You are on page 1of 60

COMBINED OFFER DOCUMENT

Fidelity Equity Fund


An open ended equity growth scheme

Continuous offer opened on May 18, 2005

Fidelity Tax Advantage Fund


An open ended equity linked savings scheme

Continuous offer opened on March 1, 2006

Fidelity India Special Situations Fund


An open ended equity growth scheme Continuous offer opened on May 24, 2006

Fidelity Short Term Income Fund


An open ended income scheme

Continuous offer opened on August 31, 2006

Fidelity Cash Fund


An open ended liquid scheme

Continuous offer opened on November 29, 2006

Issue of units at applicable NAV plus applicable Entry Load, if any.


This Offer Document contains information necessary for an investor to make an informed investment decision in the Schemes forming part of this Offer Document. Investors should read the Offer Document carefully prior to making an investment decision and retain the Offer Document for future reference. Investors may note that this Offer Document consisting of various Schemes of Fidelity Mutual Fund remains effective until a material change occurs. Material changes shall be filed with the Securities and Exchange Board of India (SEBI) and circulated to all Unit Holders or may be publicly notified by advertisements in the newspapers subject to the applicable Regulations. Investors may also like to obtain further changes after the date of this Offer Document from the Mutual Fund / its Investor Service Centers or distributors. The particulars of the Schemes under this Offer Document, have been prepared in accordance with the Securities and Exchange Board of India (Mutual Funds) Regulations, 1996, as amended till date, and filed with SEBI, and the Units being offered for public subscription have neither been approved or disapproved by SEBI nor has SEBI certified the accuracy and adequacy of this Offer Document. This Offer Document supersedes all the earlier Offer Documents of the Schemes of Fidelity Mutual Fund forming part of this Offer Document. This Offer Document is dated as at March 09, 2007.

Fidelity, Fidelity International and Pyramid Logo are trademarks of Fidelity International Limited.

SPONSOR
Fidelity International Investment Advisors
Registered Office: Pembroke Hall, 42 Crow Lane, Pembroke, Hamilton, HM19, Bermuda.

TRUSTEE
Fidelity Trustee Company Private Limited
Registered Office: 56, 5th Floor, Maker Chambers VI, 220, Nariman Point, Mumbai - 400 021.

ASSET MANAGEMENT COMPANY


Fidelity Fund Management Private Limited
Registered Office: 56, 5th Floor, Maker Chambers VI, 220, Nariman Point, Mumbai - 400 021.

REGISTRAR AND TRANSFER AGENT


Computer Age Management Services Private Limited
Registered Office: A&B, Lakshmi Bhawan, 609, Anna Salai, Chennai - 600 006.

CUSTODIAN
J P Morgan Chase Bank
Registered Office : Mafatlal Centre, 9th Floor, Nariman Point, Mumbai - 400 021.

AUDITORS TO THE FUND


Price Waterhouse
Office: 252, Veer Savarkar Marg, Shivaji Park, Dadar (West), Mumbai - 400 028.

LEGAL ADVISORS
Amarchand & Mangaldas & Suresh A. Shroff & Co.
Office: 5th Floor, Peninsula Chambers, Peninsula Corporate Park, Ganpatrao Kadam Marg, Lower Parel, Mumbai - 400 013.

Combined Offer Document Fidelity Mutual Fund

Table of Contents
Page Page E. F. G. H. I. 9 9 9 9 10 10 11 11 11 14 14 14 14 14 15 16 17 17 17 17 J. K. L. N. O. P. A. B. C. D. A. B. C. Fundamental Attributes ................................. Borrowing Powers .......................................... Investment in the Schemes by the AMC, Sponsor or their Affiliates .............................. Procedure and Recording of Investment Decisions .................................... Portfolio Turnover - Equity Schemes ............ Overview of Debt Markets ............................. Investment Restrictions ................................. Computation of Net Asset Value ................... Recording of Changes ................................... Calculation of NAV ......................................... Accounting Policies and Standards .............. Load Structure of the Schemes ..................... Fees and Expenses of the Schemes ............ Initial Issue Expenses of the existing schemes of the Fund ..................................... Condensed Financial Information ................. Units on Offer - General Information ............ Purchase of Units .......................................... Important Note on Anti Money Laundering, Know-Your-Customer and Investor Protection ................................. Investor's Personal Information .................... Facilities Offered to Investors under the Schemes .................................................. Redemption of Units ...................................... Suspension of the Purchase and Redemption of Units ............................... Right to Limit Redemptions ........................... Unit Holders' Rights ....................................... Voting Rights of the Unit Holders .................. Annual Accounts and Unit Certificates ......... NAV Information ............................................. Disclosure of Information under the Regulations .............................................. Duration of the Schemes ............................... Procedure and Manner of Winding Up ......... Services to Unit Holders ................................ 28 28 28 28 28 28 29 31 34 34 34 34 36 36 36 38 38 40 40 41

I. II.

Highlights ......................................................... Definitions and Abbreviations ...................


A. B. C. Definitions ...................................................... Abbreviations ................................................. Interpretation ..................................................

3 5 5 7 8

III. Risk Factors and Special Considerations ...............................................


A. B. C. D. E. F. G. H. A. B. C. Standard Risk Factors ................................... Risk Factors pertaining to Equity Schemes ............................................. Risk Factors pertaining to Debt Schemes ............................................... Risk Factors associated with trading in Derivatives ..................................... Risk Factors associated with Scrip Lending ................................................. Risk Factors associated with Overseas Investment ..................................... Additional Scheme Specific Risk Factors ................................................... Special Considerations .................................. The The The I. II. Fund ........................................................ Sponsor ................................................... Trustee Company (The Trustee) ............ Directors ................................................. Summary of the Substantive Provisions of the Trust Deed ................. III. Trustee - Fees and Expenses ............... IV. Trustee - Supervisory Role .................... The Asset Management Company ................ I. Constitution ............................................ II. Directors ................................................. III. Duties and Responsibilities of the AMC and the material provisions of the Investment Management Agreement ....................... IV. Key Employees of the AMC and relevant experience ................................ V. Fund Managers ...................................... VI. Compliance Officer ................................ VII. Investors Relations Officer .................... VIII. The Registrar and Transfer Agent ......... IX. The Custodian ........................................ X. The Fund Accountant ............................. XI. The Auditors ...........................................

M. Accrual of Expenses and Income .................

VI. Load, Fees and Expenses ...........................

IV. Constitution of the Fund .............................

VII. Units and the Offer ........................................

43 44 44 47 48 48 49 49 49 49 49 49 49 49 50 51 51 52 53 53 53 53 54 54 54

D. E. F. G. H. A. B. C. D. E. F. G. H.

D.

VIII.Unit Holders' Rights and Services ...........


18 18 20 20 20 20 20 20 20

V.

Investment Objective, Investment Strategy, Investment Pattern and Risk Profile and Limitations of the Schemes ....................................................
A. Schemes on Offer .......................................... I. Fidelity Equity Fund ............................... II. Fidelity Tax Advantage Fund ................. III. Fidelity India Special Situations Fund ... IV. Fidelity Short Term Income Fund .......... V. Fidelity Cash Fund ................................. Underwriting ................................................... Scrip Lending by the Fund ............................ Investment in Derivatives ..............................

IX. Consolidated Tax Benefits of Investing In the Schemes of the Fund ............................
A. For Unit Holders ............................................. For The Fund ................................................. B.

21 21 21 21 22 23 24 25 25 25

X. Other Matters ...................................................


A. B. C. D. E. F. Transactions with the Sponsor / Associates ...................................................... Policy on Offshore Investments by the Schemes .................................................. Dividends and Distributions .......................... Inter-Scheme Transfers ................................. Disclosure under Regulation 25(11) ............. General Information .......................................

B. C. D.
2

Highlights

I.

Highlights
Fidelity Equity Fund ("FEF") An open ended equity growth scheme. To generate long-term capital growth from a diversified portfolio of predominantly equity and equity-related securities. Fidelity India Special Situations Fund ("FISSF") An open ended equity growth scheme. To generate long-term capital growth from a diversified portfolio of predominantly equity and equity-related securities including equity derivatives. Fidelity Tax Advantage Fund ("FTAF") * An open ended equity linked savings scheme. To generate long-term capital growth from a diversified portfolio of predominantly equity and equityrelated securities.

Name of the Scheme Structure

The Scheme does not assure or guarantee any returns. Investment Objective

Options Minimum Initial Application Amount Minimum Additional Application Amount Minimum Amount / No. of Units for Redemption Load Structure i. Entry Load

The Scheme offers Growth option and Dividend option. The Dividend option offers Dividend Payout and Dividend Reinvestment facilities. Rs. 5,000 per application Rs.1,000 per application Rs. 1,000 or 100 Units Rs. 5,000 per application Rs.1,000 per application Rs. 1,000 or 100 Units Rs. 500 per application and in multiples of Rs. 500 thereafter Rs. 500 per application and in multiples of Rs. 500 thereafter Rs. 500 or 50 Units

For each Purchase (i) Of less than Rs. 5 Crores (ii) Of Rs. 5 Crores or more (iii) By an FOF (irrespective of the amount of Purchase) (iv) As a result of Dividend Re-investment (v) Through switch-in (including through STP) into any of the Equity Schemes of the Fund from Fidelity MultiManager Cash Fund ("FMCF") or FSTIF or FCF; provided units are first switched out / systematically transferred out from the Equity Schemes of the Fund to FMCF or FSTIF or FCF and, within a period of 90 days from such transaction, the units allotted against such switch proceeds are again switched out / systematically transferred out from FMCF or FSTIF or FCF (on a FIFO basis) into any of the Equity Schemes of the Fund. (vi) Through switch-in from other Equity Schemes of the Fund

Load (% of Applicable NAV) 2.25% NIL NIL NIL NIL

NIL

In case of SIP / STP the above criteria for Entry Load will be applicable for each instalment. A switch-in may also attract an Entry Load like any Purchase except in cases mentioned above. ii. Exit Load For Redemption Within 6 months from the date of allotment or Purchase applying First in First Out basis for investments made other than through SIP / STP or if the Purchase was made through SIP / STP and the Entry Load applicable at the time of SIP / STP Purchase was NIL / 2.25%. Within 2 years from the date of allotment or Purchase applying First in First Out basis, if the Purchase was made through SIP / STP and the Entry Load applicable at the time of the SIP / STP Purchase was 1.25%. Load (% of Applicable NAV) 1.00%

NIL 1.00%

A switch-out or a withdrawal under SWP may also attract an Exit Load like any Redemption. No Entry / Exit Loads / CDSC will be chargeable in case of switches made between different plans / options of the Scheme. Liquidity The Scheme will offer Units for Purchase and Redemption at NAV related prices on every Business Day. The Mutual Fund will endeavour to dispatch the Redemption proceeds within 3 Business Days from the acceptance of the Redemption request. The Scheme will offer Units for Purchase and Redemption at NAV related prices on every Business Day. Redemption of Units can be made only after a period of 3 years of lock-in period from the date of allotment of the Units proposed to be redeemed. The Mutual Fund will endeavour to dispatch the Redemption proceeds within 3 Business Days from the acceptance of the Redemption request.

Transparency

The NAVs will be calculated and disclosed on every Business Day. The AMC shall update the NAVs on the website of the Fund (www.fidelity.co.in) and of the AMFI (www.amfiindia.com) every Business Day. The AMC will disclose details of the portfolio of the Schemes every 6 months by either sending a complete statement to all the Unit Holders or by publishing such statement, by way of advertisement, in two daily newspapers.

Benchmark for BSE-200 index performance comparison * The Scheme has been prepared pursuant to the notifications dated November 3, 2005 and December 13, 2005 issued by the Department of Economic Affairs, Ministry of Finance, Government of India or such other scheme as the Central Government may, by notification in the Official Gazette, specify under section 80C of the Income Tax Act, 1961. Investors in the Scheme are entitled to deductions of the amount invested in Units of the Scheme, subject to a maximum of Rs. 1,00,000, under and in terms of Section 80C (2) (xiii) of the Income Tax Act, 1961.

Combined Offer Document Fidelity Mutual Fund


Highlights

Name of the Scheme Structure Investment Objective

Fidelity Short Term Income Fund ("FSTIF") An open ended income scheme To generate reasonable returns through a diversified portfolio of fixed income securities. Retail and Institutional Plans

Fidelity Cash Fund ("FCF") An open ended liquid scheme To deliver reasonable returns with lower volatility and higher liquidity through a portfolio of debt and money market instruments. Retail, Institutional and Super Institutional Plans

The Scheme does not assure or guarantee any returns.

Plans Options Dividend Frequency (All Plans)

Each of the Plans under the Scheme offers the Growth option and the Dividend option. The Dividend option offers Dividend Payout and Dividend Reinvestment facilities. Monthly Dividend payout facility: u Monthly Dividend re-investment facility: u Daily u Weekly u Monthly Retail Plan: Rs. 5,000 per application Institutional Plan: Rs. 1,00,00,000 per application Super Institutional Plan: Rs. 10,00,00,000 per application Retail Plan: Rs. 1,000 per application and thereafter in multiples of Re. 1 Institutional Plan: Rs. 1,00,000 per application and thereafter in multiples of Re. 1 Super Institutional Plan: Rs. 1,00,00,000 per application and thereafter in multiples of Re. 1 Retail Plan: Rs.1,000 or 100 Units Institutional Plan: Rs.1,00,000 or 10,000 Units Super Institutional Plan: Rs.1,00,000 or 10,000 Units

Minimum Initial Application Amount

Retail Plan: Rs. 5,000 per application Institutional Plan: Rs. 5,00,00,000 per application

Minimum Additional Application Amount

Retail Plan: Rs. 1,000 per application Institutional Plan: Rs. 1,00,000 per application

Minimum Amount / No. of Units for Redemption Load Structure i. Entry Load

Retail Plan: Rs.1,000 or 100 Units Institutional Plan: Rs.1,00,000 or 10,000 Units

NIL If the AMC introduces an Entry Load, a switch-in or transfer under STP may also attract the applicable Entry Load like any Purchase. NIL If the AMC introduces an Exit Load, a switch-out or a withdrawal under SWP or transfer under STP may also attract the applicable Exit Load like any Redemption. No Entry / Exit Loads / CDSC will be chargeable in case of switches made between different plans / options of the Scheme.

ii. Exit Load

Liquidity

The Scheme will offer Units for Purchase and Redemption at Applicable NAV on every Business Day. The Mutual Fund will endeavour to dispatch the Redemption proceeds within 3 Business Days from the acceptance of the Redemption request. The NAVs will be calculated and disclosed on every Business Day. The NAVs for every calendar day will be calculated.

Transperancy

The AMC shall update the NAVs on the website of the Fund (www.fidelity.co.in) and of the AMFI (www.amfiindia.com) every Business Day. The AMC will disclose details of the portfolio of the Scheme every 6 months by either sending a complete statement to all the Unit Holders or by publishing such statement, by way of advertisement, in two daily newspapers. Benchmark for performance comparison CRISIL Short Term Bond Fund Index CRISIL Liquid Fund Index

Investors are advised to contact any of the ISCs or the AMC by calling the investor line of the AMC at "1800 180 8000" (toll-free from a MTNL / BSNL landline) or 30309800 (at local call rate from your mobile phone prefixing the local city code or non - MTNL / BSNL landline) or 0124 2542022 (at long distance rates) to know the latest position on Entry / Exit Load or CDSC structure prior to investing.

II. Definitions and Abbreviations


A. Definitions
In this Offer Document the following terms will have the meanings indicated there against, unless the context suggests otherwise. Applicable NAV FEF, FISSF, FTAF, FSTIF : For applications for Purchases (along with a local cheque or demand draft payable at par at the place where the application is received) / Redemptions, accepted during the Ongoing Offer Period at the Designated Collection Centres of the Fund on a Business Day up to the Cut-off time of the Schemes, the NAV of that day; and For applications for Purchases (along with a local cheque or demand draft payable at par at the place where the application is received) / Redemptions accepted during the Ongoing Offer Period at the Designated Collection Centres of the Fund on a Business Day after the Cut-off time of the Schemes, the NAV of the next Business Day; and For applications for Purchases along with demand drafts not payable at par at the place where the application is received, NAV of the day on which the demand draft is credited. FCF : For Purchase : 1. In respect of valid Purchase applications accepted at a Designated Collection Centre upto 12.00 noon on a Business Day and if the funds are available for utilization by the Scheme on the same day, the closing NAV of the day immediately preceding the day of acceptance of application will be applicable. 2. In respect of valid Purchase applications accepted at a Designated Collection Centre after 12.00 noon on a Business Day and if the funds are available for utilization by the Scheme on the same day, the closing NAV of the day immediately preceding the next Business day will be applicable. 3. In respect of valid Purchase applications accepted at a Designated Collection Centre on a Business Day, irrespective of the time of acceptance of applications, where the funds are not available for utilization on the day of the application, the closing NAV of the day immediately preceding the day on which the funds are available for utilization by the Scheme will be applicable. For Redemption : 1. In respect of valid Redemption applications accepted at a Designated Collection Centre upto 3.00 p.m. on a Business Day, the closing NAV of the day immediately preceding the next Business Day will be applicable. 2. In respect of valid Redemption applications accepted at a Designated Collection Centre after 3.00 p.m. on a Business Day, the closing NAV of the next Business Day will be applicable.
Definitions and Abbreviations

Application Form / Key A form meant to be used by an investor to open a folio and Purchase Units under any Scheme Information Memorandum offered under this Offer Document. Any modifications to the Application Form will be made by way of an addendum, which will be attached thereto. On issuance of such addendum, the Application Form will be deemed to be updated by the addendum. Asset Management Company / AMC / Investment Manager Business Day Fidelity Fund Management Private Limited, the asset management company, set up under the Companies Act, 1956, having its registered office at 56, 5th Floor, Maker Chambers VI, 220, Nariman Point, Mumbai - 400 021 and authorised by SEBI to act as Asset Management Company / Investment Manager to the schemes of Fidelity Mutual Fund. FEF, FTAF, FISSF : A day not being: (1) A Saturday or Sunday; (2) A day on which both the Stock Exchanges, the BSE and the NSE are closed; (3) A day on which Purchase and Redemption of Units is suspended or a book closure period is announced by the Trustee / AMC; or (4) A day on which normal business cannot be transacted due to storms, floods, bandhs, strikes or such other events as the AMC may specify from time to time. FSTIF : A day not being: (1) A Saturday or Sunday; (2) A day on which the banks in Mumbai including the Reserve Bank of India are closed for business or clearing; (3) A day on which Purchase and Redemption of Units is suspended or a book closure period is announced by the Trustee / AMC; or (4) A day on which normal business cannot be transacted due to storms, floods, bandhs, strikes or such other events as the AMC may specify from time to time. FCF : A day not being: (1) A Saturday or Sunday; (2) A day when the money markets are closed / not accessible; (3) A day on which the banks in Mumbai or the Reserve Bank of India are closed for business or clearing; (4) A day on which Purchase and Redemption of Units is suspended by the Trustee / AMC; or (5) A day on which normal business cannot be transacted due to storms, floods, bandhs, strikes or such other events as the AMC may specify from time to time. The AMC reserves the right to change the definition of Business Day. The AMC reserves the right to declare any day as a Business Day or otherwise at any or all ISCs. A charge to the Unit Holder upon exiting (by way of Redemption) based on the period of holding of Units. The Regulations provide that a CDSC may be charged only for a no-Load scheme and only for the first four years after the Purchase and caps the percentage of NAV that can be charged in each year. J P Morgan Chase Bank, Mumbai branch registered under the SEBI (Custodian of Securities) Regulations, 1996, or any other custodian who is approved by the Trustee.
5

Contingent Deferred Sales Charge / CDSC

Custodian

Combined Offer Document Fidelity Mutual Fund

Cut-off time

Definitions and Abbreviations

FEF, FTAF, FISSF, FSTIF: A time prescribed in this Offer Document up to which an investor can submit a Purchase / Redemption request along with a local cheque or a demand draft payable at par at the place where the application is received, to be entitled to the Applicable NAV for that Business Day. All Schemes (including the plans thereunder) referred to in this Offer Document which invests in debt and money market instruments viz., Fidelity Short Term Income Fund and Fidelity Cash Fund. ISCs designated by the AMC where the applications shall be received. The names and addresses are mentioned at the end of this Offer Document. Equity Linked Savings Scheme, 2005 as notified by Ministry of Finance (Department of Economic Affairs) vide notification dated November 03, 2005 and amended vide notification dated December 13, 2005. A Load charged to an investor on Purchase of Units based on the amount of investment per application or any other criteria decided by the AMC. All Schemes referred to in this Offer Document which invest in equity and equity related instruments viz., Fidelity Equity Fund, Fidelity Tax Advantage Fund and Fidelity India Special Situations Fund. A Load (other than CDSC) charged to the Unit Holder on exiting (by way of Redemption) based on period of holding, amount of investment, or any other criteria decided by the AMC. An entity registered with SEBI under Securities and Exchange Board of India (Foreign Institutional Investors) Regulations, 1995 as amended from time to time.

Debt Schemes

Designated Collection Centres ELSS

Entry Load Equity Schemes Exit Load Foreign Institutional Investors / FII

Fidelity International The Sponsor of Fidelity Mutual Fund. Investment Advisors / FIIA Fund of Funds / FOF Fund / Mutual Fund Investment Management Agreement / IMA Investor Service Centre / ISC Load Net Asset Value / NAV A mutual fund scheme that invests primarily in other schemes of the same mutual fund or other mutual funds. Fidelity Mutual Fund, a Trust registered with SEBI under the Regulations, vide Registration No. MF / 050 / 05 / 01 dated February 17, 2005. The agreement dated August 9, 2004, entered into between Fidelity Mutual Fund and the AMC, as amended from time to time. Official points of acceptance of transaction / service requests from investors. These will be designated by the AMC from time to time. A charge that may be levied to an investor at the time of Purchase of Units of a Scheme(s) or to a Unit Holder at the time of Redemption of Units from a Scheme(s). Net Asset Value of the Units of a Scheme (including plans / options thereunder) calculated in the manner provided in this Offer Document or as may be prescribed by the Regulations from time to time.

Non Resident Indian / NRI A person resident outside India who is a citizen of India or is a person of Indian origin as per the meaning assigned to the term under Foreign Exchange Management (Investment in firm or proprietary concern in India) Regulations, 2000. Offer Document / Combined Offer Document This document issued by Fidelity Mutual Fund, offering Units of various schemes (including plans and options thereunder) viz. Fidelity Equity Fund, Fidelity Tax Advantage Fund, Fidelity India Special Situations Fund, Fidelity Short Term Income Fund and Fidelity Cash Fund for subscription. Any modifications to the Offer Document will be made by way of an addendum which will be attached to this Offer Document. On issuance of addendum, the Offer Document will be deemed to be updated by the addendum. A citizen of any country other than Bangladesh or Pakistan, if (a) he at any time held Indian passport; or (b) he or either of his parents or any of his grand parents was a citizen of India by virtue of the Constitution of India or the Citizenship Act, 1955 (57 of 1955); or (c) the person is a spouse of an Indian citizen or a person referred to in sub-clause (a) or (b). Subscription to / Purchase of Units by an investor from the Fund. The price (being Applicable NAV plus Entry Load, if any) at which the Units under a Scheme can be purchased and calculated in the manner provided in this Offer Document. Computer Age Management Services Private Limited ("CAMS"), appointed as the registrar and transfer agent for the Schemes, or any other registrar that may be appointed by the AMC. Repurchase of Units under a Scheme by the Fund from a Unit Holder. The price (being Applicable NAV minus Exit Load / CDSC) at which the Units under a Scheme can be redeemed and calculated in the manner provided in this Offer Document. Sale / Purchase of securities with a simultaneous agreement to repurchase / sell them at a later date. FEF, FTAF, FISSF, FSTIF and FCF collectively referred to as "Schemes" and individually referred to as "a Scheme" as the context permits (including the plans and options thereunder). Securities and Exchange Board of India (Mutual Funds) Regulations, 1996, as amended from time to time, including by way of circulars or notifications issued by SEBI and the Government of India.

Person of Indian Origin

Purchase / Subscription Purchase Price Registrar Redemption Redemption Price Repo / Reverse Repo Scheme / Schemes SEBI Regulations / Regulations
6

Special Situations

Situations that are considered out-of-the-ordinary and therefore, present interesting stock picking opportunities. The types of companies that may fall within the scope of such special situations could include but are not limited to: - companies with recovery potential. - companies whose growth potential may not be fully recognised by the market. - companies with hidden / undervalued assets whose value is not fully recognised by the market. - companies with interesting product pipelines which could offer good earnings potential. - companies undertaking corporate restructuring. - companies which could be potential candidates for mergers and acquisitions related activities. FIIA, being the Settlor of Fidelity Mutual Fund. A plan enabling investors to save and invest under a Scheme on a monthly / quarterly basis by submitting post-dated cheques / payment instructions. A plan enabling Unit Holders to transfer sums on a weekly / fortnightly / monthly / quarterly basis from a Scheme to other schemes launched by the Fund from time to time by giving a single instruction. A plan enabling Unit Holders to withdraw amounts from a Scheme on a monthly / quarterly basis by giving a single instruction. A form meant to be used by Unit Holders seeking additional Purchase or Redemption of Units under a Scheme of the Fund, change in bank account details, switch-in or switch-out and such other facilities offered by the AMC and mentioned in the Transaction Slip. Fidelity Trustee Company Private Limited, a company set up under the Companies Act, 1956, to act as the Trustee to Fidelity Mutual Fund. The Trust Deed dated August 9, 2004 made by and between the Sponsor and the Trustee, establishing Fidelity Mutual Fund, as amended from time to time. Amounts settled / contributed by the Sponsor towards the corpus of Fidelity Mutual Fund and additions / accretions thereto. The interest of an investor, which consists of one undivided share in the net assets of a Scheme. A person holding Units of a Scheme of the Fund offered under this Offer Document. FEF, FTAF, FISSF, FSTIF : Business Day FCF : A day on which NAVs are calculated. Same meaning as in the Trust Deed.

Definitions and Abbreviations

Sponsor Systematic Investment Plan / SIP Systematic Transfer Plan / STP Systematic Withdrawal Plan / SWP Transaction Slip

Trustee / Trustee Company Trust Deed Trust Fund Unit Unit Holder Valuation Day Words and Expressions used in this Offer Document and not defined

B. Abbreviations
In this Offer Document the following abbreviations have been used. ADR AMC AMFI AOP BOI BSE CBLO CDSC ECS EFT ELSS FCF FEF FII FIIA FISSF FOF FSTIF FTAF GDR HUF : : : : : : : : : : : : : : : : : : : : : American Depositary Receipt Asset Management Company Association of Mutual Funds in India Association of Persons Body of Individuals Bombay Stock Exchange Limited Collateralised Borrowing and Lending Obligation Contingent Deferred Sales Charge Electronic Clearing System Electronic Funds Transfer Equity Linked Savings Scheme Fidelity Cash Fund Fidelity Equity Fund Foreign Institutional Investor Fidelity International Investment Advisors, the Sponsor of Fidelity Mutual Fund Fidelity India Special Situations Fund Fund of Funds Fidelity Short Term Income Fund Fidelity Tax Advantage Fund Global Depositary Receipt Hindu Undivided Family
7

Combined Offer Document Fidelity Mutual Fund


IMA ISC NAV NRI NSE PIO POA RBI
Definitions and Abbreviations

: : : : : : : : : : : : : : : :

Investment Management Agreement Investor Service Centre Net Asset Value Non-Resident Indian National Stock Exchange of India Limited Persons of Indian Origin Power of Attorney Reserve Bank of India Real Time Gross Settlement Securities and Exchange Board of India established under the SEBI Act, 1992 Securities and Exchange Board of India Act, 1992 Special Electronic Funds Transfer Standing Instructions Systematic Investment Plan Systematic Transfer Plan Systematic Withdrawal Plan

RTGS SEBI SEBI Act SEFT SI SIP STP SWP

C. Interpretation
For all purposes of this Offer Document, except as otherwise expressly provided or unless the context otherwise requires:
u u u

The terms defined in this Offer Document include the plural as well as the singular. Pronouns having a masculine or feminine gender shall be deemed to include the other. All references to "US$" refer to United States Dollars and "Rs." refer to Indian Rupees. A "Crore" means "ten million" and a "Lakh" means a "hundred thousand". References to times of day (i.e. a.m. or p.m.) are to Mumbai (India) times and references to a day are to a calendar day including non Business Day.

