (not exceeding three) along with their addresses. The

redemption / distribution cheques would then be issued separately to each of the joint holders (upto three) in the percentages which equate to the percentageof allocation of the original investment unless requested otherwise. All othercorrespondence, would continue to be addressed to the first named joint holder.All voting rights shall remain the same as is stated aforesaid. All payments/ settlements, etc. made to such joint-holders, individually and separately shallbe a valid discharge by the Fund and the liability of the Mutual Fund in thisregard shall be to all the joint holders.

The unitholder(s) would be liable for the loss resulting from a fraudulentencashment, based on the unitholder(s) (single holder or joint holders or firstholder or any holder, with or without percentage allocation of investment)instructions, that the Fund reasonably believed as genuine. The subsequentclauses on “Nomination” and “Appointment of Beneficiary” further clarifiesthe position in the event of the death of one of the joint holder or the firstholder.

NOMINATION FACILITY

If an application is made in the name of a single individual holder or jointlynot exceeding three individuals (under any mode of holding) the unitholderscan request a Nomination Form to nominate beneficiary(s)/successor(s)(upto three) to receive the Units upon his/her/their death, to the extent providedin the Regulations. Unitholders can nominate individuals not exceeding three(jointly) as beneficiary(s)/successor(s) to receive the units either on first holderbasis or in a particular percentage allocation upon his/her/their death.Notwithstanding anything contained in any other law for the time being inforce or in any disposition, whether testamentary or otherwise, in respect of such units of the Scheme, where a nomination made in the prescribed mannerpurports to confer on any person(s) the right to vest the units of the scheme,the nominee(s) shall, on the death of the unitholders (single holder or all the

joint holders) of the scheme become entitled to all the rights in the units of theScheme (as an agent & trustee) to the exclusion of all other persons, unless thenomination is varied or cancelled in the prescribed manner as stated in theclause “Appointment of Beneficiary”. In case of 3 joint nominee(s) withoutany percentage allocation the first named nominee alone has the right to receivethe amount due in respect of units in the event of death of the unitholder(s). In

case of 3 joint nominee(s) with a particular percentage allocation, all payoutsand settlements would be made to all successors in the particular percentage asstated by the unitholder(s). If no percentage is stated for allocation amongstnominees and if the first named nominee predeceases the unitholder(s) and theunitholder(s) has/have not cancelled or substituted the nomination, secondnamed nominee shall be entitled to receive the amount due in respect of theunits of the deceased unitholder(s). However, the nomination will cease to bevalid on units repurchased/transferred by the original unitholder in full. Allpayments and settlements made to such nominee(s) and a receipt thereof shallbe a valid discharge by the Fund. Unitholders being either parent or lawfulguardian on behalf of a minor and power of attorney holder of an eligibleinstitution, societies, funds, bodies corporate, partnership firms and HUF shallhave no right to make any nomination. Nomination in favor of Non-residentswill be governed by the rules formulated by Reserve Bank of India from timeto time.



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The nomination can be made only by individuals applying for / holding unitson their own behalf singly or jointly. Non-individuals including society, trust,body corporate, partnership firm, Karta of Hindu Undivided Family, holderof Power of Attorney cannot nominate. If the units are held jointly, all jointholders will sign the nomination form. A minor can be nominated and in thatevent, the name and address of the guardian of the minor nominee shall beprovided by the unit holder. Nomination can also be in favour of the CentralGovernment, State Government, a local authority, any person designated byvirtue of his office or a religious or charitable trust. The Nominee shall not bea trust other than religious or charitable trust, society, body corporate,partnership firm, Karta of Hindu Undivided Family or a Power of Attorneyholder. A non-resident Indian can be a Nominee subject to the exchange

controls in force, from time to time. Nomination in respect of the units standsrescinded upon the transfer of units. Transfer of units in favour of a Nomineeshall be valid discharge by the asset management company against the legalheir. The cancellation of nomination can be made only by those individualswho hold units on their own behalf singly or jointly and who made the originalnomination. On cancellation of the nomination, the nomination shall standrescinded and the asset management company shall not be under anyobligation to transfer the units in favour of the Nominee.

Nomination can also be made for units which are pledged and offered assecurity in favour of any entity/body for any purpose but only after “approval”/ ”no objection” clearance from such entity/body. Notwithstanding anythingcontained in any other law for the time being in force or in disposition, whethertestamentary or otherwise, in respect of such pledge unit of the scheme, wherea nomination made in the prescribed manner purports to confer on anyperson(s) the right to rest the pledged units of the scheme, the nominee(s)shall, on the death of the unitholder(s) (single holder or all the joint holders)of the scheme become entitled to all the rights in the pledged units of thescheme to the exclusion of all other persons except the entity/body in whosefavour the units are pledged by way of lien, unless the nomination is cancelledor varied.

Unitholders are also requested to refer to the clause on “Appointment of Beneficiary”. The provisions for nomination with regard to Mutual Fundswould be as per Section 56 and Section 69 (regarding the right of thebeneficiary to transfer possession ) of the Indian Trust Act, 1882 since theMutual Fund is formed as a Trust under the said Act. However, acceptanceof such nomination/appointment of beneficiary would be at the entirediscretion of the Fund taking into consideration the provisions of the IndianTrust Act and the Mutual Fund assumes no responsibility thereof, and theunitholder(s) would be liable for the loss resulting from a fraudulentnomination/appointment of beneficiary based on the unitholder(s) (singleholder or joint-holders) instructions, that the Fund reasonably believed asgenuine.

By provision of this facility the AMC is not in any way attempting to grantany rights other than those granted by law to the nominee. A nomination inrespect of the Units does not create an interest in the property after the death

of the Unitholder. The nominee shall receive the Units only as an agent andtrustee for the legal heirs or legatees as the case may be. It is hereby clarifiedthat the nominees under the nomination facility provided herein shall notnecessarily acquire any title or beneficial interest in the property by virtue of this nomination & the transmission of units would normally be governed asper succession certificate/probate of the will.

APPOINTMENT OF BENEFICIARY AFTER EXPIRY OF TARGETPERIOD

After the expiry of relevant target period unitholder(s) shall appoint up tothree person(s) (viz. Spouse, child or dependent) as Primary and ContingentBeneficiary(s) under the Scheme to receive the benefits (as allocated)hereunder the Scheme in the event of the death of the unitholder(s). Theindividual unitholder can nominate beneficiary(s) to receive the benefitsunder the Scheme upon his / her death, to the extent provided in the foregoingclause(s) on nomination. When units are held jointly and joint names havebeen inserted then in the event of death of the first or any other holder, theperson next in the order as stated in the application form, (unless changed)

shall be the only person(s) recognized by the Fund as having any title orinterest in the benefits under the Scheme, to the extent provided in theforegoing clause(s) on “Mode of Holding”. Only on simultaneous death of all the joint holders, the beneficiary(s) nominated can receive the benefitsunder the scheme, to the extent provided in the foregoing clause(s) onnomination. Primary Beneficiary(s) shall have first right of vesting of unitson the death of the unitholder(s). Contigent Beneficiary(s) shall havesecondary right of vesting of units on the death of the unitholder(s) and alsothe primary beneficiary(s). If the unitholder’s spouse is not appointed as abeneficiary, the Fund may seek consent from the spouse to appoint anotherperson as beneficiary.

A beneficiary who becomes entitled to hold the Units in consequence of thedeath of a sole holder or all holders or the person next in the order as stated inthe prescribed form (in case of joint holders), (after one year from the date of

allotment of units), insolvency, or winding up or by operation of law, pledgeetc., (after three years from the date of allotment of units) upon producingevidence to the satisfaction of the Fund, and / or after complying with all theformalities in connection with the claim, shall have the option either to bepaid repurchase value of Units, or to continue in the Scheme if he/she sodesires and is otherwise eligible, by issuance of account statement in his/hername. All payments and settlements made to such beneficiary and a receiptthereof shall be a valid discharge by the Fund.

Every appointment of the beneficiary(s) to be made under the Scheme shallbe subject to such conditions and in writing signed by the unitholder(s) andshall remain in full force and effect until the death of the beneficiary / unitholder(s) or until the same is revoked in writing by the unitholder(s) (by

whom the same was made) and a fresh appointment is made in the manneraforesaid. Unitholder(s) may from time to time revoke or change thebeneficiary(s) (including percentage allocation) by filling an appropriate formmade available. The new appointment of the beneficiary(s) shall take effecton the date the appropriate form for appointment of the beneficiary(s) issubmitted to the collection centre whether or not the unitholder(s) is/arealive on the date of acknowledgement of the change in beneficiary(s) withoutprejudice to the Fund or AMC or Trustees on account of any payment ortransmission of Units having been made before the acknowledgement of thechange or on account of any delay in payment or transmission of units havingbeen made due to non production of evidence to the satisfaction of the Fundand /on non compliance with all the formalities in connection with the claim.

The Trustees /AMC may alter these above state provisions/norms forappointment of beneficiary(s) from time to time to the extent deemednecessary, and also in conformity with the guidelines and Notifications issuedby SEBI/ Government of India/any other regulatory body from time to timeand /or any statutory modifications or re-enactment thereof, so as to permit

the Scheme to provide maximum benefits to the unitholders and thebeneficiary(s). The provisions for appointment of beneficiary(s) with regardto Mutual Funds would be as per Section 56 and Section 69 (regarding theright of the beneficiary to transfer possession) of the Indian Trusts Act, 1882since the Mutual Fund is formed as a Trust under the said Act. However,acceptance of such nomination/appointment of beneficiary would be at theentire discretion of the Fund taking into consideration the provisions of theIndian Trust Act and the Mutual Fund assumes no responsibility thereof, andthe unitholder(s) would be liable for the loss resulting from a fraudulentnomination/appointment of beneficiary based on the unitholder(s) (singleholder or joint-holders) instructions, that the Fund reasonably believed as genuine.

PLEDGE OF UNITS

The unitholders under the scheme in conformity with the guidelines andnotification issued by SEBI/Government of India/ any other regulatory bodyfrom time to time and /or any Statutory modification or re-enactment thereof,can offer the units under the Scheme as security by way of a pledge/charge infavor of scheduled banks, financial institutions, NBFC, or any other body for

raising loans. The AMC and/or the Registrar will note and record such Pledgedunits. Appropriate documentation has been drafted for this purpose and isavailable on request. However, disbursement of such loans will be at theentire discretion of the bank/financial institution/NBFC, or any other bodyconcerned and the Mutual Fund assumes no responsibility thereof.

LISTING

The Scheme is targeted as a balanced scheme under which it is envisagedthat fresh sales will be made on a continuous basis over a period of timewhile repurchase / redemption / switch of units will be made anytime afterthe expiry of the target period. Hence units of the Scheme are not proposedto be listed on any other stock exchange(s). However, the Fund may at itssole discretion list the units under the Scheme on one or more stock exchangesat a later date to help distribution amongst a wider unitholder base.

TRANSFER

As the scheme has been specifically designed for providing lumpsum capitalgrowth on expiry of relevant target period to the unitholder, no transfer facility

(except as stated in the clauses on “GIFT FACILITY” and “MODE OFHOLDING”) is required. If a transferee becomes a holder of the units byoperation of law, then the AMC shall, subject to production of such evidence,which in their opinion is sufficient, proceed to effect the transfer, if the intendedtransferee is otherwise eligible to hold the units under the scheme.

UNITS WITH DEPOSITORY

Units of the Scheme may, if decided by the AMC, be held with a depository.Under such circumstances, units will be transferable in accordance with theprovisions of the Securities and Exchange Board of India (Depositories andParticipants) Regulations, 1996 as may be amended from time to time.

NON-PAYMENT OF RECURRING ANNUAL SUBSCRIPTION INANY YEAR UNDER FUTURE GUARD PLAN

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subscriptions from both new investors as well as existing investors, on acontinuous basis. Under this plan, the recurring annual subscription will haveto be paid once in every 12 months from the date of allotment of units to theBeneficiary. Applicant can pay annual recurring installment in lumpsum orin sub installments during each 12 months. This is shown below:

For eg. Investor is opening account under Future Guard Plan with Rs.5000/-on March 1, 2005 for 7 years target period. His schedule of payment of recurring annual installment will be as under:

No of Minimum Recurring To be paid latest byinstallment Installment (Rs.) (Last date of payment)

1st 5000 March 1, 2005 (at the timeof opening the account)

2nd 5000 March 1, 2006

3rd 5000 March 1, 2007

4th 5000 March 1, 2008

5th 5000 March 1, 2009

6th 5000 March 1, 2010

7th 5000 March 1, 2011

Applicant can pay second recurring installment of Rs. 5000/- either inlumpsum or in sub-installment say 10 sub-installments of Rs.500/- each beforeMarch 1, 2006.

In case of non-payment of the annual subscription (of the amount atleastequal to the amount of original investment while opening the account in theFuture Guard Plan) for any year within the specified time schedule the investorwould no longer be covered under the insurance policy from/for that year.

The Unitholder’s account would be deemed as a “Lapsed Account” fromthat year and his investment would be refunded to the Unitholder at ApplicableNAV minus a load, which would not exceed 7% of Applicable NAV, at theend of the chosen target year and not before. Reactivation of the “LapsedAccount” would be at the sole discretion of the Trustees of Principal MutualFund, subject to payment of penal interest which would be decided fromtime to time.

REPURCHASE OF UNITS

Repurchase Procedure

On expiry of relevant target period the units of the Scheme can be repurchased(sold back to the Fund) any time on any business day. The repurchase request

can be made on a repurchase form or by using the relevant tear off section of

the Transaction Slip that may be enclosed with the Account Statement whichshould be submitted at any of the collection centres or at the office of the

AMC or can be sent by mail to the Registrar. The redemption form requiresthe beneficiary’s signature duly attested by the applicant or a bank manager

or by a notary public or by a magistrate or by post master or any other partyacceptable to the Fund / AMC.

In case the units after expiry of the relevant target period, are standing in the

names of more than one unitholder, where mode of holding is specified as“Jointly”, repurchase requests will have to be signed by all the joint holders.

However, in cases of holding specified as ‘Either/Anyone or Survivor’, anyoneof the joint holders (in case of either/anyone or survivor) will have the power

to make repurchase request. However, in all cases, the repurchase proceedswill be paid to the first named holder only.

The repurchase would be permitted to the extent of credit balance in the

unitholder’s account. The repurchase request can be made by specifying the

Rupee amount or by specifying the number of units to be repurchased. If arepurchase request is for both a specified Rupee amount and a specifiednumber of units, the specified rupee amount will be considered the definitive

request. If the repurchase amount is specified by the unitholder, the AMCwill divide the repurchase amount so specified by the applicable NAV based

price to arrive at the number of units. The request for repurchase of unitscould also be in fractions, up to three decimal places.

In case units has been subscribed on more than one Business Day, the unitssubscribed to prior in time (that is those units which have been held for the

longest period of time), will be deemed to have been repurchased first, that ison a First -In -First-Out basis. However an unitholder may request the Fund

to repurchase units subscribed at different dates, by indicating the specificdate of subscription of the units, which is offered for repurchase.

Unitholders may also request for repurchase of their entire holding and close

the account by indicating the same at the appropriate place in the TransactionSlip / Repurchase form.

Repurchase Price

An exit load of up to a maximum of 7% or as stipulated by SEBI will be

charged on repurchase of units by unitholders under the scheme. The exitload will be calculated as a percentage of the applicable NAV. Further, thedifference between the sale price and repurchase price of units shall not exceed7% calculated on the sale price.

The repurchase price will be calculated using the following formula:

Repurchase Price = Applicable NAV*(1- exit load, i f any)

Example for calculation of Repurchase Price

If the Applicable NAV is Rs. 15 and a 2% exit load is charged the repurchaseprice will be calculated as follows:

Repurchase Price = Rs. 15 - (2% of Rs. 15)

= Rs. 15 - Re. 0.30= Rs. 14.70 per unit

The AMC reserves the right to modify the exit load or levy a different exit

load as regards the amount / tenure of investment etc. However, any suchchange in the load structure shall be only on a prospective basis. The unitholder

is requested to confirm the applicable exit load at the time of investmentfrom the AMC/ collection centre.

Units issued during the initial offer will not attract any repurchase load andthe units will be repurchased at the prevailing NAV of the relevant business

day as per the terms of the previous (original) Offer Document dated April 1,

1997 if redeemed on expiry of the relevant target period.

Repurchase by NRIs

Credit balances in the account of an NRI will be subject to any procedureslaid down by the RBI. Such repurchase proceeds will be paid by means of arupee cheque payable to the designated NRE/NRO account of the unitholder

or by a US dollar (or any other currency) draft drawn at the exchange ratesprevailing at that time and subject to RBI procedures and approvals and subject

to deduction of tax at source, as applicable. All bank charges in connectionwith such payment will have to be borne by the unitholder and /or the Scheme

by way of ongoing expenses.

The Fund will not be liable for any delays or for any loss on account of

exchange fluctuations, while converting the rupee amount in US Dollar orany other currency.

Payment of Repurchase Proceeds

The time limit set for dispatch of repurchase proceeds will be from theBusiness Day when the request is accepted at the collection centres or the

Registrar’s office. As per the SEBI Regulations, the Fund shall mail the

repurchase proceeds within ten Business Days from the date of acceptanceof valid request at any of the collection centres or the office of the Registrar,

in case of a repurchase request being sent by post. The Fund will ordinarilydispatch the repurchase warrant within 3 business days from the date of

acceptance of a valid repurchase request.In the event of failure to dispatch the repurchase or repurchase proceeds

within the statutory period specified above as per the SEBI Regulations, the

AMC shall be liable to pay interest to the unitholders at such rate (currently15% per annum) as may be specified by SEBI for the period of such delay.

Electronic Credit Clearing Services (ECS)

ECS is a facility offered by RBI, for facilitating better customer service by

direct credit of dividend or repurchase amount to an unitholder’s bank accountthrough electronic credit. This helps in avoiding loss of dividend or repurchasewarrant in transit or fraudulent encashment. The Fund will endeavour to

arrange such facility for payment of dividend/repurchase proceeds to theunitholders. However, this facility is optional for the unitholders.

Repurchase proceeds may be released through the ECS facility to unitholdersresiding in any of the cities where such a facility is available. However, the

maximum amount of repurchase in such cases should be Rs. 100,000/-. The

AMC may change this amount depending upon the relevant guidelines fromthe RBI from time to time.

In order to avail the above facility, the unitholder will have to give a written

request to the Registrar. If the unitholder has opted for the ECS facility his/

her bank branch will directly credit the amount due to them in their accountwhenever the payment is through ECS. The Registrar will send a separate

advice to the unitholder informing them of the direct credit.

It may be noted that there is no commitment from the Fund that this facilitywill be made available to the unitholders for payment of dividend/repurchaseproceeds. While the Fund will endeavour in arranging the facility it will bedependent on various factors including sufficient demand for the facility fromunitholders at any centre, as required by the authorities. In places wheresuch a facility is not available or if the facility is discontinued by the Fundfor any reason the repurchase warrants will be mailed to the unitholder.



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SYSTEMATIC WITHDRAWAL PLAN /SWITCH PLAN(S) (SWP) / (SSP)

After the expiry of target period, the unitholder may set up a SystematicWithdrawal and/or Switch Facility on a monthly, quarterly or semi-annual orannual basis (as follows) :

- redeem /transfer a fixed number of units or amount

- redeem/ transfer on dates

- redeem/transfer on realisation of Gains

Once the unitholder sets up a periodic Systematic Withdrawal / Switch plan,the plan would continue until:

- the unitholder instructs the Fund to stop periodic withdrawal and /or

switch in writing; or- the unitholder account balance is zero.

- On death or incapacity of the unitholder

- On expiry of the time/period specified by the unitholder

The unitholder has an option to select either 1st, 11th or 21st day of themonth on which the repurchase/switch is to be made. However, if no date isselected, the repurchase/switch will be made on the 11 th of the month atapplicable NAV related price. The AMC may change the date for groupinvestors or on demand from a section of the unitholders or otherwise tooffer benefits to the unitholders.

Withdrawal payments will be endeavoured to be sent within 3 BusinessDays after the repurchase date. A unitholder may avail of the SystematicWithdrawal Plan and receive regular payments from the account. The switchwill happen on selected date. A unitholder may avail of the systematic SwitchPlan and thus can rebalance/redistribute his investment across the Fund. Incase of withdrawal/switch on dates, on realisation of gains, a specified amount/

full amount/ gains/ appreciation etc. would be paid /switched to the unitholder/ other scheme either on the investment attaining a particular value or after aparticular period of time. In case of withdrawal by gains/appreciation, at theoption of the unitholder, either the amount equivalent to gains/appreciation,would be redeemed and paid to the unitholder /switched into other scheme,or the full original investment would be redeemed and the gain / appreciationcomponent paid to the unitholder/switch into other scheme and the originalinvestment amount would be reinvested either in the same scheme or anyother scheme

The amount thus withdrawn/switched shall be converted into the respectivescheme units at the applicable NAV, subject to an exit load, if any (on whichdate the payment / switch is scheduled), and such units will be subtractedfrom the unit balance of that unitholder. The minimum balance amount neededfor the Systematic Withdrawal /switch Plan may be altered from time to timeat the discretion of the AMC.

Unitholders may change the amount of withdrawal/switch but not below thespecified minimum amount of repurchase for a particular Scheme by giving30 days written notice to the Registrars / AMC.

PREMATURE REDEMPTION/ REPURCHASE OF UNITS

Anytime after the allotment of Units and before attainment of the target period,Principal Mutual Fund will allow premature redemption/ repurchase of Unitsat the applicable Repurchase price / NAV related price (applicable NAV lessload not exceeding 7% of applicable NAV). However in case of prematureredemption/repurchase unitholders may have to pay exit load/higher exit load.Exit load may be linked to the amount / tenor of investment and may changefor prospective investment from time to time depending upon thecircumstances prevailing at any given time.