III. Risk Factors and Special Considerations


A. Standard Risk Factors
u

Mutual funds, like securities investments, are subject to market risks and there is no guarantee against loss in any Scheme or that the Schemes' objectives will be achieved. As with any investment in securities, the NAV of the Units issued under the Schemes can go up or down depending on various factors and forces affecting capital and money markets. Past performance of the Sponsor or the AMC or the mutual funds managed by the Sponsor does not indicate the future performance of the Schemes. Investors in the Schemes are not being offered a guaranteed or assured rate of return. Fidelity Equity Fund, Fidelity Tax Advantage Fund, Fidelity India Special Situations Fund, Fidelity Short Term Income Fund and Fidelity Cash Fund are the names of the Schemes, and do not in any manner indicate the quality of the Schemes, their future prospects or returns. As per SEBI circular no. SEBI / IMD / CIR No. 10 / 22701 / 03 dated December 12, 2003, each scheme (including the plans thereunder) should have a minimum of 20 Unit Holders and no single Unit Holder should account for more than 25% of the corpus of such scheme. The aforesaid conditions should be met in each calendar quarter on an average basis. In case of non-fulfilment with the first condition i.e. minimum of 20 investors in the Scheme, for each calendar quarter as specified by SEBI, the Scheme shall be wound up by following the guidelines prescribed by SEBI and Unit Holders' investment in such Scheme would be redeemed at the Applicable NAV. SEBI has further prescribed that if any investor breaches the 25% limit over a quarter, a rebalancing period of one month will be allowed to the investor and thereafter the investor who is in breach of the limit shall be given 15 days notice to redeem his exposure over the 25% limit. In the event of failure on part of the said investor to redeem the excess exposure, the excess holding will be automatically redeemed by the Fund following the guidelines prescribed by SEBI.

Money market instruments may also be subject to price volatility due to factors such as changes in interest rates, general level of market liquidity and market perception of credit worthiness of the issuer of such instruments. The AMC endeavours to manage such risk by the use of inhouse credit analysis. The NAV of Equity Schemes' Units, to the extent that such Schemes are invested in money market instruments, will be affected by the changes in the level of interest rates. When interest rates in the market rise, the value of a portfolio of money market instruments can be expected to decline.

C. Risk Factors pertaining to Debt Schemes


Risk Factors
u

The performance of Debt Schemes may be affected by changes in Government policies, general levels of interest rates and risks associated with trading volumes, liquidity and settlement systems. Interest rate risk: As with all debt securities, changes in interest rates may affect the NAV of the Debt Schemes since the price of a fixed income instrument falls when the interest rates move up and vice a versa. The effect is more prominent when the duration of the instrument is higher. Hence the NAV movement of the Debt Schemes consisting of predominantly fixed income securities is likely to have inverse correlation with the movement in interest rates. In case of a floating rate instrument, this risk is lower as a result of periodic reset of the coupon. Spread risk: Though the sovereign yield curve might remain constant, investments in corporate bonds are exposed to the risk of spread widening between corporate bonds and gilts. Typically, if this spread widens, the prices of the corporate bonds tend to fall and so could the NAV of the Debt Schemes. Similar risk prevails for the investments in the floating rate bonds, where the benchmark might remain unchanged, but the spread over the benchmark might vary. In such an event, if the spread widens, the price and the NAV could fall. Credit risk or default risk: This refers to inability of the issuer of the debt security to make timely payments of principal and / or interest due. It is reflected in the credit rating of the issuer. Hence if the credit rating of the issuer is downgraded, the price of the security will suffer a loss and the NAV will fall. Credit risk factors pertaining to lower rated securities also apply to lower rated zero coupon and deferred interest kind bonds. Lower rated zero coupon and deferred interest kind bonds carry an additional risk in that, unlike bonds that pay interest through the period of maturity, the Debt Schemes by investing in these bonds will realize no cash till the cash payment date and if the issuer defaults, the Scheme may obtain no return on its investment. Separately, underlying assets in securitised debt may assume different forms and the general types of receivables include auto finance, credit cards, home loans or any such receipts. Credit risks relating to such receivables depend upon various factors, including macro-economic factors of these industries and economies. Specific factors like nature and adequacy of property mortgaged against these borrowings, nature of loan agreement / mortgage deed in case of home loans, adequacy of documentation in case of auto finance and home loans, capacity of a borrower to meet his obligations on borrowings in case of credit cards and intentions of the borrower influence the risks relating to asset borrowings underlying securitised debt. Liquidity risk: This represents the possibility that the realised price from selling the security might be lesser than the valuation price as a result of illiquid market. If a large outflow from the Scheme is funded by selling some of the illiquid securities, the NAV could fall even if there is no change in interest rates. Illiquid securities are typically quoted at a higher yield than the liquid securities and have higher bid offer spreads. Investment in illiquid securities results

B. Risk Factors pertaining to Equity Schemes


u

Equity and equity related securities are volatile and prone to price fluctuations on a daily basis. The liquidity of investments made in the Equity Schemes may be restricted by trading volumes and settlement periods. Settlement periods may be extended significantly by unforeseen circumstances. The inability of the Equity Schemes to make intended securities purchases, due to settlement problems, could cause the Equity Schemes to miss certain investment opportunities. Similarly, the inability to sell securities held in the Equity Schemes' portfolios would result at times, in potential losses to the respective Equity Schemes, should there be a subsequent decline in the value of securities held in such Equity Schemes' portfolios. Investments in equity and equity related securities involve a degree of risks and investors should not invest in Equity Schemes unless they can afford to take the risk of losing their investment. The liquidity and valuation of the Schemes' investments due to its holdings of unlisted securities may be affected if they have to be sold prior to the target date of disinvestment. Investments in money market instruments would involve a moderate credit risk i.e. risk of an issuer's liability to meet the principal payments.

Combined Offer Document Fidelity Mutual Fund


in higher current yield for the portfolio. Liquidity risk is a characteristic of the Indian fixed income market today. In addition, money market securities, while fairly liquid, lack a well-developed secondary market, which may restrict the selling ability of the Scheme and may lead to the Scheme incurring losses till the security is finally sold.
u u

Risk Factors

Reinvestment risk: This is associated with the fact that the intermediate cash flows (coupons, prepayment of principal in case of securitised transactions or principal payment in case a security gets called or repurchased) may not be reinvested at the same yield as assumed in the original calculations. In case of securitised debt, changes in market interest rates and pre-payments may not change the absolute amount of receivables for the investors but may have an impact on the re-investment of the periodic cash flows that an investor receives on securitised papers. Settlement risk: Different segments of Indian financial markets have different settlement periods and such periods may be extended significantly by unforeseen circumstances. Delays or other problems in settlement of transactions could result in temporary periods when the assets of the Scheme are uninvested and no return is earned thereon. The inability of the Debt Schemes to make intended securities purchases, due to settlement problems, could cause the Debt Schemes to miss certain investment opportunities. Similarly, the inability to sell securities held in the Debt Schemes' portfolio, due to the absence of a well developed and liquid secondary market for debt securities, may result at times in potential losses to such Schemes in the event of a subsequent decline in the value of securities held in the Debt Schemes' portfolios. Market risk: Lower rated or unrated securities are more likely to react to developments affecting the market and the credit risk than the highly rated securities which react primarily to movements in the general level of interest rates. Lower rated or unrated securities also tend to be more sensitive to economic conditions than higher rated securities. Pre-payment risk: Asset securitization is a process whereby commercial or consumer credits are packaged and sold in the form of financial instruments. In the event of pre-payment of the underlying debt, investors may be exposed to changes in tenor and yield. In addition to the factors that affect the values of securities, the NAV of Units of Debt Schemes will fluctuate with the movement in the broader fixed income market, money market and derivatives market and may be influenced by factors influencing such markets in general including but not limited to economic conditions, changes in interest rates, price and volume volatility in the bond and stock markets, changes in taxation, currency exchange rates, foreign investments, political, economic or other developments and closure of the stock exchanges. Investments in different types of securities are subject to different levels and kinds of risk. Accordingly, the Debt Schemes' risk may increase or decrease depending upon its investment pattern. E.g. investments in corporate bonds carry a higher level of risk than investments in Government securities. Further, even among corporate bonds, bonds which have a higher rating are comparatively less risky than bonds which have a lower rating.

Trading in derivatives carry a high degree of risk although they are traded at a relatively small amount of margin which provides the possibility of great profit or loss in comparison with the principal investment amount. Thus, derivatives are highly leveraged instruments. Even a small price movement in the underlying security could have an impact on their value and consequently, on the NAV of the Units of the Schemes. The Schemes may find it difficult or impossible to execute derivative transactions in certain circumstances. For example, when there are insufficient bids or suspension of trading due to price limit or circuit breakers, the Schemes may face a liquidity issue. The options buyer's risk is limited to the premium paid, while the risk of an options writer is unlimited. However the gains of an options writer are limited to the premiums earned. Since in case of the Schemes all option positions will have underlying assets, all losses due to price-movement beyond the strike price will actually be an opportunity loss. The Exchange may impose restrictions on exercise of options and may also restrict the exercise of options at certain times in specified circumstances. The writer of a put option bears the risk of loss if the value of the underlying asset declines below the exercise price. The writer of a call option bears a risk of loss if the value of the underlying asset increases above the exercise price. Investments in index futures face the same risk as the investments in a portfolio of shares representing an index. The extent of loss is the same as in the underlying stocks. The Schemes bear a risk that it may not be able to correctly forecast future market trends or the value of assets, indices or other financial or economic factors in establishing derivative positions for the Schemes. The risk of loss in trading futures contracts can be substantial, because of the low margin deposits required, the extremely high degree of leverage involved in futures pricing and the potential high volatility of the futures markets. There is the possibility that a loss may be sustained by the portfolio as a result of the failure of another party (usually referred to as the "counter party") to comply with the terms of the derivatives contract. Other risks in using derivatives include the risk of mispricing or improper valuation of derivatives and the inability of derivatives to correlate perfectly with underlying assets, rates and indices. Interest Rate Swaps (IRS) are highly specialized instruments that require investment technique and risk analysis different from those associated with equity shares and other traditional securities. The use of a IRS requires not only an understanding of the referenced asset, reference rate or index but also of the swap itself, without the benefit of observing the performance of the swap under all possible market conditions. Swap agreements are also subject to liquidity risk, which exists when a particular swap is difficult to purchase or sell. Swap agreements may be subject to pricing risk, which exists when a particular swap becomes extraordinarily expensive (or cheap) relative to historical prices or the prices of corresponding cash market instruments. IRS agreements are also subject to counterparty risk on account of insolvency or bankruptcy or failure of the counterparty to make required payments or otherwise comply with the terms of the agreement.

D. Risk Factors associated with trading in Derivatives


u

Derivative products are specialized instruments that require investment techniques and risk analysis different from those associated with stocks and bonds. The use of a derivative requires an understanding not only of the underlying instrument but of the derivative itself. The derivatives market in India is nascent and does not have the volumes that may be seen in other developed markets, which may result in volatility to the values.

E. Risk Factors associated with Scrip Lending


The risks in lending portfolio securities, as with other extensions of credit, consist of the failure of another party, in this case the approved intermediary, to comply with the terms of agreement entered into between the lender of securities i.e. any scheme

10

and the approved intermediary. Such failure to comply can result in the possible loss of rights in the collateral put up by the borrower of the securities, the inability of the approved intermediary to return the securities deposited by the lender and the possible loss of any corporate benefits accruing to the lender from the securities deposited with the approved intermediary. The Mutual Fund may not be able to sell such lent securities and this can lead to temporary illiquidity.

contribution of an amount of Rs.1,00,000 (Rupees One Lakh) collectively made by them towards setting up the Fund or such other accretions and additions to the initial corpus set up by the Sponsor.
u

F. Risk Factors associated with Overseas Investment


u

Neither this Offer Document nor the Units have been registered in any other jurisdiction. The distribution of this Offer Document in certain jurisdictions may be restricted or totally prohibited and accordingly, persons who come into possession of this Offer Document are required to inform themselves about, and to observe, any such restrictions. Prospective investors should review / study this Offer Document carefully and in its entirety and shall not construe the contents hereof or regard the summaries 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, tax, financial or any other requirements or restrictions relating to the subscription, gifting, acquisition, holding, disposal (by way of sale, switch or Redemption or conversion into money) of Units and to the treatment of income (if any), capitalisation, capital gains, any distribution and other tax consequences relevant to their subscription, acquisition, holding, capitalisation, disposal (by way of sale, transfer, switch or conversion into money) of Units within their jurisdiction of nationality, residence, incorporation, domicile etc. or under the laws of any jurisdiction to which they or any managed funds to be used to Purchase / gift Units are subject, and also to determine possible legal, tax, financial or other consequences of subscribing / gifting, purchasing or holding Units before making an application for Units. Fidelity Mutual Fund / the AMC have not authorised any person to give any information or make any representations, either oral or written, not stated in this Offer Document in connection with issue of Units under the Schemes. Prospective investors are advised not to rely upon any information or representations not incorporated in this Offer Document as the same have not been authorised by the Fund or the AMC. Any subscription, Purchase or sale made by any person on the basis of statements or representations which are not contained in this Offer Document or which are inconsistent with the information contained herein shall be solely at the risk of the investor. Subject to the Regulations, from time to time, funds managed by the affiliates / associates of the Sponsor may invest either directly or indirectly in the Schemes. The funds managed by these affiliates / associates may acquire a substantial portion of any Scheme's Units and collectively constitute a major investment in such Scheme. Accordingly, Redemption of Units held by such funds may have an adverse impact on the value of the Units of that Scheme because of the timing of any such Redemption and may affect the ability of other Unit Holders to redeem their respective Units. As the liquidity of the Schemes' investments may sometimes be restricted by trading volumes settlement periods and transfer procedures, the time taken by the Fund for Redemption of Units may be significant in the event of an inordinately large number of Redemption requests or of restructuring of the Schemes' portfolios. In view of this, the Trustee has the right, in its sole discretion, to limit redemptions under certain circumstances - please refer paragraph "Right to Limit Redemptions" in Chapter VII. Anti Money Laundering and Know Your Customer (KYC): Fidelity is committed to complying with all applicable anti money laundering and KYC laws and regulations in all of its operations. Fidelity recognises the value and importance of creating a business environment that strongly discourages money launderers from using Fidelity. To that end, certain policies have been adopted by the AMC. The need to "Know Your Customer" (KYC) is vital for the prevention of money laundering.
11

Subject to necessary approvals and within the investment objectives of the Schemes, the Schemes may invest in overseas markets which carry risks related to fluctuations in the foreign exchange rates, the nature of the securities market of the country, repatriation of capital due to exchange controls and political circumstances. It is the AMC's belief that investment in foreign securities offers new investment and portfolio diversification opportunities into multi-market and multi-currency products. However, such investments also entail additional risks. Such investment opportunities may be pursued by the AMC provided they are considered appropriate in terms of the overall investment objectives of the Schemes. Since the Schemes would invest only partially in foreign securities, there may not be readily available and widely accepted benchmarks to measure performance of such Schemes. 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 under the Regulations or by RBI from time to time. Overseas investments will be made subject to any / all approvals, conditions thereof as may be stipulated under the Regulations or by RBI and provided such investments do not result in expenses to the Fund in excess of the ceiling on expenses prescribed by and consistent with costs and expenses attendant to international investing. The Fund may, where necessary, appoint other intermediaries of repute as advisors, custodian / sub-custodians etc. for managing and administering such investments. The appointment of such intermediaries shall be in accordance with the applicable requirements of SEBI and within the permissible ceilings of expenses. The fees and expenses would illustratively include, besides the investment management fees, custody fees and costs, fees of appointed advisors and sub-managers, transaction costs and overseas regulatory costs. To the extent that the assets of the Schemes will be invested in securities denominated in foreign currencies, the Indian Rupee equivalent of the net assets, distributions and income may be adversely affected by changes in the value of certain foreign currencies relative to the Indian Rupee. The repatriation of capital to India may also be hampered by changes in regulations concerning exchange controls or political circumstances as well as the application to it of other restrictions on investment.

Risk Factors

G. Additional Scheme Specific Risk Factors


u

FTAF: By virtue of requirements under ELSS, Units issued under FTAF will not be redeemed until the expiry of three years from the date of their allotment. The ability of an investor to realise returns on investments in FTAF is consequently restricted for the first three years. Redemption will be made prior to the expiry of the aforesaid three year period only in the event of the death of a Unit Holder, subject to the Units having been held for a period of one year from the date of their allotment.

H. Special Considerations
u

The Sponsor is not responsible or liable for any loss resulting from the operation of the Schemes beyond the initial

Combined Offer Document Fidelity Mutual Fund


In terms of the Prevention of Money Laundering Act, 2002 ("PMLA") the rules issued there under and the guidelines / circulars issued by SEBI regarding the Anti Money Laundering (AML) Laws, all intermediaries, including Mutual Funds, are required to formulate and implement a client identification programme, and to verify and maintain the record of identity and address(es) of investors. The Mutual Fund Industry has collectively entrusted the responsibility of collection of documents relating to identity and address and record keeping to an independent agency (presently CDSL Ventures Limited) that will act as central record keeping agency ('Central Agency'). As a token of having verified the identity and address and for efficient retrieval of records, the Central Agency will issue an acknowledgement to each investor who submits an application and the prescribed documents to the Central Agency. Investors who have obtained an acknowledgement can invest in the schemes of the mutual fund by referring to / submitting the acknowledgement in lieu of submitting information and documents required under AML Laws.
Risk Factors

regards money laundering, the AMC shall report any suspicious transactions to competent authorities under the PMLA and rules / guidelines issued thereunder by SEBI and RBI, furnish any such information in connection therewith to such authorities and take any other actions as may be required for the purposes of fulfilling its obligations under the PMLA without obtaining the prior approval of the investor / Unit Holder / a person making the payment on behalf of the investor.
u

Investors who wish to obtain an acknowledgement have to submit a completed Application Form (the Form') along with all the prescribed documents listed in the Form, at any of the Point of Service ('POS'). The Form is available at our website (www.fidelity.co.in) and AMFI website (www.amfiindia.com). POS are the designated centres appointed by the Central Agency for receiving the Forms, processing data and providing the acknowledgement. List of and location of POS are available at our website (www.fidelity.co.in) and www.amfiindia.com. On submission of application, documents and information to the satisfaction of the POS, the investor will be given an acknowledgement across the counter. Subsequently, the Central Agency will scrutinize the information and documents submitted by the investor. In case of any deficiency in the document / information, the form will be rejected. Presently, it is mandatory for all applications for Subscription of value of Rs.50,000 and above to quote the PAN of all the applicants (guardian in case of minor) in the application for Subscription. The PAN will be validated with the records of the Central Agency before allotting units. Applications for subscriptions of value of Rs.50,000 and above without a valid PAN will be rejected. In the event of any Form being subsequently rejected for lack of information / deficiency / insufficiency of mandatory documentation, the investment transaction will be cancelled and the amount may be redeemed at Applicable NAV, subject to payment of Exit Load, wherever applicable. Such redemption proceeds will be dispatched within a maximum period of 21 days from date of acceptance of the application. All investors (both individual and non-individual) can submit the Form for the purpose of KYC. However, applicants should note that minors cannot make an application and any investment in the name of minors should be along with a guardian, who should obtain an acknowledgement for the purpose of investing with a Mutual Fund. Also, applicants / Unit Holders intending to apply for units / currently holding units and operating their Mutual Fund folios through a Power of Attorney (PoA) must ensure that the issuer of the PoA and the holder of the PoA must obtain the acknowledgement at the time of investment of value of Rs. 50, 000 and above. PoA holders are not permitted to make an application on behalf of the issuer of the PoA. Separate procedures are prescribed for change in name, address and other related details, should the applicant desire to change such information. POS will extend the services of effecting such changes. Suspicious Transaction Reporting: If after due diligence, the AMC believes that the transaction is suspicious in nature as

Investor Protection : (a) FEF, FISSF: The Schemes are designed to support longer-term investment and active trading is discouraged. Short term or excessive trading into and out of FEF or FISSF may affect its performance by disrupting portfolio management strategies and by increasing expenses. The Fund and the distributors may refuse to accept applications for Purchase, especially where transactions are deemed disruptive, particularly from market timers or investors who, in their opinion, have a pattern of short term or excessive trading or whose trading has been or may be disruptive for FEF or FISSF. If in the opinion of the AMC, a Unit Holder is indulging in short term or excessive trading as above, it shall, under powers delegated by the Trustee, have absolute discretion to reject any application, prevent further transaction by the Unit Holder or redeem the Units held by the Unit Holder at any time prior to the expiry of 30 Business Days from the date of the application. (b) FSTIF: As the Scheme is a short term income scheme, it is designed to offer investors liquidity and the Fund anticipates that investors will come in and out of the Scheme frequently. Such frequent purchases and redemptions by investors can reduce the returns to long term investors by increasing expenses of the Scheme and can also disrupt portfolio management strategies. Therefore, the Scheme is proposed to be managed with these risks in mind. Though the Scheme has no limit on the number of purchases and redemptions by any investor, the AMC reserves the right, under powers delegated by the Trustee, to reject any application, prevent further transactions by a Unit Holder, or redeem the Units held by the Unit Holder at any time prior to the expiry of 30 Business Days from the date of submission of the application if, in the AMC's opinion, a Unit Holder has been indulging in excessively frequent trading or if his trading has been or may be disruptive for the Scheme. (c) FCF: As the Scheme is a cash / liquid scheme, it is designed to offer investors liquidity and the Fund anticipates that investors will come in and out of the Scheme frequently. Such frequent purchases and redemptions by investors can reduce the returns to long term investors by increasing expenses of the Scheme and can also disrupt portfolio management strategies. Therefore, the Scheme is proposed to be managed with these risks in mind. Though the Scheme has no limit on the number of purchases and redemptions by any investor, the AMC reserves the right, under powers delegated by the Trustee, to reject any application, prevent further transactions by a Unit Holder, or redeem the Units held by the Unit Holder at any time prior to the expiry of 30 Business Days from the date of submission of the application if, in the AMC's opinion, a Unit Holder has been indulging in excessively frequent trading or if his trading has been or may be disruptive for the Scheme.

Investors are urged to study the terms of the Offer carefully before investing in the Schemes and to retain this Offer Document for future reference.

12

DUE DILIGENCE CERTIFICATE


It is confirmed that: 1. 2. 3. 4. The draft Offer Document forwarded to SEBI is in accordance with the SEBI (Mutual Funds) Regulations, 1996 and the guidelines and directives issued by SEBI from time to time. All legal requirements connected with the launching of the Scheme(s) and also the guidelines, instructions, etc. issued by the Government of India and any other competent authority in this behalf, have been duly complied with. The disclosures made in the Offer Document are true, fair and adequate to enable the investors to make a well-informed decision regarding investment in the Scheme(s). All the intermediaries named in the Offer Document are registered with SEBI and till date such registration is valid. For Fidelity Fund Management Private Limited Place : Mumbai Date : March 09, 2007 Name : Designation : Hemang Bakshi Director - Legal and Compliance

13

Risk Factors

Combined Offer Document Fidelity Mutual Fund

IV. Constitution of the Fund


A. The Fund
The Fund was established by FIIA, as a Trust under the Indian Trusts Act, 1882, in terms of the Trust Deed dated August 9, 2004 and is registered under Indian Registration Act, 1908. The Fund has been registered with SEBI vide Registration No. MF / 050 / 05 / 01. The office of the Fund is at 56, 5th Floor, Maker Chambers VI, 220, Nariman Point, Mumbai - 400 021. The objective of the Fund is to raise monies through the sale of units to the public or a section of the public under one or more schemes for investing in securities.

Names, addresses and occupations of the Directors Mr. K. R. Ramamoorthy 42, 18th Main Road, J. P. Nagar, Phase II, Bangalore -560 078 Advisor

Other directorships of the Directors ING Vysya Bank Limited The Clearing Corporation of India Limited Nilkamal Limited Subros Limited Amrit Banaspati Company Limited Ujjivan Financial Services Private Limited GMR Infrastructure Limited GMR Power Corporation Private Limited GMR Ambala-Chandigarh Express Private Limited Gryffon Investment Advisors Private Limited Asianet Satellite Communications Limited Bhoruka Power Corporation Limited Exide Industries Limited Goldiam International Limited H & R Johnson (India) Limited Nilkamal Limited Prism Cement Limited Surin Investments Private Limited Associated Battery Manufacturers (Ceylon) Limited Chloride Batteries SE Asia Private Limited Chloride Eastern Industries Private Limited Chloride Eastern Limited The Indian Merchants' Chamber Innovasynth Technologies (I) Limited Diagold Design Limited ING Vysya Life Insurance Company Limited RPG Guardian Private Limited Foodworld Supermarkets Limited

B. The Sponsor
The Sponsor of Fidelity Mutual Fund is Fidelity International Investment Advisors, a company incorporated in Bermuda in 1983 under registered number EC 10326. FIIA is registered with the following financial services regulators: the Securities Exchange Commission in the US, the HK Securities and Futures Commission in Hong Kong and the Financial Services Agency in Japan. FIIA is a wholly owned subsidiary of Fidelity International Limited, a company established in Bermuda. Given below is a brief summary of the Sponsor's financials (amounts in US $): Description Total Revenue Profit Before Tax Profit After Tax Free Reserves** Net Worth Earnings per Share Book Value per Share Dividend % Paid Up Capital (Equity) Year ended June 30, 2006 133,444,959 22,450,992 22,404,637 58,696,535 59,446,535 29.87 79.26 0% 750,000 Year ended Year ended June 30, 2005 June 30, 2004 98,231,913 10,886,916 10,850,032 36,293,391 37,043,391 14.47 49.39 10,163% 750,000 74,656,435 50,589,072 50,561,184 78,665,532 79,307,532 78.76 123.53 0% 642,000

Constitution of the Fund

Mr. Rajesh Kapadia 9-C Woodlands, 67, Dr. G. Deshmukh Marg, Mumbai - 400 026 Chartered Accountant

** Note: Including contributed surplus.

Mrs. Ann Stock is a director associated with the Sponsor.

C. The Trustee Company (The Trustee)


Fidelity Trustee Company Private Limited (the Trustee), a company incorporated under the Companies Act, 1956, is the Trustee for the Fund vide Trust Deed dated August 9, 2004.

Mrs. Ann Stock


Mrs. Stock is the Executive Director, Global Oversight responsible for Compliance, Internal Audit, Risk and Investigations and Intelligence across the FIL Group. Mrs. Stock is a Chartered Accountant (ICAEW) with an MBA and a Degree in Economics from Kingston University, England. She has over 20 years of professional experience in financial services and related fields of practice, having previously worked for KPMG and Legal and General plc.

I.

Directors
Other directorships of the Directors Fidelity Securities KK Fidelity Investment Services Limited Fidelity Investments International Fidelity Pensions Management Financial Administration Services Limited Fidelity International Investment Advisors (U.K.) Limited Fidelity Investments Asset Management (Korea) Limited Fortis Health Care Limited

The directors of the Trustee are: Names, addresses and occupations of the Directors Mrs. Ann Stock Flat 2, 130 Tonbridge Road, Tonbridge, Kent TN11 9EW United Kingdom Service

Justice (retired) S. S. Sodhi


Justice (retired) Sodhi, a lawyer, started practicing law in 1958 in the High Court of Punjab and Haryana and served as a Judge in this High Court during the period 1982 to 1994. During the period from 1968 to 1982, he also served in various positions like the Legal Remembrancer to the Punjab Government; Registrar of High Court of Punjab; Lok Pal (Ombudsman), Punjab and Haryana; and District and Sessions Judge in Punjab. In 1994, he was appointed as the Chief Justice of the High Court of Allahabad. In 1997 he was appointed as the Chairperson of Telecom Regulatory Authority of India. He is currently a Trustee of the Tribune group of newspapers, Chandigarh; Honorary Rector of the Army Law Institute, Mohali; Member Board of Governors of Yadavindra Public School, Patiala and Mohali; Director Fortis

Justice (retired) S. S. Sodhi 51, Sector 9, Chandigarh - 160 009 Retired


14

Hospital, Mohali and President, Chandigarh Lawn Tennis Association.

and frame such rules and regulations for the issue as it may in its absolute discretion deem fit; (ii) acquire, hold, manage, trade, lend and dispose of stocks and securities of all kinds, subject to RBI approval; (iii) acquire or enter into or deal in any derivative, option, hedging, swap or other contract of a similar nature, repurchase agreement transactions and to enter into securities lending and borrowing transactions, underwriting and sub underwriting contracts and placings; (iv) calculate the offer, repurchase and Redemption prices of Units including inter alia the allowance to be made in computing these prices for contingent liabilities; (v) keep the capital and monies of the Mutual Fund in call or repurchase options or deposit with banks or other financial institutions or companies or any other financial instruments as may be permitted under the Regulations; (vi) enter into agency arrangements with banks; (vii) enter into agreements or arrangements including agreements / arrangements by way of tie-ups, collaborations, joint ventures with mutual funds, asset management companies, financial institutions, investment companies, banks and other institutions; (viii) do any other kind of business connected with mobilisation of savings and investments; (ix) accept contributions, grants and donations; (x) collect, get in and receive the profit, interest, dividend and income of the Trust Property from time to time as and when the same becomes due and receivable; (xi) pay all costs, charges, expenses and outgoings of and incidental to the administration and execution of the Trust and the management and maintenance of the Trust Property and incurred for the same in accordance with and subject to the limits under the Regulations as may be stipulated from time to time; (xii) appoint brokers, sub-brokers, agents, custodial agents, registrars, share transfer agents for the purpose of purchase and sale of securities, investment under the scheme and to pay their charges; (xiii) appoint and engage advocates, solicitors, valuers, chartered accountants, credit rating agencies and other such advisers and experts for the purpose of the scheme and to pay their remuneration and charges; (xiv) do all such acts, deeds and things and exercise such powers and sign and execute all such documents, Unit Certificates, transfer forms, declarations, affidavits, indemnities as it may in its absolute discretion deem fit; (xv) open one or more bank accounts, securities account(s) with RBI and other banks (if permitted) and operate the same; (xvi) deal with all matters arising from the Mutual Fund / Asset Management Company, on the one hand and Unit Holders on the other, and to settle disputes, if any, with Unit Holders; (xvii) generally to exercise all such powers as it may be required to be exercised under the Regulations for the time being in force and do all such matters and things as may promote the Mutual Fund or as may be incidental to or consequential upon the discharge of its functions and the exercise and enforcement of all or any of the powers and rights under the Trust Deed;
15

Mr. K. R. Ramamoorthy
K. R. Ramamoorthy is a senior banker, with over 40 years of commercial and banking experience in India. He was the Chairman and CEO of two of the leading commercial banks in India, one a state-owned commercial bank - Corporation Bank - and the other - Vysya Bank Limited - in the private sector. He has also served as an Advisor to CRISIL for three years, providing expert advice and guidance on advisory assignments relating to commercial banks in the area of Credit Risk Rating framework. After his rewarding career in leadership positions, Mr. Ramamoorthy has been consulting for commercial banks in India and other developing countries. His services are availed of by The World Bank, International Monetary Fund, International Finance Corporation, commercial banks and international investors in many areas including bank restructuring, strengthening and financial risk assessment. Prior to joining the Indian banking industry, Mr. Ramamoorthy gained rich career exposure in the private sector for nearly two decades - in pharmaceutical, entertainment and engineering and consumer product marketing organisations, including Liptons, where he served for 15 years. Mr. Ramamoorthy holds degrees in Economics and Law (University Rank holder) and is a senior Fellow Member of the Institute of Company Secretaries of India. Currently he serves on the Boards of ING Vysya Bank Limited, Fidelity Trustee Company Private Limited, Clearing Corporation of India, Subros Limited, Nilkamal Limited and Amrit Banasapti Limited as an Independent Director. He is also on the Audit and Risk Management Committees of some of these companies and has also served on the various Committees constituted by the Reserve Bank of India and the Indian Banks' Association.

Constitution of the Fund

Mr. Rajesh Kapadia


Mr. Kapadia, a Chartered Accountant is a Senior Partner of the firm GM Kapadia & Company. Mr. Kapadia has more than 23 years of experience in the field of audit, taxation, investigations, due diligence, company law and exchange control. Mr. Kapadia was on the Board of the Trustee Company of DSP Merrill Lynch Mutual Fund from 1998 till 2002. Apart from being a Trustee for many charitable trusts, Mr. Kapadia is also a director on the boards of various companies.

II.

Summary of the Substantive Provisions of the Trust Deed

Pursuant to the Trust Deed dated August 9, 2004 constituting the Mutual Fund and in terms of the SEBI Regulations, the rights and obligations of the Trustee, inter alia, are as under: 1. The Trustee Company has exclusive ownership of the assets of the Schemes of the Fund ("Trust Property") and holds the same in trust and for the benefit of the Unit Holders. The Trustee Company has the authority to appoint one or more bodies corporate to act as an asset management company and to enter into an investment management agreement with them. The Trustee Company shall hold the Trust Property in trust for the benefit of the Unit Holders. The Trustee Company is responsible for the management of the Mutual Fund and for providing information to the Unit Holders, the Sponsor, SEBI and any other regulatory body and to ensure compliance by the Mutual Fund / AMC of all statutory formalities. The Trustee Company, through the AMC is, inter alia, empowered and entitled to: (i) frame one or more schemes for the issue of Units

2.

3. 4.

5.

Combined Offer Document Fidelity Mutual Fund


(xviii) pay out of the income of the Trust Property after deducting all expenses the interest and dividend in accordance with the Scheme and the Offer Document applicable to each scheme; (xix) subject to the provisions of the Regulations and the Trust Deed, exercise all powers and rights of a trustee under the Indian Trusts Act, 1882, to achieve the objects of this Trust and protect the interests of the Unit Holders. 6. The Trustee Company is responsible for supervising the collection of all income due to be paid to the scheme and for claiming any repayment of tax and holding any income received in trust for the Unit Holders in accordance with the Trusts Deed and the Regulations. The Trustee Company shall inter alia: (i) at no time acquire any asset out of the Trust Property, which involves the assumption of any liability which is unlimited or results in the encumbrance of the Trust Property in any way, except to the extent permitted by the Regulations; (v) The Trustee shall consider the reports of the independent auditor and compliance reports of Asset Management Company at the meetings of the Board of Directors of the Trustee Company for appropriate action. (vi) The Trustee shall maintain minutes of the meetings of the Board of Directors of the Trustee Company. (vii) The Trustee shall prescribe and adhere to a code of ethics by the Trustee Company, Asset Management Company and its personnel. (viii) The Trustee shall communicate in writing with the Asset Management Company regarding any deficiencies and checking on the rectification of deficiencies. (ix) The Trustee shall ensure that the accounts maintained by the Asset Management Company follow the accounting policies prescribed by SEBI or any other relevant authority and shall be in the prescribed format and have the prescribed contents. (x) The Trustee shall procure that all necessary statements in respect of the Mutual Fund and the Trust Property are prepared in the manner required by Regulations and make or cause to be made all reports, publications, notices and filings with respect to the Mutual Fund required by Indian law. (xi) The Trustee shall cause the balance sheet and accounts of the Trust to be prepared and submitted to the Sponsor for the accounting year as soon as may be after the end of each accounting year. (xii) The Trustee shall cause the affairs of the various schemes of the Trust in respect of every accounting year to be audited by one or more auditors qualified to act as auditors under the law for the time being and obtain their report and submit the same to SEBI or any other Government Authority, if required by the law in force. The auditor shall be appointed by the Trustee Company and the Trustee Company may in its discretion, determine out of what part or parts of the Trust Property or the income thereof, the cost of such audit shall be defrayed and may make such apportionment of such costs as it thinks desirable. Such auditor shall not be the same as the auditor appointed for the Asset Management Company. 8. The Trustee may amend the Trust Deed with the prior approval of SEBI and the Unit Holders where it affects the interest of Unit Holders. The Trustee Company may, subject to the Regulations, acquire, hold, develop, deal with and dispose of any movable or immovable property either on ownership, rental or other basis whatsoever, with power to let or sublet the same with or without charging any compensation fee or rent as the Trustee may in its absolute discretion deem fit. However, no investment shall be made in immovable property from the resources mobilised for the scheme.

7.

Constitution of the Fund

(ii) take reasonable care to ensure that the schemes floated and managed by the Asset Management Company, are operated in accordance with the Trust Deed, the Offer Document and the Regulations; (iii) cause the Asset Management Company to ensure that the manner of calculating the offer, repurchase and Redemption prices of Units, including inter alia the allowance to be made in computing these prices for contingent liabilities, would be in accordance with the Regulations and any guidelines issued by SEBI from time to time; (iv) be bound to discharge all obligations, duties and responsibilities entrusted to them under the Regulations. The Trustee shall exercise due diligence as under: General Due Diligence: (i) The Trustee shall be discerning in the appointment of the key personnel of the Asset Management Company.

(ii) The Trustee shall review the desirability or continuance of the Asset Management Company if substantial irregularities are observed in the schemes and shall not allow the Asset Management Company to float new schemes. (iii) The Trustee shall ensure that the Trust Property is properly protected, held and administered by proper persons and by a proper number of such persons. (iv) The Trustee shall ensure that all service providers hold appropriate registrations from SEBI or concerned regulatory authorities. (v) The Trustee shall report to SEBI of any special developments in the Mutual Fund. Special Due Diligence: (i) The Trustee shall arrange for test checks of service contracts at such frequency and in such manner as it shall deem appropriate from time to time.

9.

III. Trustee - Fees and Expenses


Pursuant to the Trust Deed, the Trustee, in addition to the reimbursement of all costs, charges and expenses incurred in or about the administration and execution of the Fund, is entitled to receive a fee from and out of the Trust Property. As per the Trust Deed, the Trustee's fee can be determined for each Scheme separately. The fee charged for each Equity Scheme will be 0.025% per annum of the average daily net assets of the respective Scheme and the fee charged for each Debt Scheme will be 0.001% per annum of the average daily net assets of the respective Scheme or Rs. 1,500,000 per annum per Scheme, whichever is lower. The Trustee fees shall be accrued on a daily basis but the payment shall be made on a monthly basis.

(ii) The Trustee shall obtain internal audit reports at regular intervals from independent auditors appointed by the Trustee Company. (iii) The Trustee shall obtain compliance certificates at regular intervals from the Asset Management Company. (iv) The Trustee shall hold meetings of the Board of Directors of the Trustee Company regularly and frequently.
16

IV. Trustee - Supervisory Role


The Compliance Officer reports directly to the Board of Directors of the Trustee to carry out the supervisory role on behalf of the Trustee. In addition, the Trustee may seek any information from time to time from the AMC. The internal audit of the Fund will be carried out by the internal audit team of the FIL Global Oversight function to facilitate monitoring the activities of the AMC. On a quarterly basis, an activity report is prepared by the AMC and the same is discussed at the board meetings of the Trustee. During the financial year 2005-2006, 6 meetings of the Board of Directors of Trustee were held. The Audit Committee, comprising of all the directors on the board of the Trustee with an independent director as its chairman, has been constituted pursuant to the SEBI circular MFD / CIR / 010 / 024 / 2000 dated January 17, 2000 to, inter alia, review internal audit systems and reports from internal and statutory auditors.

Names and addresses of the Directors

Other directorships of the Directors Fidelity MultiManager SICAV Fidelity Nominees (CI) Limited Fidelity Structured Investments SPC Fidelity Villa Mumm Limited FIL Asia Ventures Limited FIL Capital Management (Hong Kong) Limited FIL Capital Management Limited FIL Greater China Limited FIL Ventures Limited FMR UK Property Limited Millharbour Properties Limited Mutual Fund Technologies (UK) Limited Mutual Fund Technologies Limited Pembroke Europe Investments Sarl SWS International Properties Limited Uriel Limited

D. The Asset Management Company


I. Constitution
Mr. Ramesh Savoor 201, Pine View, 9, Edward Road, Bangalore - 560 052 Mr. Arun Duggal A-4, West End, New Delhi - 110 021 In conformity with the Regulations, Fidelity Fund Management Private Limited, a company registered under the Companies Act, 1956, and having its registered office at 56, 5th floor, Maker Chambers VI, 220, Nariman Point, Mumbai 400 021, has been set up to act as the Asset Management Company (AMC) to the Fund. In terms of the Investment Management Agreement ("IMA") dated August 9, 2004 entered into between the Trustee and the AMC, the AMC has been appointed as the Investment Manager to the Fund. The Investment Manager was approved by SEBI to act as the AMC for the Fund vide letter no. IMD / SB / 33960 / 05 dated February 17, 2005. The AMC manages the Schemes / plans / options of the Fund in accordance with the provisions of the Investment Management Agreement, the Trust Deed, the Regulations and the objectives of each Scheme / plan / option. The AMC can be removed by the Trustee, subject to the Regulations.

E.I.D. Parry Limited Foseco India Limited Divgi - Warner Private Limited Automotive Stampings and Assemblies Limited Zuari Industries Limited Patni Computer Systems Limited Petronet LNG Limited Blackstone Investment Co. Private Limited Tanglewood Financial Advisors Private Limited International Asset Reconstruction Co. Private Limited FourS Services Transparency International Matrix Laboratories Limited Manipal AcuNova Private Limited The Bellweather Microfinance Fund Carzonrent (India) Private Limited Jubilant Energy Limited, Canada Shriram Transport Finance Company Limited Chakra Interactive Private Limited Info Edge (India) Private Limited Shriram Properties Limited

Constitution of the Fund

II.

Directors
Other directorships of the Directors COLT Telecom Group S.A. Euroclear plc Euroclear SA / NV FID Funds (Mauritius) Limited FIL Trust Co. Limited Fidelity Adviser World Funds (Bermuda) Limited Fidelity Distributors International Limited Fidelity Fund Management Limited Fidelity Funds II SICAV Fidelity Funds Korea (L) Ltd. Fidelity Funds SICAV Fidelity International Investment Advisors Fidelity International Limited Fidelity International Quiescent Ventures Limited Fidelity International Services Limited Fidelity International Ventures Limited Fidelity Investment Management GmBH Fidelity Investment Management Limited Fidelity Investments (Cayman Islands) SPC Fidelity Investments (CI) Limited Fidelity Investments (Singapore) Limited Fidelity Investments (South Africa) Limited Fidelity Investments Distributors Fidelity Investments International GmbH Fidelity Investments Life Insurance Limited Fidelity Investments Securities Investment Trust Co. Ltd.

The directors of the AMC are: Names and addresses of the Directors Mr. Simon Haslam Flat 1, 130 Tonbridge Road, Hildenborough, Tonbridge, Kent TN11 9EW United Kingdom

Mrs. Ashu Suyash Flat No. 1 E, Laxmi Niwas, 16th Road, Near Khar Gymkhana, Khar (West), Mumbai - 400 052

Mr. Simon Haslam and Mrs. Ashu Suyash are the directors associated with the Sponsor.

Mr. Simon Haslam


Mr. Haslam is the Chief Operating Officer at Fidelity International Limited ("FIL"). He is a Director of several companies within the FIL Group, including FIL. Before joining FIL, Mr. Haslam was an audit and consulting partner at what is now Deloitte, where he specialised in the fund management and securities industry. His career in financial services, spanning more than twenty years has concentrated on financial, compliance and business matters affecting stockbroking, investment banking and fund management businesses internationally.

Mr. Ramesh Savoor


Mr. Savoor retired from Castrol India Ltd, after a long career, including 12 years as Chief Executive & Managing Director. In the last three years of Mr. Savoors tenure with Castrol, Mr. Savoor was also the leader of the business unit comprising India, Middle East and Africa, managed from India, in addition to his role as the Chief Executive & Managing Director of Castrol India. In this capacity as Business Unit Leader, he was also on the Board of Castrol Worldwide.
17

Combined Offer Document Fidelity Mutual Fund


Apart from being a director on the boards of directors of various companies, Mr. Savoor is also a director on the Governing Board of the Indian Institute of Management, Bangalore. Trustee Company Board or the Board of the AMC in writing, and also ensure that such documents do not contain any statements or matter extraneous to the Trust Deed or particulars stated in the Offer Document for the Scheme approved by the Trustee Company Board and SEBI; 7. disclose the Repurchase Price and NAV of the various Schemes of the Fund to the investors, at such intervals as may be specified by the Trustee Company Board and in accordance with the Regulations issued from time to time; maintain books and records about the operation of various Schemes of the Fund to ensure compliance with the Regulations, and submit a quarterly report on the functioning of each of the various schemes of the Fund to the Trustee Company or at such intervals and in such manner as may be required or called for by the Trustee Company or by SEBI; send periodical reports, as required under the Regulations, in addition to any other reports called for by the Trustee Company or SEBI from time to time;

Mr. Arun Duggal


Mr. Duggal has had a long career with Bank of America and was the Chief Executive Officer and Managing Director before he chose to take early retirement. For about two years, Mr. Duggal was also the Chief Financial Officer of HCL Technologies. Mr. Duggal was also instrumental in establishing the International Asset Reconstruction Company and now is its non-executive Vice Chairman. He is also an International Advisor to General Atlantic Partners, a leading American Private Equity firm and an advisor to a number of different institutions.

8.

Mrs. Ashu Suyash


Mrs. Suyash is the Managing Director and Country Head. She has over 17 years of experience in the banking sector. She held various positions during her stint with Citibank including that of Operations Head, CEO - brokerage business, Head of investor sales, Head of Business Development, Head of Strategy and Business. The assets under management of the Fund have crossed over a billion USD during her tenure over the last two years. 9.

Constitution of the Fund

III. Duties and Responsibilities of the AMC and the material provisions of the Investment Management Agreement
The duties and responsibilities of the AMC shall be consistent with the Regulations and the Investment Management Agreement. The AMC shall discharge such duties and responsibilities as provided for under the Regulations and the Investment Management Agreement. The AMC shall, in the course of managing the affairs of the Fund, inter alia: 1. provide management, advisory and administrative services for the Trust in accordance with the provisions of the IMA and any resolution of the Trustee Company Board from time to time; formulate and devise various schemes and invest the Trust Fund in accordance with the objects / provisions of the Trust Deed, the Regulations, or circulars issued by SEBI from time to time; manage the schemes of the Fund in accordance with the relevant rules and regulations applicable to them (including the provisions of the relevant Offer Document applicable to each scheme) subject to directions from SEBI; be responsible for the day-to-day management of the Trust Property and the various schemes of the Fund; be responsible for floating and issuing schemes for the Fund after approval of the same by the Trustee Company Board and SEBI, as well as investing and managing the funds raised under the various schemes, in accordance with the provisions of the Trust Deed and the Regulations; ensure that no Offer Document of a scheme, key information memorandum, abridged half yearly results and annual results are issued or published without the prior approval of the

10. instruct the Auditors to examine the Trust's annual Statement of Accounts and to report on their correctness and authorise the auditors to communicate directly with the Trustee Company at any time; 11. publish by public advertisement in newspapers and, if so thought fit, in any other manner, the un-audited half-yearly accounts and audited annual accounts of the various schemes as required under the Regulations; and 12. exercise all due diligence and vigilance in carrying out its duties and in protecting the rights and interests of the Unit Holders.

IV. Investment Management Fees


The AMC is entitled to charge an investment management and advisory fee at the rate of 1.25% per annum of the average daily net assets of the Schemes outstanding in each financial year for the net assets up to Rs. 100 Crores and at the rate of 1.00% per annum of the average daily net assets outstanding in each financial year for the net assets in excess of Rs.100 Crores.

2.

3.

V.

Shareholding Pattern of the AMC


Type of holdings Equity Shares Equity Shares Preference Shares Holdings 99.99% 0.01% 100%

The shareholding pattern of the AMC is as follows: Name of the Shareholder FIIA [via FID Investments (Mauritius) Limited, its subsidiary] Fidelity International Services Limited FIIA [via FID Investments (Mauritius) Limited, its subsidiary]

4. 5.

6.

For note on the activities of FIIA, please refer to the paragraph headed "The Sponsor". Fidelity International Services Limited is a wholly owned subsidiary of Fidelity International Limited, a company established in Bermuda.

VI. Key Employees of the AMC and relevant experience


Employee Designation Age Qualifications Total no. Assignments held of years of during last 10 years Experience 17 Citibank (Head of Strategy and Business) Citibank (Head of Business Development Times of money.com) Citibank (Head of Investor Sales) Citibank (CEO - Brokerage Business) Fidelity Investments Management Ltd. (Portfolio Manager) Period From - To 2001 - 2003 2000 - 2001 1998 - 2000 1996 - 1998 2005 - 2006

Ashu Suyash

Managing Director and Country Head

40

B.Com., A.C.A.

Sandeep Kothari Fund Manager (Equity)


18

36

B.Com., C.A.

13

Employee

Designation

Age

Qualifications

Total no. Assignments held of years of during last 10 years Experience Fidelity Investments Management Ltd. (Investment Analyst) CLSA (Global Pharma Analyst and Indian Equity Strategist) Dresdner Kleinwort Wasserstein (Sr. Investment Analyst) Credit Lyonnais Securities (Sr. Investment Analyst) James Chapal B & K (Investment Analyst)

Period From - To

2002 - 2005 2001 - 2002 1999 - 2001 1996 - 1999 1993 - 1996

Suraj Kaeley

Director- Sales and Business Development Fund Manager (Equity)

41

B.Sc, MMS

18

Met Life India Insurance Co. Private Limited (Chief Marketing Officer and Head Individual Business) 2003 - 2006 Franklin Templeton Asset Management (India) Private Limited (Senior Vice President - Sales and Marketing) 1996 - 2003 Fidelity Investments, Hong Kong (Investment Analyst (Sector Team Leader)) Fidelity Mgmt & Research, Boston (Global Investment Analyst) Fidelity Investments, Hong Kong (Investment Analyst) CLSA, Mumbai & Singapore (Assistant Investment Manager) CLSA, Mumbai (Investment Analyst) JM Share & Stock Brokers, Mumbai (Research Analyst) Franklin Templeton Asset Management (India) Private Limited - (Senior Vice President and Head of Fixed Income) (Vice President and Portfolio Manager for Gilt Portfolio) IndusInd Bank (Vice President and Head of Domestic Treasury) (Dealer in fixed income products) Chescor Limited, London (Anaylst) 2005-2006 2003-2005
Constitution of the Fund

Rajesh Singh

39

B.TechIIT Kanpur MBA IIM Ahmedabad, CFA

14

2000-2002 1998-2000 1996-1997 1995-1996

Sameer Kulkarni Fund Manager (Fixed Income)

38

BE (Mech), MMS, M.Sc, CFA (ICFAI) FRM

13

2004-2006 2002 -2004 2000-2002 1997-2000 1996-1996

Srikar Baljekar

Director Operations DirectorLegal and Compliance Associate Director Finance

47

B.Com, A.C.A., A.C.S. B.Com., A.C.S., C.P.A. (U.S.A.)

19

Kotak Mahindra Asset Management Company Limited (Chief Operations Officer) 1998 - 2004 Kotak Mahindra Finance Limited (Vice President - IT) 1992 - 1998 Kotak Mahindra Asset Management Company Limited (Vice President - Compliance) Kotak Mahindra Finance Limited (Manager - Secretarial) 1996 - 2003 1995 - 1996

Hemang Bakshi

42

20

Rajendra Khatu

35

B.Com., A. C. A.

Franklin Templeton Asset Management (India) Private 2001 -2004 Limited (Senior Manager-Corporate Accounting and Taxation) Stockholding Corporation of India Limited 1997 - 2001 (Assistant Manager - Finance) IDBI Bank Limited (Manager - Treasury) UTI Bank Limited (Deputy Manager Merchant Banking) 2002-2006 2001-2002

Vikram Chopra

Trader (Fixed Income)

28

M.B.A. from IMT, Ghaziabad, B.Com. (HONS)

The AMC has three Fund Managers and eight Research / Credit Analysts. All the key personnel are based at the Corporate Office of the AMC in Mumbai.

Personnel of Investment Department


Employee Designation Age Qualifications Total no. Assignments held of years of during last 10 years Experience 5 Tata Consultancy Services (Team Leader - IT Consultancy) Ericsson India Limited (Systems Analyst) ICICI Bank (Credit Analyst) Hindustan Lever Limited (Commercial Manager) GSK Consumer Healthcare Limited (Deputy Manager-Finance) ITC Limited (Industrial Trainee) Seshadri and Seetharam (Article Trainee) J. P. Morgan India Securities Private Limited (Analyst) HSBC Ltd. (Audit Senior) Morgan Stanley Advantage Services (Audit Senior) Bharat S Raut (KPMG) (Audit Senior) BNP Paribas (Management Trainee) ABN AMRO Bank NV ( Industrial Trainee) (Part of CA Articleship) S Madhavan and Co. (Article Trainee)
19

Varun Lohchab

Research Analyst Research Analyst

28

B.E. (Electrical), PGDM (IIM) B.Com, A.C.A., MBA (INSEAD)

Ganesh Chidambaram

29

Subramanian Balakrishnan

Research Associate

28

C.A., PGP in Management from Indian School of Business

10

Combined Offer Document Fidelity Mutual Fund


Employee Designation Age Qualifications Total no. Assignments held of years of during last 10 years Experience 3 Bain & Co. (Senior Associate Consultant) Bid or Buy India.Com (Intern) Towers Perin (Intern) Birla Sunlife Asset Management Company Limited (Credit Analyst and Fund Manager) RSM & Co. (Qualified Assistant) Khimji Kunverji & Co. (Audit Senior) ICICI Bank Limited (Manager Temasek Holdings (Associate) Fidelity Business Services India Private Limited (Research Specialist Associate) CRISIL Rating Limited (Manager) The Chaterjee Group (Investment Professional - Private Equity) Arthur Andersen / Ernst & Young (Consultant) 1998. The Mutual Fund has entered into a Custody Agreement dated February 17, 2005, with the Custodian, whose principal responsibilities under the said Agreement are to:
u

Gaurav Jalan

Research Analyst Credit Analyst

27

B.A., M.B.A.

Mahesh Chhabria

30

F.C.A., C.F.A. (I.C.F.A.I.), Financial Risk Manager from GARP, U.S.A C.A., PGDCM (IIM - Calcutta) B. Com, MBA, PG (Mass Comm.), GNIIT M.B.A., C.A., C.P.A.

Amit Kumar Jain Research Associate Ashwinder Bakhshi Research AssociateFixed Income Research Analyst

28 27

3 3

Smriti Shekhar
Constitution of the Fund

30

VII. Fund Managers


The Fund Managers who manage the investments of the Schemes forming part of this Offer Document are as follows: Fund Manager Mr. Sandeep Kothari Mr. Rajesh Singh Mr. Sameer Kulkarni Schemes managed Fidelity Equity Fund and Fidelity Tax Advantage Fund Fidelity India Special Situations Fund Fidelity Short Term Income Fund and Fidelity Cash Fund

provide custodial services to the Mutual Fund; ensure that benefits due on the holdings are received; ensure segregation of assets between different schemes of the Fund; provide detailed information and other reports as required by the AMC; maintain confidentiality of the transactions; and be responsible for any loss or damage to the assets belonging to each scheme due to negligence on its part or on the part of its approved agents.

Note: For the experience and qualification of the Fund Managers please see the table of Key Employees above.

VIII.Compliance Officer
The Compliance Officer for the Fund is Mr. Hemang Bakshi.

IX. Investors Relations Officer


The Investors Relations Officer for the Fund is Mr R Ananth Narayanan and he may be contacted at the office of the AMC at 1st Floor, Ganesha Towers, Old No. 90, New No. 104, Dr Radhakrishnan Salai, Mylapore, Chennai - 600 004.

The Custodian shall not assign, transfer, hypothecate, pledge, lend, use or otherwise dispose of any assets or property of the Fund, except pursuant to instruction from the Trustee / AMC or under the express provisions of the Custody Agreement. The Custodian will be entitled to remuneration for its services in accordance with the terms of the Custody Agreement and as estimated in the table pertaining to the recurring expenses in respect of each scheme. Accordingly, the recurring expenses will be borne by the Unit Holders of the Schemes. The Trustee has the right to change the Custodian, in certain circumstances.

X. The Registrar and Transfer Agent


Computer Age Management Services Private Limited ("CAMS") has been appointed to act as registrar and transfer agent to the Schemes in accordance with the Registrar and Transfer Agent Agreement dated September 10, 2004. The Registrar is registered with SEBI under the SEBI (Registrar and Transfer Agents) Regulations, 1993, vide registration no. INR000002813. As registrar to the Schemes, the Registrar will handle the processing of all Unit Holders' Purchase / Redemption transactions, maintenance of their folio details, processing of dividends / commission payments, handling of investor servicing, etc under all the Schemes of the Fund. The boards of the Trustee and the AMC have satisfied that the Registrar can provide the services required and have adequate facilities and systems capabilities. The Registrar will be paid fees in accordance with the agreed terms and conditions and as estimated in the table pertaining to the recurring expenses in respect of each Scheme. Accordingly, the recurring expenses will be borne by the Unit Holders of the respective Scheme. The AMC has the right to change the Registrar in certain circumstances.