For premature redemption / repurchase, the Account Statement(s) and theRedemption form (send by the Fund on request) maybe surrendered at thecollection centres or at the office of the AMC or can be sent by mail to theRegistrar duly discharged on the reverse. The Redemption form requires theBeneficiary’s signature or the Beneficiary’s Parent’s / Guardian’s signature(if Beneficiary is a minor) duly attested by the Applicant or by a bank manageror by a notary public or by a magistrate or any other party acceptable to the

Fund / AMC. The redemption cheque will be issued in favour of Beneficiaryand will be despatched to the Beneficiary. In event of death of Beneficiaryredemption cheques will be dispatch to parent / guardian of the Beneficiary(if Beneficiary is minor) or to the legal heir of the Beneficiary (if Beneficiaryis major).

Premature Redemption / repurchase of units represents the sale of units/ income arising to the beneficiary who may be a minor. Under provisions of Section 61(1A) of the Income Tax Act, all income which arises and accruesto the minor shall be clubbed in the income of his / that parent whose totalincome (excluding the income includible under Section 61(1A)) is greater.

Note: In case of premature partial repurchase under Future Guard Plan,subsequent annual subscription will get reduced depending on the balanceinvestment left in the scheme. The same will be notified to the unitholder.Also, amount of life cover as taken for the applicant shall be reduced in ratioto the amount of partial repurchase.

CLOSURE OF UNITHOLDER’S ACCOUNT

Unitholders may note that the AMC at its sole discretion may close aunitholder’s account after giving notice of 45 days, if at the time of any partrepurchase and / or systematic withdrawal / switch Plan the value of units(represented by the units in the unitholder’s account if such repurchase wereto take place, valued at the applicable NAV related Price), falls below theminimum investment/balance required for the scheme (or such other amountas the AMC may decide from time to time) or where the units are held by aunitholder in breach of any Regulation. Besides if the investor falls underthe category where the entry load is to be waived or otherwise and theinvestor then does not submit the requisite proof, then the Fund has the rightat its sole discretion to redeem appropriate number of units so as to

recover the differential / additional entry load or refuse to credit appropriatenumber of units to the account of the unitholder for the differential / additionalentry load.

RIGHT TO LIMIT REPURCHASES

The AMC may, in the general interest of the unitholders of the Scheme,keeping in view the unforeseen circumstances/unsure conditions, limit thetotal number of units which may be repurchased on any Business Day to15% of the total number of units then in issue under the Scheme (or suchhigher percentage as the AMC may decide in any particular case). Any unitswhich by virtue of these limitations are not repurchased on a particularBusiness Day will be carried forward for repurchase to the next BusinessDay, in order of receipt. Repurchases so carried forward will be priced onthe basis of the Repurchase Price of the Business Day on which repurchase ismade. Under such circumstances, to the extent multiple repurchaserequests are received at the same time on a single Business Day, repurchasewill be made on pro-rata basis, based on the size of each repurchaserequest, the balance amount being carried forward for repurchase to the nextBusiness Day(s).

POSSIBLE DEFERRAL OF REDEMPTION/REPURCHASEREQUESTS

Whilst every effort will be made to ensure that the Scheme will have sufficientliquidity to enable the repurchase cheques to be collected/despatched withinthe deadline stated in the foregoing Clause, unitholders should note that wherethe Scheme is obliged to arrange for the disposal of the underlying securities/ borrow, in order to satisfy redemption/repurchase requests, unitholders mayexperience some delays in receiving repurchase cheques, reflecting the timeinvolved in settling the underlying sales of securities/borrowing. However inany case, the Fund will ensure that the collection/despatch of repurchasecheques is not delayed beyond ten working days (when PRINCIPAL is openfor business) from the date of receipt of the repurchase request in accordancewith Regulation 53(b) of the Securities and Exchange Board of India (MutualFunds) Regulations, 1996.

SUSPENSION OF SALE/REPURCHASE/ SWITCH OPTIONS OFTHE UNITS

The Fund at its sole discretion reserves the right to withdraw sale and/orrepurchase and /or switch of the units under the scheme temporarily orindefinitely, if in the opinion of the AMC the general market conditions arenot favourable and/or suitable investment opportunities are not available fordeployment of Funds. . However, the suspension of sale/repurchase/switcheither temporarily or indefinitely will be made applicable only after theapproval of the Board of Directors of the AMC and Trustee. The approvalfrom the AMC Board and the Trustees giving details of circumstances and

justification for the proposed action shall also be informed to SEBI in advance.

The sale, repurchase and switch of the units may be temporarily suspendedunder the following conditions:

- If the Stock / Money Markets stop functioning or trading is restricted

- Under uncertain conditions when the market (capital/stock/money etcbecomes extremely volatile and the AMC so decides in the best interestof the unitholders)

- Declaration of war or occurrence of insurrection, civil commotion orany other serious or sustained financial, political or industrial emergencyor disturbance or any natural calamity

- In extreme cases or complete breakdown or dislocation of business inthe financial markets.

- Breakdown in the means of communication used for the valuation of investments in the Scheme(s), without which the value of the securitiesheld in the Scheme(s) cannot be accurately calculated.

- In the event of any force majeure or disaster that affects the normalfunctioning of the AMC or the ISC

- SEBI by order so permits

- During the period of Book Closure/Record Date

- On a requisition made by three-fourth’s of the unitholder.



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The AMC reserves the right in its sole discretion to withdraw the facility of sale and switch option of units into and out of the Scheme temporarily orindefinitely, if AMC views that changing the size of the corpus further mayprove detrimental to the existing unitholders of the Fund.

Suspension of Sale/Repurchase of Demat Units

The AMC may at its sole discretion suspend the sale/repurchase of dematUnits of the both the plans or any one plan under both the options or oneoption of the scheme either temporarily or permanently on one or moreDesignated Stock Exchange(s). During the period when there is a temporarysuspension Units will not be sold/repurchased by the Fund. On permanentlysuspending the sale/repurchase of Units, existing Units held in the

dematerialised mode shall be rematerialised and account statementsdespatched to them subsequently, requests for any transaction will be effectedin the physical mode only.

Suspension or restriction of repurchase/redemption facility under the schemeshall be made applicable only after the approval from the Board of Directorsof the Asset Management Company and the Trustees. The approval from theAMC Board and the Trustees giving details of circumstances and justificationfor the proposed action shall be informed to SEBI in advance.

DIVIDENDS AND DISTRIBUTIONS

The AMC may consider providing returns to the unitholders by way of periodicdeclaration of dividend and /or bonus units after providing for all necessaryrecurring and other expenses.

Only those unitholders whose names appear in the register of unitholders ason the record date will be entitled for dividend and /or bonus units. This datewill be fixed by the AMC/Trustees appropriately .

The dividend warrants and/or fresh Account Statement with the bonus units

shall be despatched/credited to the unitholders within 30 days or suchstipulated period of the declaration of dividend /bonus units.

All benefits accruing/earned/received under the Scheme in respect of income(not included in NAV), capital reserves and surpluses, if any at the time of its

/their declaration or otherwise under the Scheme(s) shall be available only tothe unitholders who hold the units at the time of its/their declaration.

ISSUE OF BONUS UNITS

Guided by the philosophy of value-oriented returns, the AMC may issuebonus units out of the distributable surplus available in the scheme(s)/plan(s)/ option(s). The issue of bonus units would be done at a ratio that would bedecided by the Trustees. The bonus units would be issued to all unitholderswhose names appear in the register of members as on the record date fixedfor the purpose. Fresh account/transaction statements will be sent to allunitholders after the allotment of bonus units. It may be noted that sincebonus units would be issued out of the distributable surplus, the NAV of thescheme(s)/plan(s)/option(s) will be adjusted to the extent of the bonus unitsissued after the record date fixed for the purpose.

SPLIT IN THE FACE VALUE OF UNITS

The units under the Scheme are presently being issued at the face value of Rs. 10. The AMC may split the face value of the units to below Rs. 10 inmultiple of an appropriate integer, the intent being to protect the interest of the unitholders. The units after split in the face value would be issued to allUnitholders whose names appear in the register of members as on the recorddate fixed for the purpose. Fresh account/transaction statements will be sentto all unitholders after the split procedure is completed. The NAV of theScheme will be adjusted to the extent of the split in the face value of unitsafter the record date fixed for the purpose.

XI - A SALE AND REPURCHASE OF DEMAT UNITS THROUGHDESIGNATED STOCK EXCHANGES

An investor may, if he/she/it so desires, use his/her/its existing demat account(“demat”) in respect of the demat units of the Scheme and in that case mayavail of the advantage of the automated trading, clearing and settlement systemof stock exchange(s)/ Clearing Corporations, for sale and repurchase of the

demat Units of the Scheme. Availability of wide reach of such a system, willmake transacting in the demat Units operationally convenient. An investormay approach a broker, for this purpose, who is a registered member(Participant/Trading Member/Broker) of a stock exchange/clearing house/ clearing corporation, with which the Fund has entered into an agreement/ understanding in this regard (hereinafter referred to as the “Designated Stock Exchanges /Designated Clearing Corporation”) and place an order for thesale / repurchase of demat Units to the Broker.

As of date, the fund has entered into necessary agreement with National Stock Exchange Of India Limited (NSEIL) and its wholly owned clearingcorporation, National Securities Clearing Corporation Limited (NSCCL) foravailing their automated trading, clearing and settlement system for Sale andRepurchase of demat Units of the Fund, namely the Mutual Fund ServiceSystem (MFSS). The investors are not required to pay any charge to the

participant (broker) for the sale/ repurchase of units done through theparticipant (broker). AMC will supply hard copy of the documents to theparticipants (broker) as it is being supplied to other distributors.

Orders placed for the sale / repurchase of demat Units by the Brokers of theDesignated Stock Exchange/Designated Clearing Corporation will betransacted by the Fund at the same price (upto 2 decimals or otherwise) atwhich sale and repurchase is being done on that day for Units in the present(physical) mode. Both Sale as well as repurchase is being effected on theapplicable day end Sale Price/Repurchase Price respectively, of the businessday or the following Business Day (in case the transaction day is not a BusinessDay for the Mutual Fund).

Investors desiring of transacting in demat Units should note the following:

Units for purchase as well as for repurchase in demat mode through theDesignated Stock Exchange is presently open only for Resident investors,excluding non-resident investors as well as investors who have custodianshandling the settlement of their investment which may be made available ata future date. Switching of demat Units inter scheme as well as intra schemewhich is presently not being made available & may be made available at afuture date.

Prospective investors should consider utilising the facility for sale andrepurchase of demat Units through Designated Stock Exchanges only afterfully understanding and comprehending the aforesaid risks of dealing throughBrokers as repurchase facility through the AMC would not be possible. Dematunits shall be repurchased/redeemed only through the Mutual Fund ServiceSystem (MFSS) facility provided by National Stock Exchange of IndiaLimited/NSCCL or any other system of Designated Stock Exchange(s).

PROCEDURE FOR PURCHASE OF DEMAT UNITS OVER THESTOCK EXCHANGE(S)

Purchase of demat Units by Investors

Purchase of demat Units may be made through Brokers of Designated Stock Exchanges/Designated Clearing Corporation and for a specific number of demat Units. The AMC however, reserves the right to change the basis forpurchase through demat mode from number of Units’ basis to any other basis.

Under the instructions issued by the Designated Stock Exchanges / DesignatedClearing Corporations, the Broker registered with such Designated Stock Exchanges / Designated Clearing Corporation is legally bound to supply to theinvestor the abridged offer document for the specific scheme (made availableto the Broker by the Fund through such Designated Stock Exchange/ DesignatedClearing Corporation) and procure the completed application form from theinvestor for the Broker’s record before accepting the first order from any investor.However, for subsequent investments, completed order confirmation/ transaction slips containing the relevant details may be adequate. Under theprocedure prescribed by the Designated Stock Exchange / Designated ClearingCorporation, the Broker is under an obligation to furnish to the investor anorder confirmation / transaction slip for the purchase order.

Sale Price of demat Units by Investors

The sale will be effected on the applicable day end Sale Price (upto 2 decimalsor otherwise) on the business day or the following Business Day (in case thetransaction day is not a Business Day for the Mutual Fund). The applicableSale Price as aforesaid for the sale of demat Units will be the same price (upto2 decimals or otherwise) as applicable for Units subscribed in the normal(physical) mode. Units tendered for subscription through the demat mode, willbe priced at the applicable NAV plus entry load, if any. However dependingupon the circumstances and system availability entry load chargeable on theunits repurchase through demat mode may be lower or different than the entryload chargeable on the units repurchase in physical mode.

Allotment of demat Units

The Designated Stock Exchange / Designated Clearing Corporation and theFund would agree upon a settlement cycle / schedule for the orders placed bythe investors with the Brokers for purchase of demat Units from time to time.For the time being the settlement cycle is T + 3 (which may change), with Tbeing the transaction day, i.e. the demat units of the scheme would be deliveredto the Designated Clearing Corporation on the 3rd Business Day from thetransaction day. On a settlement day, subject to the Fund receivingconfirmation from the Designated Stock Exchange/ Designated ClearingCorporation of the payment proceeds, the Fund will make delivery of thedemat Units to the Designated Clearing Corporation of the Designated Stock Exchange. The Designated Clearing Corporation will then credit the dematUnits to the respective Broker’s pool account. Under the procedure prescribedby the Designated Stock Exchange / Designated Clearing Corporation,thereupon the Broker is under an obligation to credit the respective demataccount of the Unitholder. However, the credit of demat Units by the Fund tothe Designated Clearing Corporation of the Designated Stock Exchange willconstitute full discharge of the Fund of its obligation to allot demat Units tothe investor and for this purpose, the Investor shall have constituted the Brokerof the Designated Stock Exchange is his/her/its authorised agent. Kindly see



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Section II “Risk Factors” for Risk associated with Sale and Repurchase of demat Units through Designated Stock Exchange / Designated ClearingCorporation.

PROCEDURE FOR REPURCHASE OF DEMAT UNITS

Minimum amount / Units for repurchase of demat Units

The repurchase is permitted to the extent of the credit balance (which doesnot have a lock- in) in the Unitholder’s demat account. The repurchase requestmay be made by specifying the number of demat Units (without decimals) tobe repurchased.

The AMC however, reserves the right to change the basis for repurchase

through demat mode from Unit basis to any other basis.

Repurchase of demat Units

Resident investors may get repurchased their dematerialised Units by placingan order with a Broker which is a member of the Designated Stock Exchange/ Designated Clearing Corporation, for the demat Units to be repurchased bythe Fund. As with any dematerialised securities, the demat Units will have tobe transferred to the Broker’s demat account from the Unitholder’s demataccount, and then offered for repurchase to the Fund through the DesignatedStock Exchange / Designated Clearing Corporation. Under the procedureprescribed by the Designated Stock Exchange / Designated ClearingCorporation, the Broker is under an obligation to furnish to the investor anorder confirmation / transaction slip for the repurchase order.

Repurchase Price of demat Units

The Repurchase will be effected on the applicable day end Repurchase Price(upto 2 decimals or otherwise) on the business day or the following BusinessDay (in case the transaction day is not a Business Day for the Mutual Fund).

The applicable Repurchase Price as aforesaid for the repurchase of dematUnits will be same price (upto 2 decimals or otherwise) as applicable forUnits repurchased in the present (physical) mode. Units tendered forrepurchase through the demat mode will be priced at the Applicable NAVless exit load, if any. However depending upon the circumstances and systemavailability exit load chargeable on the units repurchase through demat modemay be lower or different than the exit load chargeable on the units repurchasein physical mode.

Payment of Repurchase Proceeds

The Designated Stock Exchange / Designated Clearing Corporation and theFund, would agree upon a settlement cycle / schedule for the orders placedby the investors with the Brokers for repurchase of demat Units from time totime. For the time being the settlement cycle is T + 3 (which may change),with T being the transaction day, i.e. the repurchase proceeds of the scheme(s)would be paid to the Designated Clearing Corporation on the 3rd BusinessDay from the transaction day. On settlement day, subject to the Fund receivingconfirmation from the Designated Clearing Corporation of the availability

of demat Units offered for repurchase, the Fund will pay the repurchaseproceeds to the Designated Clearing Corporation of the Designated Stock Exchange. The Designated Clearing Corporation will then credit therepurchase proceeds to the respective Broker’s pool account. Under theprocedure prescribed by the Designated Stock Exchange / Designated ClearingCorporation, the Broker is under an obligation thereupon to pay the respectiverepurchase proceeds to the Unitholder. However, the payment of repurchaseproceeds by the Fund to the Designated Clearing Corporation of theDesignated Stock Exchange will constitute full discharge of the Fund of itsobligation to pay the repurchase price of the demat Units to the investor andfor this purpose, the Investor shall have constituted the Broker of theDesignated Stock Exchange is his/her/its authorised agent. Kindly see SectionII “Risk Factors” for Risk associated with Sale and Repurchase of dematUnits through Designated Stock Exchange / Designated Clearing Corporation.

Other Information

Expenses incurred for the above distribution channel will form a part of theoverall expense limit stated under clause 52 of SEBI (Mutual Funds)

Regulations, 1996. Any expenditure over and above the set limits shall beborne by the Asset Management Company and / or the Trustee and / or theSponsor.

XII. VALUATION POLICY AND DETERMINATION OF NETASSET VALUE (NAV)

The assets of the Scheme will be valued according to the following guidelines,presently in force, which are in conformity with SEBI Regulations.

VALUATION POLICY

1. Traded Securities :

1. The securities shall be valued at the last quoted closing price on thestock exchange.

2. When the securities are traded on more that one recognised stock exchange, the securities shall be valued at the last quoted closing priceon the stock exchange where the security is actively traded. It would beleft to the AMC to select the appropriate stock exchange, but the reasonsfor the selection should be recorded in writing. There should howeverbe no objection for all scrips being valued at the prices quoted on thestock exchange where a majority in value of the investments areprincipally traded such as the National Stock Exchange (NSE) or TheStock Exchange, Mumbai (BSE).

3. Once a stock exchange has been selected for valuation of a particularsecurity, reasons for change of the exchange shall be recorded in writingby the AMC.

4. When on a particular valuation day, a security has not been traded on theselected stock exchange; the value at which it is traded on another stock exchange may be used.

5. When a security (other than debt securities) is not traded on any stock exchange on a particular valuation day, the value at which it was tradedon the selected stock exchange or any other stock exchange, as the casemay be, on the earliest previous day may be used provided such date isnot more than thirty days prior to the valuation date. When a debt security(other than Government securities) is not traded on any stock exchangeon a particular valuation day, the value at which it was traded on theprincipal stock exchange or any other stock exchange, as the case maybe, on the earliest previous day may be used provided such date is notmore than fifteen days prior to the valuation date. When a debt security(other than Government securities) is purchased by way of privateplacement, the value at which it was bought may be used for a period of 15 days beginning from the date of purchase.

6. Presently the AMC is valuing the securities of the scheme based on the

quotations of the NSE, since the price quotations of all securities listedon most of the Stock Exchanges are available on NSE. However, theAMC reserves the right to change the basis of valuation to BSE, or anyother stock exchange, if it is found to be more appropriate.

7. Government Securities shall be valued at the prices released byCRISIL.com which is currently the only approved agency suggestedby Association of Mutual Funds in India (AMFI)

2. Thinly Traded Securities :

(i) Thinly Traded Equity/Equity Related Securities :

When trading in an equity/equity related security (such as convertibledebentures, equity warrants, etc.) in a month is less than Rs. 5 lacs or thetotal volume is less than 50,000 shares, it shall be considered as a thinlytraded security and valued accordingly.

Where a stock exchange identifies the “thinly traded” securities byapplying the above parameters for the preceding calendar month andpublishes/provides the required information along with the dailyquotations, the same can be used by the Fund.

If the share is not listed on the stock exchanges which provide suchinformation , then it will be obligatory on the part of the Fund to make itsown analysis in line with the above criteria to check whether suchsecurities are thinly traded which would then be valued accordingly. Inorder to determine whether a security is thinly traded or

not, the volumes traded in all recognised stock exchanges in India maybe taken into account.

In case trading in an equity security is suspended upto 30 days, then thelast traded price would be considered for valuation of that security. If anequity security is suspended for more than 30 days, then the AssetManagement Company/Trustees will decide the valuation norms to befollowed and such norms would be documented and recorded.

(ii) Thinly Traded Debt Securities:

A debt security (other than Government Securities) shall be consideredas a thinly traded security if on the valuation date, there are no individualtrades in that security in marketable lots (currently Rs 5 crore) on theprincipal stock exchange or any other stock exchange.

A thinly traded debt security as defined above would be valued as perthe norms set for non-traded debt security.

3. Non Traded Securities :

When a security (other than a debt security) is not traded on any stock exchange for a period of thirty days prior to the valuation date, the securitymust be treated as a ‘non traded’ security. When a debt security (otherthan a Government security) is not traded on any stock exchange on aparticular valuation day, the security must be treated as a ‘non traded’security.

4. Valuation of Non-Traded/Thinly Traded Securities

Non traded/ thinly traded securities shall be valued “in good faith” by the



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Asset Management Company on the basis of appropriate valuation methods

based on the principles laid down below and approved by the AMC. Such

decision of the AMC must be documented and the supporting data in respect

of each security so valued must be preserved. The methods used to arrive at

the values “in good faith” shall be periodically reviewed by the Trustees and

reported upon by the Auditors as “Fair and Reasonable” in their report on the

annual accounts of the Fund. For the purpose of valuation of non traded

securities, the following principles will be adopted;

(i) Non-Traded/Thinly Traded Equity Securities:

Equity instruments shall generally be valued as follows on the basis of

capitalisation of earnings solely or in combination with the NAV, usingfor the purposes of capitalisation, the price or earning or earnings ratios

of comparable traded securities and with an appropriate discount for

lower liquidity.

(a) Based on the latest available Balance Sheet, net worth shall be cal

culated as follows :

Net Worth per share = [share capital+ reserves (excluding revalua

tion reserves) – Misc. expenditure and Debit Balance in P&L A/c]

Divided by No. of Paid up Shares.

(b) Average capitalisation rate (P/E ratio) for the industry based upon

either BSE or NSE data (which should be followed consistently and

changes, if any noted with proper justification thereof) shall be taken

and discounted by 75% i.e. only 25% of the Industry average P/E

shall be taken as capitalisation rate (P/E ratio). Earnings per share

of the latest audited annual accounts will be considered for this pur

pose.