XII. The Fund Accountant


J P Morgan Chase Bank, Mumbai has been appointed as the fund accountant for the Schemes. J P Morgan Chase Bank provides fund accounting, NAV calculation and other related services in accordance with an Administration Agreement dated February 17, 2005 between the AMC and J P Morgan Chase Bank. J P Morgan Chase Bank is entitled to remuneration for its services in accordance with the terms of the Administration Agreement and such remuneration will be borne by the AMC and not by the Unit Holders of any Scheme. The AMC has the right to change the fund accountant in certain circumstances.

XIII.The Auditors
Price Waterhouse, Chartered Accountants, 252, Veer Savarkar Marg, Shivaji Park, Dadar (West), Mumbai 400 028, are the auditors appointed for the Fund. The audit fees for each Scheme will be borne by the Unit Holders of the respective Scheme as part of the recurring expenses of that Scheme. The Trustee has the right to change the Auditors.

XI. The Custodian


J P Morgan Chase Bank, Mumbai has been appointed as custodian of the Schemes. The Custodian is registered with SEBI under the SEBI (Custodians of Securities) Regulations, 1996, vide registration number IN / CUS / 014 dated November 10,

20

V. Investment Objective, Investment Strategy, Investment Pattern and Risk Profile and Limitations of the Schemes
A. Schemes on Offer I. Fidelity Equity Fund
i. Type of Scheme
An open ended equity growth scheme

the event of deviations, rebalancing will be carried out within 10 Business Days. Equity related securities include equity warrants and compulsorily convertible instruments. Money market instruments and Mutual Fund Units: Investments other than in equity will be made for managing liquidity. The preferred instruments will be Money market instruments. Money market instruments include commercial papers, commercial bills, treasury bills, Government securities having an unexpired maturity upto one year, call or notice money, certificate of deposit, usance bills and any other like instruments as specified by Reserve Bank of India from time to time. For the purpose of further diversification and liquidity, the Scheme may invest in another equity scheme managed by the same AMC or by the AMC of any other Mutual Fund without charging any fees on such investments, provided that aggregate interscheme investment made by all schemes managed by the same AMC or by the AMC of any other Mutual Fund shall not exceed 5% of the net asset value of the Fund. The Scheme does not intend to invest in securitised debt.

ii.

Investment Objective

The investment objective of the Scheme is to generate longterm capital growth from a diversified portfolio of predominantly equity and equity-related securities. There is no assurance that the objective of the Scheme will be realised and the Scheme does not assure or guarantee any returns. For defensive considerations and / or for managing liquidity, the Scheme may also invest in money market instruments. The Scheme does not intend to and shall not invest in derivative instruments of any kind. The performance of the Scheme will be benchmarked against the BSE-200 Index.

II. Fidelity Tax Advantage Fund


The investment objective and the strategy to be adopted by the Scheme would be similar to Fidelity Equity Fund. However, it may differ to a certain extent on account of the mandatory lock-in period for the subscriptions received under the Scheme.
Investment Objective

iii. Investment Strategy


The investment approach is bottom up stock picking. The Scheme seeks to add the best opportunities that the market presents, without any sector / cap bias. The key features of the Fund's investment strategy include: Diversification: The Scheme will be well diversified across sectors in about 60 to 80 stocks. Maximum exposure to a single sector shall be 25% of the net assets of the Scheme. Individual holdings will rarely exceed 4% of net assets of the Scheme. The Scheme is likely to be fully invested in equity at all times. Bottom-up stock picking: Consistent with Fidelity's approach, the Scheme focuses on bottom-up stock picking (i.e. focussing solely on prospects of individual stocks) as opposed to a topdown approach (i.e. predicting macro economic and political trends and taking investment decisions based on them). No cap bias: It will seek to identify the best stocks at a point in time, regardless of any market cap bias.

i.

Type of Scheme

An open ended equity linked savings scheme (Growth)

ii.

Investment Objective

The investment objective of the Scheme is to generate longterm capital growth from a diversified portfolio of predominantly equity and equity-related securities. There is no assurance that the objective of the Scheme will be realised and the Scheme does not assure or guarantee any returns. For defensive considerations and / or for managing liquidity, the Scheme may also invest in money market instruments. The Scheme does not intend to and shall not invest in derivative instruments of any kind. The performance of the Scheme will be benchmarked against the BSE-200 Index.

iv. Investment Pattern and Risk Profile


Under normal circumstances, it is anticipated that the asset allocation shall be as follows: Instrument Normal Allocation (% of net assets) 95% 5% Range of Allocation (% of net assets) 80% to 100% 0% to 20% Risk Profile

iii. Investment Strategy


The investment approach is bottom up stock picking. The Scheme seeks to add the best opportunities that the market presents, without any sector / cap bias. The key features of the Fund's investment strategy include: Diversification: The Scheme will be well diversified across sectors in about 60 to 80 stocks but it could hold more than 80 stocks at any given time. Maximum exposure to a single sector shall be 25% of the net assets of the Scheme. While holdings in individual stocks will generally not exceed 4% of net assets of the Scheme, there may be times when considering the investment opportunities, holdings in certain stocks could be in excess of 4%. The Scheme is likely to be fully invested in equity at all times. Bottom-up stock picking: Consistent with Fidelity's approach, the Scheme focuses on bottom-up stock picking (i.e. focussing solely on prospects of individual stocks) as opposed to a topdown approach (i.e. predicting macro economic and political trends and taking investment decisions based on them).
21

Equity and equity related securities* Money market instruments

High Low to Medium

* Includes investments in Offshore securities, ADRs and GDRs not exceeding 10% of the net assets of the Scheme as on March 31 of each relevant year. The corpus of the assets of the Scheme shall be predominantly invested in equity and equity related securities. However, due to market conditions, the AMC may invest beyond the range set out above. Such deviations shall normally be for a short term purpose only, for defensive considerations and the intention being at all times to protect the interests of the Unit Holders. In

Combined Offer Document Fidelity Mutual Fund


No cap bias: It will seek to identify the best stocks at a point in time, regardless of any market cap bias.

iii. Investment Strategy


The Scheme will primarily be a diversified equity fund which will seek to invest in undervalued companies for long term investment with key theme focus being "Special Situations" these are situations that are out-of-the-ordinary and which therefore present interesting stock picking opportunities. The types of companies that may fall within the scope of such Special Situations could include but are not limited to: companies with recovery potential. companies whose growth potential, may not be fully recognised by the market. companies with hidden / undervalued assets whose value, may not be fully recognised by the market. companies with interesting product pipelines which could offer good earnings potential. companies undertaking corporate restructuring. companies which could be potential candidates for mergers and acquisitions related activities.

iv. Investment Pattern and Risk Profile


Under normal circumstances, it is anticipated that the asset allocation shall be as follows: Instrument Normal Allocation (% of net assets) 95% 5% Range of Allocation (% of net assets) 80% to 100% 0% to 20% Risk Profile

Equity and equity related securities* Money market instruments

High Low to Medium

* Includes investments in Offshore securities, ADRs and GDRs not exceeding 10% of the net assets of the Scheme as on March 31 of each relevant year. The corpus of the assets of the Scheme shall be predominantly invested in equity and equity related securities. In accordance with ELSS, investments in equity and equity related securities will not fall below 80% of the net assets of the Scheme. As per ELSS, the Scheme after 3 years from the date of allotment of Units could hold investments in short term money market instruments or other liquid instruments or both only up to 20% of its net assets.
Investment Objective

Equity related securities include equity warrants and compulsorily convertible instruments. In case the investments are made in partly convertible issues of debentures and bonds including those issued on right basis, the non convertible portion of the debentures / bonds so acquired will be disinvested within a period of 12 months as specified in ELSS. Money market instruments: Investments other than in equity will be made for managing liquidity. The preferred instruments will be Money market instruments. Money market instruments include commercial papers, commercial bills, treasury bills, Government securities having an unexpired maturity upto one year, call or notice money, certificate of deposit, usance bills and any other like instruments as specified by Reserve Bank of India from time to time. The Scheme does not intend to invest in securitised debt.

The investment approach will be bottom-up stock picking - where investments will be selected primarily on the basis of specific criteria relevant to the company in question rather than general macro-economic considerations. There will be no particular bias towards any market cap size or any sector. The Scheme will endeavour to remain fully invested in equity and related instruments at all times. A limited exposure to various derivatives instruments is likely - for the purposes of hedging, portfolio balancing and optimising returns. In Fund Manager's opinion, some recent examples of companies offering potential Special Situations were: A major auto manufacturer - (Hidden Value / Restructuring). The stock is up about 150% in less than 12 months as the market appears to have recognized underlying value of insurance and other subsidiaries and potential restructuring efforts by the management to unlock this value. A telecom company - (Under appreciated Growth). The stock has been re-rated and is up nearly 10 times in less than 3 years as the company has delivered better than expected growth and market has gained improved appreciation of underlying growth potential of the business. These are a few illustrative examples of what the Fund Manager believes could have been described as companies in Special Situations. This does not indicate the Fund's preference for these companies over others. Neither does this mean that other companies have not fared better than these companies. It is also not necessary that the Scheme will have these companies in its portfolio. These examples are provided only to help investors get a better understanding of the term 'Special Situations'.

III. Fidelity India Special Situations Fund


i. Type of Scheme
An open ended equity growth scheme

ii.

Investment Objective

The investment objective of the Scheme is to generate longterm capital growth from a diversified portfolio of predominantly equity and equity-related securities including equity derivatives. There is no assurance that the objective of the Scheme will be realised and the Scheme does not assure or guarantee any returns. For defensive considerations and / or for managing liquidity, the Scheme may also invest in money market instruments. The Scheme may invest in derivatives instruments to the extent permitted under and in accordance with the applicable Regulations, including for the purposes of hedging, portfolio balancing and optimizing returns. Hedging does not mean maximization of returns but only attempts to reduce systemic or market risk that may be inherent in the investment. The performance of the Scheme will be benchmarked against the BSE-200 Index.
22

iv. Investment Pattern and Risk Profile


Under normal circumstances, it is anticipated that the asset allocation shall be as follows: Instrument Normal Allocation (% of net assets) 95% 5% Range of Allocation (% of net assets) 80% to 100% 0% to 20% Risk Profile

Equity and equity related securities* Money market instruments

High Low to Medium

* Includes investments in Offshore securities, ADRs and GDRs not exceeding 10% of the net assets of the Scheme as on March 31 of each relevant year and investments in equity derivatives. The corpus of the assets of the Scheme shall be predominantly invested in equity and equity related securities including equity derivatives. However, due to market conditions, the AMC may

invest beyond the range set out above. Such deviations shall normally be for a short term purpose only, for defensive considerations and the intention being at all times to protect the interests of the Unit Holders. In the event of deviations, rebalancing will normally be carried out within 10 Business Days. Equity related securities include equity warrants and compulsorily convertible instruments. Money market instruments and Mutual Fund Units: Investments other than in equity will be made for managing liquidity. The preferred instruments will be Money market instruments. Money market instruments include commercial papers, commercial bills, treasury bills, Government securities having an unexpired maturity upto one year, call or notice money, certificate of deposit, usance bills and any other like instruments as specified by Reserve Bank of India from time to time. For the purpose of further diversification and liquidity, the Scheme may invest in other equity schemes managed by the same AMC or by the asset management company of any other Mutual Fund without charging any fees on such investments, provided that aggregate inter-scheme investment made in all schemes managed by the same AMC or in schemes managed by the AMC of any other Mutual Fund shall not exceed 5% of the net asset value of the Fund. The Scheme does not propose to invest in securitised debt.

2. 3. 4. 5. 6.

Returns offered relative to alternative investment opportunities. Quality of the security / instrument (including the financial health of the issuer) Maturity profile of the instrument Liquidity of the security Any other factors considered relevant in the opinion of the fund management team.

The fund management team, supported by credit research group will generally adopt a bottom up approach for securities identification to optimise the risk adjusted returns on the diversified portfolio. The credit quality of the portfolio will be maintained and monitored using the in-house research capabilities as well as the inputs from the independent credit rating agencies. Investments in debt instruments carry various risks such as interest rate risk, liquidity risk, default risk, reinvestment risk etc. Whilst such risks cannot be eliminated, they may be minimized by diversification and effective use of hedging techniques. The Scheme may invest in derivatives up to 100% of the net assets of the Scheme for the purpose of hedging and portfolio balancing purposes. The Scheme may also invest in permitted offshore instruments for diversification.

iv. Investment Pattern and Risk Profile


The Scheme will invest the entire corpus in debt and money market securities. There will be no investment in equity and equity related products. Under normal circumstances, it is anticipated that the asset allocation shall be as follows: Instrument Normal Risk Allocation (% of net assets) 0 - 100% 0 - 100 % Profile*

Investment Objective

IV. Fidelity Short Term Income Fund


i. Type of Scheme
An open ended income scheme

ii.

Investment Objective
Debt Instruments including securitized debt Money Market instruments

To generate reasonable returns through a diversified portfolio of fixed income securities. There is no assurance that the objective of the Scheme will be realised and the Scheme does not assure or guarantee any returns. The Scheme may invest in derivatives up to 100% of the net assets of the Scheme for the purpose of hedging and portfolio balancing purposes. Hedging does not mean maximization of returns but only attempts to reduce systemic or market risk that may be inherent in the investment. The performance of the Scheme will be benchmarked against the CRISIL Short Term Bond Fund Index.

Medium to Low Medium to Low

*The average maturity profile of the portfolio of the Scheme is likely to be up to 4 years. The Scheme may, subject to applicable regulations from time to time, invest in offshore securities up to 25% of net assets of the Scheme. Subject to regulations and prevailing laws as applicable, the portfolio will consist of permissible domestic or international fixed income instruments, most suitable to meet the investment objectives. The instruments listed below could be listed, unlisted, privately placed, secured, unsecured, rated or unrated acquired through primary or secondary market through stock exchanges, over the counter or any other dealing mechanisms. The following investment categories are likely to cover most of the available investment universe. The investments could be coupon bearing (fixed or floating), zero coupon discounted instruments, instruments with put and / or call options or any other type. Weights in the portfolio may not have any correlation to the order of listing.
u

iii. Investment Strategy


The portfolio will be constructed and actively managed to generate returns to match the investment objective and to maintain adequate liquidity to accommodate funds movement. As the interest rate risk of the portfolio is likely to be similar to that of the shorter end of the maturity spectrum, in line with the investment objective, a significant proportion of the total returns is likely to be in the form of income yield or accrual. Selective capital appreciation opportunities could be explored by extending credit and duration exposure above that offered by a cash fund. The fund management team will take an active view of the interest rate movement supported by quantitative research, to include various parameters of the Indian economy, as well as developments in global markets. Investment views / decisions will be a combination of credit analysis of individual exposures and analysis of macro economic factors to estimate the direction of interest rates and level of liquidity and will be taken, inter alia, on the basis of the following parameters: 1. Prevailing interest rate scenario

Securities issued or guaranteed by central government, state governments or local governments and / or repos / reverse repos / ready forward contracts in such government securities as are or may be permitted under the Regulations and RBI from time to time (including but not limited to coupon bearing bonds, zero coupon bonds and treasury bills). Securities issued (including debt obligations) by domestic government agencies and statutory bodies, which may or may not be guaranteed by central or state government. Corporate bonds of public sector or private sector undertakings. Debt obligation of banks (public or private sector) and financial institutions.
23

Combined Offer Document Fidelity Mutual Fund


u

Convertible debentures. (The Scheme may have some exposure to equity or equity related instruments to the extent of conversion of these debentures into equity or equity related instruments.) Money market instruments (which includes but is not limited to commercial papers, commercial bills, treasury bills, usance bills, government securities having unexpired maturity upto one year, certificates of deposit, bills rediscounting, CBLO, repo, call money and any other like instruments as are or may be permitted under the Regulations and RBI from time to time.) Deposits of scheduled commercial banks as permitted under the extant Regulations. Securitised debt (asset backed securities, mortgage backed securities, pass through certificates, collateralised debt obligations or any other instruments as may be prevailing and permissible under the Regulations from time to time). Derivatives (which includes but is not limited to interest rate derivatives, currency derivatives, credit derivatives and forward rate agreements or such other derivatives as are or may be permitted under the Regulations and RBI from time to time). Any international fixed income securities as are or may be permitted under the Regulations, RBI and other applicable law from time to time. Overseas mutual fund units which are permissible under the Regulations or by any other regulatory body. Any other domestic or international instrument as may be permitted under the Regulations or any other regulatory body from time to time.

The fund management team, comprising credit research and quantitative research, will take an active view on the key drivers affecting the short term interest rate movement as well as liquidity. This will include various parameters of the Indian economy, as well as developments in global markets. Investment views / decisions will be a combination of credit analysis of individual exposures and analysis of macroeconomic factors to estimate the direction of interest rates and level of liquidity and will be taken, inter alia, on the basis of the following parameters: 1. 2. 3. 4. 5. 6. Prevailing interest rate scenario Returns offered relative to alternative investment opportunities Quality of the security / instrument (including the financial health of the issuer) Maturity profile of the instrument Liquidity of the security Any other factors considered relevant in the opinion of the fund management team.

The fund management team, supported by credit research group will generally adopt a bottom up approach for securities identification to optimise the risk adjusted returns on the diversified portfolio. The credit quality of the portfolio will be maintained and monitored using the in-house research capabilities as well as the inputs from the independent credit rating agencies. Investments in debt instruments carry various risks such as interest rate risk, liquidity risk, default risk, reinvestment risk etc. Whilst such risks cannot be eliminated, they may be minimized by diversification and effective use of hedging techniques. The Scheme may invest in derivatives up to 100% of the net assets of the Scheme for the purpose of hedging and portfolio balancing purposes. The Scheme may also invest in permitted offshore instruments for diversification.

Investment Objective

For the purpose of further diversification and liquidity, the Scheme may invest in other debt schemes managed by the same AMC or by the asset management company of any other Mutual Fund without charging any fees on such investments, provided that aggregate inter-scheme investment made in all schemes managed by the same AMC or in schemes managed by the AMC of any other Mutual Fund shall not exceed 5% of the net asset value of the Fund.

iv. Investment Pattern and Risk Profile


The Scheme will invest the entire corpus in debt and money market securities. There will be no investment in equity and equity related products. Under normal circumstances, it is anticipated that the asset allocation shall be as follows: Instrument Normal Risk Allocation (% of net assets) 0 - 100% 0 - 100% Profile

V. Fidelity Cash Fund


i. Type of Scheme
An open ended liquid scheme

ii.

Investment Objective

Money Market instruments Debt Instruments including securitised debt

To deliver reasonable returns with lower volatility and higher liquidity through a portfolio of debt and money market instruments. There is no assurance that the objective of the Scheme will be realised and the Scheme does not assure or guarantee any returns. The Scheme may invest in derivatives up to 100% of the net assets of the Scheme for the purpose of hedging and portfolio balancing purposes. Hedging does not mean maximization of returns but only attempts to reduce systemic or market risk that may be inherent in the investment. The performance of the Scheme will be benchmarked against the CRISIL Liquid Fund Index.

Medium to Low Medium to Low

* The Scheme may, subject to applicable regulations from time to time, invest in offshore securities up to 25% of net assets of the Scheme. Subject to regulations and prevailing laws as applicable, the portfolio will consist of permissible domestic or international fixed income instruments, most suitable to meet the investment objectives. The instruments listed below could be listed, unlisted, privately placed, secured, unsecured, rated or unrated acquired through primary or secondary market through stock exchanges, over the counter or any other dealing mechanisms. The following investment categories are likely to cover most of the available investment universe. The investments could be coupon bearing (fixed or floating), zero coupon discounted instruments, instruments with put and / or call options or any other type. Weights in the portfolio may not have any correlation to the order of listing.
u

iii. Investment Strategy


The portfolio will be constructed and managed to generate returns to match the investment objective and to maintain adequate liquidity to accommodate funds movement. As the interest rate risk of the portfolio is likely to be similar to that of the money market curve, in line with the investment objective, a significant proportion of the total returns is likely to be in the form of income yield or accrual.
24

Securities issued or guaranteed by Central Government, State Governments or local governments and / or repos / reverse repos / ready forward contracts in such government securities as are or may be permitted under the Regulations

and RBI from time to time (including but not limited to coupon bearing bonds, zero coupon bonds and treasury bills).
u

iv.

For a portfolio using Interest Rate Swaps, a. the composite floating rate asset (underlying fixed rate asset and Interest Rate Swap, paying fixed and receiving floating) would have interest reset frequency upto 1 year. If Interest Rate Swaps (receiving fixed and paying floating), have been used to convert a floating rate asset into a fixed rate asset, the fixed leg of the Interest Rate Swap would have remaining tenor upto 1 year.

Securities issued (including debt obligations) by domestic government agencies and statutory bodies, which may or may not be guaranteed by Central or State Government. Corporate bonds of public sector or private sector undertakings. Debt obligation of banks (public or private sector) and financial institutions. Money market instruments (which includes but is not limited to commercial papers, commercial bills, treasury bills, usance bills, government securities having unexpired maturity upto one year, certificates of deposit, bills rediscounting, CBLO, repo, call money and any other like instruments as are or may be permitted under the Regulations and RBI from time to time). Deposits of scheduled commercial banks as permitted under the extant Regulations. Securitised debt (asset backed securities, mortgage backed securities, pass through certificates, collateralised debt obligations or any other instruments as may be prevailing and permissible under the Regulations from time to time). Derivatives (which includes but is not limited to interest rate derivatives, currency derivatives, credit derivatives and forward rate agreements or such other derivatives as are or may be permitted under the Regulations and RBI from time to time). Any international fixed income securities as are or may be permitted under the Regulations, RBI and other applicable law from time to time. Overseas mutual fund units which are permissible under the Regulations or by any other regulatory body. Any other domestic or international instrument as may be permitted under the Regulations or any other regulatory body from time to time. v. b.

For a portfolio using Forward Rate Agreements, the summation of the beginning and end dates of the period covered would be 1 year or less.

C.

If there are positions in Interest Rate Futures and Bond Futures, the repricing risk would be 1 year or less.

The repricing tenor of each of the securities included in the portfolio of the Scheme shall be 1 year or less as illustrated above.

B. Underwriting
The Schemes do not propose to underwrite securities of other issuers.

C. Scrip Lending by the Fund


If permitted by SEBI under extant Regulations / guidelines, the Equity Schemes may also engage in scrip lending. The AMC shall comply with all reporting requirements and the Trustee shall carry out periodic review as required by SEBI guidelines. Scrip lending means the lending of stock to another person or entity for a fixed period of time, at a negotiated compensation. The securities lent will be returned by the borrower on expiry of the stipulated period. The Investment Manager will apply the following limits, should it desire to engage in scrip lending: 1. 2. Not more than 20% of the net assets of a Scheme can generally be deployed in scrip lending; and Not more than 5% of the net assets of a Scheme can generally be deployed in scrip lending to any single counterparty.
Investment Objective

For the purpose of further diversification and liquidity, the Scheme may invest in other debt schemes managed by the same AMC or by the asset management company of any other Mutual Fund without charging any fees on such investments, provided that aggregate inter-scheme investment made in all schemes managed by the same AMC or in schemes managed by the AMC of any other Mutual Fund shall not exceed 5% of the net asset value of the Fund. The portfolio of the Scheme will have the following characteristics: A. Mark-to-Market component of the Scheme on a weekly average basis would be less than 10% of the net assets. (Mark-to-market would mean the valuation of an asset (e.g. marketable securities, derivatives and other financial contracts) using a traded price or a derived price from the corresponding yield curve). For the purpose of calculating the mark-to-market component of the portfolio, money market instruments would be excluded. And B. Maximum repricing tenor of 1 year reckoned as under: i. ii. iii. For a fixed rate asset, the remaining tenor would be 1 year or less. For a floating rate asset, the interest reset frequency would be 1 year or less. For a fixed rate / floating rate asset where the principal is paid in a staggered and / or on amortizing basis (e.g. securitized papers), the average maturity of such an asset would be 1 year or less.

Various risks associated with scrip lending, such as counterparty risks, liquidity and other market risks, are described in Chapter I of this Offer Document.

D. Investment in Derivatives
i. Applicable to FISSF
The Scheme may invest in various derivatives instruments including futures (index and stock), options (index and stock) and forward contracts which are available for investment in Indian markets from time to time and which are permissible as per the applicable Regulations. Investment in such instruments will be made in accordance with the investment objective and the strategy of the Scheme to protect the value of the portfolio and to enhance returns. The investments shall also be subject to the internal limits as may be laid down from time to time and such limits and restrictions as may be prescribed by the Regulations or any other regulatory body. Initially the Scheme would invest only in 'stock and / or index futures'. Investments in other derivative instruments may be done by the Scheme only once the Trustees are comfortable that the systems for dealing, back office and accounting are in place for derivative instruments other than 'stock and / or index futures'. Before commencing the use of other derivative instruments, the Trustees will submit a separate confirmation to SEBI that the AMC has the necessary systems for dealing, back office and accounting in place for using other derivative instruments.
25

Combined Offer Document Fidelity Mutual Fund

Concepts and Examples:


Derivatives are financial contracts of pre-determined fixed duration, whose values are derived from the value of an underlying primary financial instrument, commodity or index, such as: interest rates, exchange rates, commodities and equities.

Particulars

Index Future 1.14

Actual purchase of stocks 1.43

Futures:
A futures contract is an agreement between the buyer and the seller for the purchase and sale of a particular asset at a specific future date. The price at which the asset would change hands in the future is agreed upon at the time of entering into the contract. The actual purchase or sale of the underlying asset involving payment of cash and delivery of the instrument does not take place until the contracted date of delivery. A futures contract involves an obligation on both the parties to fulfil the terms of the contract. Currently, futures contracts have a maximum expiration cycle of 3-months. Three contracts are available for trading, with 1 month, 2 months and 3 months expiry respectively. A new contract is introduced on the next trading day following the expiry of the relevant monthly contract. Futures contracts typically expire on the last Thursday of the month. For example a contract with the January expiration expires on the last Thursday of January.

VI. Brokerage Cost - on sale (in Rs.) (Assumed @ of 0.04% for index future and 0.05% for spot stocks) (0.04% of 2855, 0.05%of 2855) VII. Securities Transaction Tax (in Rs.) (STT on sale of index futures - 0.0133% of 2855; STT on sale of stocks - 0.1% of 2855) Total Cost (I + II + III - IV + VI + VII) (in Rs.)

0.38

2.86

7.16

8.54

Index Futures:
Index Futures began trading on NSE on June 12, 2000. A futures contract on the stock market index gives its owner the right and obligation to buy or sell the portfolio of stocks characterized by the index. Stock index futures are cash settled; there is no delivery of the underlying stocks. Let us assume that the Nifty Index at the beginning of the month October 2006 was 2840 and three futures indices as under were available: Month October November December Bid price 2845 2860 2875 Offer price 2855 2870 2890

Please note that the above example is based on assumptions and is used only for illustrative purposes (including an assumption that there will be a gain pursuant to investment in index futures). As can be seen in the above example, the costs associated with the trade in futures are less than that associated with the trade in actual stock. Thus, in the above example the futures trade seems to be more profitable than the trade in actual stock. However, buying of the index future may not be beneficial as compared to buying stocks if the execution and brokerage costs on purchase of index futures are high and the return on surplus funds are low. The actual returns may vary based on actuals and depends on final guidelines / procedures and trading mechanism as envisaged by stock exchanges and other regulatory authorities.

Investment Objective

Stock Futures:
Stock futures were launched on 9th November 2001. A futures contract on a stock gives its owner the right and obligation to buy or sell the stocks. Like index futures, stock futures are also cash settled; there is no delivery of the underlying stocks. A purchase or sale of futures on a security gives the trader essentially the same price exposure as a purchase or sale of the security itself. In this regard, trading stock futures is no different from trading the security itself.

Example:
Assume that the spot price of the stock held by Mr. X is Rs. 390. Two-month futures cost him Rs. 402. For the futures contract he pays an initial margin. Now if the price of the security falls any further, he will suffer losses on the stock he holds. However, the losses he suffers on the stock will be offset by the profits he makes on his short futures position. For e.g. if the price of the stock held by him falls to Rs. 350, the fall in the price of the security will result in a fall in the price of futures. Futures will now trade at a price lower than the price at which he entered into a short futures position (assume futures trade at Rs. 340). Hence his short futures position will start making profits. The loss of Rs.40 incurred on the security he holds, will be made up by the profits of Rs. 62 (the initial margin paid and other related costs are not considered) made on his short futures position.