(c) The value as per the net worth value per share and the capital earning value calculated as above shall be averaged and further dis

counted by 10% for ill-liquidity so as to arrive at the fair value per

share.

(d) In case the EPS is negative, EPS value for that year shall be taken as

zero for arriving at capitalised earning.

(e) In case where the latest balance sheet of the company is not avail

able within nine months from the close of the year, unless the ac

counting year is changed, the shares of such companies shall be

valued at zero.

(f) In case an individual security accounts for more than 5% of the total

assets of the scheme, an independent valuer shall be appointed for

the valuation of the said security.

To determine if a security accounts for more than 5% of the total assets

of the Scheme, it should be valued by the procedure above and the

proportion which it bears to the total net assets of the Scheme to which it

belongs would be compared on the date of valuation.

(ii) Non Traded Debt Instruments

Non traded debt instruments in the Fund shall generally be valued on an

“yield to maturity” basis, the capitalization factor being determined for

comparable traded securities and with appropriate discount for lower

liquidity.

(a) Non Traded/Thinly Traded Debt Securities of Upto 182 Days toMaturity :

As the non-traded money market securities are valued on the basis

of amortization (cost plus accrued interest till the beginning of the

day plus the difference between the redemption value and the cost

spread uniformly over the remaining maturity period of the instru

ments) the same process should be adopted for non-traded debt se

curities with residual maturity of upto 182 days, in the absence of

any other standard benchmarks in the market. All other non tradedNon Government debt instruments should be valued using the

method suggested in (ii)(b) hereof.

(b) Non Traded/Thinly Traded Debt Securities of Over 182 Days

to Maturity.

For the purpose of valuation, all Non Traded Debt Securities would

be classified into “Investment grade” and “Non Investment grade”

securities based on their credit ratings. The non-investment grade

securities would further be classified as “Performing” and “Non Per

forming” assets

• All Non Government investment grade debt securities, classi

fied as not traded, shall be valued on yield to maturity basis as

described below.

• All Non Government non investment grade performing debt

securities would be valued at a discount of 25% to the face

value

• All Non Government non investment grade non performing debt

securities would be valued based on the provisioning norms.

The approach in valuation of non traded debt securities is based on the concept

of using spreads over the benchmark rate to arrive at the yields for pricing

the non traded security.

The Yields for pricing the non traded debt security would be arrived at using

the process as defined below.

Step A

A Risk Free Benchmark Yield is built using the government securities (GOI

Sec) as the base. GOI Secs are used as the benchmarks as they are traded

regularly; free of credit risk; and traded across different maturity spectrums

every week.

Step B

A Matrix of spreads(based on the credit risk) are built for marking up the

benchmark yields. The matrix is built based on traded corporate paper on the

wholesale debt segment of an appropriate stock exchange and the primary

market issuances. The matrix is restricted only to investment grade corporate

paper.

Step C

The yields as calculated above are Marked-up/Marked-down for ill-liquidity

risk

Step D

The Yields so arrived are used to price the portfolio

METHODOLOGY

A. Construction of Risk Free Benchmark

Using Government of India dated securities, the Benchmark shall be

constructed as below :

Government of India Dated securities will be grouped into the following

duration buckets viz., 0.5-1 years, 1-2 years, 2-3 years, 3-4 years, 4-5

years, 5-6 years and over 6 years and the volume weighted yield would

be computed for each bucket. Accordingly, there will be a benchmark

YTM for each duration bucket.

The benchmark as calculated above will be set weekly, and in the event

of any change in the Reserve Bank of India (RBI) policies affecting

interest rates during the week, the benchmark will be reset to reflect any

change in the market conditions.Note : The concept of duration over tenor has been chosen in order to capture

the reinvestment risk. It is intended to gradually move towards a methodology

that incorporates the continuous curve approach for valuation of such

securities. However, in view of the current lack of liquidity in the corporate

bond markets, a continuous curve approach to valuation would be necessarily

based on limited data points, and this would result in out of line valuations.

As an interim methodology therefore it is proposed that the Duration Bucket

approach be adopted and continuously tracked in order to fine tune the duration

buckets on a periodic basis. Over the next few years it is expected that with

the deepening of the secondary market trading, it would be possible to make

a gradual move from the Duration Bucket approach towards a continuous

curve approach.

B . Building a Matrix of Spreads for Marking-up the Benchmark Yield

Mark up for credit risk over the risk free benchmark YTM as calculated

in step A, will be determined using the trades of corporate debentures/

bonds of different ratings. All trades on appropriate stock exchange during the fortnight prior to the benchmark date will be used in building the

corporate YTM and spread matrices. Initially these matrices will be built

only for corporate securities of investment grade. The matrices are dy

namic and the spreads will be computed every week. The matrix will be

built for all duration buckets for which the benchmark GOI matrix is

built to effectively link the corporate matrix with the GOI securities

matrix.

Accordingly:

• All traded paper (with minimum traded value of Rs. 1 crore) will beclassified by their ratings and grouped into 7 duration buckets; for ratedsecurities, the most conservative publicly available rating will be used;

• For each rating category, average volume weighted yield will be obtained



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both from trades on the appropriate stock exchange and from the primary

market issuances

• Where there are no secondary trades on the appropriate stock exchange

in a particular rating category and no primary market issuances during

the fortnight under consideration, then trades on appropriate stock

exchange during the 30 day period prior to the benchmark date will be

considered for computing the average YTM for such rating category;

• If the matrix cannot be populated using any or all of the above steps,

then credit spreads from trades on appropriate stock exchange of the

relevant rating category over the AAA trades will be used to populate

the matrix;

• In each rating category, all outliers will be removed for smoothening the

YTM matrix;

• Spreads will be obtained by deducting the YTM in each duration category

from the respective YTM of the GOI securities;

• In the event of lack of trades in the secondary market and the primary

market the gaps in the matrix would be filled by extrapolation. If the

spreads cannot be extrapolated for the reason of practicality, the gaps in

the matrix will be filled by carrying the spreads from the last matrix.

C. Mark-up/Mark-down Yield

The Yields calculated would be marked-up/marked-down to account for the

il-liquidity risk, promoter background, finance company risk and the issuer

class risk. As the level of il-liquidity risk would be higher for non rated

securities the marking process for rated and non rated securities would be

differentiated as follows:

C(I) Adjustments for Securities rated by external rating agencies

The Yields so derived out of the above methodology could be adjusted to

account for risk mentioned above.

A Discretionary discount/premium of upto +100/-50 Basis Points for securities

having a duration of upto 2 years and upto +75/-25 Basis Points for securities

having duration higher than 2 years will be permitted to be provided for the

above mentioned types of risks. The rationale for the above discount structure

is to take cognizance of the differential interest rate risk of the securities.

This structure will be reviewed periodically.

C (II) Adjustments for Internally Rated Securities

To value an unrated security, the investment manager has to assign an internal

credit rating, which will be used for valuation. Since un-rated instruments

tend to be more illiquid than rated securities, the yields would be marked up

by adding +50 basis point for securities having a duration of upto 2 years and

+25 basis point for securities having duration of higher than 2 years to account

for the illiquidity risk. Further additional discretionary discount upto +50 for

instruments may be provided.(c) Non traded/thinly traded Government securities will be valued atyield to maturity based on the prevailing market value.

Valuation of securities with Put/Call Options

The option embedded securities would be valued as follows:

Securities with call option :

The securities with call option shall be valued at the lower of the value as

obtained by valuing the security to final maturity and valuing the security to

call option.

In case there are multiple call options, the lowest value obtained by valuing

to the various call dates and valuing to the maturity date is to be taken as the

value of the instrument.

Securities with Put option :

The securities with put option shall be valued at the higher of the value as

obtained by valuing the security to final maturity and valuing the security to

put option.

In case there are multiple put options, the highest value obtained by valuing

to the various put dates and valuing to the maturity date is to be taken as the

value of the instruments.

Securities with both Put and Call option on the same day.

The securities with both Put and Call option on the same day would be deemed

to mature on the Put/Call day and would be valued accordingly.

(iii) Illiquid Securities :

(a) Aggregate value of “illiquid securities” of the scheme, which are

defined as non-traded, thinly traded and unlisted equity shares, shall not

exceed 15% of the total assets of the scheme and any illiquid securities

held above 15% of the total assets shall be assigned zero value.

Provided that in case any scheme has illiquid securities in excess of

15% of total assets as on September 30, 2000 then such a scheme

shall within a period of two years bring down the ratio of illiquid

securities within the prescribed limit of 15% in the following time

frame:

(i) All the illiquid securities above 20% of total assets of the scheme

shall be assigned zero value on September 30, 2001.

(ii) All the illiquid securities above 15% of total assets of the scheme

shall be assigned zero value on September 30, 2002.

(b) The Fund shall disclose as on March 31 and September 30 the

scheme-wise total illiquid securities in value and percentage of thenet assets while making disclosures of half yearly portfolios to the

unitholders. In the list of investments, an asterisk mark shall also be

given against all such investments which are recognised as illiquid

securities.

(c) The Fund shall not transfer illiquid securities among its schemes

w.e.f. October 1, 2000.

(d) In respect of closed ended funds, for the purposes of valuation of

illiquid securities, the limits of 15% and 20% applicable to open-

ended funds should be increased to 20% and 25% respectively.

(e) Where a scheme has illiquid securities as at September 30, 2001 not

exceeding 15% in the case of an open-ended fund and 20% in the

case of closed fund, the concessions of giving time period for

reducing the illiquid security to the prescribed limits would not be

applicable and at all time the excess over 15% or 20% shall be

assigned nil value.

iv) In respect of convertible debentures and bonds, the non-convertible andconvertible components will be valued separately. The non-convertible

component is valued on the same basis as would be applicable to a debt

instrument. The convertible component is valued on the same basis as

would be applicable to an equity instrument. If, after conversion the

resultant equity instrument would be traded pari-passu with an existing

instrument, which is traded, the value of the latter instrument is adopted

after appropriately discounting for the non-tradability of the instrument

during the period preceding the conversion. While valuing such

instruments, the fact whether the conversion is optional will be factored

in.

v) In respect of warrants to subscribe for shares attached to instruments,

the warrants are valued at the value of the share which would be obtained

on exercise of the warrant as reduced by the amount which would be

payable on exercise of the warrant. A discount similar to the discount to

be determined in respect of convertible debentures (as referred to above)

is deducted to account for the period that must elapse before the warrantcan be exercised.

vi) Where instruments have been bought on ‘repo’ basis, the instrument will

be valued at the resale price after deduction of applicable interest up to

date of resale. Where an instrument has been sold on a ‘repo’ basis,

adjustment must be made for the difference between the repurchase price

(after deduction of applicable interest up to date of repurchase) and the

value of the instrument. If the repurchase price exceeds the value, the

depreciation must be provided for and if the repurchase price is lower

than the value, credit must be taken for the appreciation.

vii) While investments in call money, bills purchased under rediscounting

scheme and short term deposits with bank shall be valued at cost plus

accrual, other money market instruments shall be valued at the yield at

which they are currently traded. For this purpose, non-traded instruments

(instruments not traded for a period of seven days) will be valued at cost

plus interest accrued till the beginning of the day plus the difference

between the repurchase value and the cost spread uniformly over the

remaining maturity period of the instruments.

5. Valuation of Unlisted Equity Shares

Unlisted equity shares will be valued as per the guidelines issued by SEBI on

May 2, 2002, which is as follows:

Unlisted equity shares of a company shall be valued “in good faith” on the

basis of the valuation principles laid down below:

(a) Based on the latest available audited balance sheet, net worth shall be

calculated as lower of (i) and (ii) below:

i) Net worth per share = [share capital plus free reserves (excluding

revaluation reserves) minus Miscellaneous expenditure not written

off or deferred revenue expenditure, intangible assets and

accumulated losses] divided by Number of Paid up Shares.



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ii) After taking into account the outstanding warrants and options, Net

worth per share shall again be calculated and shall be = [share capital

plus consideration on exercise of Option/Warrants received/

receivable by the Company plus free reserves(excluding revaluation

reserves) minus Miscellaneous expenditure not written off or deferred

revenue expenditure, intangible assets and accumulated losses]

divided by {Number of Paid up Shares plus Number of Shares that

would be obtained on conversion/exercise of Outstanding Warrants

and Options}

The lower of (i) and (ii) above shall be used for calculation of net

worth per share and for further calculation in (c) below.

(b) Average capitalisation rate (P/E ratio) for the industry based upon either

BSE or NSE data (which should be followed consistently and changes,

if any, noted with proper justification thereof) shall be taken and

discounted by 75% i.e. only 25% of the Industry average P/E shall be

taken as capitalisation rate (P/E ratio). Earnings per share of the latest

audited annual accounts will be considered for this purpose.

(c) The value as per the net worth value per share and the capital earning

value calculated as above shall be averaged and further discounted by

15% for illiquidity so as to arrive at the fair value per share.

The above methodology for valuation shall be subject to the following

conditions:

i) All calculations as aforesaid shall be based on audited accounts.

ii) In case where the latest balance sheet of the company is not available

within nine months from the close of the year, unless the accounting

year is changed, the shares of such companies shall be valued at

zero.iii) If the net worth of the company is negative, the share would be

marked down to zero.

iv) In case the EPS is negative, EPS value for that year shall be taken as

zero for arriving at capitalised earning.

v) In case an individual security accounts for more than 5% of the total

assets of the scheme, an independent valuer shall be appointed for

the valuation of the said security. To determine if a security accounts

for more than 5% of the total assets of the scheme, it should be

valued in accordance with the procedure as mentioned above on the

date of valuation.

At the discretion of the AMC and with the approval of the trustees, an unlisted

equity share may be valued at a price lower than the value derived using the

aforesaid methodology.

6. Valuation of Rights

Until they are traded, the value of the ‘rights’ shares would be calculated as:

Vr = n X (Pex - Pof )

m

Where, Vr = Value of rights

n = No. rights offered

m = No. of original shares held

Pex = Ex-rights price

Pof = Rights offer Price

Where the rights are not treated pari-passu with the existing shares, suitable

adjustments would be made to the value of rights. Where it is decided not to

subscribe for the rights but to renounce them and renunciations are being

traded, the rights can be valued at the renunciation value.

7. Expense and Income Accrual

All expenses and incomes accrued up to the valuation date shall be considered

for computation of NAV. For this purpose, while major expenses likemanagement fees and other periodic expenses should be accrued on a day to

day basis, other minor expenses and income need not be so accrued, provided

the non-accrual does not affect the NAV calculations by more than 1%.

8. Changes in the Securities and Units

Any changes in securities and in the number of units are recorded in the

books not later than the first valuation date following the date of transaction.

If this is not possible given the frequency of NAV disclosure, the recording

may be delayed up to a period of seven days following the date of the

transaction, provided that as a result of the non-recording, the NAV

calculations shall not be affected by more than 1%.

In case the Net Asset Value of a scheme differs by more than 1%, due to non

- recording of the transactions, the investors or scheme/s as the case may be,

shall be paid the difference in amount as follows:-

(i) If the investors are allotted units at a price higher than Net Asset Value

or are given a price lower than Net Asset Value at the time of sale of their

units, they shall be paid the difference in amount by the scheme.

(ii) If the investors are charged lower Net Asset Value at the time of purchase

of their units or are given higher Net Asset Value at the time of sale of

their units, asset management company shall pay the difference in amount

to the scheme. The asset management company may recover the

difference from the investors.

All other assets (if any) are taken at fair value as determined in-good faith in

accordance with the appropriate valuation methods based on the principlesapproved/adopted by the AMC, and amended from time to time, to ensure

appropriate fair valuation of assets for the Fund. The Trustees/AMC may

alter these above stated investment valuation norms from time to time, and

also to the extent the SEBI (Mutual Funds) Regulations, 1996 change, so as

to permit the Scheme to make valuation of its investments in the full spectrum

of permitted valuation norms for Mutual Funds to determine NAV. As such

valuation of all investments of the Scheme will be made in accordance with

SEBI (Mutual Funds) Regulations, 1996 including Schedule VIII thereof.

DETERMINATION OF NAV

The NAV of the scheme(s) for each plan/option at any time shall be determined

by dividing the net assets of the Scheme by the number of outstanding units

on the valuation date

The NAV of the Scheme will be calculated on a daily basis as shown below:

(Market/Fair Value of Securities + Accrued Income +

Receivables+other assets+unamortised issue expenses

NAV per unit = - Accrued Expenses – payables-other liabilities)

No. of units outstanding of the scheme/plan

The NAV will be calculated up to two decimals.

The computation of Net Asset Value, valuation of assets, computation of

applicable Net Asset Value (related price) for fresh/ongoing sale, repurchase,

switch and their frequency of disclosure shall be based upon a formula in

accordance with the Regulations and as amended from time to time including

by way of Circulars, Press Releases, or Notifications issued by SEBI or the

Government of India to regulate the activities and growth of Mutual Funds.

The dividend paid on units under the Dividend Plan of the Fund shall be

deducted in computing the NAV of the units under the Dividend Plan, each

time a dividend is declared and till it is distributed. Consequently, once the

dividend is distributed, the NAV of the units will always remain lower than

the NAV of the units under the Growth Plan. The income earned and profits

realized attributable to the units under the Growth Plan shall remain invested

and shall be deemed to have remained invested in the Growth Plan (exclusiveof the units under the Dividend Plan) and would be reflected in the NAV of

the units under the Growth Plan.

ACCOUNTING POLICIES AND STANDARDS

The AMC will follow Accounting Policies and Standards as prescribed under

Schedule Nine of the SEBI Regulations.

1. All investments will be marked to market and will be carried in the balance

sheet at market value. However, since the unrealised gain arising out of

appreciation can not be distributed, provision will be made for exclusion

of this item when arriving at distributable income.

2. Dividend income earned by the scheme will be recognised; not on the

date the dividend is declared, but on the date the share is quoted on an

ex-dividend basis. For investments that are not quoted on the stock

exchange, dividend income must be recognised on the date of declaration.

3. In respect of all interest bearing investments, income will be accrued on

a day to day basis as it is earned. Therefore, when such investments are

purchased, interest paid for the period from the last interest due date up

to the date of purchase shall not be treated as a cost of purchase but shall

be debited to Interest Recoverable Account. Similarly, interest received

at the time of sale for the period from the last interest due date up to the

date of sale shall not be treated as an addition to sale value but shall be

credited to Interest Recoverable Account.

4. In determining the holding cost of investments and the gains or loss on

sale of investments, the “average cost” method shall be followed.

5. Transactions for purchase or sale of investments would be recognized as

of the trade date and not as of the settlement date so that the effect of all

investments traded during the financial year are recorded and reflected

in the financial statements for that year. When investment transactions



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take place outside the stock market, e.g. acquisition through private

placement or purchase or sales through private treaty, the transaction

would be recorded, in the event of a purchase, as of the date on which

the scheme obtains an enforceable obligation to pay the price or, in the

event of a sale, when the scheme obtains an enforceable right to collect

the proceeds of sale or an enforceable obligation to deliver the instruments

sold.

6. Where income receivable on investments has been accrued and has not

been received for a period of twelve months beyond the due date,

provision shall be made by debit to the revenue account for the income

so accrued and no further accrual of income shall be made in respect of

such investment.

7. When units are sold in the case of an open ended scheme, the difference

between the sale price and the face value of the Unit, if positive, should

be credited to the reserves and, if negative, is debited to reserves, the

face value being credited to Capital Account. Similarly, when in respect

of such a scheme, units are repurchased, the difference between the

purchase price and the face value of the unit, if positive, shall be debited

to reserves and, if negative, shall be credited to reserves, the face value

being debited to the Capital Account.

8. In the case of an open ended scheme, when units are sold, an appropriate

part of the sale proceeds shall be credited to an Equalisation Account

and when units are repurchased, an appropriate amount shall be debited

to Equalisation Account. The net balance on this account shall be credited

or debited to the revenue account. The balance on the Equalisation

Account debited or credited to the revenue account shall not decrease or

increase the net income of the Fund but is only an adjustment to the

distributable surplus. It shall therefore be reflected in the revenue accountonly after the net income of the Fund is determined.

9. The cost of investment acquired or purchased would include brokerage,

stamp charges and any charge customarily included in the brokers’ bought

note. In respect of privately placed debt instrument, any front-end

discount offered shall be reduced from the cost of the investment.

10. Underwriting commission shall be recognised as revenue only when there

is no devolvement on the Fund. Where there is devolvement on the Fund,

the full underwriting commission received and not merely the portion

applicable to the devolvement shall be reduced from the cost of the

investment.

11. Identification and Provisioning for Non Performing Assets

(i) Definition of a Non Performing Asset (NPA)

An ‘asset’ shall be classified as non performing, if the interest and/

or principal amount has not been received or remained outstanding

for one quarter from the day such income / installment has fallendue.

(ii) Effective date for classification and provisioning of NPAs :

The definition of NPA may be applied after a quarter following the

due date of interest. For e.g. if the due date for interest is 30.09.2002

it will be classified as NPA from 01.01.2003.

(iii) Treatment of income accrued on the NPA and further accruals

• After the expiry of the 1st quarter from the date the income has

fallen due, there will be no further interest accrual on the asset

i.e. if the due date for interest falls on 30.09.2002 and if the

interest is not received, accrual will continue till 31.12.2002

after which there will be no further accrual of income. In short,

taking the above example, from the beginning of the 2nd quar

ter, there will be no further accrual on income.

• On classification of the asset as NPA from a quarter following

the due date of interest, all interest accrued and recognized inthe books of accounts of the Fund till the date, should be pro

vided for. For e.g if interest income falls due on 30.09.2002,

accrual will continue till 31.12.2002 even if the income as on

30.09.2002 has not been received. Further, no accrual will be

done from 01.01.2003 onwards. Full provision will also be made

for interest accrued and outstanding as on 30.09.2002.

(iv) Provision for NPAs

Both secured and unsecured investments, once recognized as NPAs,

call for provisioning in the same manner and where these are re

lated to close ended scheme the phasing would be such to ensure

full provisioning prior to the closure of the scheme or the scheduled

phasing, whichever is earlier.