The Scheme could buy an index of October 2006 at the offer price of 2855. The Fund will be required to pay the initial margin as required by the exchanges. The following is a hypothetical example of a typical trade in index future and the costs associated with the trade. Particulars Index Future 2840 2855 15 Actual purchase of stocks 2840 NIL

Index as on beginning October 2006 October 2006 futures price (in Rs.) I. Execution Cost (Carry cost and other costs associated with the Index Futures - 2855-2840) (in Rs.) II. Brokerage Cost - on purchase (Assumed @ of 0.04% for index future and 0.05% for spot stocks) (in Rs.) (0.04% of 2855, 0.05%of 2840) III. Securities Transaction Tax (in Rs.) (STT on purchase of index futures - NIL; STT on purchase of stocks - 0.1% of 2840) IV. Gain on surplus funds (assumed 5% returns on 90% of the money left after paying margin (10%)) (in Rs.) (5% x 2840 x 90% x 30 days / 365) V. Spot market price at the expiry of October contract (in Rs.)
26

Options:
1.14 1.42 An option is a contract which provides the buyer of the option (also called the holder) the right, without the obligation, to buy (call) or sell (put) a specified asset at an agreed price on or upto a particular date. For acquiring this right the buyer has to pay a premium to the seller. The seller on the other hand has the obligation to buy or sell that specified asset at the agreed price. The premium is determined considering number of factors such as the underlying asset's market price, the number of days to expiration, strike price of the option, the volatility of the underlying asset and the risk less rate of return. The strike price, the expiration date and the market lots are specified by the exchanges. An option contract may be of two kinds, viz., a call option or a put option. An option that provides the buyer the right to buy is a call option. The buyer of the call option (known as the holder of the option) can call upon the seller of the option (known as

NIL

2.84

10.50

NIL

2855

2855

writer of the option) and buy from him the underlying asset at the agreed price at any time on or before the expiry date of the option. The seller of the option has to fulfil the obligation on exercise of the option. The right to sell is called a put option. Here, the buyer of the option can exercise his right to sell the underlying asset to the seller of the option at the agreed price. Options are of two types: (a) European and (b) American. In a European option, the holder of the option can only exercise his right on the date of expiration. In an American option, he can exercise this right anytime between the purchase date and the expiration date.

portfolio. The investments shall also be subject to the internal limits as may be laid down from time to time and such limits and restrictions as may be prescribed by the Regulations or any other regulatory body.

Concepts and Examples:


Derivatives are financial contracts of pre-determined fixed duration, whose values are derived from the value of an underlying primary financial instrument, commodity or index, such as: interest rates, exchange rates, commodities and equities.

Interest Rate Swaps:


Interest Rate Swaps is an agreement between two parties (counterparties) to exchange payments at specified dates on the basis of a specific amount with reference to a specified reference rate. Swap Agreements provide for period payment dates for both parties where payments are netted and only the net amount is paid to the counterparty entitled to receive the net payment. Consequently, the Debt Schemes' current obligations (or rights) under a swap agreement will generally be equal only to the net amount to be paid or received under the agreement, based on the relative values of the possession held by each counterparty.

Example on options:
Buying a Call option: Assume that the Scheme buys a call option at the strike price of Rs. 2,000 and pays a premium of Rs. 100. If the market price of the underlying stock on the date of expiry of the option is Rs. 2,400 (i.e. more than Rs. 2,100 which is total of the strike price and the premium), the Scheme would earn profits. However, if on the date of the expiry of the option, the market price of the underlying stock is Rs. 1,900, the Scheme will not exercise the option and it shall lose the premium of Rs. 100. Thus, in the above example, the loss for the Scheme, as the buyer of the option, is limited to the premium paid by him while the gains are unlimited. Buying a Put Option: Assume that the Scheme buys a put option at the strike price of Rs. 2,000 and pays a premium of Rs. 100. If the market price of the underlying stock decreases to Rs.1,850 the Scheme would be protected from the downside and would only have to bear the loss of the premium of Rs 100 instead of a loss of Rs.150 whereas if the stock price moves up to say Rs. 2,150 the Scheme may let the option expire and forego the premium thereby capturing Rs. 50 upside after bearing the premium of Rs. 100. Writing a Call Option: Assume that the Scheme writes a call option at the strike price of Rs. 2,050 and earns a premium of Rs. 100. If the market price of the underlying stock on the date of expiry increases to Rs. 2,200 (i.e. more than Rs. 2,050) then the option is exercised. The Scheme earns the premium of Rs. 100 / - but loses the difference between the market price and the exercise price i.e. Rs. 150 / -. In case the market price of the underlying stock decreases to Rs. 2,000, the Scheme gets to keep the premium of Rs.100. Writing a Put Option: Assume that the Scheme writes a put option at the strike price of Rs. 2,050 and earns a premium of Rs. 50. If the market value of the underlying stock decreases to Rs. 2,000 the put option will be exercised and the Scheme will earn the premium of Rs.50 but losses the difference between the exercise price and the market price which is Rs. 50. However if the market price of the underlying stock is Rs. 2,100, the option-holder will not exercise the option. As a result of which the option will expire and the Scheme will earn the premium income of Rs. 50. A forward contract is a transaction in which the buyer and the seller agree upon the delivery of a specified quality (if commodity) and quantity of underlying asset at a predetermined rate on a specified future date. Please note that the above examples are based on assumptions and are used only for illustrative purposes.

Example of a swap transaction:


Assume that a Debt Scheme has a Rs. 50 crore floating rate investment linked to MIBOR (Mumbai Inter Bank Offered Rate). Thus, the Scheme has a potential interest rate risk and stands to incur a loss if the interest rate moves down. To hedge this interest rate risk, the Scheme can enter into a 6 month MIBOR swap on July 1, 2006 for 6 months that is upto January 1, 2007. Through this swap, the Scheme will receive a fixed determined rate (assume 6%) and pays the 'benchmark rate' (MIBOR), which is fixed by an intermediary who runs a book and matches deals between various counterparties, such intermediary could be the NSE or the Reuters. This swap would effectively lock in the interest rate of 6% for the next 6 months, eliminating the daily interest rate risk. On January 1, 2007 the Scheme is entitled to receive interest on Rs. 50 crore at 6% for 180 days i.e., Rs. 1.5 crores (this amount is known at the time the swap is concluded) and will pay the compounded benchmark rate. The counterparty is entitled to receive the daily compounded call rate for 180 days and pay 6% fixed rate. On January 1, 2007, if the total interest on the daily overnight compounded benchmark rate is higher than Rs. 1.5 crore, the Scheme will pay the difference to the counterparty. If the daily compounded benchmark rate is lower, then the counterparty will pay the Scheme the difference. Effectively, the Scheme earns interest at the rate of 6% p.a. for 6 months without lending money for 6 months fixed, whilst the counterparty pays interest @ 6% p.a. for 6 months on Rs. 50 crores without borrowing for 6 months fixed.

Investment Objective

Forward Rate Agreement:


Forward rate agreement is a transaction in which the counterparties agree to pay or receive the difference between an agreed fixed rate and the interest rate prevailing on a stipulated future date, based on a notional amount, for an agreed period. As the interest rate is fixed now for a future period, the only payment is the difference between the agreed fixed rate and the reference rate in the future. As in the case of interest rate swaps, only notional amounts are exchanged. Assume that on June 30, 2006, the 90 day commercial paper (CP) rate is 6.75% and the Scheme has an investment in a CP of face value Rs. 25 crores which is going to mature on September 30, 2006. If the interest rates are likely to remain stable or decline after September 2006, and if the fund manager, who wants to re-deploy the maturity proceeds for 3 more months, does not want to take the risk of interest rates going down, he can then enter into a following forward rate agreement (FRA) say as on June 30, 2006 :
27

ii.

Applicable to FSTIF and FCF

The Schemes may invest in various derivatives instruments including interest rate swaps, currency swaps and forward contracts which are available for investment in Indian markets from time to time and which are permissible under the Regulations and by the RBI from time to time. Investment in such instruments will be made in accordance with the investment objective and the strategy of the Debt Schemes to protect the value of their

Combined Offer Document Fidelity Mutual Fund


He can receive 3 X 6 FRA on June 30, 2006 at 6.75% (FRA rate for 3 months lending in 3 months time) on the notional amount of Rs. 25 crores, with a reference rate of 90 day CP benchmark. If the CP benchmark on the settlement date i.e. September 30, 2006 falls to 6.5%, then the Scheme receives the difference 6.75 - 6.5 i.e. 25 basis points on the notional amount of Rs. 25 crores for 3 months. The maturity proceeds are then reinvested at say 6.5% (close to the benchmark). The scheme, however, would have locked in the rate prevailing on June 30, 2006 (6.75%) as it would have received 25 basis points more as settlement amount from FRA. Thus the fund manager can use FRA to mitigate the reinvestment risk. In this example, if the rates move up by 25 basis points to 7% on the settlement date (September 30, 2006), the Scheme loses 25 basis points but since the reinvestment will then happen at 7%, effective returns for the Scheme is unchanged at 6.75%, which is the prevailing rate on June 30, 2006.

F. Borrowing Powers
Under the Regulations, the Fund is allowed to borrow to meet the temporary liquidity needs of a Scheme for the purpose of repurchase, Redemption of Units or payment of interest or dividend to the Unit Holders. Further, as per Regulations, the Fund shall not borrow more than 20% of the net assets of a Scheme and the duration of such borrowing shall not exceed a period of 6 months. The Fund may enter into necessary arrangements with banks / financial institutions for borrowing purposes. The Scheme may bear the interest charged on such borrowings.

G. Investment in the Schemes by the AMC, Sponsor or their Affiliates


Subject to the Regulations the AMC, the Sponsor, the Trustee and their associates or affiliates, may invest either directly or indirectly in any Scheme mentioned in this Offer Document. However, AMC shall not charge any investment management and advisory services fee on its own investment in a Scheme.

Forward Contracts:
Forward contract is a transaction in which the buyer and the seller agree upon the delivery of a specified quality (if commodity) and quantity of underlying asset at a predetermined rate on a specified future date. Assume that on June 30, 2006, the scheme has invested 1 million dollars in a US treasury security. Fund manager expects that the yields in the US will come down in the next 6 months and plans to sell the asset on December 31, 2006 to book the gain. Rupee is trading at Rs. 44 to a US Dollar on June 30, 2006. If rupee appreciates compared to the Dollar in these 6 months to say Rs. 43.50 per Dollar, the Scheme will earn lower returns in Rupee terms when the fund manager sells the investments on December 31, 2006 and converts the proceeds into Rupees. He can mitigate this exchange rate risk by entering into a forward contract to sell 1 million dollars on June 30, 2006 for value December 31, 2006 (6 month forward) and receive the prevailing premium of say 40 paise per Dollar i.e. he has locked in a rate of Rs. 44.40 per US Dollar for delivery on December 31, 2006. With this the Scheme is not exposed to the loss of Rupee appreciation or profit from Rupee depreciation. Please note that the above examples are based on assumptions and are used only for illustrative purposes.

H. Procedure and Recording of Investment Decisions


All investment decisions, relating to the Schemes, are being undertaken by the AMC in accordance with the Regulations and the investment objectives specified in this Offer Document. All investment decisions taken by the AMC in relation to the corpus of the Schemes are being recorded. With regard to investments in any equity and debt instruments, individual scrip wise reasons are being recorded by the fund manager at the time of placing individual orders. In case of investments in equity instruments the reasons are being recorded on the dealing desk in Hong Kong. A detailed report is made before taking any decision to invest in a company for the first time. Performance of the Schemes is periodically tabled before the Boards of the AMC and the Trustee respectively. Performance of the Schemes vis--vis their respective benchmark indices are being monitored by the Boards of the Trustee and the AMC periodically. Further, the Boards of the Trustee and the AMC also review the performance of the Schemes in the light of performance of the mutual fund industry as published from time to time by independent research agencies and financial newspapers and journals. The AMC has appointed Investment Committees for the Equity and Debt / Fixed income schemes comprising of the fund manager of the respective Scheme, a research / credit analyst of the AMC, FIL Group Chief Investment Officers and the Compliance Officer. The Committee's role is to lay down the broad investment policy for the Schemes, review the policy and to review the portfolio and performance of the Schemes periodically. However the day to day investment management decision will solely be of the fund manager of the respective Scheme.

Investment Objective

E. Fundamental Attributes
In terms of the Regulations and SEBI's circular dated February 4, 1998, "Fundamental Attributes" referred above shall mean: i) Type of Scheme, i.e. an open ended equity growth scheme or an open ended equity linked savings scheme or an open ended income scheme or an open ended liquid scheme; Investment Objectives, Investment Strategy, Investment Pattern;

ii)

iii) Terms of Issue relating to listing, Redemption, fees, expenses In accordance with Regulation 18(15A) of the Regulations, the Trustee shall ensure that no change in the fundamental attributes of the Scheme or the Fund or the fees and expenses payable or any other change which would modify the Scheme and affect the interest of the Unit Holders, will be carried out unless: (i) a written communication about the proposed change is sent to each Unit Holder and an advertisement is given in one English daily newspaper having nationwide circulation as well as in a Marathi daily newspaper with wide circulation published in Mumbai (as the head office of the Fund is situated there); and

I. Portfolio Turnover - Equity Schemes


The fund managers normally will buy stocks which they believe will deliver superior earnings growth over a one-to-two year period and hence the portfolio turnover is not expected to be very high. Portfolio turnover is defined as the aggregate value of investment and disinvestment in equity / equity related securities (other than those caused by the Purchases and Redemptions by Unit Holders) as a percentage of the average corpus of the Scheme during a specified period of time. This would also exclude investments / disinvestments in money market instruments.

J. Overview of Debt Markets


Indian fixed income market, one of the largest and most developed in South Asia, is now well integrated with the global financial markets. Increase in the limit of foreign institutional investors'

(ii) the Unit Holders are given an option to exit at the prevailing NAV without any Exit Load, if any.

28

investment in the domestic fixed income market to 3.5 billion dollars and a road map for the convertibility of Rupee will certainly result in attracting global investors to the Indian Market. Screen based order matching system developed by the Reserve Bank of India (RBI) for trading in government securities, straight through settlement system for the same, settlements guaranteed by the Clearing Corporation of India and innovative instruments like CBLO have contributed in reducing the settlement risk and increasing the confidence level of the market participants. The RBI reviews the monetary policy four times a year giving the guidance to the market on direction of interest rate movement, liquidity and credit expansion. The central bank has been operating as an independent authority, formulating the policies to maintain price stability and adequate liquidity. Bonds are traded in dematerialised form and institutional investors' preference for listed instruments has resulted in most of the bonds getting listed. This has improved the disclosure standards by the issuers. Credit rating agencies have been playing an important role in the market and are an important source of information to manage the credit risk. Government (Central and State) is the largest issuer of debt in the market. Public sector enterprises, quasi government bodies and private sector companies are other issuers. Insurance companies, provident funds, banks, mutual funds, financial institutions, corporates and FIIs are major investors in the market. Government loans are available up to 30 years maturity. Variety of instruments available for investments including plain vanilla bonds, floating rate bonds, money market instruments, structured obligations and interest rate derivatives make it possible to manage the interest rate risk effectively. Daily average turnover in the market ranges from Rs. 500 crores to Rs. 10,000 crores. 80 to 90% of it is in gilts. The securities available are listed or unlisted, secured or unsecured, public issue or private placements. Indicative levels of the instruments currently trading are as follows: Instrument CBLO / Repo CP / CD / T Bills Securitised Debt PSU Bonds / Corporate Bonds Central / State Govt. Securities Maturity Short Short Short / Medium Medium Low to High Yield 6.25% to 7.25% 7.00% to 11.00% 10.00% to 12.00% 9.50% to 10.50% 7.50% to 8.00% Liquidity Very High High Low Medium High 7. 6. 2.

instruments. Provided further that investments in debt securities issued by public bodies / institutions such as electricity boards, municipal corporations, state transport corporations etc. guaranteed by the State or Central government would be included within the aforesaid limit. Provided further that investment within such limit can be made in mortgaged backed securitised debts which are rated not below investment grade by a credit rating agency registered with SEBI. No Scheme shall invest more than 10% of its net assets in unrated debt instruments (irrespective of residual maturity) issued by a single issuer and the total investment in such instruments shall not exceed 25% of the net assets of that scheme. The Fund under all its schemes shall not own more than 10% of any company's paid up capital carrying voting rights. For the purpose of determining the above limit, a combination of positions of the underlying securities and stock derivatives will be considered. 4. 5. No Scheme shall invest more than 5% of its net assets in the unlisted equity shares or equity related instruments. Transfers of investments from one scheme to another scheme in the Fund shall be made only if, (a) such transfers are done at the prevailing market price for quoted instruments on spot basis. Explanation - "spot basis" shall have the same meaning as specified by stock exchange for spot transactions. (b) the securities so transferred shall be in conformity with the investment objective of the scheme to which such transfer has been made. A Scheme may invest in other schemes managed by the same AMC or by the asset management company of any other mutual fund without charging any fees, provided that aggregate inter-scheme investment made in all schemes under the same management or in schemes under the management of any such other asset management company shall not exceed 5% of the net asset value of the Fund. A Scheme shall buy and sell securities on the basis of deliveries and shall in all cases of purchases, take delivery of relative securities and in all cases of sale, deliver the securities and shall in no case put itself in a position whereby it has to make short sale or carry forward transaction or engage in badla finance. Provided that the Fund may enter into derivatives transactions for the purpose of hedging and portfolio balancing in accordance with the guidelines issued by SEBI in an attempt to protect the value of the portfolio. 8. The Fund shall, get the securities purchased or transferred in the name of the Fund on account of any scheme, wherever investments are intended to be of long term nature. Pending deployment of funds of any scheme in securities in terms of investment objectives of that scheme, the scheme can invest its funds in short term deposits of scheduled commercial banks.
Investment Objective

3.

These are only indicative levels in February 2007 and are likely to change depending upon the prevailing market conditions.

K. Investment Restrictions
As per the Trust Deed read with the Regulations, the following investment restrictions apply in respect of the Schemes at the time of making investments. However, all investments by the Schemes are made in accordance with their respective investment objective, investment strategy and investment pattern described previously. 1. No Scheme shall invest more than 15% of its net assets in debt instruments (irrespective of residual maturity) issued by a single issuer which are rated not below investment grade by a credit rating agency authorised to carry out such activity under the Act. Such investment limit may be extended to 20% of the net assets of a scheme with the prior approval of the Board of Trustees and the Board of the AMC. Provided that such limit shall not be applicable for investments in government securities and money market

9.

10. No Scheme shall make any investment in; a) b) any unlisted security of an associate or group company of the Sponsor; or any security issued by way of private placement by an associate or group company of the Sponsor; or

29

Combined Offer Document Fidelity Mutual Fund


c) the listed securities of group companies of the Sponsor which is in excess of 25% of the net assets. b. iii. or 15% of the total open interest of the market in index futures, whichever is higher, per Stock Exchange. This limit would be applicable on open positions in all futures contracts on a particular underlying index.

11. No Scheme shall make any investment in any fund of funds scheme. 12. No Scheme shall invest more than 10% of its net assets in the equity shares or equity related instruments of any company. For the purpose of determining the above limit, a combination of positions of the underlying securities and stock derivatives, will be considered. 13. All Schemes will comply with any other Regulations applicable to the investments of Mutual Funds from time to time. 14. No term loans for any purpose may be advanced by the Fund and the Fund shall not borrow except to meet temporary liquidity needs of the Schemes for the purpose of repurchase, redemption of Units or payment of interest or dividends to Unit Holders, provided that the Fund shall not borrow more than 20% of the net assets of any Scheme and the duration of such a borrowing shall not exceed a period of 6 months. 15. Mark-to-Market component of FCF on a weekly average basis shall be less than 10% of the net assets. [Mark-tomarket would mean the valuation of an asset (e.g. marketable securities, derivatives and other financial contracts) using a traded price or a derived price from the corresponding yield curve]. For the purpose of calculating the mark-to-market component of the portfolio, money market instruments shall be excluded. The Trustee Company / AMC may alter these above stated limitations from time to time, and also to the extent the Regulations change and as permitted by RBI, so as to permit the Scheme to make its investments in the full spectrum of permitted investments in order to achieve its investment objective.

Additional position limit for hedging for the Fund In addition to the position limits at point (i) and (ii) above, the Fund may take exposure in equity index derivatives subject to the following limits: a. Short positions in index derivatives (short futures, short calls and long puts) shall not exceed (in notional value) the Fund's holding of stocks. Long positions in index derivatives (long futures, long calls and short puts) shall not exceed (in notional value) the Fund's holding of cash, government securities, TBills and similar instruments.

b.

iv.

Position limit for the Fund for stock based derivative contracts The position limit for the Fund in a derivative contract on a particular underlying stock, i.e. stock option contracts and stock futures contracts shall be as follows: a. For stocks having applicable market-wise position limit (MWPL) of Rs. 500 crores or more, the combined futures and options position limit shall be 20% of applicable MWPL or Rs. 300 crores, whichever is lower and within which stock futures position cannot exceed 10% of applicable MWPL or Rs. 150 crores, whichever is lower. For stocks having applicable market-wise position limit (MWPL) less than Rs. 500 crores, the combined futures and options position limit would be 20% of applicable MWPL and futures position cannot exceed 20% of applicable MWPL or Rs. 50 crore which ever is lower.

Investment Objective

b.

v.

Position limit for the Scheme The position limit / disclosure requirements for the Scheme shall be as follows: a. For stock option and stock futures contracts, the gross open position across all derivative contracts on a particular underlying stock of the Scheme shall not exceed the higher of: 1% of the free float market capitalisation (in terms of number of shares) Or 5% of the open interest in the derivative contracts on a particular underlying stock (in terms of number of contracts). b. For index based contracts, the Fund shall disclose the total open interest hold by its scheme or all schemes put together in a particular underlying index, if such open interest equals to or exceeds 15% of the open interest of all derivatives contracts on that underlying index.

Investment Restrictions pertaining to trading in derivatives:


In accordance with SEBI's circulars nos. DNPD / Cir-29 / 2005 and DNPD / Cir-30 / 2006 dated September 14, 2005 and January 20, 2006 respectively, the following conditions shall apply to the Scheme's participation in the derivatives market. Please note that the investment restrictions applicable to the Scheme's participation in the derivatives market will be as prescribed or varied by SEBI or by the Trustees (subject to SEBI requirements) from time to time. i. Position limit for the Fund in index options contracts The position limit for the Fund in index options contracts shall be as follows: a. The Fund's position limit in all index options contracts on a particular underlying index shall be Rs. 250 crore or 15% of the total open interest of the market in index options, whichever is higher, per Stock Exchange. This limit would be applicable on open positions in all options contracts on a particular underlying index.

b. ii.

Position limit for the Fund in index futures contracts The position limit for the Fund in index futures contracts shall be as follows: a. The Fund's position limit in all index futures contracts on a particular underlying index shall be Rs. 250 crore

This position limits shall be applicable on the combined position in all derivative contracts on an underlying stock at a stock exchange. The Trustee may alter the above restrictions from time to time to the extent that changes in the Regulations may allow and as deemed fit in the general interest of the Unit Holders.

30

L. Computation of Net Asset Value


The Net Asset Value of the Units of a Scheme will be computed by dividing the net assets of the Scheme by the number of Units outstanding under that Scheme on the valuation date. The Fund shall value its investments according to the valuation norms, as specified in Schedule VIII of the Regulations, or such norms as may be prescribed by SEBI from time to time. The broad valuation norms pertaining to the Equity and Debt Schemes are detailed below.

ii. Non-Traded Equity Securities When a security (other than debt and Government securities) is not traded on any stock exchange for a period of 30 days prior to the Valuation Day, the scrip is treated as non-traded scrip. Non-traded / thinly traded equity securities shall be valued "in good faith" by the asset management company on the basis of the valuation principles laid down below: Based on the latest available Balance Sheet, net worth shall be calculated as follows : a. Net Worth per share = [share capital+ reserves (excluding revaluation reserves) - Miscellaneous expenditure and Debit Balance in P&L A / c] Divided by No. of Paid up Shares. 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. 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 10% for illiquidity so as to arrive at the fair value per share. In case the EPS is negative, EPS value for that year shall be taken as zero for arriving at capitalised earning. 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. 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 belongs would be compared on the date of valuation.

Valuation Norms: 1.
i.

Traded Securities
Traded securities are valued at the last quoted closing price on the NSE. If a particular security is not listed on the NSE, it is valued at the last quoted closing price on the stock exchange where it is principally traded ("another stock exchange"). When on a particular Valuation Day, a security listed on the NSE has not been traded on the NSE, the value at which it has been traded on another stock exchange is used. When a equity security is not traded on any stock exchange on a particular valuation day, the value at which it was traded on the selected stock exchange or any other stock exchange, as the case may be, on the earliest previous day may be used provided such date is not more than 30 days prior to the Valuation Day. When a debt security (other than Government Securities) is not traded on any stock exchange on any particular valuation day, the value at which it was traded on the principal stock exchange or any other stock exchange, as the case may be, on the earliest previous day may be used provided such date is not more than fifteen days prior to valuation date. When a debt security (other than Government Securities) is purchased by way of private placement, the value at which it was bought may be used for a period of fifteen days beginning from the date of purchase.

b.

ii.

c.

Investment Objective

d. e.

f.

2.

Thinly Traded Securities / Non-Traded Securities / Unlisted Equity Securities

i. Thinly Traded Equity / Equity related securities When trading in an equity / equity related security (such as convertible debentures, equity warrants, etc.) in a month is less than Rs. 5 lakh and the total volume is less than 50,000 shares, it shall be considered as a thinly traded security and valued accordingly. Where a stock exchange identifies the "thinly traded" securities by applying the above parameters for the preceding calendar month and publishes / provides the required information along with the daily quotations, the same can be used by the Fund. If the share is not listed on the stock exchanges which provide such information, then it will be obligatory on the part of the Fund to make its own analysis in line with the above criteria to check whether such securities are thinly traded which would then be valued accordingly. In case trading in an equity security is suspended upto 30 days, then the last traded price would be considered for valuation of that security. If an equity security is suspended for more than 30 days, then the AMC / Trustees will decide the valuation norms to be followed and such norms would be documented and recorded.

iii. Unlisted Equity Shares 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. 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].

ii.

31

Combined Offer Document Fidelity Mutual Fund


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. ii. All calculations as aforesaid shall be based on audited accounts. 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. If the net worth of the company is negative, the share would be marked down to zero. In case the EPS is negative, EPS value for that year shall be taken as zero for arriving at capitalised earning. 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. ii. Thinly Traded / Non-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-Performing" assets. All Non Government investment grade debt securities, classified 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 Government Securities as the base. Government Securities 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. As per the recommendation of AMFI, CRISIL Bond Valuation Matrix is used to arrive at yields for pricing the portfolio.

iii.
Investment Objective

iv. v.

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.

3.

Thinly Traded / Non-Traded Debt Securities

4.

Valuation of securities with Put / Call Options:

The option embedded securities would be valued as follows: i. 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. ii. 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. iii. 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.

A debt security (other than Government Securities) shall be considered as a thinly traded security if on the valuation date, there are no individual trades in that security in marketable lots (currently Rs. 5 crore) on the principal stock exchange or any other stock exchange. Non-traded / Thinly Traded Debt Securities would be valued as per the norms set out below: i. Thinly Traded / Non-Traded Debt Securities of Upto 182 Days to Maturity: As the 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 instruments) a similar process should be adopted for non-traded debt securities with residual maturity of upto 182 days. Debt securities purchased with residual maturity of upto 182 days are to be valued at cost (including accrued interest till the beginning of the day) plus the difference between the redemption value (inclusive of interest) and cost spread uniformly over the remaining maturity period of the instrument. In case of a debt security with maturity greater than 182 days at the time of purchase, the last valuation price plus accrued interest should be used instead of purchase cost. All other non-traded Non Government debt instruments shall be valued using the method suggested below.

5.

Government securities

All Government bonds are to be valued at the prices provided by CRISIL.COM on a daily basis.

32

6.