The value of the asset must be provided in the following manner or

earlier at the discretion of the fund. The Fund will not have the dis

cretion to extend the period of provisioning. The provisioning against

the principal amount or instalments should be made at the following

rates irrespective of whether the principal is due for repayment or

not.

• 10% of the book value of the asset should be provided for after

6 months following the due date of interest i.e. 3 months from

the date of classification of the asset as NPA.

• 20% of the book value of the asset should be provided for after

9 months following the due date of interest i.e 6 months from

the date of classification of the asset as NPA.

• Another 20% of the book value of the assets should be pro

vided for after 12 months following the due date of interest i.e

9 months from the date of classification of the asset as NPA.

• Another 25% of the book value of the assets should be pro

vided for after 15 months following the due date of interest i.e.

12 months from the date of classification of the asset as NPA.

• The balance 25% of the book value of the asset should be pro

vided for after 18 months following the due date of interest i.e

15 months from the date of classification of the assets as NPA.

Book value for the purpose of provisioning for NPAs shall be taken as a

value determined as per the prescribed valuation method. If any

installment is fallen due, during the period of interest default, the amount

of provision should be installment amount or above provision amount,

whichever is higher.

(v) Reclassification of assets :

Upon reclassification of assets as ‘performing assets’ :

1. In case an issuer has fully cleared all the arrears of interest, theinterest provisions can be written back in full.

2. The asset will be reclassified as performing on clearance of allinterest arrears and if the debt is regularly serviced over the

next two quarters.

3. In case the issuer has fully cleared all the arrears of interest, theinterest not credited on accrual basis would be credited at the

time of receipt.

4. The provision made for the principal amount can be writtenback in the following manner :-

• 100% of the asset provided for in the books will be writtenback at the end of the 2nd quarter where the provision of

principal was made due to the interest defaults only.

• 50% of the asset provided for in the books will be written

back at the end of the 2nd quarter and 25% after everysubsequent quarter where both installments and interest

were in default earlier.

5. An asset is reclassified as ‘standard asset’ only when both over

due interest and overdue installments are paid in full and there

is satisfactory performance for a subsequent period of 6 months.

(vi) Receipt of past dues :

When the fund has received income/principal amount after their clas

sification as NPAs ;

• For the next 2 quarters, income should be recognized on cashbasis and thereafter on accrual basis. The asset will continue tobe classified as NPA for these two quarters.

• During this period (2 quarters), although the asset is classified

as NPA no provision needs to be made for the principal if the

same is not due and outstanding.

• If part payment is received towards principal, the asset contin

ues to be classified as NPA and provisions are continued as perthe norms set at (iv) above. Any excess provision will be writ

ten back.

(vii)Classification of Deep Discount Bonds as NPAs :

Investments in Deep Discount Bonds can be classified as NPAs, if

any two of the following conditions are satisfied:

• If the rating of the Bond comes down to grade ‘BB’ or below.

• If the company is defaulting in their commitments in respect of other assets, if available.

• Full Networth erosion.



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Provision should be made as per the norms set at (iv) above as soon

as the asset is classified as NPA.

Full provision can be made if the rating comes down to grade ‘D’.

(viii) Reschedulement of an asset :

In case any company defaults either interest or principal amount

and the Fund has accepted a reschedulement of the schedule of pay

ments, then the following practice may be adhered to :

(a) In case it is a first reschedulement and only interest is in de

fault, the status of the asset, namely, ‘NPA’ may be continued

and existing provisions should not be written back. This prac

tice should be continued for two quarters of regular servicingof the debt. Thereafter, this be classified as ‘performing asset’

and the interest provided may be written back.

(b) If the reschedulement is done due to default in interest and prin

cipal amount, the asset should be continued as non performing

for a period of 4 quarters, even though the asset continues to be

serviced during these 4 quarters regularly. Thereafter, this can

be classified as ‘performing asset’ and all the interest provided

till such date should be written back.

(c) If the reschedulement is done for a second/third time or there

after, the characteristic of NPA should be continued for eight

quarters of regular servicing of the debt. The provision should

be written back only after it is reclassified as ‘performing asset’.

To provide appropriate details of the Schemewise deployment of the assets

of the Fund, certain accounting policies and standards in accordance with the

appropriate guidance notes issued by the Institute of Chartered Accountantsof India may be adopted by AMC and amended from time to time. The

Trustees/AMC may alter these above stated accounting policies and standards

from time to time, and also to the extent the guidance notes issued by the

Institute of Chartered Accountants of India, and the SEBI (Mutual Funds)

Regulations, 1996 change, so as to permit the Scheme(s) to give a true and

fair view of its state of affairs. As such the accounting policies and standards,

and the preparation of the annual report and annual statement of account of

the Scheme(s) will be in accordance with SEBI (Mutual Funds) Regulations,

1996, including Schedule IX and XI thereof.

XIII. LOADS, EXPENSES AND FEES

The information provided under this section is to assist the unitholder to

understand the expense structure of the current Scheme and types of fees and

their percentage the unitholder is likely to incur on subscribing the units of

the Scheme.

LOAD

The units will be sold and repurchased on an on-going basis at applicable

NAV-based prices. For the information of Investors/unitholders, the maximum

total transaction expenses of the Scheme that may be levied on the Investor/

unitholder and expressed as a percentage of the amount of the Scheme’s

NAV, are estimated to be as follows:

Type of Transaction Levy Upto % of NAV

Maximum Sales Load imposed 7 (3% on subsequent annual

on Resale recurring installment under

Future Guard Plan)

Sales Load, if any, on issue of Nil

Units in lieu of Dividends

Contingent Deferred Redemption/

Sale Load

Year 1,Year 2,Year 3,Year 4 Nil

Maximum Redemption/ 7

Repurchase/Exit Load

Maximum Switchover/ At applicable entry-exit loads for

Exchange Fee respective Scheme

Units issued during the initial offer will not attract any repurchase load and

the units will be repurchased at the prevailing NAV of the relevant business

day as per the terms of the previous (original) Offer Document dated April 1,

1997 if redeemed on expiry of the relevant target period.

Under normal circumstances based on the Scheme’s potential performance

in the market environment existing as of the date of the Offer Document, the

Fund intends to charge the following load, till subsequently changed.

Type % of NAV

Entry load 2.25 %

For ongoing subscription of units(for new as well as on paymentof recurring annual installment

under future guard plan)

Exit load on redemption before 3.00 % if redeemed on or beforeexpiry of target period expiry of three years from the

date of opening of account

2.00 % if redeemed after expiry

of three years from the date of opening of account but on orbefore the expiry of five yearsfrom the date of opening of account. NIL if redeemed after theexpiry of five years from the dateof opening of account.

Exit load on redemption on or NILafter expiry of target period

The repurchase price shall not be lower than 93% of the NAV and the

sale price shall not be higher than 107% of the NAV and the differencebetween the repurchase price and sale price shall not exceed 7% on the saleprice.

The AMC reserves the right to change/modify entry / exit / switchover load(including zero load), depending upon the circumstances prevailing at any given

time. A load structure when introduced by the AMC may comprise of an entryload and/or exit load and/or switchover load as may be permissible under theSEBI Regulations. The load may also be changed from time to time and in thecase of an exit / repurchase load this may be linked to the period of holding,while in case of entry load this may be linked to the amount of investment. Theswitchover load may be different from the entry and /or exit load charged forsale and/or repurchase units. The load charged could also be different as regardsthe amount / tenor of investment etc. However any such change in the loadstructure shall be only on a prospective basis. In case of switch between Schemes

it may be decided by the AMC that the the applicable entry load, if any will bereduced by any entry and/or exit load already paid by the unitholder in theScheme he is switching out from.

There is no entry load and/or exit load on units of a Scheme subscribedwith reinvested and/or sweep dividends or other distributions. Entry and/or

exit load may be waived and/or lower at the discretion of the AMC for thefollowing:

• Death of the unitholder

• Incapacity/disability of the unitholder (as per Tax Act)

• Small balance amounts being redeemed

• Through Systematic Investment/Withdrawal/Switch plan (subject tolimits) /SIP for Corporate Employees

• Reinvestment of the redemption proceeds of one scheme of the Fundwithin 60 days after the redemption of units (an entry and /or exit loadshould have been paid for the original investment)

The investor should indicate on the application form that he is eligible for

waiver or otherwise of the entry and/or exit load as per rules laid down by theAMC. Reasonable documentary proof should be made available to claim thewaiver. If the proof is not made available sufficient units would be redeemed topay the differential/additional entry load, or no units would be credited to theaccount of the unitholder for the differential/additional entry load.

The Load, if levied, will be retained in the respective Scheme and used by theFund/AMC to cover the cost of raising/redeeming units on a continuous basis

by way of providing redemption/distribution related services to the Fund relatingto the Sale, promotion, advertising and marketing of the units of the Schemeand costs associated with liquidating the Fund’s investment Securities, including

payments for postage and also payments to brokers for their services inconnection with the redemption/distribution of the units.

EXPENSES

Initial Issue Expenses

i) Present Scheme

Being existing scheme, there will be no initial scheme launch expenditure.

ii) Past Schemes

During the Financial Year ended 31 March 2004, Principal GlobalOpportunities Fund was launched in February 2004 and the initial issue



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expenses were borne by the Scheme which amounted to 5.76% of the

amount mobilized during the Initial Public offer i.e. Rs.65.22 crores.

Annual Recurring Expenses

The Ongoing fees and expenses of operating the Plans in the Scheme on an

annual basis, expressed as a percentage of the amount of the Plan’s average

net assets are inter alia given below:

(1) Future Guard Plan (under both the options)

(as % of dailyaverage net assets)

Investment Management and Advisory Fees 1.25%Trustee Fees 0.01%

Custodian Fees/Depository Charges 0.01%

Registrar and Transfer Agent Fees 0.11%

Costs related to investor communications, 0.87%

costs of Fund transfer from one location to another,

cost of providing account statements and dividend

repurchase cheques and warrants, costs of statutory

advertisements etc

Marketing and Selling Expenses 0.21%

Audit Fees 0.02%

Annual Insurance Premium on life 0.02%

insurance cover offer to first applicant

Total Annual Recurring Expenses 2.50%

(2) Career Builder Plan (under both the options)

(as % of dailyaverage net assets)

Investment Management and Advisory Fees 1.25%

Trustee Fees 0.01%

Custodian Fees/Depository Charges 0.01%

Registrar and Transfer Agent Fees 0.11%

Costs related to investor communications, 0.87%

costs of Fund transfer from one location to another,

cost of providing account statements and dividend

repurchase cheques and warrants, costs of

statutory advertisements etc

Marketing and Selling Expenses 0.21%

Audit Fees 0.02%

Annual Insurance Premium on life 0.02%insurance cover offer to first applicant

Total Annual Recurring Expenses 2.50%

The purpose of the above table is to assist the unitholder in understanding the

various costs and expenses that a unitholder in the Scheme will bear directly

or indirectly. These estimates have been made in good faith by the AMC

and are subject to change inter-se the expenses may be more than as specified

in the table above, but the total recurring expenses that can be charged to the

scheme in this Offer Document will be subject to limits prescribed from time

to time under the SEBI Regulations. Expenses over and above the permissible

limits will be borne by the AMC and/or the Trust and/or the Sponsors. Any

expense other than those specified in the SEBI Regulations shall be borne by

the AMC and/or the Sponsors and/or Trust.

The AMC shall charge the Mutual Fund with investment and advisory fees

subject to the following:

The AMC shall charge the Mutual Fund with investment and advisory fees

subject to the following:

Average Weekly Net Assets Fees

On first Rs.100 crores 1.25%

On the balance of Assets 1.00%

SEBI has prescribed the following limits for total annual recurring expenses,

which can be charged to the Scheme;

Average Weekly Net Assets %

On the first Rs. 100 Crores 2.50%

On the next Rs. 300 Crores 2.25%

Average Weekly Net Assets %

On the next Rs. 300 Crores 2.00%

On the balance of assets. 1.75%

Any expenditure in excess of the limits specified in the SEBI Regulations

shall be borne by the AMC and /or by the sponsors and/or Trust.

The Fund shall strive to reduce the level of these expenses so as to keep them

well within the maximum limits currently allowed by SEBI and any revision

in the said expenses limits by SEBI would be applicable.

XIV. UNITHOLDERS’ RIGHTS AND SERVICESAn unitholder of the Scheme has a proportionate right in the beneficial

ownership of assets of the scheme and to the dividends declared by the

Scheme. Unitholders are advised to refer to the relevant provisions of the

Indian Trusts Act, 1882, in this regard. Copies of certain relevant documents

will be available for inspection at the office of the AMC at Mumbai.

Fundamental Attributes

Type of a scheme, Investment objective and terms of a scheme constitute the

fundamental attributes of the Scheme vide clarification issued by SEBI on

February 4, 1998.

As per the Regulation 18 (15A) of SEBI Regulations, 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) a written communication about the proposed change is sent to each

unitholder andii) 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

iii) the unitholders are given an option to exit at the prevailing Net Asset

Value without any exit load.

In addition to change in the fundamental attributes of the Scheme, any other

change which would affect the interest of the unitholders would not be carried

out unless

i) a 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 the 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.

RIGHTS OF UNITHOLDERS

The allottees of units under the Scheme of the Fund are the beneficiaries.

The following are the significant rights of the beneficiaries under the SEBI

Regulations.

• Unitholders under the Scheme have a proportionate right in the beneficial

ownership of the assets under the Scheme.

• The unitholders have a right to ask the Trustees about any information

which may have an adverse bearing on their investments, and the Trustees

shall be bound to disclose such information to the unitholders as stated

in the clauses “NAV Information” and “Disclosures”

• The unitholders have a right to receive audited annual report setting forth

the financials of the Scheme as on 31st March along with the entire

portfolio in detail.

• The appointment of AMC for the Fund can be terminated upon resolution

by the Trustees or by seventy five percent of the unitholders of the

Scheme.

• Unitholders have the right to inspect all the documents listed under the

clause “Documents for inspection”

• Under normal circumstances, the redemption /repurchase proceeds shall

be mailed within ten working days from the date of redemption /

repurchase, while income distribution warrants shall be despatched within

30 days of the declaration of income

DIVIDENDS AND DISTRIBUTIONS

In the interest of the Scheme and the unitholders the AMC may consider

providing returns to the unitholders at appropriate times by way of periodic

declaration of dividend and /or bonus units under the Scheme after providing



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for all necessary recurring and other expenses.

Only those unitholders whose names appear in the register of unitholders as

on the record date will be entitled for dividend and /or bonus units. This date

will be fixed by the AMC/Trustees appropriately .

The dividend warrants and/or fresh Account Statement with the bonus units

shall be despatched/credited to the unitholders within 30 days or such

stipulated period of the declaration of dividend /bonus units.

All benefits accruing/earned/received under the Scheme in respect of income

(not included in NAV), capital reserves and surpluses, if any at the time of its

/their declaration or otherwise under the Scheme shall be available only to

the unitholders who hold the units at the time of its/their declaration.VOTING RIGHTS OF THE UNITHOLDERS

Subject to the provisions of the SEBI Regulations, the consent of unitholders

shall be obtained, entirely at the option of the Trustees,, either at a meeting

through a postal ballot or any other mode of communication as stated in the

clause “unitholder’s consent”.

DISCLOSURES

NAV Information

The NAV of both the plans under Scheme will be calculated by the Fund on

each Business Day. The unitholders may obtain the information on NAV on

any business day, by calling the office of the AMC or any of the collection

Centres at various locations. The Fund shall make available to the press for

publishing the NAV on all business days (either through an advertisement

or) by Press Release, in at least two daily newspaper/s. Further, the Sale and

Repurchase prices of units will also be similarly made available to the press

for publishing on all business days or as may be prescribed by SEBI in atleast one daily newspaper. The Fund shall also make available to AMFI for

publishing the Scheme’s NAV, Sale/Repurchase price in at least one (if not

two) daily newspaper (of all India circulation) on all business days. Under

normal circumstances, the NAV will be determined and updated on AMFI

web site by around 8.00 p.m. on all business days. However NAV computation

has to take into account number of factors such as daily subscriptions/

redemptions details, securities transactions and their valuation, status of the

clearance of the cheques (in respect of subscription), timely receipt of stock

prices and hence, NAV may not be determined and/or updated on AMFI

website by around 8.00 p.m. on all business days. Further NAV may be

determined before 8 p.m. but may not be updated before 8 p.m. on AMFI

web site due to technical reasons such as internet traffic, system shut down

etc. On occasions of delay in updation of NAV on AMFI website, the reasons

for the same if material in nature would be informed to SEBI (reasons which

are routine would not be informed). NAVs would however be endeavoured

to be made available before commencement of business hours the following

business day, failing which a press release explaining the material reasons

for non-availability would be released. In the event NAV cannot be calculated

and/or published because of suspension of trading on the BSE/NSE/RBI,

during the existence of a state of emergency and/or a breakdown in

communications, the AMC may suspend calculation and/or publication of

NAV, etc of the units.

Financial Results

The Fund will mail to all unitholders an abridged scheme wise annual report,

not later than six months from 31st March, containing details as specified in

the SEBI Regulations. Further, the full text of the annual report will be

available for inspection at the office of the Fund. A copy of the full annual

report shall be available to the unitholders, at a price, on specific request.

The Fund will publish, before the expiry of one month from the close of each

half year, as on 31st March and 30th September, the Fund’s unaudited financial

results in one English daily newspaper circulating in the whole of India and

in a newspaper published in the language of the region where the Head Officeof the Fund is situated. The Fund shall also display half yearly results on its

web site and web-site of AMFI.

Portfolio Disclosure

The Fund will send to all unitholders a complete statement of its portfolio

before the expiry of one month from the close of each half year (i.e. 31st

March and 30th September) or the Fund may publish statement of scheme

portfolio by way of an advertisement, in one English daily circulating in the

whole of India and in a newspaper published in the language of the region

where the head office of the Mutual Fund is situated. The Fund shall make

scripwise disclosures of NPAs on half yearly basis along with the half yearly

portfolio disclosure. The total amount of provisions made against the NPAs

shall be disclosed in addition to the total quantum of NPAs and their proportion

of the assets of the Fund’s scheme.

The Scheme’s entire portfolio/top holdings will also be disclosed half yearly.

Fund shall also display half yearly portfolio statement on its web site. The

format for half yearly disclosure of portfolio will be as prescribed by SEBI

vide guidelines ref. MFD/CIR/9/120/2000 dated November 24, 2000.

Unclaimed Distribution Amount

As per SEBI Guidelines Ref: MFD/CIR/9/120/2000 dated November 24, 2000,

unclaimed redemption and dividend amounts shall be deployed by the Fund in

call money market or money market instruments only and the investors who

claim these amounts during a period of three years from the due date shall be

paid at the prevailing Net Asset Value. After a period of three years, this amount

can be transferred to a pool account and the investors can claim the amount at

NAV prevailing at the end of the third year. The income earned on such amount

can be used for the purpose of investor education. AMC should make a

continuous effort to remind the investors through letters to take their unclaimed

amounts. Further, the investment management fee charged by the AMC for

managing unclaimed amounts shall not exceed 50 basis points.

Scheme Amendments

The AMC may add to or otherwise amend either all or any of the terms of the

Scheme, by duly complying with the guidelines of and notifications issued

by SEBI/GOI/any other regulatory body, that may be issued from time to

time subject to the prior approval of SEBI, if required The offer document

shall be fully revised and updated atleast once in two years. Till the time the

offer document is revised and reprinted, an addendum giving details of each

of the changes shall be attached to offer document and abridged offer

document. The addendum shall be circulated to all the distributors/brokersso that the same can be attached to all offer documents already in stock. The

addendum/amendment will be circulated to unitholders along with/included

in the newsletter sent to unitholders. Further arrangement will be made to

make available the changes in the offer document in the form of a notice/any

other manner in/at all the investor service centers/distributors/brokers office.

DURATION OF THE SCHEME AND WINDING UP

Being open ended; the Scheme has a perpetual life. The AMC, the Fund and

Trustees reserve the right to make such changes / alterations to the Scheme

(including charging of fees and expenses) offered under this Offer Document

to the extent permitted by the SEBI Regulations. However, in terms of the

SEBI Regulations, the Scheme may be wound up:

a) On the happening of any event which, in the opinion of the Trustees,

requires the Scheme to be wound up; or

b) Seventy five percent of the unitholders of the Scheme pass a resolution

that the Scheme be wound up; or

c) SEBI directs the Scheme to be wound up in the interest of the unitholders.

Where a Scheme is to be wound up pursuant to the above/SEBI Regulations,

the Trustees shall give notice of the circumstances leading to the winding up

of the Scheme to SEBI; and in two daily newspapers having circulation all

over India and also in a vernacular newspaper circulating at the place where

the Mutual Fund is established.

Effect of Winding Up

On and from the date of the publication of the notice as stated above, the

Trustee or the AMC as the case maybe, shall -

- cease to carry on any business activities in respect of the Scheme so

wound up;

- cease to create or cancel units in the Scheme;

- cease to issue or redeem units in the Scheme.

Procedure and Manner of Winding Up

In the event of the Scheme being wound up, the AMC shall proceed as follows:

- The Trustee shall call a meeting of the unitholders to consider and pass

necessary resolutions by simple majority of unitholders present and voting

at the meeting for authorising the AMC or any other person/agency to

take the steps for winding up of the Scheme

- The AMC or the person authorised as above shall dispose of the assets

of the Scheme concerned in the best interests of the unitholders of that

Scheme.

- The proceeds of the sale made in pursuance of the above, shall in the

first instance be utilised towards discharge of such liabilities as are

properly due under the Scheme and after making appropriate provision



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for meeting the expenses connected with such winding up, the balance

shall be paid to the unitholders in proportion to their respective interests

in the assets of the Scheme as on the date when the decision for the

winding up was taken.

- On the completion of the winding up, the AMC shall forward to SEBI

and the unitholders, a report on the winding up containing particulars

such as circumstances leading to the winding up, the steps taken for

disposal of assets of the Scheme before winding up, expenses of the

Scheme for winding up, net assets available for distribution to the

unitholders and a certificate from the Auditors of the Fund.