While investments in call money, bills purchased under rediscounting plan and short term deposits with banks 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, that is instruments not traded for a period of 7 days, will be valued at cost plus interest accrued till the beginning of the Valuation Day plus the difference between the redemption value and the cost spread uniformly over the remaining maturity period of the instruments. The non-convertible and convertible components of convertible debentures and bonds shall be valued separately. The non-convertible component would be valued on the same basis as would be applicable to a debt instrument. The convertible component should be 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 can be adopted after an appropriate discount for the non-tradability of the instrument during the period preceding the conversion. While valuing such instruments, the fact whether the conversion is optional should also be factored in. Where an instrument has been bought on a 'Repo' basis, the instrument would be valued at the resale price after deduction of applicable interest upto the date of resale. Where an instrument has been sold on a 'Repo' basis, adjustment would 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 of the instrument, the depreciation would be provided for, and if the repurchase price is lower than the value of the instrument, credit would be taken for the appreciation. In respect of warrants to subscribe attached to instruments, the warrants would be 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 shall be deducted to account for the period, which must elapse before the warrant can be exercised. calculated as: Vr = n m x (Pex - Pof) Where Vr n m Pex Pof = Value of rights = no. of rights offered = no. of original shares held = Ex-rights price = Rights Offer Price

all such investments which are recognised as illiquid securities. iii. Mutual Funds shall not be allowed to transfer illiquid securities among their schemes.

12. Valuation in respect of Non-Performing Assets (NPAs)


Valuation of Non-Performing assets (debt securities) will be done in accordance with "SEBI Guidelines for Identification and Provisioning for NPAs" issued vide circular dated September 18, 2000 (as modified), which will form part of valuation policy of a Scheme. An asset shall be classified as "Non-Performing" if the interest and / or principal amount have not been received or remained outstanding for three months from the day such income / instalment has fallen due. The Fund shall make scripwise disclosures of NPAs on a 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 a Scheme. In the list of investments, an asterisk mark shall be given against such investments which are recognised as NPAs. Where the date of redemption of an investment has lapsed, the amount not redeemed shall be shown as 'Sundry Debtors' and not investment, provided that where an investment is redeemable by instalments that will be shown as an investment until all instalments have become overdue.

7.

8.

Investment Objective

13. Accounting and Valuation Policies with respect to Derivative Products:


i. Equity Option Derivatives Premium paid / received on bought / written option contracts shall be debited / credited to "equity option premium account" and recorded as an asset / liability. When the option contracts are squared off before expiry, the difference between the premium paid and received on the squared off transactions shall be recognised in the revenue account. When the option contracts are exercised on or before expiry, the difference between the option settlement price as determined by the exchange and the premium shall be recognised in the revenue account. If more than one option contracts in respect of the same stock / index with the same strike price and expiry date to which the squared off / exercised contract pertains is outstanding at the time of square off / exercise of the contract, the weighted average method shall be followed for determining the gain or loss. Premium asset / liability in respect of options not exercised / squared off as on expiry date shall be transferred to revenue account. As at the balance sheet date / date of determination, all open option positions shall be valued at the last quoted price at the exchange where it is traded. Non-traded equity option contracts shall be valued at fair value as per procedures determined by the AMC and approved by the Trustee. The unrealised appreciation / depreciation on all open positions shall be considered for determining net asset value. ii. Equity Futures Derivatives Futures contracts are marked to market daily at the futures settlement price as determined by the exchange and correspondingly, variation margin calculated as the difference between the trade price or the previous day's settlement price, as the case may be, and the current day's settlement price shall be recorded as a receivable or payable. When a contract is squared off / settled on expiry, the difference between the square-off price / the final settlement price and the contract price shall be recognized in the revenue account. If more than one futures contracts in respect of the same stock and expiry date, to which the squared off / settled contract pertains,

9.

10. Until they are traded, the value of "rights" shares shall be

Where the rights are not treated pari passu with the existing shares, suitable adjustments shall be made to the value of the 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.

11. Illiquid Securities


i. 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. All funds shall disclose as on March 31 and September 30 the scheme-wise total illiquid securities in value and percentage of the net assets while making disclosures of half yearly portfolios to the Unit Holders. In the list of investments, an asterisk mark shall also be given against

ii.

33

Combined Offer Document Fidelity Mutual Fund


is outstanding at the time of square off / settlement of the contract, the weighted average method shall be followed for determining the gain or loss. As at the balance sheet date / date of determination, all open futures positions shall be valued at the last quoted price at the exchange where it is traded. Non-traded equity futures contracts shall be valued at fair value as per procedures determined by the AMC and approved by the Trustee. The unrealised appreciation / depreciation on all open positions shall be considered for determining net asset value. iii. The traded derivatives shall be valued at market price in conformity with the stipulations of sub clauses (i) to (v) of clause 1 of the Eighth Schedule to the SEBI Regulations, as amended from time to time. iv. The valuation of untraded derivatives shall be done in accordance with the valuation method for untraded investments prescribed in sub clauses (i) and (ii) of clause 2 of the Eighth Schedule to the SEBI Regulations as amended from time to time. The NAVs of FEF, FTAF, FISSF and FSTIF are calculated on all Business Days whereas the NAVs of FCF are calculated on all calendar days. The valuation of a Scheme's assets and calculation of a Scheme's NAV are subject to audit on an annual basis and such regulations as may be prescribed by SEBI from time to time.

P. Accounting Policies and Standards


In accordance with the Regulations, the AMC will follow the accounting policies and standards detailed below. 1. The AMC shall keep and maintain proper books of accounts, records and documents, for all the Schemes so as to explain its transactions and to disclose at any point of time the financial position of any Scheme and, in particular, to give a true and fair view of the state of affairs of the Fund. For the purposes of the financial statements, the Fund shall mark all investments to market and carry investments in the balance sheet at market value. However, since the unrealised gain arising out of appreciation on investments cannot be distributed, provision shall be made for exclusion of this item when arriving at distributable income. In respect of all interest-bearing investments, income shall 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. In determining the holding cost of investments and the gains or loss on sale of investments, the "average cost" method shall be followed. Transactions for purchase or sale of investments shall be recognised as of the trade date and not as of the settlement date, so that the effect of all investments traded during a financial year are recorded and reflected in the financial statements for that year. Where investment transactions take place outside the stock market (for example, acquisitions through private placement or purchases or sales through private treaty), the transaction shall be recorded, in the event of a purchase, as of the date on which any 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. Where income receivable on investments has accrued but has not been received for the period as specified in the SEBI guidelines for identification and provisioning for NPAs, provision shall be made by debiting to the revenue account the income so accrued in the manner specified in the SEBI guidelines for identification and provisioning for NPAs. Insofar as provision for the principal amount is concerned, the same shall be provided as specified in the aforesaid guidelines. When Units are sold, the difference between the sale price and the face value of the Unit, if positive, shall be credited to reserves and if negative, shall be debited to reserves, the face value being credited to the capital account. Similarly, when Units are repurchased, the difference between the Purchase Price and 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. 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.

2.

M. Accrual of Expenses and Income


All expenses and income accrued up to the Valuation Day shall be considered for calculation of NAV. For this purpose, while major expenses like management fees and other periodic expenses would be accrued on a day to day basis, the minor expenses and income may not be so accrued, provided the non accrual does not affect the NAV calculations by more than 1%. 3.

Investment Objective

N. Recording of Changes
Any changes in securities and in the number of Units will be 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 7 days following the date of the transaction, provided as a result of such 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. 4.

5.

(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. The valuation guidelines outlined above are within the parameters of the Regulations and are subject to changes from time to time by the AMC and / or the Trustee. However, such changes must be in conformity with the Regulations.

6.

7.

O. Calculation of NAV
The NAV of Units under the Scheme shall be calculated by either of the following methods shown below: Market or fair value of the Scheme's investments + Current Assets - Current Liabilities and Provisions NAV (Rs.) = No. of Units outstanding under the Scheme NAV (Rs.) = Unit Capital + Reserves and Surplus No. of Units outstanding under the Scheme 8.

The NAV will be calculated upto three decimal places for the Equity Schemes and four decimal places for the Debt Schemes.
34

The balance on the equalisation account debited or credited to the revenue account shall not decrease or increase the net income of any scheme but shall only be an adjustment to the distributable surplus. It shall therefore be reflected in the revenue account only after the net income of a scheme is determined. 9. The cost of investments acquired or purchased shall include securities transaction tax, brokerage, stamp charges and any charge customarily included in the broker's bought note. In respect of privately placed debt instruments, any front-end discount offered shall be reduced from the cost of the investment.

declared. For investments, which are not quoted on the stock exchange, dividend income shall be recognised on the date of declaration. 11. Bonus shares to which the scheme becomes entitled shall be recognised only when the original shares to which the bonus entitlement accrues are traded on the stock exchange on an ex-bonus basis. Similarly, rights entitlements shall be recognised only when the original shares on which the rights entitlement accrues are traded on the stock exchange on an ex-rights basis. The accounting policies and standards outlined above are consistent with the current Regulations and are subject to changes made from time to time by the AMC and / or Trustee. However, such changes must be in conformity with the Regulations.

10. Dividend income earned by the scheme shall be recognised on the date on which the investment is quoted on an exdividend basis, not on the date on which the dividend is

35

Investment Objective

Combined Offer Document Fidelity Mutual Fund

VI. Load, Fees and Expenses


A. Load Structure of the Schemes
1. FEF, FTAF, FISSF
Load (% of Applicable NAV) 2.25% NIL NIL NIL NIL

under STP may also attract the applicable Entry Load like any Purchase. Exit Load : NIL If the AMC introduces an Exit Load, a switch-out or a withdrawal under SWP or transfer under STP may also attract the applicable Exit Load like any Redemption. No Entry / Exit Loads / CDSC will be chargeable in case of switches made between different plans / options of the Scheme. The Trustee retains the right to change / impose an Entry / Exit Load / CDSC, subject to the provisions below. 1. Any such changes / impositions would be chargeable only for prospective Purchases and Redemptions from such prospective Purchases (applying First in First Out basis). The AMC shall arrange to display a notice in all the ISCs before changing the prevalent Load Structure. An addendum detailing the changes in Load Structure will be attached to Offer Documents and Application Forms. Unit Holders / Prospective investors will be informed of changed / prevailing Load Structures through various means of communication such as public notice and / or display at ISCs / Distributors' offices, on account statements, acknowledgements, investor newsletters, etc. The Redemption Price will not be lower than 93% of the Applicable NAV and the Purchase Price will not be higher than 107% of the Applicable NAV, provided that the difference between the Redemption Price and the Purchase Price at any point in time shall not exceed the permitted limit as prescribed by SEBI from time to time, which is currently 7% calculated on the Purchase Price.

Entry Load:
For each Purchase (i) Of less than Rs. 5 Crores

(ii) Of Rs. 5 Crores or more (iii) By an FOF (irrespective of the amount of Purchase) (iv) As a result of Dividend Re-investment (v) Through switch-in (including through STP) into any of the Equity Schemes of the Fund from Fidelity MultiManager Cash Fund ("FMCF") or FSTIF or FCF; provided units are first switched out / systematically transferred out from the Equity Schemes of the Fund to FMCF or FSTIF or FCF and, within a period of 90 days from such transaction, the units allotted against such switch proceeds are again switched out / systematically transferred out from FMCF or FSITF or FCF (on a FIFO basis) into any of the Equity Schemes of the Fund. (vi) Through switch-in from other Equity Schemes of the Fund

2.

3. NIL

In case of SIP / STP the above criteria for Entry Load will be applicable for each instalment. A switch-in will also attract an Entry Load like any Purchase except in cases mentioned above.
Fees and Expenses

Exit Load:
For Redemption (i) Within 6 months from the date of allotment or Purchase applying First in First Out basis for investments made other than through SIP / STP or if the Purchase was made through SIP / STP and the Entry Load applicable at the time of SIP / STP Purchase was NIL / 2.25% Load (% of Applicable NAV) 1.00%

Investors are advised to contact any of the ISCs or the AMC by calling the investor line of the AMC at "1800 180 8000" (toll-free from a MTNL / BSNL landline) or 30309800 (at local call rate from your mobile phone prefixing the local city code or non - MTNL / BSNL landline) or 0124 2542022 (at long distance rates) to know the latest position on Entry / Exit Load or CDSC structure prior to investing. All Loads / CDSC are intended to enable the AMC to recover expenses incurred for promotion or distribution and sales of the Units of the Schemes. All Loads including CDSC will be retained in the Schemes in a separate account and will be utilised to meet the distribution and marketing expenses. Any surplus amounts in this account may be credited to a Scheme whenever considered appropriate by the AMC.

(ii) Within 2 years from the date of allotment or Purchase applying First in First Out basis, if the Purchase was made through SIP / STP and the Entry Load applicable at the time of SIP / STP Purchase was 1.25% However in case of FTAF, the Exit Load is NIL.

1.00%

B. Fees and Expenses of the Schemes


As per the Regulations, the following fees and expenses can be charged to the Scheme:

A switch-out or a withdrawal under SWP may also attract an Exit Load like any Redemption

1.

Investment Management Fee

2.

FSTIF, FCF

Entry Load : NIL If the AMC introduces an Entry Load, a switch-in or transfer

The AMC is entitled to an investment management fee at the rate of 1.25% per annum of the daily average net assets of the scheme(s) outstanding in each financial year for the net assets up to Rs. 100 Crores and at the rate of 1.00% per annum of the daily average net assets of the scheme(s) outstanding in each financial year for the net assets in excess of Rs. 100 Crores.

36

2.

Recurring Expenses

The fees and expenses of operating the Schemes on an annual basis, and which are charged to the Schemes, are as follows (each as a percentage per annum of the average daily net assets): Nature of Expense Fidelity Equity Fund Fidelity Tax Advantage Fund Fidelity India Special Situations Fund Fidelity Short Term Income Fund Retail Plan Investment Management and Advisory Fee Trustee Fees and Expenses Custodian Fees Registrar and Transfer Agent Fees Audit Fees Marketing and Selling Expenses including agents' commission Costs related to investor communications Costs of fund transfer from location to location Cost of providing account statements and dividend and Redemption cheques and warrants Costs of statutory advertisements Service Tax Other expenses which are directly attributable to the Scheme, subject to the approval of the Trustee* Total Recurring Expenses Nature of Expense Retail Plan Investment Management and Advisory Fee Trustee Fees and Expenses Custodian Fees Registrar and Transfer Agent Fees Audit Fees Marketing and Selling Expenses including agents' commission Costs related to investor communications Costs of fund transfer from location to location Cost of providing account statements and dividend and Redemption cheques and warrants Costs of statutory advertisements Other expenses which are directly attributable to the Scheme, subject to the approval of the Trustee* Total Recurring Expenses * 0.200 0.001 0.005 0.025 0.001 0.325 0.134 0.004 0.100 1.2500 0.0250 0.2000 0.2000 0.0100 0.6500 0.0100 0.0100 0.0125 1.2500 0.0250 0.2000 0.2000 0.0100 0.6500 0.0100 0.0100 0.0125 1.2500 0.0250 0.2000 0.2000 0.0100 0.6500 0.0100 0.0100 0.0125 0.3000 0.0010 0.1000 0.1200 0.0100 0.4000 0.0200 0.0040 0.0400 Institutional Plan 0.3000 0.0010 0.1000 0.1200 0.0100 0.2500 0.0050 0.0040 0.0050

0.0050 0.1275

0.0050 0.1275

0.0050 0.1275

0.0050

0.0050

2.5000

2.5000

2.5000 Fidelity Cash Fund Institutional Plan 0.200 0.001 0.005 0.025 0.001 0.120 0.020 0.004 0.019

1.0000

0.8000

Fees and Expenses

Super Institutional Plan 0.200 0.001 0.005 0.025 0.001 0.005 0.005 0.003

0.005

0.005

0.005

0.800

0.400

0.250

Other expenses: Any other expenses which are directly attributable to the Schemes, may be charged with approval of the Trustee within the overall limits as specified in the Regulations except those expenses which are specifically prohibited.

The purpose of the above table is to assist the investor in understanding the various costs and expenses that the investor in any Scheme will bear directly or indirectly. The above estimates for recurring expenses for a Scheme are based on the corpus size of Rs. 100 Crores under any scheme, and may change to the extent assets are lower or higher. These estimates have been made in good faith as per the information available to the AMC at the time of preparation of the Offer Document, and the AMC reserves the right to change the estimates, both inter se or in total, subject to prevailing Regulations.
37

Combined Offer Document Fidelity Mutual Fund


The AMC may incur actual expenses which may be more or less than those estimated above under any head and / or in total. The AMC will charge the Schemes such actual expenses incurred, subject to the statutory limit prescribed in Regulation 52 of the Regulations, as given below. Any excess over these limits will be borne by the AMC. However, an additional Management Fee of up to 1% may be charged in case of a No-Load scheme.

C. Initial Issue Expenses of the existing schemes of the Fund:


Scheme Name Initial Issue Expenses (in Rs. Lakhs) Total Charged to the Scheme to the extent of the Entry Load 2,650.54 883.65 3,508.34 Borne by the AMC

Maximum Recurring Expenses:


Average daily net assets FEF, FISSF, FTAF FSTIF, FCF

Maximum as a % of Average daily net assets First 100 Crores Next 300 Crores Next 300 Crores Balance Assets 2.50% 2.25% 2.00% 1.75% 2.25% 2.00% 1.75% 1.50% Fidelity Equity Fund Fidelity MultiManager Cash Fund Fidelity Tax Advantage Fund Fidelity India Special Situations Fund Fidelity Short Term Income Fund Fidelity Cash Fund 3,526.11 1.67 1,960 3,841.13 155.73 18.50

875.57 1.67 1,077.24 332.79 155.73 18.50

Maximum Management Fee to be charged by the AMC:


Average daily net assets Maximum as a % of Average daily net assets 1.25% 1.00%

First 100 Crores Balance Assets

D. Condensed Financial Information


Historical Per Unit Statistics Fidelity Equity Fund Fidelity MultiManager Cash Fund Fidelity Tax Advantage Fund Fidelity India Special Situations Fund May 2006 to February 2007 March 28, 2006 May 22, 2006 May 22, 2006 February 20, 2007 10.00 (G) / 10.00 (D) 0.73 0 13.052 (G) / 13.052 (D)

May 2005 to March 2006


Fees and Expenses

April 2006 to February 2007 March 21, 2005 May 16, 2005 April 01, 2006 February 20, 2007 17. 850 (G) / 15.752 (D) 4.23 0 21.814(G) / 19.249 (D)

January 2006 to March 2006 January 2, 2006 January 9, 2006 January 9, 2006 March 31, 2006 10.00 (G) / 10.00 (DR) 0.72 0.12 0 10.1333 (G) / 10.0135 (DR)

April 2006 to February 2007 January 2, 2006 January 9, 2006 April 01, 2006 February 20, 2007 10.1333 (G) / 10.0135 (DR) 0.69 0.59 0 10.7426 (G) / 10.0092 (DR)

February 2006 to March 2006 January 5, 2006 February 27, 2006 February 27, 2006 March 31, 2006 10.00 (G) / 10.00 (D) 2.02 0 10.774 (G) / 10.774 (D)

April 2006 to February 2007 January 5, 2006 February 27, 2006 April 01, 2006 February 20, 2007 10.774 (G) / 10.774 (D) 0.15 0 12.870 (G) / 12.870 (D)

Date of Launch Date of Allotment Beginning of year / Allotment Date End of year / period NAV at beginning of year / Allotment Date (Rs.) Net Income per unit (Rs.) Dividend Transfer to reserves (if any) (Rs.) NAV as at the end of the period Scheme returns as at the end of the period : Annualised Absolute Benchmark Returns as at the end of the period: Annualised Absolute Net Assets at end of the period (Rs. Crs.) Ratio of Recurring Expenses to net assets (%)

March 21, 2005 May 16, 2005 May 16, 2005 March 31, 2006 10.00 (G) / 10.00 (D) 2.35 2.00 0 17. 850 (G) / 15.752 (D)

N.A. 78.50%

55.48% N.A.

N.A. 1.33%

6.63% N.A.

N.A. 7.74%

N.A. 28.70%

N.A. 30.52%

N.A. 63.38% 3152.41 1.87%@

46.03% N.A. 2683.50 1.86%@

N.A. 1.20% 45.56 0.35%@

6.06% N.A. 83.51 0.35%@

N.A. 9.61% 510.59 2.28%@

N.A. 30.99% 718.46 2.22%@

N.A. 31.49% 2176.16 1.90%@

38

Historical Per Unit Statistics

Fidelity Short Term Income Fund Retail Plan Institutional Plan Retail Plan

Fidelity Cash Fund Institutional Plan Super Institutional Plan

August 2006 to February 2007 Date of Launch Date of Allotment Beginning of year / Allotment Date End of year / period NAV at beginning of year / Allotment Date (Rs.) August 17, 2006 August 30, 2006 August 30, 2006 February 20, 2007 10.00 (G) / 10.00 (D) 10.00 (G) / 10.00 (D) 10.00 (G) / 10.00 (DD) / 10.00 (WD) / 10.00 (MD)

November 2006 to February 2007 November 20, 2006 November 27, 2006 November 27, 2006 February 20, 2007 10.00 (G) / 10.00 (DD) / 10.00 (WD) / 10.00 (MD) 0.17 10.00 (G) / 10.00 (DD) / 10.00 (MD)

Net Income per unit (Rs.) Dividend 0.19

0.68 0.20 0.16 (DD) / 0.16 (WD) / 0.12 (MD) 0 10.1681 (G) / 10.0000 (DD) / 10.0023 (WD) / 10.0467 (MD)

0.17 (DD) / 0.17 (WD) / 0.13 (MD) 0 10.1776 (G) / 10.0000 (DD) / 10.0024 (WD) / 10.0494 (MD)

0.17 (DD) / 0.04(MD) 0 10.1810 (G) / 10.0000 (DD) / 10.1448 (MD)

Transfer to reserves (if any) (Rs.) NAV as at the end of the period:

0 10.1690 (G) / 9.9746 (D)

0 10.1786 (G) / 9.9775 (D)

Scheme returns as at the end of the period : Annualised Absolute Benchmark Returns as at the end of the period: Annualised Absolute Net Assets at end of the period (Rs. Crs.) Ratio of Recurring Expenses to net assets (%) N.A. 2.03% 68.44 0.90%@ N.A. 6.14% 1.43%
Fees and Expenses

N.A. 1.69%

N.A. 1.79%

7.22% 1.68%

7.63% 1.78%

7.77% 1.81

326.00 0.34%@

@ The ratio of expenses to average daily net assets by percentage has been annualised for the respective period. G- Growth Option, D - Dividend Option, DR - Dividend Reinvestment Option, DD - Daily Dividend, WD - Weekly Dividend, MD - Monthly Dividend Notes: 1) Fidelity Tax Advantage Fund was launched on January 05, 2006, Fidelity India Special Situations Fund was launched on March 28, 2006, Fidelity Short Term Income Fund was launched on August 17, 2006 and Fidelity Cash Fund was launched on November 20, 2006. The returns for the aforesaid schemes are in absolute terms and are not annualised and compounded except in case of Fidelity Cash Fund where the returns are shown also in simple annualised terms. 2) 3) 4) 5) Returns are calculated since the date of allotment of units. Returns for the schemes are calculated on the face value of the Units i.e. Rs. 10. NAVs of the Growth Options of the respective schemes / plans have been used to compute the returns. Benchmark for the schemes: FEF, FTAF, FISSF: BSE 200; FSTIF: CRISIL Short Term Bond Index; FMCF, FCF: CRISIL Liquid Fund Index.

39

Combined Offer Document Fidelity Mutual Fund

VII. Units and the Offer


A. Units on Offer - General Information
1. Minimum Amount for applying under the Schemes
Minimum initial application amount and minimum additional application amount for applying in the Schemes is as follows: Scheme Name Minimum Initial Application Amount (per application) Rs. 5,000 Minimum Additional Application Amount (per application) Rs.1,000

If the investor does not clearly specify the choice of option at the time of investing, it will be treated as a Growth Option. If the investor does not clearly specify the choice of Payout or Reinvestment options within the Dividend option, it will be treated as a Re-investment Option.

5. a.

Cut-off time and Applicable NAV FEF, FTAF, FISSF, FSTIF:

The Cut-off time for the Schemes is 3 p.m., and the Applicable NAV will be as under: For Purchase / Redemption 1. In respect of valid Purchase (along with cheques / drafts / other payment instruments) / Redemption applications accepted at a Designated Collection Centre upto 3 p.m. on a Business Day, the NAV of such day will be applicable. 2. In respect of valid Purchase (along with cheques / drafts / other payment instruments) / Redemption applications accepted at a Designated Collection Centre after 3 p.m. on a Business Day, the NAV of the next Business Day will be applicable.

FEF FTAF FISSF FSTIF

Rs. 500 and in multiples of Rs. 500 and in multiples Rs. 500 thereafter of Rs. 500 thereafter Rs. 5,000 Retail Plan: Rs. 5,000 Institutional Plan: Rs. 5,00,00,000 Retail Plan: Rs. 5,000 Institutional Plan: Rs. 1,00,00,000 Super Institutional Plan: Rs.10,00,00,000 Rs.1,000 Retail Plan: Rs.1,000 Institutional Plan: Rs.1,00,000 Retail Plan: Rs.1,000 and thereafter in multiples of Re. 1 Institutional Plan: Rs. 1,00,000 and thereafter in multiples of Re. 1 Super Institutional Plan: Rs.1,00,00,000 and thereafter in multiples of Re. 1

FCF

The above will be applicable only for cheques / drafts / payment instruments payable locally in the city in which ISC is located. No outstation cheques will be accepted.

b. FCF:
The Cut-off time and the Applicable NAV for the Scheme will be as under: For Purchase 1. In respect of valid Purchase applications accepted at a Designated Collection Centre upto 12.00 noon on a Business Day and if the funds are available for utilization by the Scheme on the same day, the closing NAV of the day immediately preceding the day of acceptance of application will be applicable. 2. In respect of valid Purchase applications accepted at a Designated Collection Centre after 12.00 noon on a Business Day and if the funds are available for utilization by the Scheme on the same day, the closing NAV of the day immediately preceding the next Business Day will be applicable. In respect of valid Purchase applications accepted at a Designated Collection Centre on a Business Day, irrespective of the time of acceptance of applications, where the funds are not available for utilization on the day of the application, the closing NAV of the day immediately preceding the day on which the funds are available for utilization by the Scheme will be applicable.

2.

Minimum balance to be maintained under the Scheme

The minimum balance to be maintained at all times under a Scheme shall be equal to the minimum redemption size under a Scheme. If, in the course of redemption / switch-out from a Scheme, the balance units / amount available under the Scheme falls below the minimum redemption size requirement, all units in that Scheme would be redeemed / switched-out.

3.
Units and the Offer

Plans available under the Schemes:


FSTIF : The Scheme offers two plans - (a) Retail Plan; and (b) Institutional Plan FCF : The Scheme offers three plans - (a) Retail Plan; (b) Institutional Plan; and (c) Super Institutional Plan. 3.

a. b.

Though, the portfolio of the aforesaid plans under the respective Schemes and the options thereunder will be unsegregated, the annual recurring expenses chargeable to the investors in the plans will be different. Due to difference in the annual recurring expenses chargeable to the plans and the rate of dividend that might be declared under the options of the plans, the NAVs of each of the options under the plan will be different. If the investor does not clearly specify the choice of a plan at the time of investing, then it shall be treated as the application for the plan with the lowest annual recurring expense based on the amount of investment subject to fulfillment of the minimum application amount requirement of the plan.

No outstation cheques will be accepted. For Redemption 1. In respect of valid Redemption applications accepted at a Designated Collection Centre upto 3.00 p.m.on a Business Day, the closing NAV of the day immediately preceding the next Business Day will be applicable. 2. In respect of valid Redemption applications accepted at a Designated Collection Centre after 3.00 p.m. on a Business Day, the closing NAV of the next Business Day will be applicable.

4.

Options available under the Schemes / Plans c.

Each Scheme (and the plans thereunder) offers two options Growth option and Dividend option. The Dividend option offers Dividend Payout and Dividend Reinvestment facilities. Growth option: under this option no dividend will be declared. Dividend option: under this option, a dividend may be declared by the Trustee, at its discretion, from time to time (subject to the availability of distributable surplus as calculated in accordance with the Regulations).
40

For Switches all Schemes

Valid applications for 'switch-out' shall be treated as applications for Redemption and valid applications for 'switch-in' shall be treated as applications for Purchase, and the provisions of the Cut-off time and the Applicable NAV mentioned in the Offer Document as applicable to Purchase and Redemption shall be applied respectively to the 'switch-in' and 'switch-out' applications.

6.