Notwithstanding anything contained herein, the application of the provisionsof SEBI Regulations in respect of disclosures of half-yearly reports and annual

reports shall continue to be applicable until the winding up is completed or

the Scheme ceases to exist.

After the receipt of report referred to in the above, if SEBI is satisfied that all

measures for winding up of the Scheme have been completed, the Scheme

shall cease to exist.

SERVICES TO UNITHOLDERS

Investor Services

It is the endeavour of the Fund to provide consistently high quality service to

its unitholders. This would encompass all interactions by the unitholders

with the Fund. The Fund will strive to upgrade the quality of service through

implementation of appropriate technology, through ensuring quality

consciousness amongst its service personnel and agencies associated with it.

The Fund will endeavour to provide a high degree of convenience for the

unitholders’ dealing with it. The Fund will strive to constantly increase thislevel of convenience.

Facilitating Enquiries and Transactions

a) It will be the endeavour of the Fund to extensively use technological

tools in rendering unitholder service. The Fund’s Registrar will endeavour

to send the Account Statements (on account of Financial and/or non-

financial transactions) e.g., allotment of units in lieu of distribution of

periodic dividend, besides periodic information etc by way of e-mail,

which is speedier and economical. Other financial transactions

(subscription of units) can also be conveyed to the unitholders by way of

e-mail, wherever requested, subject to such safeguards the Fund may

deem necessary.

b) Investor Service Centres in select cities

The AMC shall provide unitholder service through its centers.

Unitholders’ enquiries and transactions during business hours will be

entertained at the AMC’s centres at the addresses listed at the end of this

Offer Document. Unitholders/investors can also write/e-mail/contact

them at the AMC’s Corporate Office at Mumbai. In addition unitholders

may also contact the AMC at its corporate office for any additional

service. The AMC will, in course of time, be setting up its own service

centres at other major locations to handle unitholder enquiries and

transactions besides providing a high degree of convenience to the

unitholders.

c) Meeting in Person

Investor Relations personnel of the AMC will be available every business

day between normal official hours of the AMC for personal meeting

with any unitholder. The purpose of this facility is to attend to any query

related to investment needs of a unitholder, resolve any unitholder service

related queries through the Registrar and to provide such other services

that the unitholder desires.

d) Client Relations ManagerAt present, Mrs Usha Mallya is the Client Relations Manager and can be

contacted at the office of the AMC, the present address being as follows:

Principal Mutual Fund

Apeejay House, 5th floor, 3 Dinshaw Vachha Road, Churchgate,

Mumbai 400 020 , India.

Phone + 91 22 2204 4988 Fax + 91 22 2204 4990.

E mail: [email protected]

Website: www.principalindia.com

e) Service Standards

The Fund shall endeavour to adhere to the following time schedules on

an ongoing basis provided the unitholder furnishes the Mutual Fund with

all the required correct and complete supporting legal/other documents.

From the date of receipt MAXIMUM STANDARD

Repurchase Cheque Mailing Within 10 days Within 3 days

Purchase Intimation Within 30 days Within 3 days

Updated account statement on Within 30 days Within 5 days

a/c of allotment of units in

lieu of dividend

Address change Within 10 days Within 5 days

Ownership Transmission Within 30 days Within 10 days

Dispatch of Dividend Proceeds Within 30 days Within 10 days

The above mentioned time schedule does not include postal transit time.

TELEPHONE TRANSACTION SERVICES

TELETOUCH provides you with a host of services that will help you plan

ahead, get ahead:

Know NAVs - Whenever you want information, you can now keep track of

our funds. This feature will ensure that you make your purchase, sale or

switch decisions correctly, to maximise the returns on your portfolio.

Know your last 5 transactions – Sometimes, it is difficult to keep track of

your transactions. This unique feature helps you keep a tab on your last 5

transactions. Thereby helping you keep a record of how your portfolio has

changed.

Subscriptions made easy – Want information on different mutual fund

schemes? Want to know how to purchase units, how much you need to invest,and what fund is the best investment avenue for you?

Material Request – You can order for the product brochures.

Account Balances – Know the exact details of your investments in our different

schemes.

SIGNATURE VERIFICATION/INDEMNITY

Certain transactions may require that the unitholder’s signature be verified

by a bank Manager, or a notary public or a magistrate or other party acceptable

to the Fund for the following.

- Redemption of Rs.1,00,00,000/- or more from an individual/joint holder

account

- If the redemption cheque is payable to other than the unitholder, the

sponsor or its affiliates/associates.

- To make a Dividend sweep from a folio/account with joint holders to a

folio/account with only one holder or different joint holders.

- To change ownership of a folio/account.

- To add telephone transaction services or other privileges that would be

added from time to time.

- To change bank account information designated under an existing

telephone withdrawal plan

- To have a redemption cheque mailed to an address other than the addresses

on the folio /account or to the address on the folio/account if it has been

changed within the preceding month

- To switch among folios with different ownership

- To issue duplicate unit certificate.

- To change or introduce nomination/appointment of beneficiary and/or

percentage allocation of investment, if the ownership of the folio/account

has been changed within the preceding Month.The above is an indication of transactions that may require signature

verification that the AMC may insist upon.

REGISTER OF UNITHOLDERS

A register of unitholders shall be maintained electronically or in any other

mode at the office of the Registrar and Transfer Agent and also at such other

places as the AMC may decide and such register shall be conclusive evidence

of ownership. The register may be closed for such time and for such period

as the AMC may determine. In the event of closure of the register for a period

or periods, appropriate notice shall be given by way of publication in

newspaper(s) or other media. Requests for fresh/ongoing sales, repurchase,

switching will not be accepted during the period the register is closed and no

NAV would be determined/declared.



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XV. HISTORICAL INFORM ATION

EXISTING SCHEMES OF THE MUTUAL FUND

Name Principal Principal Principal Principal PrincipalEquity Fund Money Market Fund Deposit Fund Tax Savings Fund Child Benefit Fund

Type Open-ended Open-ended Open-ended Open-ended Equity Open-ended Scheme withEquity Growth Scheme Money Market Debt Scheme Linked Savings Scheme redemption after fixed

Mutual Fund Scheme target period

Objective To provide investors To build a high quality To build a high quality To build a high quality The investment objective of long term capital income oriented portfolio income oriented portfolio growth-oriented portfolio the Scheme is to generateappreciation in order to provide and provide returns along to provide long-term regular returns and/or

returns along with high with regular liquidity to capital gains to the capital appreciation/ liquidity to the investors investors investor accretion with the aim of

giving lumpsum capitalgrowth at the end of thechosen target period orotherwise to the Beneficiary.

Date of June 14, 1995 June 16, 1997 August 13, 1997 March 31, 1996 January 7, 1998Commencement / Allotment

Name Principal Principal Principal Principal PrincipalIndex Fund Growth Fund Balanced Fund Income Fund Cash Management Fund

Type Open-ended Open-ended Open-ended Open-ended Open-endedIndex Scheme Equity Scheme Balanced Scheme Income Scheme Liquid Scheme

Objective To invest principally in To achieve long term To provide periodic return To generate regular To provide high level of securities of companies capital appreciation and capital appreciation/ income and capital income available from shortwhose securities are accretion from a judicious appreciation / accretion term investments as is

included in the Nifty and mix of equity and debt thro investment in debt considered consistent withsubject to tracking errors instruments with the aim instruments and related preservation of capital andendeavor to attain results to minimize capital securities besides maintenance of liquidity bycommensurate with erosion. preservation of capital. investing in a portfolio of the Nifty money market and

investment grade instrument.

Date of July 27, 1999 October 25, 2000 January 14, 2000 October 25, 2000 October 25, 2000Commencement / Allotment

Name Principal Principal Principal Principal PrincipalPersonal Tax Saver Fund Money Value Bond Fund PNB Debt Fund Dividend Yield Fund Floating RateFund

Type Open-ended Equity Open-ended Income Open-ended Income Open ended equity An open-ended incomeSavings Scheme Scheme Scheme scheme scheme

Objective To provide long term To generate an attractive An Open ended Scheme To provide capital appre- The primary investmentgrowth of capial. return for its investors with the objective of ciation and/or dividend objective of the Floating Rate

consistent with preservation generating steady stream distribution by investing Fund will be to generate incomeof capital and liquidity by of income over long term predominantly in a well- consistent with the prudentinvesting in a portfolio of period consistent with diversified portfolio of risk from a portfolio comprisinghigh quali ty debt and prudent risk through companies that have a substantially of floating ratemoney market instruments. investment in debt and relatively high dividend debt instruments, fixed rate

money market securities. yield. debt instruments swappedfor floating rate return, andalso fixed rate instrumentsand money market instruments.

Date of May 23, 2002 September 30, 2002 March 29, 2004 October 15, 2004 September 14, 2004Commencement / Allotment

Name Principal Government Principal Principal Principal Global Principal ResurgentSecurities Fund Monthly Income Plan Trust Benefit Fund Opportunities Fund India Equity Fund

Type Open-ended Dedicated An open-ended fund. An Open-ended An Open-ended Open-ended Equity SchemeGovernment Securities Monthly Income is not Income Scheme Growth SchemeScheme assured and is subject to the

availability of distributablesurplus.

Objective The investment objective of To generate regular income The investment objective of Investment objective of the To generate long term capitalthe Scheme will be to through investments in fixed the scheme is to build a high Scheme is to build a high appeciation in equity and equitygenerate risk-free return and income securities so as to quality income oriented quality International Equity related securities of Indianthus provide medium to long make periodical income portfolio and provide returns portfolio out of the Companies that are perceivedterm capital gains and distribution to the and/or capital appreciation Permissible Investments as to be potential growth storiesincome distribution to its Unitholdersand also to along with regular liquidity defined and permitted as a result of turnaround,Unitholders, while at all generate long- term capital to a distinct class of investors under the regulations from restructuring and acquisition –t imes emphasising the appreciat ion by investing a who have special needs. t ime to time, and provide led st rategy being followedimportance of capital portion of the Scheme’s returns and/or capital appre- by thempreservation. assets in equity and ciation along with regular

equity related instruments. liquidity to the investors.

Date of August 23, 2001 May 23, 2002 September 30, 2002 March 29, 2004 August 23, 2001Commencement / Allotment



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Condensed Financial Information of the Scheme of Principal Mutual Fund Launched during Last Three Fiscal Year i.e. from April 1, 2001to March 31, 2004:

1. Principal Balanced Fund

Date of initial allotment : 14th January, 2000

1/4/2003 to 31/3/2004 1/4/2002 to 31/3/2003 1/4/2001 to 31/3/2002

Dividend Plan Growth Plan Dividend Plan Growth Plan

NAV at the beginning of the year (Rs. per unit) 6.53 9.85 9.68 9.1899 9.1414

Net Income (Rs. per unit ) 2.01 0.71 -0.14

Dividends (Rs. per unit) 0.00 0.00 0.00 0.00 0.00

Transfer to reserves (if any) (Rs. in crore)** 12.79 0.21 -0.20

NAV at the end of the year (Rs. per unit) 11.69 10.00 9.90 9.8553 9.6840

Returns from the date of allotment/ inception 3.78 0.00 -0.41 -1.02 -2.23till the end of the year/period (%) 2

Benchmark Index Returns (Inhouse Blended Index) 5 – – – – –

Comparative performance vis-à-vis Benchmark Index 5 – – – – –

Scheme returns since inception of benchmark N.A. – – – –index (Crisil Balanced Fund Index) 2, 5

Crisil Balanced Fund Index returns since its inception 5 – – – – –

Comparative performance vis-à-vis – – – – –Crisil Balanced Fund Index 5

Net Assets end of period (Rs. in crore) 25.52 13.65 0.95 14.45

Ratio of Recurring Expenses to net assets 2.50 2.17 2.06

Bench mark return (Weightage average – 9.37 12.77of NIFTY & I Bex - since date of allotment) (Wt. Avg. I-Bex & Nifty)

2 Returns reported in the table above are calculated with the inception NAV taken as Rs.10, the Face Value of the Unit at the time of allotment/ inception on 14th January, 2000.

5 The Benchmark for comparing performance of SUN F&C Balanced Fund is CRISIL Balanced Fund Index

3. Principal Trust Benefit Fund

Date of initial allotment : 30th September, 2002

1/4/2003 to 31/3/2004 30/9/2002 to 31/3/2003

Quarterly Half-yearly Annual Growth Quarterly Half-yearly Annual GrowthDividend Dividend Dividend Dividend Dividend Dividend

NAV at the beginning of the year (Rs. per unit) 10.2071 10.2061 10.6653 10.6563 10.0000 10.0000 10.0000 10.0000

Net Income (Rs. per unit ) 1.04 0.21

Dividends (Rs. per unit) 0.71 0.71 – – 0.45 0.45 0.00 0.00

Transfer to reserves (if any) (Rs. in crore)** 1.37 0.79

NAV at the end of the year (Rs. per unit) 10.3197 10.3272 11.6419 11.6319 10.2071 10.2061 10.6653 10.6563

Return since inception (%) 10.39 6.58 6.59 6.65 6.56

Net Assets end of period (Rs. in crore) 4.64 1.64 2.67 12.42 7.06 1.32 2.21 10.31

Ratio of Recurring Expenses to net assets 1.25% 1.25%

Bench mark re turn (since date of allo tment) 9 .43 (Crisil Composite Bond Fund Index) 5.19 (Crisil Composite Bond Index)

** Net surplus for the year

2. Principal Deposit Fund

1/4/2003 to 31/3/2004

371 Days - (Fixed 371 Days - (FixedMaturity Plan - Jan 04)# Maturity Plan - Mar 04)@

Growth Growth

NAV at the beginning of the year (Rs per unit) N.A. N.A.

Net Income (Rs per unit ) 0.12 0.01

Dividends (Rs per unit) 0.00 0.00

Transfer to reserves (if any) (Rs in crore)** 0.85 0.15

NAV at the end of the year (Rs per unit) 10.1196 10.0114

Annualised return (%) – 0.11

Net Assets end of period (Rs in crore) 71.87 134.36


Benchmark Return (Since date of allotment)(%) N.A.

# Allotment date as on 12/01/2004. @ Allotment date as on 29/03/2004.



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1/4/2002 to 31/3/2003 23/8/2001 to 31/3/2002

Investment Plan Savings Plan Investment Plan Savings Plan

Dividend Plan Growth Plan Dividend Plan Growth Plan Dividend Plan Growth Plan Dividend Plan Growth Plan

NAV at the beginning of the year QD - 10.6785 11.6454 10.2952 10.8569 QD - 10.0000 10.0000 10.0000 10.0000(Rs. per unit) HD - 10.6956 HD - 10.0000

Net Income (Rs. per unit ) 1.49 1.22 0.44 0.66

Dividends (Rs. Per unit) QD - 0.90 0.00 0.85 0.00 QD - 0.85 0.00 0.50 0.00HD - 0.90 HD - 0.85

Transfer to reserves (if any) (Rs. in crore) ** -2.86 0.15 1.79 0.25

NAV at the end of the year (Rs. per unit) QD - 11.0813 13.1178 10.3338 11.8233 QD - 10.6246 11.5867 10.2728 10.8333HD - 11.1073 HD - 10.6416

Absolute Return since inception (%) QD - 10.24 18.45 17.85 17.88 QD - 14.54 15.87 7.81 8.33HD - 11.02 HD - 14.67

Net Assets end of period (Rs. in Crore) QD - 10.62 8.88 0.09 2.62 54.19 6.57HD - 0.75

Ratio of Recurring Expenses to net assets 1.25 1.18 1.25 1.25

Bench mark absolute return 19.67 19.67 15.32 15.32(I-Bex - since date of allotment)

QD - Quarterly Dividend HD - Half Yearly Dividend

4. Principal Government Securities Fund

Date of initial allotment : 23rd August, 2001

1/4/2003 to 31/3/2004

Investment Plan Provident Fund Plan# Savings Plan

Dividend Plan Growth Plan Dividend Plan Growth Plan Annual Rebalance Dividend Plan Growth PlanOption 2004

NAV at the beginning of the year QD - 11.0813 13.1178 HD - N.A. N.A. N.A. 10.3338 11.8233(Rs. per unit) HD - 11.1073 AD - N.A.

AD - N.A.

Net Income (Rs. per unit ) 1.70 0.04 1.53

Dividends (Rs. Per unit) QD - 0.78 0.00 HD - 0.00 0.00 0.00 0.59 0.00HD - 0.78 AD - 0.00AD - 0.00

Transfer to reserves (if any) (Rs. in crore) ** 0.79 0.01 (0.32)

NAV at the end of the year (Rs. per unit) QD - 11.5042 14.6994 HD - 10.0783 10.0783 10.0352 10.1486 12.3809HD - 11.5443 AD - 10.0783AD - 14.6961

Absolute Return since inception (%) QD - N.A. 15.93 HD - 0.00 0.78 0.09 0.00 8.54HD - N.A. AD - 0.00AD - N.A.

Net Assets end of period (Rs. in Crore) QD - 11.37 7.33 HD - 0.41 7.59 36.37 0.03 0.39HD - 0.90 AD - 0.29AD - 0.01

Ratio of Recurring Expenses to net assets 1.25% 1.10% 0.98%

Bench mark absolute return N.A. HD - N.A. 16.33 N.A. N.A.(I-Bex - since date of allotment) (I Sec Li-Bex) AD - N.A. (I Sec Si-Bex)

(I Sec Li-Bex)

QD - Quarterly Dividend HD - Half Yearly Dividend AD - Annual Dividend # Allotment Date - 13 February, 2004.

5. Principal Monthly Income Plan

Date of initial allotment : 23rd May, 2002

1/4/2003 to 31/3/2004 23/5/2002 to 31/3/2003

Monthly Quarterly Growth MIP Plus# Monthly Quarterly GrowthDividend Dividend Monthly Quarterly Growth Dividend Dividend

Dividend DividendNAV at the beginning of the year (Rs. per unit) 10.3134 10.3177 11.0891 N.A. N.A. N.A. 10.0000 10.0000 10.0000

Net Income (Rs. per unit ) 0.49 0.07 0.67

Dividends (Rs. per unit) 0.76 0.77 – – – – 0.60 0.65 0.00

Transfer to reserves (if any) (Rs. in crore)** 34.84 0.82 1.19

NAV at the end of the year (Rs. per unit) 10.9275 10.9232 12.7200 10.0650 10.0649 10.0649 10.3134 10.3177 11.0891

Return since inception (%) 13.83 0.65 10.81 10.83 10.89

Net Assets end of period (Rs. in crore) 118.85 99.95 223.76 25.40 79.35 69.98 1.79 2.19 94.10

Ratio of Recurring Expenses to net assets 1.97% 2.00% 2.00

Bench mark return (since date of allotment) 14.19 (Crisil MIP Blended Index) 2.33 (Crisil MIP Blended Index) 7.58 (Crisil MIP Blended Index)

# Allotment Date – December 30, 2003




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6. Principal Resurgent India Equity Fund

Date of initial allotment : 3rd July, 2000

Current Fiscal Year 2003-2004 Fiscal Year 2002-2003 Fiscal Year 2001-2002

NAV at the beginning of the year/ period (Rs.) 12.33 10.56 9.68

Net Income per Unit (Rs.) 5.87 0.11 0.06

Dividends per Unit (Rs.) and Record Date - - -

Transfer to reserves (if any) (Rs.) 5.07 1.15 0

NAV at the end of the year/ period (Rs.) 32.33 12.33 10.56

Returns from the date of allotment/ inception till the 36.79% 4 7.91% 4 3.16% 4

end of the year/ period (Growth Plan) 2

S&P CNX 500 returns 5 7.91% 4 -14.34% 4 -16.94% 4

Comparative performance vis-à-vis S&P CNX 500 5 28.88% 22.25% 20.10%

Net Assets at the end of the period/ year (Rs. crores) 4.55 1.53 1.17

Ratio of expenses to average net assets 2.5% 2.50% 2.50%

1 The Scheme was launched on 17th April, 2000 and the Units were allotted on 30th June, 2000.

2 Returns exclude entry/ exit load, if any.

3 Absolute returns (For Growth as well as Dividend option since both have same NAV till declaration of first dividend)

4 Compounded Annualised returns (For Growth as well as Dividend option since both have same NAV till declaration of first dividend)

5 This Scheme falls in the purview of special purpose / unique fund and as such and in line with AMFI’s recommendation in this regard, the Mutual Fund proposes to draw on theservices of CRISIL and/or ICICI Securities Ltd (through the intermediation of the AMFI) and/or a neutral agency duly approved by AMFI to structure an appropriate index whichwill then be made applicable from a notified date. In the interregnum and in compliance with SEBI Circular No. MFD/CIR/ 16 / 400 / 02 dated 26th March, 2002, the S&P CNX500 will be the benchmark index for the SUN F&C Resurgent India Equity Fund.

6 Annualised

Returns reported in the table above are calculated with the inception NAV taken as Rs.10, the Face Value of the Unit at the time of allotment/ inception on 30th June, 2000.

8. Principal Personal Tax Saver Fund†

Date of initial allotment : 31st March, 1996


NAV at the beginning of the year/period (Rs.) 40.75 45.97 40.19

Net Income per Unit (Rs.) 5.06 4.98 -7.14

Dividends per Unit (Rs.) and Record Date – – –

Transfer to reserves (if any) (Rs.) 5.68 -8.19 –

NAV at the end of the year/ period (Rs.) 85.03 40.75 45.97

Returns from the date of allotment/inception till the 29.61% 22.22% 27.65%end of the year/ period 2, 3

BSE 100 Index returns 3 8.06% -0.45% 2.30%

Comparative performance vis-à-vis BSE 100 21.55% 22.67% 25.35%

Net Assets at the end of the year/period (Rs. crores) 4.91 2.98 4.49

Ratio of expenses (excluding deferred revenue expenditure 2.5% 2.22% 2.03%amortised) to average net assets

† Effective August 23, 2002, Unitholders of JF Personal Tax Saver ’96 of JF Mutual Fund have migrated to SUN F&C Personal Tax Saver of SUN F&C Mutual Fund. The NAV of the Scheme as on the migration date, August 23, 2002 was Rs. 44.52. Financial information is being given for the pre (as per JF records) as well as post migration periods with aview to maintaining continuity of information.