Minimum Number of investors and maximum holding by an investor


As per SEBI circular no. SEBI / IMD / CIR No. 10 / 22701 / 03 dated December 12, 2003, each scheme (including the plans thereunder) should have a minimum of 20 Unit Holders and no single Unit Holder should account for more than 25% of the corpus of such scheme. The aforesaid conditions should be met in each calendar quarter on an average basis. In case of non-fulfilment with the first condition i.e. minimum of 20 investors in the Scheme, for each calendar quarter as specified by SEBI, the Scheme shall be wound up by following the guidelines prescribed by SEBI and Unit Holders' investment in such Scheme would be redeemed at the Applicable NAV. SEBI has further prescribed that if any investor breaches the 25% limit over a quarter, a rebalancing period of one month will be allowed to the investor and thereafter the investor who is in breach of the limit shall be given 15 days notice to redeem his exposure over the 25% limit. In the event of failure on part of the said investor to redeem the excess exposure, the excess holding will be automatically redeemed by the Fund following the guidelines prescribed by SEBI.

A Mutual Fund through its schemes, including Fund of Funds schemes.

Note: Minor Unit Holder on becoming major may inform the Registrar about attaining majority and provide his specimen signature duly authenticated by his banker as well as his details of bank account and PAN (if required) to enable the Registrar to update their records and allow him to operate the Account in his own right.

2.

Who cannot invest

IT SHOULD BE NOTED THAT THE FOLLOWING ENTITIES CANNOT INVEST IN THE SCHEMES: 1. Any individual who is a foreign national or any other entity that is not an Indian resident under the Foreign Exchange Management Act, 1999, except where registered with SEBI as a FII or FII sub account. Overseas Corporate Bodies (OCBs) shall not be allowed to invest in the Schemes. These would be firms and societies which are held directly or indirectly but ultimately to the extent of at least 60% by NRIs and trusts in which at least 60% of the beneficial interest is similarly held irrevocably by such persons (OCBs). Non-Resident Indians residing in the United States of America and Canada. Non-Resident Indians residing in the Financial Action Task Force (FATF) Non Compliant Countries and Territories (NCCTs).

2.

B. Purchase of Units
1. Who can invest
Prospective investors are advised to satisfy themselves that they are not prohibited by any law governing such entity and any Indian law from investing in the Schemes and are authorised to purchase units of mutual funds as per their respective constitutions, charter documents, corporate / other authorisations and relevant statutory provisions. The following is an indicative list of persons who are generally eligible and may apply for subscription to the Units of the Schemes forming part of this Offer Document:
u

3. 4.

Indian resident adult individuals, either singly or jointly (not exceeding three); Minor through parent / lawful guardian; (please see the note below) Companies, bodies corporate, public sector undertakings, association of persons or bodies of individuals and societies registered under the Societies Registration Act, 1860; Religious and Charitable Trusts, Wakfs or endowments of private trusts (subject to receipt of necessary approvals as required) and Private Trusts authorised to invest in mutual fund schemes under their trust deeds; Partnership Firms constituted under the Partnership Act, 1932; A Hindu Undivided Family (HUF) through its Karta; Banks (including Co-operative Banks and Regional Rural Banks) and Financial Institutions; Non-Resident Indians (NRIs) / Persons of Indian Origin (PIO) on full repatriation basis or on non-repatriation basis; Foreign Institutional Investors (FIIs) registered with SEBI on full repatriation basis; Army, Air Force, Navy and other para-military funds and eligible institutions; Scientific and Industrial Research Organisations; Provident / Pension / Gratuity and such other Funds as and when permitted to invest; International Multilateral Agencies approved by the Government of India / RBI ; The Trustee, AMC or Sponsor or their associates (if eligible and permitted under prevailing laws); and

The Fund reserves the right to include / exclude new / existing categories of investors to invest in the Schemes from time to time, subject to SEBI Regulations and other prevailing statutory regulations, if any. Subject to the Regulations, any application for Units may be accepted or rejected in the sole and absolute discretion of the Trustee. For example, the Trustee may reject any application for the Purchase of Units if the application is invalid or incomplete or if, in its opinion, increasing the size of any or all of the Schemes' Unit capital is not in the general interest of the Unit Holders, or if the Trustee for any other reason does not believe that it would be in the best interest of the Schemes or its Unit Holders to accept such an application. The AMC / Trustee may need to obtain from the investor verification of identity or such other details relating to a subscription for Units as may be required under any applicable law, which may result in delay in processing the application.

Units and the Offer

u u

3.

Purchase Price

The Purchase Price of the Units is the price at which an investor can Purchase Units of a Scheme. It will be calculated as described below: Purchase Price = Applicable NAV x (1 + Entry Load) Purchase Price will be calculated for up to three decimal places for Equity Schemes and four decimal places for Debt Schemes. For example, if the Applicable NAV of the Scheme is Rs.10, and it has a 2.00% Entry Load, the Purchase Price will be calculated as follows: Purchase Price = 10 x (1 + 2.00%) i.e. 10 x 1.0200 =10.200 If any Scheme has no Entry Load, the Purchase Price will be equal to the Applicable NAV. For details on Load structure for the Schemes, please refer Chapter - LOAD AND FEES AND EXPENSES.

u u

41

Combined Offer Document Fidelity Mutual Fund

4.

How to Apply

Application Forms / Transaction Slips for the Purchase of Units of a Scheme will be available at the ISCs / distributors. Applications filled up and duly signed by all joint investors should be submitted along with the cheque / draft / other payment instrument to a Designated Collection Centre. Please refer to the paragraph "How to pay" below for details of payment. Applications should be made in adherence to the minimum amount requirements as mentioned in paragraph "Minimum Amount for applying in the Scheme". It is mandatory for every applicant to provide the name of the bank, branch, address, account type and number as per SEBI requirements and any Application Form without these details will be treated as incomplete. Such incomplete applications will be rejected. The Registrar / AMC may ask the investor to provide a blank cancelled cheque or its photocopy for the purpose of verifying the bank account number. In case of application for (i) lump sum investment of Rs. 50,000 or more, or (ii) each SIP instalment of Rs. 50,000 or more, or (iii) SIP instalments aggregating more than Rs. 1,00,000, the applicant or in the case of application in joint names, each of the applicants, should mention his / her permanent account number (PAN) allotted under the Income Tax Act, 1961 and also submit a photocopy of the PAN card(s) or a communication from the Income Tax authority indicating allotment of PAN ("PAN Communication") along with the application for the purpose of verification of the number. Investors who do not have PAN are required to provide a declaration in Form 60 prescribed under the Income Tax Act, 1961 along with the application. An application will be treated as incomplete and rejected if: a. b. c. the PAN is not mentioned; the PAN is mentioned but not supported by a photocopy of the PAN card or PAN Communication; or the Form 60 is not provided along with the application in cases where investors do not have the PAN.

The cheque should be payable at a bank's branch, which is situated at and is a member of the Banker's Clearing House / Zone in the city where the application is submitted to a Designated Collection Centre. Applications accompanied by outstation demand drafts must be submitted / sent by post or courier at the following address: Computer Age Management Services Private Limited Unit: Fidelity Mutual Fund 178 / 10, Kodambakkam High Road, Opposite Hotel Palm Grove, Chennai - 600 034 An investor may invest through a distributor with whom the AMC has made an arrangement, whereby payment may be made through ECS / EFT / SEFT / RTGS / SI / Wire Transfer or in any manner acceptable to the AMC and is evidenced by receipt of credit in the bank account of the Fund. The following modes of payment are not valid and applications accompanied by such payments are liable to be rejected.
u

Outstation cheques will not be accepted (i.e. if the cheque is payable at a bank's branch which does not participate in the local clearing mechanism of the city where the application is submitted) Cash, money orders or postal orders will not be accepted. Post dated cheques (except for applications for purchasing Units under SIP) will not be accepted

If the applicant is resident of a city, the banking clearing circle of which is different from that of any Investor Service Centre, as designated by the AMC from time to time, the AMC shall bear the bank charges for the demand draft(s) borne by the applicant. The AMC shall not refund any demand draft charges. However in case of applications pertaining to FCF, the AMC shall not bear or refund any bank charges for the demand draft(s) incurred by the applicant. Applications accompanied by cheques / drafts not fulfilling the above criteria are liable to be rejected. Note: The Trustee, at its discretion at a later date, may choose to alter or add other modes of payment.

Applications incomplete in any respect (other than mentioned above) will be liable to be rejected. In order to protect investors from frauds, it is advised that the Application Form number / folio number and name of the first investor should be written overleaf the cheque / draft, before they are handed over to any courier / messenger / distributor / ISC. In order to protect investors from fraudulent encashment of cheques, the Regulations require that cheques for Redemption of Units specify the name of the Unit Holder and the bank name and account number where payments are to be credited. Hence, all applicants for Purchase of Units must provide a bank name, bank account number, branch address and account type in the Application Form.

Units and the Offer

Payment by NRIs, FIIs


(a) Repatriation Basis In the case of NRIs / PIOs, payment may be made either by inward remittance through normal banking channels or out of funds held in a Non - Resident (External) Rupee Account (NRE) / Foreign Currency (Non-Resident) Account (FCNR). Flls may pay their subscriptions either by inward remittance through normal banking channels or out of funds held in a NonResident Rupee Account maintained with the designated branch of an authorised dealer in accordance with the relevant exchange management regulations. (b) Non-repatriation Basis In the case of NRIs, payment may be made either by inward remittance through normal banking channels or out of funds held in an NRE / FCNR / Non-Resident Ordinary Rupee Account (NRO).

5.

How to pay

All cheques / drafts must be drawn favouring either "Fidelity Equity Fund" or "Fidelity Tax Advantage Fund" or "Fidelity India Special Situations Fund" or "Fidelity Short Term Income Fund" or "Fidelity Cash Fund" depending on the Scheme in which the investor proposes to invest. They should be crossed "Account Payee only". A separate cheque or bank draft must accompany each application. If the amount mentioned on the application is different from the amount mentioned on the accompanying cheque or bank / demand draft, then the amount which is lower in value will be treated as the application amount and the application will be processed accordingly. Payment can be made by either
u u u

6.

Application under Power of Attorney

Cheque; Draft (i.e. demand draft or bank draft); or a payment instrument (such as pay order, banker's cheque, etc.)

An applicant wanting to transact through a power of attorney must lodge the photocopy of the Power of Attorney (PoA) attested by a Notary Public or the original PoA (which will be returned after verification) within 30 days of submitting the Application Form / Transaction Slip at a Designated Collection Centre. Applications are liable to be rejected if the power of attorney is not submitted within the aforesaid period.

42

7.

Application by a non-Individual Investor

In case of an application by a company, body corporate, society, mutual fund, trust or any other organisation not being an individual, a duly certified copy of the relevant resolution or document along with the updated Specimen Signature list of Authorised Signatories must be lodged within 7 Business Days along with the Application Form / Transaction Slip at a Designated Collection Centre. Further, the AMC may require that a copy of the incorporation deeds / constitutive documents (e.g. Memorandum and Articles of Association) be also submitted to the Registrar. Requests for redemption may not be processed if the necessary documents are not submitted within the aforesaid period.

and December within 10 Business days of the end of the respective quarter. The account statements under the dividend - reinvestment facility will be sent once every month, subject to declaration of dividend under a Scheme / Plan.

C. Important Note on Anti Money Laundering, Know-Your-Customer and Investor Protection


u

8.

Mode of Holding

An application can be made by up to a maximum of three applicants. Applicants must specify the 'mode of holding' in the Application Form. If an application is made by one Unit Holder only, then the mode of holding will be considered as 'First-named holder'. If an application is made by more than one investors, they have an option to specify the mode of holding as either 'First-named holder' or 'Jointly' or 'Anyone or Survivor'. If the mode of holding is specified as 'First-named holder', all instructions to the Fund would have to be signed by the First named Unit Holder only. The Fund will not be empowered to act on the instruction of the Second or Third Unit Holder in such cases. If the mode of holding is specified as 'Jointly', all instructions to the Fund would have to be signed by all the Unit Holders, jointly. The Fund will not be empowered to act on the instruction of any one of the Unit Holders in such cases. If the mode of holding is specified as 'Anyone or Survivor', an instruction signed by any one of the Unit Holders will be acted upon by the Fund. It will not be necessary for all the Unit Holders to sign. If an application is made by more than one investor and the mode of holding is not specified, the mode of holding would be treated as joint. The Fund will not be empowered to act on the instruction of any one of the Unit Holders in such cases. In all cases, all communication to Unit Holders (including account statements, statutory notices and communication, etc.) will be addressed to the first-named Unit Holder. All payments, whether for redemptions, dividends, etc will be made favouring the firstnamed Unit Holder. The first-named Unit Holder shall have the right to exercise the voting rights associated with such Units as per the applicable guidelines. Investors should carefully study paragraphs "Transmission of Units" and "Nomination Facility" below "Facilities Offered to Investors under the Scheme" before ticking the relevant box pertaining to the mode of holding in the Application Form.

Anti Money Laundering and Know Your Customer (KYC): Fidelity is committed to complying with all applicable anti money laundering and KYC laws and regulations in all of its operations. Fidelity recognises the value and importance of creating a business environment that strongly discourages money launderers from using Fidelity. To that end, certain policies have been adopted by the AMC. The need to "Know Your Customer" (KYC) is vital for the prevention of money laundering. In terms of the Prevention of Money Laundering Act, 2002 ("PMLA") the rules issued there under and the guidelines / circulars issued by SEBI regarding the Anti Money Laundering (AML) Laws, all intermediaries, including Mutual Funds, are required to formulate and implement a client identification programme, and to verify and maintain the record of identity and address(es) of investors. The Mutual Fund Industry has collectively entrusted the responsibility of collection of documents relating to identity and address and record keeping to an independent agency (presently CDSL Ventures Limited) that will act as central record keeping agency ('Central Agency'). As a token of having verified the identity and address and for efficient retrieval of records, the Central Agency will issue an acknowledgement to each investor who submits an application and the prescribed documents to the Central Agency. Investors who have obtained an acknowledgement can invest in the schemes of the mutual fund by referring to / submitting the acknowledgement in lieu of submitting information and documents required under AML Laws. Investors who wish to obtain an acknowledgement have to submit a completed Application Form (the Form') along with all the prescribed documents listed in the Form, at any of the Point of Service ('POS'). The Form is available at our website (www.fidelity.co.in) and AMFI website (www.amfiindia.com). POS are the designated centres appointed by the Central Agency for receiving the Forms, processing data and providing the acknowledgement. List of and location of POS are available at our website (www.fidelity.co.in) and www.amfiindia.com. On submission of the application, documents and information to the satisfaction of the POS, the investor will be given an acknowledgement across the counter. Subsequently, the Central Agency will scrutinize the information and documents submitted by the investor. In case of any deficiency in the document / information, the form will be rejected. Presently, it is mandatory for all applications for Subscription of value of Rs.50,000 and above to quote the PAN of all the applicants (guardian in case of minor) in the application for Subscription. The PAN will be validated with the records of the Central Agency before allotting units. Applications for subscriptions of value of Rs.50,000 and above without a valid PAN will be rejected. In the event of any Form being subsequently rejected for lack of information / deficiency / insufficiency of mandatory documentation, the investment transaction will be cancelled and the amount may be redeemed at Applicable NAV, subject to payment of Exit Load, wherever applicable. Such redemption proceeds will be dispatched within a maximum period of 21 days from date of acceptance of the application.
43
Units and the Offer

9.

Processing of applications

(a) Allotment
New investors may apply for Units by filling up an Application Form. Existing investors can apply for Units using a Transaction Slip. All valid and complete applications will be allotted Units at the Applicable NAV for the application amount.

(b) Account Statements


An account statement will be sent by ordinary post / courier / secured encrypted electronic mail to each Unit Holder, stating the number of Units purchased, generally within 3 Business Days, but not later than 30 days from date of acceptance of the valid Transaction Slip. The first account statement under SIP / STP / SWP shall be issued within 10 Business days of the initial investment. Thereafter the account statement to Unit Holders under SIP / STP / SWP will be sent once every quarter ending March, June, September

Combined Offer Document Fidelity Mutual Fund


All investors (both individual and non-individual) can submit the Form for the purpose of KYC. However, applicants should note that minors cannot make an application and any investment in the name of minors should be along with a guardian, who should obtain an acknowledgement for the purpose of investing with a Mutual Fund. Also, applicants / Unit Holders intending to apply for units / currently holding units and operating their Mutual Fund folios through a Power of Attorney (PoA) must ensure that the issuer of the PoA and the holder of the PoA must obtain the acknowledgement at the time of investment of value of Rs. 50, 000 and above. PoA holders are not permitted to make an application on behalf of the issuer of the PoA. Separate procedures are prescribed for change in name, address and other related details, should the applicant desire to change such information. POS will extend the services of effecting such changes. Suspicious Transaction Reporting: If after due diligence, the AMC believes that the transaction is suspicious in nature as regards money laundering, the AMC shall report any suspicious transactions to competent authorities under the PMLA and rules / guidelines issued thereunder by SEBI and RBI, furnish any such information in connection therewith to such authorities and take any other actions as may be required for the purposes of fulfilling its obligations under the PMLA without obtaining the prior approval of the investor / Unit Holder / a person making the payment on behalf of the investor.
u

redemptions by investors can reduce the returns to long term investors by increasing expenses of the Scheme and can also disrupt portfolio management strategies. Therefore, the Scheme is proposed to be managed with these risks in mind. Though the Scheme has no limit on the number of purchases and redemptions by any investor, the AMC reserves the right, under powers delegated by the Trustee, to reject any application, prevent further transactions by a Unit Holder, or redeem the Units held by the Unit Holder at any time prior to the expiry of 30 Business Days from the date of submission of the application if, in the AMC's opinion, a Unit Holder has been indulging in excessively frequent trading or if his trading has been or may be disruptive for the Scheme.

D. Investor's Personal Information


The AMC may share investors' personal information with the following third parties:
u

Registrar, Banks and / or authorised external third parties who are involved in transaction processing, despatches, etc. of investors' investment in any Scheme; Distributors through whom applications of investors are received for the Schemes; or Any other organisations for compliance with any legal or regulatory requirements or to verify the identity of investors for complying with anti-money laundering requirements.

Investor Protection (a) FEF, FISSF: FEF and FISSF are designed to support longer-term investment and active trading is discouraged. Short term or excessive trading into and out of FEF or FISSF may affect its performance by disrupting portfolio management strategies and by increasing expenses. The Fund and the distributors may refuse to accept applications for Purchase, especially where transactions are deemed disruptive, particularly from market timers or investors who, in their opinion, have a pattern of short term or excessive trading or whose trading has been or may be disruptive for FEF or FISSF. If in the opinion of the AMC, a Unit Holder is indulging in short term or excessive trading as above, it shall, under powers delegated by the Trustee, have absolute discretion to reject any application, prevent further transaction by the Unit Holder or redeem the Units held by the Unit Holder at any time prior to the expiry of 30 Business Days from the date of the application. (b) FSTIF: As the Scheme is a short term income scheme, it is designed to offer investors liquidity and the Fund anticipates that investors will come in and out of the Scheme frequently. Such frequent purchases and redemptions by investors can reduce the returns to long term investors by increasing expenses of the Scheme and can also disrupt portfolio management strategies. Therefore, the Scheme is proposed to be managed with these risks in mind. Though the Scheme has no limit on the number of purchases and redemptions by any investor, the AMC reserves the right, under powers delegated by the Trustee, to reject any application, prevent further transactions by a Unit Holder, or redeem the Units held by the Unit Holder at any time prior to the expiry of 30 Business Days from the date of submission of the application if, in the AMC's opinion, a Unit Holder has been indulging in excessively frequent trading or if his trading has been or may be disruptive for the Scheme. (c) FCF: As the Scheme is a cash / liquid scheme, it is designed to offer investors liquidity and the Fund anticipates that investors will come in and out of the Scheme frequently. Such frequent purchases and

Account statements or financial information pertaining to the investor, if it is to be sent over the internet to the Unit Holder, distributors or any other entity as indicated above, will be sent only through a secure means and / or through encrypted electronic mail.

E. Facilities Offered to Investors under the Schemes


1. Systematic Investment Plan (SIP)
This facility enables investors to save and invest periodically over a longer period of time. It is a convenient way to "invest as you earn" and affords the investor an opportunity to enter the market regularly, thus averaging the acquisition cost of Units. The conditions for investing in SIP will be as follows: 1. The date of the first cheque shall be the same as the date of the application while the remaining cheques (minimum 5 cheques) shall be post dated cheques (dated uniformly either the 1st, 10th, 15th or 25th of a month or quarter). Alternatively, the payment under SIP may be made through a distributor with whom the AMC has made an arrangement for payment of investment money through ECS / EFT / SEFT / RTGS / SI / Wire Transfer or in any manner acceptable to the AMC. There shall be a gap of at least 30 days between the date of the first and second instalment. Purchases can be made on monthly / quarterly basis. All the cheques / payment instructions (including the first cheque / payment instruction) shall be of equal amounts. The minimum amount of each cheque / payment instruction shall be Rs. 500. The aggregate of such cheques / payment instructions shall not be less than Rs. 5,000 (Rs. 3,000 in case of FTAF). There is no upper limit for the Purchase for a single cheque / payment instruction or in aggregate. An extension of an existing SIP will be treated as a new SIP on the date of such application, and all the above conditions need to be met with.

Units and the Offer

2. 3. 4. 5. 6.

7.

44

8.

The load structure prevailing at the time of submission of the SIP application (whether fresh or extension) will apply for all the instalments indicated in such application. In case of cancellation of a SIP or cheques returned uncleared for SIP instalments or payment instructions not honoured, if no Entry Load had been charged, the AMC may reduce the number of Units allotted against the previous instalments to the extent of applicable Entry Load on such instalments.

9.

The SIP facility will not be available for investors investing in the following plans: Institutional Plan under FSTIF Institutional Plan under FCF Super Institutional Plan under FCF For applicable load on Purchases through SIP please refer to Chapter VI - LOAD AND FEES AND EXPENSES.

2.

Systematic Withdrawal Plan (SWP)

The Units will be allotted to the investor at the Applicable NAV of the respective dates on which the investments are sought to be made. However, if any of the dates on which an investment is sought to be made is a non Business Day, the Units will be allotted at the Applicable NAV of the next Business Day. Any Unit Holder can avail of this facility subject to certain terms and conditions detailed in the Application Form. This facility is available only if the Application Form / Transaction Slip along with the post-dated cheques / payment instructions is handed over to an ISC. The AMC has the authority to make available SIP by way of a salary savings scheme for a group of employees through an arrangement with their employers. Date Amount Invested (Rs.) 1,000,000.00 Amount withdrawn under SWP (Rs.) 7,000.00 7,000.00 7,000.00 7,000.00 7,000.00 7,000.00 7,000.00 7,000.00 7,000.00 7,000.00 7,000.00 7,000.00 7,000.00

This facility enables the Unit Holders to withdraw sums from their Unit accounts in the Scheme at periodic intervals through a one-time request. The withdrawals can be made monthly / quarterly on any date specified by the Unit Holder. The minimum amount in rupees for withdrawal under the SWP facility shall be Rs. 500, while the minimum number of Units for withdrawal shall be 50 Units. The withdrawals will commence from the Start Date mentioned by the Unit Holder in the Application Form for the facility. A minimum period of 7 days shall be required for registration under SWP. The Units will be redeemed at the Applicable NAV of the respective dates on which such withdrawals are sought. However, if any of the dates on which the redemption is sought is a non Business Day, the Units will be redeemed at the Applicable NAV of the next Business Day. This facility is explained by way of an illustration below: Assumed++ NAV per Unit (Rs.) 10.000 10.071 10.142 10.214 10.286 10.359 10.432 10.506 10.580 10.655 10.730 10.806 10.883 10.960 Units redeemed 695.065 690.199 685.334 680.537 675.741 671.012 666.286 661.626 656.969 652.377 647.788 643.205 638.686 Unit Balance* 100,000.000 99,304.935 98,614.736 97,929.402 97,248.865 96,573.124 95,902.112 95,235.826 94,574.200 93,917.231 93,264.854 92,617.066 91,973.861 91,335.175 Value after SWP (Rs.) 1,000,000.00 1,000,100.00 1,000,150.65 1,000,250.91 1,000,301.83 1,000,400.99 1,000,450.83 1,000,547.59 1,000,595.04 1,000,688.10 1,000,731.88 1,000,820.02 1,000,951.53 1,001,033.52
Units and the Offer

January 31, 2006 March 10, 2006 April 10, 2006 May 10, 2006 June 10, 2006 July 10, 2006 August 10, 2006 September 10, 2006 October 10, 2006 November 10, 2006 December 10, 2006 January 10, 2007 February 10, 2007 March 10, 2007

++ The NAVs in the table above are purely illustrative and should not be understood or construed as assured or guaranteed returns. Entry and Exit Loads are assumed to be NIL for the purpose of the illustration. * Previous Balance less Units redeemed For applicable load on Redemptions through SWP please refer Chapter - LOAD AND FEES AND EXPENSES.

3.

Systematic Transfer Plan (STP)

4.

Switching

This facility enables Unit Holders to transfer fixed sums from their Unit accounts in one scheme to the other schemes launched by the Fund from time to time. The transfers under this facility can be made on a weekly / fortnightly / monthly / quarterly basis. The minimum amount in rupees for transfer under the STP facility shall be Rs. 500. The transfer will commence from the date mentioned by the Unit Holder in the Application Form for the facility and will take place every week / fortnight / month / quarter on the day specified by the Unit Holder. A minimum period of 7 days shall be required for registration under STP. The Units will be allotted / redeemed at the Applicable NAV of the respective dates of the Schemes on which such investments / withdrawals are sought from a scheme. In case the day on which the investment / withdrawal is sought is a non - Business Day for any scheme, then the application for the facility will be deemed to have been received on the immediately following Business Day.

(i) Inter-Scheme Switching


The Transaction Slip can be used by investors to make interscheme switches within the Fund. All valid applications for switchout shall be treated as Redemption and for switch-in as Purchases with the respective Applicable NAVs of the Schemes / options.

(ii) Intra-Scheme Switching


Investors can switch between different options under the Schemes, at the Applicable NAV. All valid applications for switchout shall be treated as Redemption and for switch-in as Purchases with the respective Applicable NAVs of the option. As per current Load structure, no Entry or Exit Loads will be charged for intrascheme switching. However, AMC may change the Loads prospectively as indicated in the paragraph on Load Structure of the Schemes in this Offer Document.
45

Combined Offer Document Fidelity Mutual Fund


Note: For tax implications on switching please see Chapter on TAX BENEFITS OF INVESTING IN THE FUND shall not apply to units allotted to investors other than 'assessees'.

5.

Lien on Units for Loans

8.

Nomination Facility

In case of FTAF, as per ELSS, the Units issued under the Scheme can be transferred, assigned or pledged only after a period of three years of its issue. In conformity with the guidelines and notifications issued by SEBI / Government of India / any other regulatory body from time to time, Units under the Schemes may be offered as security by way of a lien / charge in favour of scheduled banks, financial institutions, non-banking finance companies (NBFCs), or any other body. The Registrar will note and record the lien against such Units. A standard form for this purpose is available on request with the Registrar. The Unit Holder will not be able to redeem / switch Units under lien until the Lien Holder provides written authorisation to the Fund that the lien / charge may be vacated. As long as Units are under lien, the Lien Holder will have complete authority to exercise the lien, thereby redeeming such Units and receiving payment proceeds. In such instance, the Unit Holder will be informed by the Registrar through an account statement. In no case will the Units be transferred from the Unit Holder to Lien Holder. All benefits accruing on the Units under lien during the period of the lien in the form of bonus, dividend or otherwise shall be subject to lien.

A Unit Holder can, at the time an application is made or by subsequently writing to an ISC, request for a nomination form in order to nominate any one person to receive the Units upon his / her death, subject to the completion of certain necessary formalities e.g. providing proof of the death of the Unit Holder, signature of the nominee, furnishing proof of guardianship if the nominee is a minor and the execution of an indemnity bond or such other documents as may be required from the nominee in favour of and to the satisfaction of the AMC / Registrar. Nomination can be made only by individuals on their own behalf, either singly or jointly. If the Units are held jointly, all joint Unit Holders must sign the nomination form. Only the following categories of Indian residents can be nominated: (a) individuals; (b) minors through parent / legal guardian (whose name and address must be provided); (c) religious or charitable trusts; and (d) Central Government, State Government, a local authority or any person designated by virtue of his office. A nomination in respect of Units will be treated as rescinded upon the Redemption of the Units. Cancellation of a nomination can be made only by the Unit Holders who made the original nomination and must be notified in writing. On receipt of a valid cancellation, the nomination shall be treated as rescinded and the AMC / Fund shall not be under any obligation to transfer the Units in favour of the nominee. The transfer of Units / payment to the nominee of the Redemption proceeds shall be valid and effectual against any demand made upon the Fund / AMC / Trustee and shall discharge the Fund / AMC / Trustee of all liability towards the estate of the deceased Unit Holder and his / her legal personal representative or other successors. The Fund, the AMC and the Trustee are entitled to be indemnified from the deceased Unit Holder's estate against any liabilities whatsoever that any of them may suffer or incur in connection with a nomination. In case of FTAF, as per ELSS, in the event of the death of the 'assessee', the nominee or legal heir as the case may be shall be able to withdraw the investment only after the completion of 1 year from the date of allotment of the units to the 'assessee'. Accordingly, transfer of units (allotted to 'assessees' as defined under the ELSS) to nominees as mentioned above will be carried out only after the completion of 1 year from the date of its allotment. The restriction of 1 year shall not apply to units allotted to investors other than 'assessees'.