1 The Scheme was launched on 1st January, 1996 and the units were allotted on March 31, 1996

2 Returns exclude entry/ exit load, if any

3 Compounded Annualised

Returns reported in the table above are calculated with the inception NAV taken as Rs. 10, the Face Value of the unit at the time of allotment / inception on 31st March, 1996.

The Benchmark for comparing performance of SUN F&C Personal Tax Saver is BSE 100.

7. Principal PNB Debt Fund

Date of initial allotment : 28th May, 1999

1/4/2003 to 31/03/2004 1/4/2002 to 31/03/2003 1/4/2001 to 31/03/2002

Dividend Growth

NAV at the beginning of the year (Rs per unit) 18.0654 18.0654 15.85 12.94

Net Income (Rs per unit ) 1.90 1.40 2.91

Dividends (Rs per unit) 0.56 NIL 1.50

Transfer to reserves (if any) (Rs in crore)** 6.56 5.82 0.00 2.91

NAV at the end of the year (Rs per unit) 13.0000 19.8600 18.0654 15.8500

Annualised return (%) 15.5136 13.98 17.65

Net Assets end of period (Rs in crore) 80.31 113.74 80.69


Benchmark Return (Since date of allotment)(%) N.A. 10.74% N.A.

Effective April 30th,2004,consequent to takeover of the schemes of PNB Mutual Fund, PNB Debt Fund has been renamed as Principal PNB Debt Fund .

The Last Nav of PNB Debt Fund as on April 30,2004 was Rs.13.0370 (Dividend option) and Rs.19.9173 (Growth option).

Financial information is being given for the pre(as per PNB MF records) as well as post merger periods with a view to maintaining continuity of information.




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11. Principal Income Fund - Short Term Plan

Date of initial allotment : 24th April, 2002

1/4/2003 to 31/3/2004 24/4/2002 to 31/3/2003

Dividend Plan Growth Plan Institutional Plan# Dividend Plan Growth Plan

Monthly Dividend Weekly Dividend Growth

NAV at the beginning of the year (Rs. per unit) 10.1189 10.7342 N.A. N.A. N.A. 10.0000 10.0000

Net Income (Rs. per unit ) 0.98 1.79

Dividends (Rs. per unit) 0.52 – 0.42 0.41 – 0.45 0.00

Transfer to reserves (if any) (Rs. in crore)** (0.55) 8.08

NAV at the end of the year (Rs. per unit) 10.1457 11.4024 10.0553 10.9393 10.5424 10.1189 10.7342

Return since inception (%) 7.01 5.42 7.46 7.34

Net Assets end of period (Rs. in crore) 16.37 33.01 65.97 10.05 42.96 0.14 124.94

Ratio of Recurring Expenses to net assets 1.00% 0.80% 1.02

Bench mark return (since date of allotment) 6.69 (Crisil Short Term Bond Fund Index) 7.21 (JP Morgan T-Bill Index)

# Allotment Date – May 9, 2003

9. Principal Global Opportunities Fund

Date of initial allotment : 29th March, 2004

29/3/2004 to 31/3/2004

Annual Dividend Plan Growth Plan

NAV at the beginning of the year (Rs per unit) N.A. N.A.

Net Income (Rs per unit) (0.01)

Dividends (Rs per unit) 0.00 0.00

Transfer to reserves** (if any) (Rs in crore) (0.29)

NAV at the end of the year (Rs per unit) 9.9559 9.9559

Annualised return (%) N.A. N.A.Net Assets end of period (Rs in crore) 46.30 18.65

Ratio of Recurring Expenses to net assets 2.50%

Benchmark return (Since date of allotment - NIFTY) (%) N.A. (MSCI World Index)

10. Principal Money Value Bond Fund

Date of initial allotment : 27th November, 1998


Dividend Plan Growth Plan Dividend Plan Growth Plan Dividend Plan Growth Plan

NAV at the beginning of the year/ period (Rs.) 10.6377 17.0425 10.39 15.35 10.12 13.08

Net Income (Rs. per unit) 1.96 4.74 1.32 1.16 2.39 3.88

Dividends (Rs. per unit) and Record Date 0.27 (07/04/03) – 0.25 (05/07/02) – 0.55 (24/09/01) –

0.27 (30/06/03) – 0.30 (26/09/02) – 0.325 (26/12/01) –

0.27 (29/09/03) – 0.30 (26/12/02) – 0.40 (19/03/02) –0.24 (30/12/03) – – – – –

Transfer to reserves (if any) (Rs.) -0.74 -15.08 -0.71 3.37 0.32 -0.46

NAV at the end of the year/ period (Rs.) 10.0993 18.4387 10.1628 17.0425 10.39 15.35

Returns from the date of allotment/ inception – 12.10% 12.10% 4

till the end of the period (Growth Plan) 2

I-SEC Bond Index (IBEX) returns 5 – 16.50% – – – –

Comparative performance vis-à-vis I-SEC – -4.40% – – –Bond Index (IBEX) 5

Scheme returns since inception of benchmark – – – – 9.60% 4 –index (Crisil Composite Bond Fund Index) 2,5

Crisil Composite Bond Fund Index returns – – – – 9.61% 4 –since its Inception 5

Comparative performance vis-à-vis – – – – -0.01% –Crisil Composite Bond Fund Index 5

Net Assets at the end of the year/period (Rs. crores) 9.536 36.948 20.57 137.21 54.8 64.14

Ratio of expenses to average net assets 2.14 2.14 2.15

1 The Scheme was launched on 26th October, 1998 and the Units were allotted on 23rd November, 1998 for Bond Option and Liquid Option-Normal Plan.2 Returns exclude entry/ exit load, if any.3 Absolute returns4 Compounded Annualised returns5 Crisil Composite Bond Fund Index has been chosen as the benchmark index for the Bond Option of the Scheme in compliance with SEBI Circular No. MFD/CIR/16/400/02dated 26th

March 2002. However, since the values of this index are available only from 30th March 2002, we have used I-SEC Bond Index (IBEX) as the benchmark index for disclosingcomparative performance of Bond Option under the Scheme for the period prior to the introduction of Crisil Composite Bond Fund Index.

6 AnnualisedReturns reported in the table above are calculated with the inception NAV taken as Rs.10, the Face Value of the Unit at the time of allotment/ inception on 23rd November, 1998.




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Condensed Financial Information of the Scheme of Principal Mutual Fund for the period April 1, 2004 to September 30, 2004:

Principal Governement Securities Fund

Investment Plan Provident Fund Plan Savings Plan

Quarterly Half-yearly Annual Growth Annual Growth Half-yearly Annual NAV Dividend GrowthDividend Dividend Dividend Dividend Dividend Rebalancing

Option 2005

NAV at the beginning of the year 11.5042 11.5443 14.6994 14.6961 10.0783 10.0783 10.0783 10.0352 10.1486 12.3809(Rs. per unit)

Net Income (Rs. per unit) (0.12) (0.12) 0.26

Dividend Declared (Rs. per unit) 0.18 0.18 0.88 – – – – – 0.15 –

Transfer to Reserves (if any) – – – – – – – – – –(Rs. in Crore)

NAV at the end of the year/period 10.9715 11.0100 13.2744 14.2731 9.8080 9.7901 9.7900 9.7477 10.1060 12.5374(Rs per unit)

Return since inception (%) – – – 12.13 – (2.10) – – – 7.55

Net Assets end of period (Rs. in Crore) 10.38 0.82 0.01 13.27 0.28 28.04 15.14 37.57 0.04 0.42

Ratio of Recurring Expenses 1.25% 1.10% 1.00%

to net assets

Benchmark return (%) – – – N.A. – (4.08) – – – 7.55(Since date of allotment) (I-Sec Li-Bex) (I-Sec Li-Bex) (I-Sec Si-Bex)

Principal Floating Rate Fund - Short Maturity Plan

Regular Option Institutional Option

Growth Daily Weekly Monthly Growth Daily Weekly MonthlyDividend Dividend Dividend Dividend Dividend Dividend

NAV at the beginning of the year (Rs. per unit) N.A. N.A. N.A. N.A. N.A. N.A. N.A. N.A.

Net Income (Rs. per unit) 0.03

Dividend Declared (Rs. per unit) – 0.02 0.02 – – 0.02 0.02 –

Transfer to Reserves (if any) (Rs. in Crore) – – – – – – – –NAV at the end of the year/period (Rs per unit) 10.0268 10.0007 10.0081 10.0272 10.0276 10.0007 10.0083 10.0277

Return since inception (%) 0.27 – – – 0.28 – – –

Net Assets end of period (Rs. in Crore) 15.91 3.84 32.40 1.88 120.05 33.76 18.84 14.04


Benchmark return (%) 3.29 – – – 3.29 – – –(Since date of allotment) (Crisil LiquiFex) (Crisil LiquiFex)

Principal Principal Deposit Fund Principal Trust Benefit FundBalanced Fund#

371 Days 371 Days 91 Days Fixed Fixed Quarterly Half yearly Annual GrowthDividend Growth Fixed Fixed Maturity Plan - Aug 04 Dividend Dividend Dividend

Maturity MaturityPlan - Plan - Dividend Growth

Jan 2004 June 2004

Growth Growth

NAV at the beginning of the year 11.69 11.69 10.1196 N.A. N.A. N.A. 10.3197 10.3272 11.6419 11.6319(Rs. per unit)

Net Income (Rs. per unit ) 1.53 0.27 0.18 0.04 0.13

Dividends (Rs. Per unit) – – – – – – 0.09 0.09 0.71 –

Transfer to reserves (if any) – – – – – – – – – –(Rs. In Crore)

NAV at the end of the year/period 12.05 12.04 10.3751 10.1297 10.0431 10.0431 10.1492 10.1568 10.7644 11.5523(Rs. per Unit)

Return since inception (%) – 4.02 3.75 1.30 – 0.43 – – – 7.47

Net Assets end of period (Rs. Crs.) 26.96 7.78 73.69 89.68 44.03 20.65 2.97 1.57 0.88 9.92

Ratio of Recurring Expenses to 2.49% 0.57% 0.13% 0.15% 1.25%net assets

Bench mark return (%) – N.A. N.A. N.A. – N.A. – – – N.A.(Since Date of Allotment) (Crisil Balanced Index) (Crisil CompBex)



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Principal Floating Rate Fund - Flexible Maturity Plan Principal Resurgent

Regular Option Institutional Option India Equity Fund

Growth Weekly Monthly Growth Weekly Monthly Dividend GrowthDividend Dividend Dividend Dividend

NAV at the beginning of the year (Rs. per unit) N.A. N.A. N.A. N.A. N.A. N.A. 32.33 32.33

Net Income (Rs. per unit) 0.04 12.25

Dividend Declared (Rs. per unit) – 0.02 – – 0.02 – – –

Transfer to Reserves (if any) (Rs. in Crore) – – – – – – – –

NAV at the end of the year/period (Rs per unit) 10.0296 10.0082 10.0295 10.0305 10.0085 10.0303 32.42 32.34

Return since inception (%) 0.30 – – 0.31 – – – 5.69

Net Assets end of period (Rs. in Crore) 5.72 2.43 7.47 22.83 6.02 24.36 3.93 1.51Ratio of Recurring Expenses to net assets 0.76% 0.58% 2.50%

Benchmark return (%) 3.29 – – 3.29 – – – 6.26(Since date of allotment) (Crisil LiquiFex) (Crisil LiquiFex) (Nifty)

Principal Income Fund - Short Term Plan Principal Global Principal Money

Institutional Plan Opportunities Fund Value Bond Fund

Dividend Growth Daily Weekly Growth Annual Growth Dividend GrowthDividend Dividend Dividend

NAV at the beginning of the year (Rs. per unit) 10.1457 11.4024 10.0553 10.9393 10.5424 9.96 9.96 10.0993 18.4387

Net Income (Rs. per unit) 0.38 (0.07) 0.22

Dividend Declared (Rs. per unit) 0.24 – 0.22 0.23 – – – – –Transfer to Reserves (if any) (Rs. in Crore) – – – – – – – – –

NAV at the end of the year/period (Rs per unit) 10.0985 11.6561 10.0465 10.9356 10.7878 10.4097 10.4097 10.0321 18.3191

Return since inception (%) – 6.49 – – 5.58 – 3.16 – 10.89

Net Assets end of period (Rs. in Crore) 11.42 22.72 28.61 10.02 47.73 72.71 23.18 13.78 20.14

Ratio of Recurring Expenses to net assets 1.00% 0.80% 2.39% 2.25%

Benchmark return (%) – 5.62 – – 4.00 – (1.93) – N.A.(Since date of allotment) (Crisil STBEX) (MSCI World) (Crisil CompBex)

Principal Monthly Income Plan Principal Principal

MIP Plus PNB Debt Fund PersonalMonthly Quarterly Growth Growth Monthly Quarterly Dividend Growth

Tax Saver

Dividend Dividend Dividend Dividend Fund

NAV at the beginning of the year (Rs. per unit) 10.9275 10.9232 12.7200 10.0649 10.0650 10.0649 13.00 19.86 85.03

Net Income (Rs. per unit) 0.34 0.04 (0.18) 32.98

Dividend Declared (Rs. per unit) 0.37 0.35 – – 0.12 0.12 – – –

Transfer to Reserves (if any) (Rs. in Crore) – – – – – – – – –


Return since inception (%) – – 11.18 2.16 – – – 12.38 29.42


Ratio of Recurring Expenses to net assets 1.91% 2.00% 2.29% 2.50%

Benchmark return (%) – – 10.31 (1.22) – – – 0.04 13.41(Since date of allotment) (Crisil MIPex) (Crisil CompBex) (BSE 100)



4545

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LATEST NAV & ANNUALISED RETURNS - FROM 01/04/2004 TO 16/11 /2004

Principal Principal Cash Principal Principal PrincipalBalanced Fund# Management Fund - Child Benefit Fund Equity Fund Dividend Yield Fund

Money at Call Option

Dividend Growth Dividend Growth Career Future Dividend Growth Dividend GrowthBuilder Guard

NAV at the beginning of the year 11.69 11.69 10.0000 12.2480 25.38 25.04 18.40 17.46 N.A. N.A.(Rs. per unit)

Net Income (Rs. per unit ) 3.23 0.42 2.10 1.07 0.05

Dividends (Rs. Per unit) – – 0.24 – – – – – – –

Transfer to reserves (if any) – – – – – – – – – –

(Rs. In Crore)NAV at the end of the year/period 12.60 12.60 10.0000 12.5757 27.38 27.03 18.32 17.37 10.25 10.25(Rs. per Unit)

Return since inception (%) – 4.89 – 5.80 15.81 15.59 – 6.03 – 2.50

Net Assets end of period (Rs. Crs.) 19.34 7.09 2.80 7.41 3.85 1.26 25.11 30.98 303.37 93.96

Ratio of Recurring Expenses to 2.49% 0.50% 2.50% 2.50% 2.27%net assets

Bench mark return (%) – N.A. – N.A. N.A. N.A. – 7.01 – 5.05(Since Date of Allotment) (Crisil Balanced Index) (Crisil LiquiFex) (Crisil Balanced Index) S&P Nifty S&P CNX 500

# 15/05/2004 to 16/11/2004

Principal Deposit Fund

Plan 54 371 days - 371 days - 371 days - Fixed 91 days - Fixed 371 days - FixedEA/EB Jan 04 Mar 04 Maturity Plan - Jun 04 Maturity Plan - Aug 04 Maturity Plan - Nov 04

Growth Growth Dividend Growth Dividend Growth Dividend Growth

NAV at the beginning of the year (Rs. per unit) 15.9357 10.1196 10.0114 N.A. N.A. N.A. N.A. N.A. N.A.

Net Income (Rs. per unit) 0.03 0.34 0.40 0.27 0.10 0.01

Dividend Declared (Rs. per unit) – – – – – – – – –



Return since inception (%) 6.94 4.40 3.15 – – – – – –

Net Assets end of period (Rs. in Crore) 4.80 74.15 138.44 – 90.06 44.29 20.77 1.40 66.86

Ratio of Recurring Expenses to net assets 2.25% 0.57% 0.25% 0.13% 0.15% 0.20%

Benchmark return (%) N.A. N.A. N.A. N.A. N.A. N.A.(Since date of allotment)

Principal Governement Securities Fund

Investment Plan Provident Fund Plan Savings Plan

Quarterly Half-yearly Annual Growth Annual Growth Half-yearly Annual NAV Dividend GrowthDividend Dividend Dividend Dividend Dividend Rebalancing

Option 2005

NAV at the beginning of the year 11.5042 11.5443 14.6994 14.6961 10.0783 10.0783 10.0783 10.0352 10.1486 12.3809

(Rs. per unit)Net Income (Rs. per unit) (0.24) (0.21) 0.34

Dividend Declared (Rs. per unit) 0.18 0.18 0.88 – – – – – 0.15 –



Return since inception (%) – – – 11.22 – -3.03 – – – 7.41


Ratio of Recurring Expenses 1.25% 1.10% 1.00%to net assets

Benchmark return (%) – – – N.A. – (7.36)# – – – N.A.(Since date of allotment) (I-Sec Li-Bex) (I-Sec Li-Bex) (I-Sec Si-Bex)

# 09/02/2004



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Principal Floating Rate Fund - Flexible Maturity Plan Principal Growth Fund

Regular Option Institutional Option Dividend Growth

Growth Monthly Weekly Growth Monthly WeeklyDividend Dividend Dividend Dividend

NAV at the beginning of the year (Rs. per unit) N.A. N.A. N.A. N.A. N.A. N.A. 12.80 18.89

Net Income (Rs. per unit) 0.09 1.27

Dividend Declared (Rs. per unit) – 0.04 0.07 – 0.04 0.07 1.50 –

Transfer to Reserves (if any) (Rs. in Crore) – – – – – – – –NAV at the end of the year/period (Rs per unit) 10.0973 10.0522 10.0175 10.0999 10.0556 10.0180 14.14 23.69

Return since inception (%) 0.97 – – 1.00 – – – 23.65



Benchmark return (%) 0.60 – – 0.60 – – – 12.04(Since date of allotment) (Crisil LiquiFex) (Crisil LiquiFex) (Nifty)

Principal Income Fund Principal Index Fund

Quarterly Half Yearly Annual Growth Institutional Plan Annual GrowthDividend Dividend Dividend Quarterly Half Yearly Growth Dividend

Dividend Dividend

NAV at the beginning of the year (Rs. per unit) 10.7356 10.8832 10.7774 15.5451 10.1995 0.0000 10.7910 10.2120 13.4415Net Income (Rs. per unit) 0.00 (7.00)

Dividend Declared (Rs. per unit) 0.18 0.18 0.40 – 0.06 – – – –



Return since inception (%) – – – 11.01 – – 4.28 – 6.78

Net Assets end of period (Rs. in Crore) 11.38 16.34 0.29 58.46 10.80 – 32.84 11.18 16.24


Benchmark return (%) – – – N.A. – – 2.14 – 7.03(Since date of allotment) (Crisil CompBex) (Crisil CompBex) (Nifty)

Principal Floating Rate Fund - Short Maturity Plan

Regular Option Institutional Option

Growth Daily Monthly Weekly Growth Daily Monthly WeeklyDividend Dividend Dividend Dividend Dividend Dividend

NAV at the beginning of the year (Rs. per unit) N.A. N.A. N.A. N.A. N.A. N.A. N.A. N.A.


Dividend Declared (Rs. per unit) – 0.08 0.04 0.07 – 0.08 0.04 0.08



Return since inception (%) 0.90 – – – 0.93 – – –

Net Assets end of period (Rs. in Crore) 15.94 10.51 7.47 38.08 165.77 37.61 5.78 4.88Ratio of Recurring Expenses to net assets 0.65% 0.48%

Benchmark return (%) 0.60 – – – 0.60 – – –(Since date of allotment) (Crisil LiquiFex) (Crisil LiquiFex)

Principal Cash Management Fund – Liquid Option

Institutional PlanWeekly Growth Monthly DailyWeekly Growth Monthly DailyDividend Dividend Dividend

Dividend Dividend Dividend

NAV at the beginning of the year (Rs. per unit) 10.1066 12.5115 10.0319 10.0007 10.0079 10.4504 10.0346 10.0010


Dividend Declared (Rs. per unit) 0.24 – 0.25 0.24 0.26 – 0.27 0.26



Return since inception (%) – 6.37 – – – 4.88 – –



Benchmark return (%) – N.A. – – – 3.98 – –(Since date of allotment) (Crisil LiquiFex) (Crisil LiquiFex)



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Principal Resurgent Principal Principal Principal Global Principal MoneyEquity Fund# PNB Debt Fund## Personal Tax Opportunities Fund Value Bond Fund$$

Dividend Growth Dividend Growth Saver Fund Annual Growth@ Dividend GrowthDividend@

NAV at the beginning of the year (Rs. per unit) N.A. N.A. N.A. N.A. N.A. 9.96 9.96 N.A. N.A.

Net Income (Rs. per unit) 8.39 (0.34) 36.45 0.02 0.17

Dividend Declared (Rs. per unit) – – – – – – – – –



Return since inception (%) – 33.47 – 11.98 – – 6.33 – 10.50


Ratio of Recurring Expenses to net assets 2.50% 2.29% 2.50% 2.39% 2.25%

Benchmark return (%) – 5.74$ – N.A. –^ – 6.63 – N.A.(Since date of allotment) (S&P CNX Nif ty) (Crisi l CompBex) (BSE 100) (MSCI World) (Crisil CompBex)

# 15/05/2004 to 16/11/2004 $ 03/07/2000 @ (Previous Business Day) ## 01/05/2004 to 16/11/2004 $$ 15/05/2004 to 16/11/2004 ^31/03/1996

Please Note that :

Principal Pnb Debt Fund , Principal Money Value Bond Fund , Principal Personal Tax Saver Fund & Principal Resergent India Equity Fund are schemes taken over from PNB MF &SUN F&C MF respectively dueing the period.

Note: The Returns for the above schemes have been calculated on a compounded annaulised basis, for a period of more than one year and on an absolute basis for a period of lessthan one year. Moreover, the return above are calculated for the respective schemes, s ince their ALLOTMENTS, upto Nov 16, 2004.

Principal Income Fund - Short Term Plan Principal Principal Trust Benefit Fund

Dividend Growth Institutional Plan Tax Quarterly Half yearly Annual Growth

Daily Weekly GrowthSavings Dividend Dividend Dividend

Dividend Dividend Fund

NAV at the beginning of the year 10.1457 11.4024 10.0553 10.9393 10.5424 27.73 10.3197 10.3272 11.6419 11.6319(Rs. per unit)

Net Income (Rs. per unit) 0.39 5.10 0.08

Dividend Declared (Rs. per unit) 0.28 – 0.25 0.26 – – 0.09 0.09 0.71 –


NAV at the end of the year/period 10.0930 11.6960 10.0433 10.9379 10.8277 33.48 10.0804 10.0879 10.6914 11.4740

(Rs per unit)Return since inception (%) – 6.29 – – 4.28 18.45 – – – 6.66


Ratio of Recurring Expenses 1.00% 0.80% 2.50% 1.25%to net assets

Benchmark return (%) – 5.32# – – 2.14 7.76 – – – 5.07@

(Since date of allotment) (CrisilSTBEX) (CrisilSTBEX) (Nifty) (Crisil CompBex)

# 26/04/2002 @ 07/10/2002

Principal Cash Management Fund – Principal Monthly Income Plan

Liquid Option - Institutional Premium Plan MIP Plus

Daily Weekly Monthly Growth Monthly Quarterly Growth Growth Monthly QuarterlyDividend Dividend Dividend Dividend Dividend Dividend Dividend

NAV at the beginning of the year N.A. N.A. N.A. N.A. 10.9275 10.9232 12.7200 10.0649 10.0650 10.0649(Rs. per unit)

Net Income (Rs. per unit) 0.28 0.53 0.13

Dividend Declared (Rs. per unit) 0.09 0.09 0.07 – 0.42 0.35 – – 0.16 0.12



Return since inception (%) – – – 1.00 – – 10.84 3.24 – –


Ratio of Recurring Expenses 0.48% 1.91% 2.00%to net assets

Benchmark return (%) – – – 0.73 – – 9.70$ -1.04$$ – –(Since date of allotment) (Crisil LiquiFex) (Crisil MIPex) (Crisil MIPex)

$ 23/05/2002 @ 05/01/2004



4848

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INVESTOR COMPLAINTS AND REDRESSAL

The basic objective of the Fund is to set high standards with regard to unitholder servicing as stated in the earlier clauses. To achieve this end, the Fund has attempted tohandle unitholder grievances efficiently and resolve any problems relating to its unitholders. Unitholder grievances are normally received at AMC’s corporate office /Centres.

The complaint/query history given as below:

Particulars Principal Principal Principal Principal Principal Principal Principal PrincipalEquity Fund Tax Savings Money Market Deposit Fund Child Benefit Index Fund Growth Fund Balanced Fund

Fund Fund Fund

1/4/2001 to 31/3/2002

Received 710 988 1 3 11 7 0 3

Redressed 709 987 1 3 11 7 0 3

Pending as on 31/3/2002 1 1 0 0 0 0 0 0

1/4/2002 to 31/3/2003

Received 11 14 0 1 2 1 0 0

Redressed 11 14 0 1 2 1 0 0

Pending as on 31/3/2003 0 0 0 0 0 0 0 0

1/4/2003 to 31/3/2004

Received 12 25 0 0 0 0 2 3

Redressed 12 25 0 0 0 0 2 3

Pending as on 31/3/2004 0 0 0 0 0 0 0 0

1/4/2004 to 16/11/2004

Received 0 1 0 0 1 0 1 0

Redressed 0 1 0 0 1 0 1 0

Pending as on 16/11/2004 0 0 0 0 0 0 0 0

Forwarded by SEBI1/4/2001 to 31/3/2002

Received 6 0 0 0 0 0 0 0

Redressed 6 0 0 0 0 0 0 0

Pending as on 31/3/2002 0 0 0 0 0 0 0 0

1/4/2002 to 31/3/2003

Received 0 2 0 0 0 0 0 0Redressed 0 2 0 0 0 0 0 0

Pending as on 31/3/2003 0 0 0 0 0 0 0 0

1/4/2003 to 31/3/2004

Received 5 4 0 0 0 0 0 0

Redressed 5 4 0 0 0 0 0 0

Pending as on 31/3/2004 0 0 0 0 0 0 0 0

1/4/2004 to 16/11/2004

Received 0 1 0 0 0 0 0 0

Redressed 0 1 0 0 0 0 0 0

Pending as on 16/11/2004 0 0 0 0 0 0 0 0

Particulars Principal Principal Principal Principal Principal Principal Principal Global PrincipalIncome Fund Cash Management Government Monthly Income Monthly Income Trust Benefit Opportunities PNB Debt

Fund Securities Fund Plan Plan - MIP Plus Fund Fund Fund@

1/4/2001 to 31/3/2002

Received 41 6 1 – – – – –Redressed 41 6 1 – – – – –

Pending as on 31/3/2002 0 0 0 – – – – –

1/4/2002 to 31/3/2003

Received 30 1 1 24 – 0 – –

Redressed 30 1 1 24 – 0 – –

Pending as on 31/3/2003 0 0 0 0 – 0 – –

1/4/2003 to 31/3/2004Received 15 1 0 13 4 0 – –

Redressed 15 1 0 13 4 0 – –

Pending as on 31/3/2004 0 0 0 0 0 0 – –

1/4/2004 to 16/11/2004

Received 0 0 0 4 2 0 4 –

Redressed 0 0 0 4 2 0 4 –

Pending as on 16/11/2004 0 0 0 0 0 0 0 –

Forwarded by SEBI1/4/2001 to 31/3/2002

Received 0 0 0 – – – – –

Redressed 0 0 0 – – – – –Pending as on 31/3/2002 0 0 0 – – – – –

1/4/2002 to 31/3/2003

Received 0 0 0 3 – 0 – –

Redressed 0 0 0 3 – 0 – –

Pending as on 31/3/2003 0 0 0 0 – 0 – –

1/4/2003 to 31/3/2004

Received 1 0 0 0 0 0 – –

Redressed 1 0 0 0 0 0 – –

Pending as on 31/3/2004 0 0 0 0 0 0 – –

1/4/2004 to 16/11/2004

Received 0 0 0 0 0 0 0 1

Redressed 0 0 0 0 0 0 0 1

Pending as on 16/11/2004 0 0 0 0 0 0 0 0



4949

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Fees paid to IDBI Bank Ltd.* as collecting banker and as intermediary for distribution of units.

(Rs. in Lacs)

PARTICULARS 2000-2001 2001-2002 2002-2003 1/4/2003 to30/6/2003

Collecting Bank 4.49 12.47 14.54 3.65Charges

Brokerage on 9.02 39.36 76.99 15.31unit mobilisation

Fees paid to IDBI Capital Market Services Ltd. (ICMS)* as intermediary for distribution of units.

(Rs. in lacs)

PARTICULARS 2000-2001 2001-2002 2002-2003 1/4/2003 to 5/5/2004^ to30/6/2003 16/11/2004

Brokerage on 61.73 103.05 32.45 6.07 40.03unit mobilisation

Fees paid to Stock Holding Corporation of India Ltd. (SHCIL)* as intermediary for distribution of units.

(Rs. in lacs)

PARTICULARS 2000-2001 2001-2002 2002-2003 1/4/2003 to30/6/2003

Brokerage onunit mobilisation 1.62 10.36 5.42 0.15

*With effect from June 24, 2003, IDBI and its associates have ceased to be associatesof Principal Mutual Fund.

^With effect from May 5, 2004 ICMS has become an associate under Regulation2(C) of SEBI (Mutual Funds) Regulation, 1996.

Fees paid/provided to IDBI* as intermediary for distribution of units and as Principal Trustee.

(Rs. in Lacs)

PARTICULARS 2000-2001 2001-2002 2002-2003 1/4/2003 to30/6/2003

Brokerage on – – – –unit mobilisation

Principal 82.89 14.76 15.99 4.63Trusteeship Fees

* With effect from June 24, 2003, IDBI and its associates have ceased to be associatesof Principal Mutual Fund.

Fees for Investor Communication Services paid to Principal Consulting India(P) Ltd.

(Rs. in lacs)

Financial Year 2002-2003 113.40

Financial Year 2003-2004 187.98

1/4/2004 to 16/11/2004 197.19

Investment in Group/Associate Company(s)

There were no investments made in the securities of Sponsor/Group companiesof the Sponsor.

ISSUES SUBSCRIBED BY PRINCIPAL MUTUAL FUND IN WHICHSPONSOR/ASSOCIATE IS THE ISSUE MANAGER

During last three fiscal years i.e 2001-2002, 2002-2003 & 2003-2004 the Fundhas not undertaken any underwriting obligations with respect to issues of associatecompanies and have not subscribed to the issues lead managed by associate companies.

Principal Monthly Principal Principal Principal Principal Resurgent Principal DividendIncome Plan - MIP Plus Growth Fund Balanced Fund Tax Saver Fund India Equity Fund Yield Fund

Volume Brokerage Volume Brokerage Volume Brokerage Volume Brokerage Volume Brokerage Volume Brokerage(%) (%) (%) (%) (%) (%)

2000-2001 – – 206.06 0.33 145.59 0.34 – – – – – –

2001-2002 – – 84.21 0.34 144.64 0.36 – – – – – –

2002-2003 – – – – 14.99 0.26 – – – – – –

1/4/2003 to 30/6/2003 – – 87.74 0.32 – – – – – – – –

5/5/2004^ to 16/11/2004 210.95 0.24 1569.76 0.23 151.72 0.26 147.12 0.24 186.60 0.23 233.30 0.27

The details of brokerage paid to IDBI Capital Market Services Ltd.* during the last three years and upto November 16, 2004 for current financial year is as below :

(All volume figures in Rs lacs and brokerage is a % of volume)

Principal Principal Principal Principal PrincipalEquity Fund Tax Savings Fund Child Benefit Fund Index Fund Monthly Income Plan

Volume Brokerage Volume Brokerage Volume Brokerage Volume Brokerage Volume Brokerage(%) (%) (%) (%) (%)

2000-2001 813.62 0.25 21.40 0.25 – – 7656.91 0.35 – –

2001-2002 31.34 0.20 27.13 0.21 – – 3158.79 0.35 – –

2002-2003 118.30 0.25 – – – – 1212.29 0.25 41.32 0.25

1/4/2003 to 30/6/2003 – – – – – – 1464.05 0.24 – –

5/5/2004^ to 16/11/2004 – – 275.96 0.23 32.78 0.23 5676.41 0.19 327.89 0.25

ASSOCIATE TRANSACTIONS

Under the normal circumstances, the Fund may have dealing with and/or do transactions with or may utilise the services of associates of sponsors/AMC

Name of the Associate Nature of Associates Activity Services utilised or to be utilised

Principal Consulting Investor Services • Services relating to investor communicationIndia (Pvt.) Ltd.

The brokerage/commission payable to the sponsor/its associates will be/are market related and disclosed in the published half-yearly and annual accounts of the scheme.

Particulars Principal Principal Principal Principal PrincipalResurgent India Money Value Floating Rate Fund Floating Rate Fund Dividend Yield Fund#

Equity Fund* Bond Fund* Short Maturity Plan$ Flexible Maturity Plan$

Direct

1/4/2004 to 16/11/2004

Received 0 0 0 0 2

Redressed 0 0 0 0 2

Pending as on 16/11/2004 0 0 0 0 0

Forwarded by SEBI

1/4/2004 to 16/11/2004

Received 0 0 0 0 0

Redressed 0 0 0 0 0

Pending as on 16/11/2004 0 0 0 0 0

* The investor complaints statistics is provided for the period commencing from May 14, 2004 as the schemes were migrated from Sun F & C Mutual Fund to Principal Mutual Fundeffective May 14, 2004.

@ The investor complaints statistics is provided for the period commencing from April 30, 2004 as the scheme was migrated from PNB Mutual Fund to Principal Mutual Fund effectiveApril 30, 2004.

$ As the Scheme was launched on August 19, 2004, the statistics of investor complaints for previous years has not been mentioned.# As the Scheme was launched on September 6, 2004, the s tatistics of investors complains for previous years has not been mentioned.

Note: One investor query was forwarded by SEBI in the month of July 2004 relating to the merger of the schemes of PNB Mutual Fund. The same was duly resolved. Further, thereare 23 cases forwarded by SEBI on October 28, 2004. Of which 7 cases pertain to the period when the Fund was IDBI Mutual Fund. 2 of them were already responded to in August2004 and 4 were responded to in early November 2004. The rest of the cases pertain to the closed/ redeemed Schemes (like ELSS 93, PNB EG 93 etc.) responsibility for which wastaken over from PNB Mutual Fund in April 2004. Out of the above 23 cases, only 5 cases are yet to be resolved as on December 7, 2004.



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Details of investment made by any scheme in company which has invested in any scheme of Principal Mutual Fund in excess of 5% of net assets of that schemeas on Nov 16, 2004

Name of the Company Scheme in which investment is Aggregate investment by Scheme by which investment is Aggregate Investment(Investor) made by company scheme in securities of made in securities of the company outstanding

the company during as on November 16, 2004the specified period* (At Market Value)

Nature of Amount Nature of AmountInvestment (Rs in Lacs) Investment (Rs in Lacs)

Finolex Industries Ltd . Principal Deposit Fund - Equity Shares 1,557.64 Principal Child Benefit Fund, Principal Equity Shares 1 ,762.29371 Days Fixed Maturity Plan Personal Tax Saver Fund, PrincipalNov 2004 Growth Fund, Principal Monthly

Income Plan, Principal MonthlyIncome Plan - MIP Plus, Principal TaxSavings Fund, Principal Balanced Fund,Principal Dividend Yield Fund &Principal Resurgent India Fund

Debt – – Debt –

Grasim Industries Ltd. Principal Deposit Fund - 91 Days Equity Shares 1,167.36 Principal Child Benefit Fund, Equity Shares 351.96Fixed Maturity Plan Aug 2004, Principal Personal Tax Saver Fund,Principal Deposit Fund - 371 Days - Principal Tax Saving Fund,June 2004 & Principal Deposit Principal Index Fund &Fund - 371 Days - Nov 2004 Principal Growth Fund

Debt 511.47 – Debt –

HCL Technologies Ltd. Principal Floating Rate Fund - Equity Shares 691.16 Principal Index Fund Equity Shares 38.41Short Maturity Plan Debt – – Debt –

Hindalco Industries Ltd. Principal Floating Rate Fund - Equity Shares 1,491.90 Principal Child Benefit Fund, Principal Equity Shares 1,034.24Flexible Maturity Plan, Principal Personal Tax Saver Fund, PrincipalDeposit Fund - 371 Days - June 2004, Index Fund, Principal Growth Fund,Principal Deposit Fund - 371 Days - Principal Monthly Income Plan,Nov 2004 & Principal Cash Principal Monthly Income Plan - MIPManagement Fund - Liquid Option Plus, Principal Tax Saving Fund &

Principal Resurgent India FundDebt 4,379.40 Principal Monthly Income Plan, Debt 4,578.60

Principal Trust Benefit Fund, PrincipalIncome Fund, Principal Floating RateFund - Flexible Maturity Plan, PrincipalIncome Fund - Short Term Plan,Principal PNB Debt Fund & PrincipalDeposit Fund - 371 Days - Nov 2004

Hindustan Zinc Ltd. Principal Deposit Fund - Equity Shares 515.23 Principal Growth Fund & Principal Equity Shares 496.13371 days - March 2004 Tax Saving Fund


ITC Ltd. Principal Cash Management Fund - Equity Shares 2,420.17 Principal Child Benefit Fund, Principal Equity Shares 1,575.82Liquid Option Personal Tax Saver Fund, Principal

Index Fund, Principal Growth Fund,Principal Monthly Income Plan,Principal Monthly Income Plan - MIPPlus, Principal Resurgent India Fund,Principal Tax Saving Fund &Principal Equity Fund


Maruti Udyog Ltd. Principal Deposit Fund - 371 Days - Equity Shares 5,088.52 Principal Child Benefit Fund, Principal Equity Shares 1,084.56March 2004 Personal Tax Saver Fund, Principal

Index Fund, Principal Growth Fund,Principal Monthly Income Plan,Principal Monthly Income Plan MIPPlus, Principal Resurgent India Fund &Principal Balanced Fund


Patni Computer Principal Deposit Fund - Equity Shares 1,042.56 Principal Balanced Fund Equity Shares 60.10Systems Ltd. 371 Days - June 2004 Debt 511.47 – Debt –

Raymonds Ltd. Principal Deposit Fund - 371 Days - Equity Shares 274.78 Principal Growth Fund and Equity Shares 299.63June 2004 & Principal Deposit Principal Resurgent India FundFund - 371 Days - March 2004

Debt 8,000.00 Principal Cash Management Fund - Debt 1,000.00Liquid Option

Sun Pharmaceutical Principal Deposit Fund - 371 Days - Equity Shares 1,910.17 Principal Child Benefit Fund, Principal Equity Shares 1,474.94

Industr ies Ltd. June 2004 & Principal Deposit Fund - Growth Fund, Principal Monthly Income371 Days - Jan 2004 Plan, Principal Monthly Income Plan -MIP Plus, Principal Index Fund,Principal Balanced Fund, PrincipalPersonal Tax Saver Fund, Principal TaxSavings Fund & Principal ResurgentIndia Fund.

Debt 7,000.00 – Debt –

TATA Motors Ltd. Principal Deposi t Fund - 91 Days Equity Shares 3,405.13 Principal Chi ld Benefi t Fund, Principal Equity Shares 959.63Fixed Maturity Plan Aug 2004, Index Fund, Principal Equity Fund,Principal Deposit Fund - 371 Days Principal Growth Fund, PrincipalFixed Maturity Plan Mar 2004, Monthly Income Plan, Principal TaxPrincipal Floating Rate Fund - Savings Fund & Principal PersonalFlexible Maturity Plan & Tax Saver FundPrincipal Floating Rate Fund - Warrants 42.00 – Warrants –Short Maturity Plan




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Name of the Company Scheme in which investment is Aggregate investment by Scheme by which investment is Aggregate Investment(Investor) made by company scheme in securities of made in securities of the company outstanding

the company during as on November 16, 2004the specified period* (At Market Value)

Nature of Amount Nature of AmountInvestment (Rs in Lacs) Investment (Rs in Lacs)

Videsh Sanchar Principal Deposit Fund - 91 Days - Equity Shares 167.55 Principal Index Fund Equity Shares 21.52Nigam Ltd. August 2004 & Principal Income

Fund - Short Term Plan Debt – – Debt –

Vijaya Bank Principal Equity Fund Equity Shares 18.10 – Equity Shares –

Term Deposi t 14,600.00 Principal Deposi t Fund - 371 Days - Term Deposi t 4,100.00

March 2004 & Principal CashManagement Fund - Liquid Option

** Specified period means one year prior and one year after the date of investment by company in any scheme.

Most of the above securities were purchased from the open secondary/primary market at relavent market/offer prices over a period of time based on the approved investmentstrategy. All the securities pertain to highly rated blue-chip companies.

The AMC is of the view that the above investments are considered sound and in line with the investment objective of the relevant schemes.

BORROWING BY THE MUTUAL FUND

Details of borrowing for the year ended March 31, 2004 and for the period from April 1, 2004 to November 16, 2004:

Name of the Fund Nature of the Source Purpose Date of Date of Rate of Amount Collateral(Category) Instrument/ Borrowings Repayment Borrowing Borrowed used

Mode of of borrowing as % of (if any)Borrowings (specify the Net Assets

period of borrowing)

Principal Cash Management Fund - Temporary Citibank N.A. Redemption 02/06/03 02/06/03 14.50% 1.47% Nil

Money at Call Option Overdraft (one day)

Principal Balanced Fund Temporary IDBI Bank Ltd Redemption 22/08/03 29/08/03 10.00% 3.78% NilOverdraft (seven days)

Principal Cash Management Fund - Temporary PNB Redemption 16/01/04 17/01/04 10.75% 0.52% NilLiquid Option Overdraft (one day)

Principal Cash Management Fund - Temporary Citibank N. A. Redemption 28/01/04 29/01/04 14.50% 2.26% NilLiquid Option - Institutional Plan - Overdraft (one day)Growth Option

Principal Cash Management Fund - Temporary Citibank N. A. Redemption 10/03/04 11/03/04 14.50% 0.0045% NilLiquid Option Overdraft (one day)

Principal Cash Management Fund - Temporary HSBC Redemption 10/03/04 11/03/04 14.81% 0.14% NilLiquid Option Overdraft (one day)

Principal Cash Management Fund - Temporary Standard Redemption 27/03/04 29/03/04 14.50% 0.84% NilLiquid Option Overdraft Chartered Bank (two days)

Principal Income Fund Temporary IDBI Bank Ltd Redemption 02/07/04 03/07/04 12.50% 0.62% NilOverdraft (one day)

Principal Monthly Income Plan Temporary IDBI Bank Ltd Redemption 02/07/04 03/07/04 12.50% 0.30% NilOverdraft (one day)

Principal Global Opportunities Temporary IDBI Bank Ltd Redemption 06/09/04 07/09/04 12.25% 0.79% NilFund Overdraft (one day)




Principal Floating Rate Fund - Temporary HDFC Bank Ltd Redemption 28/09/04 29/09/04 15.50% 4.89% NilFlexible Maturity Plan Overdraft (one day)

XVI. TAX TREATMENT OF INVESTMENTS IN MUTUAL FUNDS

Certain tax benefits described below are available, under present taxation laws, tothe unitholders (on attaining majority or otherwise) of Mutual Funds including“The Fund” and applies only to persons holding Units as an investment, and doesnot constitute legal or tax advice. Such benefits will be available only to the soleunitholder or the first named holder, in case the units are held in the names of more than one person or to the respective joint holder (to the extent of allocation of investment) in case percentage is specified by joint holders. Theinformation set forth below is included for general information purposes onlyand is based on advice received by the Trustees regarding the law and practice inforce in India and Investors/Unitholders should be aware that the relevantfiscal rules on their interpretation may change. As is the case with any investment,there can be no guarantee that the tax position or proposed tax position prevailingat the time of an investment in the Fund will ensure indefinitely. In view of theindividual nature of tax consequences, each Investor/Unitholder is advised toconsult his/her State/Country of incorporation, establishment, citizenship, residenceor domicile.

I. PRINCIPAL MUTUAL FUND

The entire income of Fund registered under the Securities and ExchangeBoard of India Act, 1992 (15 of 1992) or regulations made thereunder willbe exempt from income tax in accordance with the provisions of section10(23D) of the Income-tax Act, 1961. Consequently, income received bythe Scheme is not liable for deduction of tax at source.

The tax provisions in the following paragraphs are updated as per the Finance (No. 2) Act 2004. The Securities Transaction Tax (STT) and the consequent Capital gains provisions shall come into force fromOctober 01, 2004.

Dividend Distribution TaxWith effect from 9th July, 2004, under section 115R of the Income tax Act,1961 tax on Income Distributed will be payable as under on the incomedistributed:

For individuals and HUFs: @ 12.50% plus surcharge @ 2.5% and educationcess @ 2% of the Tax and Surcharge.

For others: @ 20% plus surcharge @ 2.5% and education cess @ 2% of theTax and Surcharge.



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Open ended Equity oriented mutual funds have been exempted from payingDividend Distribution Tax.

As per the Explanation to Section 115Tof the Income Tax Act 1961, “equityoriented funds” means “such fund where the investible funds are invested byway of equity shares in domestic companies to the extent of more than fiftypercent of the total proceeds of such fund”. The percentage of Equity shareholding of the fund shall be computed with reference to the annual averageof the monthly averages of the opening and closing figures.

II. TO THE UNITHOLDERS

A. IN RESPECT OF INCOME DISTRIBUTION:

Under the provisions of section 10(35) of the Income-tax Act, 1961, incomereceived by all categories of unitholders from the Scheme will be exempt

from income tax in their hands. In view of this position, no tax needs bededucted at source from such distribution by the scheme. However, incomefrom the transfer of Units of a mutual fund is not exempt from taxation.

1. IN RESPECT OF LONG TERM CAPITAL GAINS

i. Equity Oriented Schemes

Long term capital gains arising on or after October 01, 2004 (i.e. after thedate on which the STT comes into force) from the transfer of units of anEquity Oriented scheme (as defined u/s. 115T of the Income Tax Act, 1961)would be exempt from Income-Tax as per section 10(38) of the Income-TaxAct, 1961. The mutual fund would recover STT @ 0.15% from the unitholderwhen units are re-purchased by the mutual fund/ redeemed by the investor

ii. Mutual Fund units other than those of Equity Oriented Schemes

Long term capital gains arising from the transfer of units other than EquityOriented Schemes would be chargeable to tax as under:

i) For Individuals and HUFs (including Non Resident Indians)Long-term Capital Gains in respect of Units held for a period of morethan 12 months are chargeable under section 112 of the In come-TaxAct, 1961 at the rate of 20% plus surcharge as applicable and educationcess @ 2% of the Tax and surcharge. Capital gains would be computedafter taking into account cost of acquisition, as adjusted by Cost InflationIndex notified by the Central Government and expenditure incurredwholly and exclusively in connection with such transfer. In a case, wheretaxable income, as reduced by long term capital gains, is below theexemption limit, the long term capital gains will be reduced to the extentof the shortfall and only the balance long term capital gains will becharged at the flat rate of 20% plus surcharge and education cess, asmay be applicable.

It is further provided that an assessee will have an option to seek concessional rate of tax of 10%, plus surcharge as applicable pluseducation cess, provided the long term capital gains are computed withoutsubstituting indexed cost in place of actual cost of acquisition.

ii) For Partnership Firms, Indian Companies/Foreign Companies

Long-term Capital Gains in respect of units held for a period of morethan 12 months will be chargeable under section 112 of the Income-TaxAct, 1961, at the rate of 20% plus surcharge @ 2.5% and education cess@ 2% of the Tax and surcharge. Capital gains would be computed aftertaking into account cost of acquisition, as adjusted by Cost InflationIndex notified by the Central Government, and expenditure incurredwholly and exclusively in connection with such transfer.

It is further provided that an assessee will have an option to avail of theconcessional rate of tax of 10%, plus surcharge @ 2.5% and educationcess @ 2% of the Tax and surcharge on long term capital gains computedwithout adjusting cost for indexation.

iii) For Overseas Financial Organisations, and Foreign InstitutionalInvestors fulfilling conditions laid down under section 115AB and115AD respectively

Under section 115AB/115AD of the Income-Tax Act, 1961, long termcapital gains in respect of units held for a period of more than 12 monthswill be chargeable at the rate of 10%, plus surcharge and education cess,as may be applicable. Such gains would be calculated without indexationof cost of acquisition.

iv) Setting Off Previous Year’s Brought Forward Losses

Loss arising on transfer of a long term capital asset can be set off onlyagainst other long term capital gains and not against any other income.If there is nil or inadequate long term capital gains in any year, the lossremaining will be allowed to be carried forward to the next year upto amaximum of 8 years.

2. SHORT TERM CAPITAL GAINS:

i. Equity Oriented Schemes

Short term capital gains arising on or after October 01, 2004 (i.e. after thedate on which the STT comes into force) from the transfer of units of anequity oriented scheme (as defined under Section 115T of the Income TaxAct, 1961) would be charged to tax u/s. 111-A of the Income Tax Act, 1961@ 10% plus surcharge as applicable plus education cess as applicable on thetax and surcharge, The mutual fund would recover STT @ 0.15% from theunitholder when units are re-purchased by the mutual fund/ redeemed by theinvestor

ii. Mutual Fund units other than Equity Orinted Schemes

Short term capital gains arising from the transfer of units other than EquityOriented Schemes would be chargeable to tax as under:

i. Capital Gains/Losses

Short term capital gains are taxed at the normal rates applicable to each

unitholder. Loss arising on transfer of a short term capital asset can beset off only against other short term capital gains or long term capitalgains. If there is nil or in adequate capital gains in any year, the lossremaining will be allowed to be carried forward to the next year upto amaximum of 8 years.

As per section 94(7), if any person buys or acquires units within a periodof three months prior to the record date fixed for declaration of dividend,or distribution of income, and sells or transfers the same within a periodof nine months from such record date, then capital losses arising fromsuch sale to the extent of dividend or income received or receivable onsuch units will be ignored for the purpose of computing his incomechargeable to tax.

Similarly, as per section 94(8), if any person buys or acquires units withina period of three months prior to the record date fixed for declaration of bonus units and sells or transfers the same within a period of nine monthsfrom such record date, then capital losses arising from such sale will beignored for the purpose of computing his income chargeable to tax andthe loss so ignored shall be deemed to be the cost of the bonus units.

ii. Income Tax Rates

Short term Capital Gains in respect of Units held for a period of notmore than 12 months is added to the total income. Total income includingshort-term capital gains is chargeable to tax as per the relevant slab rates.The maximum tax rates applicable to different categories of assesseesare as follows:

Resident individuals and HUF 30% plus surcharge plus education cess

Partnership Firms 35% plus surcharge plus education cess

Indian Companies 35% plus surcharge plus education cess

Non Resident Ind ians 30% plus surcharge plus education cess

Foreign Companies 40% plus surcharge plus education cess

3. TAX DEDUCTION AT SOURCE

(i) Under section 195/196B/196D of the Income Tax Act, 1961, tax shall

be deducted at source in respect of capital gains as under:a. In case of non resident other than a company -

• Long term capital gains 20% plus surcharge plus education cess(other than Equity oriented schemes)

• Short term capital gains 30% plus surcharge plus education cess

b. In case of foreign company -

• Long term capital gains 20% plus surcharge plus education cess

(other than Equity oriented schemes)

• Short term capital gains 40% plus surcharge plus education cess

c. In case of Offshore Fund and FIIs as defined in 115AB

• Long term capital gains 10% plus surcharge plus education cess

As per circular no. 728 dated October 1995 by CBDT, in the case of a remittanceto a country with which a Double Taxation Avoidance Agreement (DTAA) is inforce, the tax should be deducted at the rate provided in the Finance Act of therelevant year or at the rate provided in DTAA between India and that countrywhichever is more beneficial to the tax payer.

4. EXEMPTION FROM TAX ON CAPITAL GAINS ARISING ON

TRANSFER OF UNITS HELD FOR MORE THAN 12 MONTHS(WHEREVER APPLICABLE)

U/S. 54EC of the Income Tax Act, 1961

Under section 54EC of the Income Tax Act, 1961, where a tax payer hasmade long term capital gains from the transfer of units held in the MutualFund for a period exceeding 12 months and the assessee has any time withina period of 6 months after the date of such transfer, invested the whole of thecapital gains in any of the specified assets i.e., in bonds redeemable after 3years issued by the National Bank for Agriculture and Rural Development,or by the National Highways Authority of India or by the Rural ElectrificationCorporation Limited or by The National Housing Bank or by the SmallIndustries Development Bank of India, such capital gains shall be exemptedfrom tax on capital gains under section 54EC of the Income Tax Act, 1961.However, if the assessee has invested only a part of the capital gains, he willbe eligible for proportionate exemption.

U/S 54ED of the Income Tax Act, 1961

Under Section 54ED, whereby the capital gains arising from the transfer of units held in the mutual fund for a period exceeding 12 months will be exempt,if the assessee has, any time within a period of 6 months after the date of such

transfer, invested the whole of the capital gains in acquiring equity sharesforming part of an eligible issue of capital. However, if the assessee has investedonly a part of the capital gains, he will be eligible for proportionate exemption.An eligible issue of capital means an issue of equity shares offered forsubscription to the public by a public company formed and registered in India.

Indirect Tax impact on investors due to tax impact on the scheme:

The scheme may be impacted by the rates of taxation on capital gains, interestand other corporate actions on investment by non resident mutual funds, indifferent countries of investment, in line with the prevailing tax laws in thosecountries of investment, as also in line with the respective tax treaties inexistence with India

F. INVESTMENTS BY CHARITABLE AND RELIGIOUS TRUSTS INTHE SCHEME

Units of the Scheme constitute an eligible avenue for investment by charitableor religious trusts per rule 17C of the Income Tax Rules, 1962, read withclause (xii) of sub-section (5) of section 11 of the Income Tax Act, 1961.



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G. WEALTH TAX

Units held under the Scheme are not treated as assets within the meaning of section 2(ea) of the Wealth Tax Act, 1957 and are, therefore, not liable toWealth-Tax.

H. GIFT TAX

Units of the Scheme may be given as a Gift and no Gift tax will be payableeither by the donor or the donee, as the Gift Tax Act has been abolished witheffect from October 1, 1998.

Units of the Scheme may be given as a Gift and no Gift tax will be payable eitherby the donor or the donee, as the Gift Tax Act has been abolished with effect fromOctober 1, 1998.

XVII. GENERAL INFORMATION

Utilisation of Services of Associates

The Trustees, the AMC, the Custodian, the Registrar, any Associate, any Distributor,Dealer other companies within the Principal group etc. may from time to time act(individually and/or jointly) as manager, custodian, registrar, administrator,investment adviser, distributor or dealer or agent or marketing associate,respectively in relation to, or be otherwise involved in, other Schemes/Funds/ Activities (in the same or different capacity) (to the extent permitted under variousrelevant Regulations), which may have similar investment objectives to those of the Scheme(s)/Fund. The AMC, may for example, make investments for otherpermitted business activities or on its own behalf without making the same availableto the Scheme/Fund. The AMC/Trustees will, at all times have regard in suchevent to its obligations to act in the best interests of the Scheme(s)/Fund so far asis practicable, having regard to its obligations to other permitted business activitiesand will ensure that such transactions are conducted with/by the Scheme/Fundpurely on commercial terms/on an arm’s length basis as principal to principal.

AMC may, utilise the services of the Companies stated in the clause ‘AssociateTransactions” (and to whom selling commission has been paid/ provided fortheir marketing efforts in mobilising subscription for the units of the previous

schemes of the Fund) and/or the Sponsors, Associates, other Companies withinthe PRINCIPAL group, Employees or their relatives, etc. for the purpose of anysecurities transactions and distribution and sale of units/securities, provided thatany deal in securities through any broker associated with the Sponsors should notbe beyond 5% of the quarterly aggregate purchase and sale of securities by theFund, as per SEBI Regulations and brokerage or commission paid as per prevailingmarket practice and/or approved rates is disclosed in the half yearly annual accountsof the Fund. AMC may, invest in Units of the Funds/Schemes in PRINCIPAL (theexisting Funds/Schemes including the present Scheme(s) and others as may beannounced/launched from time to time), only after full disclosure of its intentionto invest has been made in the Offer Documents. AMC shall not charge any feeson its investment in Units of the Funds/Schemes in the Fund.

AMC shall not act as a Trustees of any Mutual Fund and shall not undertake anyother business activities except in the nature of portfolio management services,management and advisory services to offshore funds, pension funds, providentfunds, venture capitals funds, management of insurance funds, financialconsultancy and exchange of research on commercial basis, if any of such activitiesare not in conflict with the activities of the Fund. Provided that AMC may itself orthrough its subsidiaries undertake such activities if it satisfies SEBI that its keypersonnel, the system, back office, bank and securities accounts are segregatedactivity wise and there exist systems to prohibit access to inside information of

various activities. Provided further that AMC shall meet the capital adequacyrequirements, if any, separately for each such activity and obtain separate approval,if necessary under the relevant Regulations.

SCHEME RIGHTS AND ADDITIONS/AMENDMENTS TO THESCHEME(S)

The AMC may add to or otherwise amend either all or any of the terms of theScheme(s), by duly complying with the guidelines of and notifications issued bySEBI/GOI/any other regulatory body, that may be issued from time to time subjectto the prior approval of SEBI, if required.

POWER TO REMOVE DIFFICULTIES

If any difficulty arises in giving effect to the provision of the scheme(s), the Trusteesmay take such steps, which are not inconsistent with these provisions which appearto them to be necessary and expedient, for the purpose of removing the difficulties.

POWER TO MAKE RULES

The AMC may from time to time prescribe such forms and make such rules forthe purpose of giving effect to the provisions of the scheme(s), and add to, alter oramend all or any of the forms and rules that may be framed from time to time.

DOCUMENTS FOR INSPECTIONThe following documents are available for inspection by prospective unitholders,under the scheme(s), between 11.00 a.m. and 1.00 p.m. on any Business Day atthe office of AMC at 5 th Floor, Apeejay House, 3 Dinshaw Vachha Road, Mumbai400 020.

a) Memorandum and Articles of PRINCIPAL Asset Management Co. Ltd. alongwith Registration Certificate from SEBI.

b) Copy of Trust Deed and Investment Management Agreement.

c) Copy of Custodian Agreement.

d) Copy of Agreement with Registrars.

e) Copy of this scheme(s) Offer Document.

f) Copies of the Indian Trust Act, 1882, Indian Registration Act 1908, and theSecurities (Contracts Regulations) Act, 1956.

g) Copy of SEBI (Mutual Funds) Regulations 1996.

Penalties and Pending Litigations

1. All cases of penalties (indicating nature of penalty) awarded Noneby SEBI under the SEBI Act or any of its regulations againstthe Sponsor of the Mutual Fund or any company associatedwith the Sponsor in any capacity including the AssetManagement Company, Trustee Company/Board of Trustees,or any of the directors or key personnel (specifically the fundmanagers) of the Asset Management Company and TrusteeCompany.

For Sponsor and its associates, other than the penalt ies as Nonementioned above, the penalties awarded by any financialregulatory body, including stock exchanges, for defaults inrespect of shareholders, debenture holders and depositorsshall also be disclosed. Additionally, penalties awarded forany economic offence and violation of any securities lawsshall be disclosed.

2. Details of all cases of suspensions and cancellation of Nonecertificate of registration (for irregularities / violations infinancial services sector or for defaults in respect of shareholders, debenture holders and depositors) of the AMC,Trustee Company and sponsor or any associate of thesponsor shall be disclosed for the last 10 years.

3. Any pending material litigation proceedings incidental to the Nonebusiness of the Mutual Fund to which the Sponsor of theMutual Fund or any company associated with the Sponsor inany capacity including the AMC, Board of Trustees /TrusteeCompany or any of the directors or key personnel is a party.

Any pending criminal cases against the Sponsor or any Nonecompany associated with the Sponsor in any capacityincluding the AMC, Board of Trustees/Trustee Company orany of the directors or key personnel

4. Any deficiency in the systems and operations of the Sponsor Noneof the Mutual Fund or any company associated with thesponsor in any capacity including the AMC or the TrusteeCompany which SEBI has specifically advised to bedisclosed in the offer document, or which has been notifiedby any other regulatory agency, shall be disclosed.

5. Any enquiry/adjudication proceedings under the SEBI Act Noneand the Regulations made thereunder, that are in progressagainst the Sponsor of the Mutual Fund or any companyassociated with the Sponsor in any capacity such as the AMC,Board of Trustees/Trustee Company or any of the Directors orkey personnel of the Asset Management Company shall bedisclosed.

The above information has been disclosed in good faith as per the informationavailable to the AMC.

MISCELLANEOUS CLAUSE

Statements in this Offer Document are, except where otherwise stated, based onthe law and practice currently in force in India and are subject to changes therein.

Notwithstanding anything contained in the Offer Document, the provisions of theSEBI (Mutual Funds) Regulations, 1996 and the guidelines there under shall beapplicable.

Subject to SEBI Regulations permitting:

The AMC, the Trust/or the Sponsor may also absorb expenditures in addition tothe limits laid down under Regulation 52 of SEBI Regulations.

Further, any amendments/replacement/re-enactment of SEBI Regulation/ clarification and guidelines in the form of notes or circulars issued from time totime by SEBI for the operation and management of Mutual Fund subsequent tothe date of the Offer Document shall prevail over those specified in this OfferDocument.

JURISDICTION

Any dispute arising out of this issue shall be subject to the exclusive jurisdictionof the Courts in India. Statements in this Offer Document are, except whereotherwise stated, based on the law, practice currently in force in India, and aresubject to changes therein.

This information contained in this Offer Document regarding taxation is for generalinformation purposes only and is in conformity with the relevant provisions of the

Tax Act, and has been included relying upon advice provided to the Fund’s taxadvisor based on the relevant provisions prevailing as at November 2004.

The scheme under this Offer Document has been approved by the Board of Trusteesof IDBI Mutual Fund (now Principal Mutual Fund) on April 1, 1997 andamendment thereto on November 8, 2000 & February 1, 2001. Further, the Trusteeshave also approved this updated offer document on November 19, 2004.

For and on behalf of the Board of Directors of Principal Asset Management Company Private Limited

Sd/-

Place : Mumbai SANJAY SACHDEV

Date : December 13, 2004 Managing Director & Chief Executive Officer



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For details, please contact your financial advisor or call the Principal Customer Relations Team.

Principal Asset Management Company Private Limited

Mumbai: Apeejay House, 5th Floor, 3 Dinshaw Vachha Road, Churchgate, Mumbai-400 020. Tel.: (022) 5659 0333 / 2204 4988.

Ahmedabad: 401, Broadway Business Centre, Opp. Samartheshwar Mahadev Temple, Law Garden Cross Road, Ellisbridge,

Ahmedabad - 380 006. Tel.: (079) 2640 7933-36.

Bangalore: Prestige Meridien 1, No. 29, M.G. Road, Bangalore-560 001. Tel: (080) 2509 5567-69.

Chandigarh: SCO 455-56, 1st Floor, Sector-35 C, Chandigarh-160 022. Tel: (0172) 508 9514 / 507 5068.

Chennai: Challamal, No. 401, 11, Thiyagaraya Road, Chennai-600 017. Tel: (044) 2431 4678-79 / 2435 3887.

Coimbatore: No. 9, Gowtham Center Annexe, 1054, Avinashi Road, Coimbatore-641018. Tel.: (0422) 5393561. Tele/Fax: (0422) 5393562.

Hyderabad: White House, 503, 5th Floor, Block 1B, Begumpet, Hyderabad-500 016. Tel: (040) 5562 0812 / 5566 9548.

Indore: G 8 & 9, Ground floor, City Center, 570, Mahatma Gandhi Marg, Indore-452 001. Tel: (0731) 506 7596 / 506 7345.

Jaipur: 105-B, 1st Floor, Shyam Anukampa Complex, Opp. HDFC Bank Ltd., Ashok Marg, C-Scheme, Jaipur-302 001. Tel.: (0141) 511 8240.

Kolkata: Block No. 503, SHUBHAM, 5th Floor, 1, Sarojini Naidu Sarani, Kolkata-700 017. Tel: (033) 2281 7030 / 2281 7268.

Lucknow: 210-B, 2nd Floor, Saran Chambers-2, 5, Park Road, Lucknow-226 001. Tel: (0522) 223 9770 / 223 8816.

Ludhiana: 302, SCO-18, Opp. Ludhiana Stock Exchange, Feroze Gandhi Market, Ludhiana-141001. Tel.: (0161) 277 4209/508 6682.

New Delhi: 310-311, Ansal Bhawan, 16, K.G. Marg, New Delhi-110 001. Tel: (011) 2331 6990 / 91.

Pune: Office No.101, “Shrinath Plaza”, “A” Wing, 1st Floor, Fergusson College Road, Dnyaneshwar Paduka Chowk,

Shivajinagar, Pune-411 004. Tel.: (020) 2553 8737 / 38, 401 5055. Telefax: (020) 2551 3094.

Surat: 206 Jolly Plaza, Athwagate, Surat-395001. Tel: (0261) 5577964.

Vadodara: 103, Paradise Complex, Sayaj igunj, Vadodara-390 005. Tel.: (0265) 558 6212.

Visit us at www.principalindia.com or e-mail us at [email protected]

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