6.

Listing and Transfer of Units

The Schemes being open ended, the Units are not proposed to be listed on any stock exchange and no transfer facility is provided. However, the Fund may at its sole discretion list the Units on one or more stock exchanges at a later date. The Fund will offer and redeem the Units at Applicable NAV. If a person becomes a Unit Holder in a Scheme consequent to operation of law, the Fund will, subject to production of satisfactory evidence, effect the transfer, if the transferee is otherwise eligible to hold the Units. Similarly, in cases of transfers taking place consequent to death or insolvency, the transferee's name will be recorded by the Fund subject to production of satisfactory evidence and if the transferee is otherwise eligible to hold the Units. In all such cases, if the transferee is not eligible to hold the Units, the Units will be redeemed and the proceeds will be disbursed to the transferee if such transferee is entitled to the same.

Units and the Offer

7.

Transmission of Units

If Units are held in a single name by the Unit Holder, Units shall be transmitted in favour of the nominee where the Unit Holder has appointed a nominee upon production of death certificate or any other documents to the satisfaction of the AMC / Registrar. If the Unit Holder has not appointed a nominee or in the case where the nominee dies before the Unit Holder, the Units shall be transmitted in favour of or as otherwise directed by the Unit Holder's personal representative(s) on production of the death certificate and / or any other documents to the satisfaction of the AMC / Registrar. If Units are held by more than one registered Unit Holder, then, upon death of one of the Unit Holders, the Units shall be transmitted in favour of the remaining Holder(s) (in the order in which the names appear in the register of Unit Holders with the Registrar) on production of a death certificate and / or any other documents to the satisfaction of the AMC / Registrar and to the nominee only upon death of all the Unit Holders. In case of FTAF, as per ELSS, in the event of the death of the 'assessee', the nominee or legal heir as the case may be shall be able to withdraw the investment only after the completion of 1 year from the date of allotment of the units to the 'assessee'. Accordingly, transmission of units (allotted to 'assessees' as defined under the ELSS) as mentioned above will be carried out only after the completion of 1 year from the date of its allotment. The restriction of 1 year

9.

Folio Number

Unless otherwise requested by the Unit Holder, a single folio number may be assigned if an investor invests in different schemes of the Fund and a consolidated account statement will then be provided for investments in all the schemes.

10. Fractional Units


Since a request for Purchase or Redemption is generally made in rupee amounts and not in terms of a fixed number of Units of a Scheme, an investor may be left with fractional Units. Fractional Units will be computed and accounted for up to three decimal places in case of Equity Schemes and four decimal places in case of Debt Schemes. However, fractional Units will in no way affect the investor's ability to redeem the Units, either in part or in full, standing to the Unit Holder's credit.

11. Consolidation of folios


In case an investor holds investments in multiple folios under the Fund, the AMC has the right to consolidate all the folios belonging to the same investor into one folio.

46

F. Redemption of Units
In case of FTAF, as per ELSS, Unit Holders will not be able to redeem Units under the Scheme for a period of 3 years from the date of allotment of respective Units. After the period of 3 years, Units could be redeemed as mentioned in the Offer Document. However, in the event of the death of a Unit Holder, the nominee will be able to redeem the Units held by the deceased Unit Holder subject to the expiry of one year from the date of allotment of such Units. The Unit Holder has the option to request for Redemption either in amount in rupees or in number of Units. In case the request for Redemption specifies both, i.e. amount in rupees as well the number of Units to be redeemed, then the latter will be considered as the redemption request and the request will be processed accordingly.

by Rs. 25 (i.e. Rs. 9,800 x 0.25%, rounded of to the nearest rupee), making the net redemption amount Rs. 9,775. If a Redemption of Rs. 10,000 is sought by the Unit Holder at a Redemption Price of Rs. 9.80 (as calculated above), the effective redemption amount will be grossed up to Rs. 10,025 (i.e. 10,000 (1-0.25%)) and 1022.959 units (10,025 9.80) will be redeemed. This is to ensure that the Unit Holder receives the net amount of Rs. 10,000 as desired. Investors may note that the Trustee has a right to modify the existing Load structure in any manner or introduce an Entry Load or Exit Load or CDSC or a combination of Entry Load and / or Exit Load and / or CDSC and / or any other Load subject to a maximum as prescribed under the Regulations and with prospective effect only. Please refer Chapter LOAD AND FEES AND EXPENSES.

1.

Minimum amount in rupees / no. of units for Redemption

3.

How to Redeem

The minimum amount in rupees / no. of units for Redemption under the Schemes will be as follows: Scheme Name FEF FTAF FISSF FSTIF FCF Minimum amount / no. of units for Redemption Rs. 1,000 or 100 Units Rs. 500 or 50 Units Rs. 1,000 or 100 Units Institutional Plan: Rs.1,00,000 or 10,000 Units Retail Plan: Rs.1,000 or 100 Units Retail Plan: Rs.1,000 or 100 Units Institutional Plan: Rs.1,00,000 or 10,000 Units Super Institutional Plan: Rs.1,00,000 or 10,000 Units

A Transaction Slip can be used by the Unit Holder to request for a Redemption. The requisite details should be entered in the Transaction Slip and submitted at an ISC. Transaction Slips can be obtained from any of the ISCs.

4.

Payment of Proceeds

Resident Investors
Redemption proceeds will be paid by cheques, marked "A / c Payee only" and drawn in the name of the sole holder / firstnamed holder (as determined by the records of the Registrar). The Mutual Fund will endeavour to despatch the Redemption proceeds within 3 Business Days from the acceptance of the Redemption request, but not beyond 10 Business Days from the date of Redemption. If the payment is not made within the period stipulated in the Regulations, the Unit Holder shall be paid interest @15% p.a. for the delayed period and the interest shall be borne by the AMC. The bank name and bank account number, as specified in the Registrar's records, will be mentioned in the cheque. The cheque will be payable at par at all the cities having ISCs. If the Unit Holder resides in any other city, he will be paid by a demand draft payable at the city of his residence and the demand draft charges shall be borne by the AMC. The proceeds may be paid by way of direct credit / EFT / SEFT / RTGS / Wired Transfer / any other manner through which the investor's bank account specified in the Registrar's records is credited with the Redemption proceeds. Note: The Trustee, at its discretion at a later date, may choose to alter or add other modes of payment. The redemption proceeds will be sent by courier or (if the addressee city is not serviced by the courier) by registered post. The despatch for the purpose of delivery through the courier / postal department, as the case may be, shall be treated as delivery to the investor. The AMC / Registrar are not responsible for any delayed delivery or non-delivery or any consequences thereof, if the despatch has been made correctly as stated in this paragraph.

Units can be redeemed (sold back to the Fund) at the Redemption Price, except for the units under FTAF which are subject to a lock in period of three years as per ELSS . If an investor has purchased Units of a Scheme on more than one Business Day the Units will be redeemed on a first-in-first-out basis. If multiple Purchases are made on the same day, the Purchase appearing earliest in the account statement will be redeemed first.

Units and the Offer

2.

Redemption Price

The Redemption Price of the Units is the price at which a Unit Holder can redeem Units of a scheme. It will be calculated as described below: Redemption Price = Applicable NAV x (1 - Exit Load* or CDSC*) * Either Exit Load or CDSC, whichever is applicable, will be charged. Redemption Price will be calculated for up to three decimal places for the Equity Schemes and four decimal places for the Debt Schemes. For example, if the Applicable NAV of a Scheme is Rs.10, and it has a 2% Exit Load, the Redemption Price will be calculated as follows: Redemption Price = 10 x (1 - 2.00%) i.e. 10 x 0.98 = 9.80 If the Scheme has no Exit Load and no CDSC, the Redemption Price will be equal to the Applicable NAV. The Securities Transaction Tax levied only in case of Equity Schemes under the Income Tax Act, 1961 at the rate of 0.25% (or such other applicable rate) on the amount of redemption will be reduced from the amount of redemption. To illustrate: If a Redemption of 1,000 units is sought by the Unit Holder at a Redemption Price of Rs. 9.80 (as calculated above), the redemption amount is Rs. 9,800. This will be further reduced

Non-Resident Investors
For NRIs, Redemption proceeds will be remitted depending upon the source of investment as follows: (i) Repatriation Basis When Units have been purchased through remittance in foreign exchange from abroad or by cheque / draft issued from proceeds of the Unit Holder's FCNR deposit or from funds held in the Unit Holder's Non Resident (External) account kept in India, the proceeds can be remitted to the Unit Holder in foreign currency (any exchange rate fluctuation will be borne by the Unit Holder). The proceeds can also be sent to his Indian address for crediting to his NRE / FCNR / non-resident (Ordinary) account, if desired by the Unit Holder.
47

Combined Offer Document Fidelity Mutual Fund


(ii) Non Repatriation Basis When Units have been purchased from funds held in the Unit Holder's non-resident (Ordinary) account, the proceeds will be sent to the Unit Holder's Indian address for crediting to the Unit Holder's non-resident (Ordinary) account. For FIIs, the designated branch of the authorised dealer may allow remittance of net sale / maturity proceeds (after payment of taxes) or credit the amount to the Foreign Currency account or Non-resident Rupee account of the FII maintained in accordance with the approval granted to it by the RBI. The Fund will not be liable for any delays or for any loss on account of any exchange fluctuations, while converting the rupee amount in foreign exchange in the case of transactions with NRIs / FIIs. The Fund may make other arrangements for effecting payment of Redemption proceeds in future. e) a) When one or more stock exchanges or markets which provide the basis of valuation for a substantial portion of the assets of the Scheme is closed otherwise than for ordinary holidays. When, as a result of political, economic or monetary events or any other circumstances outside the control of the Trustee and the AMC, the disposal of the assets of the Scheme is not considered to be reasonably practicable or might otherwise be detrimental to the interests of the Unit Holders. In the event of breakdown in the means of communication used for the valuation of investments of the Scheme, so that the value of the securities of the Scheme cannot be accurately or reliably arrived at. If, in the opinion of the AMC, extreme volatility of markets causes or might cause, prejudice to the interests of the Unit Holders of the Scheme. In case of natural calamities, war, strikes, riots, and bandhs. In case of any other event of force majeure or disaster that in the opinion of the AMC affects the normal functioning of the AMC or the Registrar. If so directed by SEBI.

b)

c)

d)

5.

Effect of Redemptions

f)

The number of Units held by the Unit Holder in his folio will stand reduced by the number of Units Redeemed. Units once redeemed will be extinguished and will not be reissued. g)

6.

Unclaimed Redemptions and Dividends

As per circular no. MFD / CIR / 9 / 120 / 2000, dated November 24, 2000 issued by SEBI, the unclaimed Redemption and dividend amounts shall be deployed by the Fund in call money market or money market instruments only. The investment management fee charged by the AMC for managing such unclaimed amounts shall not exceed 50 basis points. The circular also specifies that investors who claim these amounts during a period of three years from the due date shall be paid at the prevailing NAV. Thus, after a period of three years, this amount can be transferred to a pool account and the investors can claim the said amounts at the NAV prevailing at the end of the third year. In terms of the circular, the onus is on the AMC to make a continuous effort to remind investors through letters to take their unclaimed amounts. The details of such unclaimed amounts shall be disclosed in the annual report sent to the Unit Holders.

In any of the above eventualities, the time limits for processing requests for subscription and Redemption of Units will not be applicable. All types of subscription and Redemption of Units will be processed on the basis of the immediately next Applicable NAV after the resumption of dealings in Units.

H. Right to Limit Redemptions


The Trustee may, in the general interest of the Unit Holders of the Scheme and when considered appropriate to do so based on unforeseen circumstances / unusual market conditions, limit the total number of Units which may be redeemed on any Business Day to 5% of the total number of Units then in issue, under the Scheme and option(s) thereof, or such other percentage as the Trustee may determine. Any Units which consequently are not redeemed on a particular Business Day, will be carried forward for Redemption to the next Business Day, in order of receipt. Redemptions so carried forward will be priced on the basis of the Applicable NAV (subject to the prevailing Load) of the Business Day on which Redemption is made. Under such circumstances, to the extent multiple Redemption requests are received at the same time on a single Business Day, redemptions will be made on a pro-rata basis, based on the size of each Redemption request, the balance amount being carried forward for Redemption to the next Business Day. In addition, the Trustee reserves the right, in its sole discretion, to limit redemptions with respect to any single account to an amount of Rs. 1 Lakh in a single day.

Units and the Offer

G. Suspension of the Purchase and Redemption of Units


Subject to the approval of the Boards of the AMC and of the Trustee, and subject also to necessary communication of the same to SEBI, the determination of the NAV of the Units of the Scheme, and consequently of the Purchase, Redemption and switching of Units, may be temporarily suspended in any of the conditions described below.

48

VIII. Unit Holders' Rights and Services


A. Unit Holders' Rights
1. 2. Unit Holders of the Scheme(s) have a proportionate right in the beneficial ownership of the assets of the Scheme(s). If the Fund declares a dividend under any Scheme(s), it is bound to dispatch the dividend warrants within 30 days from the date of declaration of the dividend. The Trustee is bound to disclose to the Unit Holders any important information known to the Trustee which may have a material adverse bearing on their investments. The appointment of the AMC for the Fund can be terminated by the Trustee or by 75% of the Unit Holders of the Schemes, and any change in the appointment of the AMC is subject to the prior approval of SEBI and the Unit Holders. The Trustee is obliged to convene a meeting on a requisition of 75% of the Unit Holders of the Schemes / plans / options. 75% of the Unit Holders can pass a resolution to wind up the relevant Scheme. Unit Holders have the right to inspect all the documents listed under the paragraph "Documents Available for Inspection" in the Offer Document. The Trustee shall obtain the consent of the Unit Holders: a) b) c) whenever required to do so by the Regulations or otherwise by SEBI, in the interest of Unit Holders; whenever required to do so on a requisition made by 75% of the Unit Holders of the relevant Scheme; and if the Trustee decides to propose the winding-up of the Fund or of the relevant Scheme.

by calling the investor line of the AMC at "1800 180 8000" (toll-free from a MTNL / BSNL landline) or 30309800 (at local call rate from your mobile phone prefixing the local city code or non - MTNL / BSNL landline) or 0124 2542022 (at long distance rates). The Fund will publish the NAVs, Purchase Price and Redemption Price of all Schemes in at least two daily newspapers on all Business Days. The NAVs of the Schemes will also be updated on the website of the Fund i.e. www.fidelity.co.in and on the AMFI website i.e. www.amfiindia.com.

3.

E. Disclosure of Information under the Regulations


An annual report of the Schemes will be prepared as at the end of each financial year (March 31) and copies of the report or an abridged summary thereof will be mailed to all Unit Holders as soon as possible but not later than 6 months from the closure of the relevant financial year. If the report is mailed in a summary form, the full report will be available for inspection at the registered office of the Trustee and a copy thereof on request to the Unit Holders on payment of a nominal fee. In addition, the Fund shall before the expiry of one month from the close of each half year (March 31 and September 30) publish its unaudited financial results in one national English daily newspaper circulating in the whole of India and in a Marathi daily newspaper. These shall also be displayed on the website of the Fund and that of AMFI. Full portfolio details, in the prescribed format, shall also be disclosed either by publishing it in the newspapers or by sending to the Unit Holders within one month from the end of each halfyear and it shall also be displayed on the website of the Fund.

4.

5. 6. 7.

8.

F. Duration of the Schemes


The duration of the Schemes is perpetual. However, in accordance with the Regulations, Schemes may be wound up, after repaying the amount due to the Unit Holders: a) b) c) on the happening of any event which, in the opinion of the Trustee, requires the Schemes to be wound up; or if 75% of the Unit Holders of the Scheme pass a resolution that the Scheme be wound up; or if SEBI so directs in the interests of Unit Holders.

In circumstances requiring the approval of Unit Holders, the AMC shall be guided by the directions issued by SEBI and / or the Trustee, under the Regulations about the manner of obtaining such approval.

B. Voting Rights of the Unit Holders


Subject to the provisions of the Regulations as amended from time to time, the consent of the Unit Holders shall be obtained, entirely at the option of the Trustee, either at a meeting of the Unit Holders or through postal ballot. Only one Unit Holder in respect of each folio or account representing a holding shall vote and he shall have one vote in respect of each resolution to be passed.

If the Scheme is so wound up, the Trustee shall give notice of the circumstances leading to the winding up of the Schemes: a) b) to SEBI; and in two daily newspapers having a circulation all over India, and in a vernacular newspaper with circulation in Mumbai.
Unit Holders' Rights

C. Annual Accounts and Unit Certificates


Unit Holders will also be sent an annual account statement by the AMC, within 30 days after March 31. The annual account statement will show all transactions during the 12 month period from April 1 of the preceding year and will also indicate the closing balance of Units held and their NAV as on March 31. Account statements to be issued in lieu of Unit Certificates under the Scheme shall be non-transferable. The account statement shall not be construed as a proof of title. A non-transferable Unit Certificate will be sent to the Unit Holder within 6 weeks following the receipt of a written request. Units are non-transferable. The Trustee reserves the right to make the Units transferable at a later date, subject to the Regulations. All Units will rank pari passu, among Units within the same option in a scheme, as to assets and earnings.

On and from the date of the publication of notice of winding up, the Trustee or the AMC, as the case may be, shall a) b) c) cease to carry on any business activities in respect of the Schemes so wound up; cease to create or cancel Units in the Schemes; and cease to issue or redeem Units in the Schemes.

G. Procedure and Manner of Winding Up


The Trustee shall call a meeting of the Unit Holders to approve, by simple majority of the Unit Holders present and voting at the meeting, a resolution authorising the Trustee or any other person to take steps for winding up of the Scheme. The Trustee, or other person authorised as above, shall dispose of the assets of the Scheme concerned in the best interest of Unit Holders of the Scheme. The proceeds of sale shall be first utilised towards discharge of such liabilities as are due and payable under the Scheme, and, after meeting the expenses connected with the winding up, the balance shall be paid to the
49

D. NAV Information
The NAVs of FEF, FISSF, FTAF and FSTIF will be calculated by the Fund on all Business Days while the NAVs for FCF will be calculated on all calendar days. The details may be obtained

Combined Offer Document Fidelity Mutual Fund


Unit Holders in proportion to their respective interests in the assets of the Scheme, as on the date when the decision for winding up was taken. On completion of the winding up, the Trustee shall forward to SEBI and Unit Holders a report on the winding up, detailing, the circumstances leading to the winding up, the steps taken for disposal of the assets of the Scheme before winding up, net assets available for distribution to the Unit Holders and a certificate from the Auditors of the Fund. Notwithstanding anything contained herein above, the provisions of the SEBI Regulations in respect of disclosures of half-yearly reports and annual reports shall continue to be applicable until winding up is completed or the Scheme ceases to exist. After the receipt of the Trustee's report referred to above, and if SEBI is satisfied that all measures for winding up of the Scheme have been complied with, the Scheme shall cease to exist. Address : 1st Floor, Ganesha Towers, Old No. 90, New No 104, Dr. Radhakrishnan Salai, Mylapore, Chennai - 600 004. : 91-44-39180035 : 91-44-39180031 : investor.line@fidelity.co.in

Telephone Fax E-mail

2.

Investor Grievances Redressal Mechanism


No. of Complaints

Investor Complaints till February 20, 2007

Nature of Complaint Complaints received from SEBI Correction in investor details Non - allotment of Units Non receipt of account statements Non receipt of dividend warrants Non receipt of redemption warrant Other Complaints Total

Received 2 11,007 309 1,332 187 242 529 13,608

Redressed 2 11,002 306 1,332 187 240 523 13,592

Pending 0 5 3 0 0 2 6 16

H. Services to Unit Holders


1. Investor Services
Investors can enquire about NAVs, Unit Holdings, Valuation, Dividends, etc or lodge any service request by calling the investor line of the AMC at "1800 180 8000" (toll-free from a MTNL / BSNL landline) or 30309800 (at local call rate from your mobile phone prefixing the local city code or non - MTNL / BSNL landline) or 0124 2542022 (at long distance rates). In order to protect confidentiality of information, the service representatives may require personal information of the investor for verification of his / her identity. The AMC will at all times endeavour to handle transactions efficiently and to resolve any investor grievances promptly. Any complaints should be addressed to Mr. R. Ananth Narayanan, who has been appointed as the Investor Relations Officer. He can be contacted at:

The investor complaints received by the Fund are redressed by the Investor Relations Officer and CAMS, the Registrar. The Compliance Officer regularly reviews the redressal of complaints for assessing the quality and timeliness of the redressal.

50

Unit Holders' Rights

IX. CONSOLIDATED TAX BENEFITS OF INVESTING IN THE SCHEMES OF THE FUND


The information furnished below outlines briefly the tax implications with respect to the unit holders of the Scheme and with respect to the Fund and is based on relevant provisions of the Income Tax Act, 1961 and Wealth Tax Act, 1957 (collectively called 'the relevant provisions') as at March 09, 2007. For this purpose, the provisions of the Finance Act, 2006 as assented by the President of India have been considered. The proposals of the Finance Bill, 2007 are considered as the same has been presented in the Parliament, however, they will be law only after it is given assent by the President of India. The implications stated herein have been reviewed and certified by the Auditors of the Scheme and are found in agreement with the relevant provisions vide their letter dated March 09, 2007.However, the Fund does not make any representations on the procedures for ascertaining the tax benefits nor do they make any representation regarding any legal interpretations. Since the information below is based on the relevant provisions as on March 09, 2007, any subsequent changes in the said provisions could affect the tax benefits. Except for the above procedure, the auditor has not performed any other services in connection with any other data or information included in this Offer document. THE FOLLOWING INFORMATION IS PROVIDED FOR GENERAL INFORMATION PURPOSES ONLY AND APPLIES TO THE SCHEME. IN VIEW OF THE INDIVIDUAL NATURE OF TAX BENEFITS, EACH INVESTOR IS ADVISED TO CONSULT HIS OR HER OWN TAX CONSULTANT WITH RESPECT TO THE SPECIFIC TAX IMPLICATIONS ARISING OUT OF HIS OR HER PARTICIPATION IN THE SCHEMES.

An education cess of 2% on total income tax payable (including surcharge) is payable by all categories of taxpayers. The Union Budget 2007 presented by Finance Minister on February 28, 2007 proposes to levy surcharge on foreign companies, firms and domestic companies only if their total income exceeds Rs. 10,000,000. Additionally, the Union Budget 2007 proposes to levy an additional surcharge, called 'Secondary and Higher Education Cess' at the rate of 1%, thus, increasing the aggregate rate of education cess to 3%, payable on total income tax payable (including surcharge). Moreover, in case of an equity-oriented fund, long term capital gains arising from the sale of a units of such equity oriented fund are exempt from tax under section 10(38) of the Act, where such sale attracts Securities Transaction Tax ('STT'). However, at the time of sale of units (redemption) the unit holder will have to pay a STT of 0.25% on value of sale of the unit to the Mutual Fund, which will be collected by the Mutual Fund and deposited into Government Treasury. For this purpose, 'an equity oriented fund' is a fund where the investible funds are invested in equity shares of domestic companies to the extent of more than 65% of the total proceeds of such fund. As per Finance Act, 2006, even income by way of long term capital gains exempt under section 10(38) of the Act, would be taken into account while computing the Book Profits of a company for the purpose of Minimum Alternate Tax payable under section 115JB of the Act.

2.2. Short-term capital gains


Short term capital gains arising to a unit holder will be taxed at the normal rate applicable to that unit holder as per the provisions of the Act. In case of an individual or HUF, being a resident, where the total income as reduced by the short term capital gains is below the maximum amount not chargeable to tax (i.e Rs. 100,000 in case of all individuals, to Rs. 135,000 in case of women and to Rs.185, 000 in case of senior citizens), the short term capital gains shall be reduced by the amount by which the total income as so reduced falls short of the maximum amount which is not chargeable to income tax and the tax on the balance of such short term capital gains shall be computed at the applicable slab rates. A reference may also be made to the provisions of section 112 of the Act, which provides for a similar treatment in case of longterm capital gains. In case of domestic companies the short-term capital gains are taxable @30%, in case of foreign companies @40% and in case of FII as per section 115AD of the Act @30%. In case of an equity-oriented fund, as per section 111A of the Act, short term capital gains arising from the sale (redemption) of a unit of an equity oriented fund, where such sale (redemption) attracts STT, is taxable at the rate of 10%. However, at the time of sale of units (redemption) the unit holder will have to pay a STT of 0.25% on the value of the sale of the unit to the Mutual Fund, which will be collected by the Mutual Fund and deposited into Government Treasury. In addition to the aforesaid tax, surcharge and education cess is also payable as mentioned in para 2.1 above.

A) FOR UNIT HOLDERS


1. Income from units
Under the provisions of section 10(35) of the Income Tax Act, 1961 ('the Act'), income received in respect of the units of a Mutual Fund specified under section 10(23D) will be exempt from income tax in the hands of all unit holders.

2.

Capital Gains
Under Section 2(29A) read with 2(42A) of the Act, units of a mutual fund are treated as a long-term capital asset if they are held for a period of more than twelve months preceding the date of transfer. Units held for not more than 12 months preceding the date of their transfer are shortterm capital assets.

2.1. Long-term capital gains


As per section 112 of the Act, income arising on transfer of a long-term capital asset by resident and non-resident investors [other than Foreign Institutional Investor ('FII')], would be chargeable to tax at the rate of 20% after indexation or at 10% without indexation, if applicable. In case of FII, such income is chargeable to tax at the rate of 10% under section 115AD of the Act. In case of an individual or Hindu Undivided Family ('HUF'), being a resident, where the total income as reduced by the long-term capital gains is below the maximum amount not chargeable to tax (i.e. Rs.100,000 in case of all individuals, to Rs.135,000 in case of women and to Rs.185, 000 in case of senior citizens), the long term capital gains shall be reduced to the extent of the shortfall and only the balance long term capital gains will be subject to the flat rate of taxation. In addition to the aforesaid tax, surcharge at the following rates is also payable: In case of foreign companies at the rate of 2.5%, In case of firm /domestic company/ artificial jurisdiction person at the rate of 10% and In the case of an individual, HUF or Association of Persons ('AOP'), where the income exceeds Rs. 1,000,000, at the rate of 10%, of such tax liability is also payable.

3.

Deduction under the provisions of Section 80C of the Act


In terms of the provisions of section 80C of the Act, an Individual or a HUF is entitled to claim a deduction for investments made in specified securities etc. up to a maximum amount of Rs. 100,000. Subscription to any units of any Mutual Fund notified under clause (23D) of section 10 of the Act or from the Administrator or the specified company under any plan formulated in accordance with such scheme as the Central Government may, by notification in the Official Gazette, specify in this behalf, qualify for deduction under section 80C of the Act. The Central Government has notified the Equity Linked Savings Scheme, 2005 ('ELSS, 2005') in this regard vide Notification No. 226 dated November 3, 2005 as amended by Notification No. 259 dated December 13, 2005. The investors would be entitled to the benefit under section

51

Consolidated Tax Benefits

Combined Offer Document Fidelity Mutual Fund


80C of the Act for investments made under such schemes of the Fund, which are in accordance with ELSS 2005 ('Fidelity Tax Advantage Fund'), subject to the aggregate limit of Rs.100,000 provided under section 80C of the Act. term capital gains arising from units chargeable to tax if the payee Unit holder is a non-resident. In respect to shortterm capital gains, tax is required to be deducted at source at the rate of 30% if the payee Unit holder is a non-resident non-corporate and at the rate of 40% if the payee Unit holder is a foreign company in case of schemes other than equity oriented scheme. In case of short-term capital gains arising from sale of equityoriented schemes, tax is required to be deducted at the rate of 10%. Further, the aforesaid tax to be deducted is required to be increased by surcharge and education cess, as applicable. As per circular no. 728 dated October 30, 1995 issued by the CBDT, in the case of a remittance to a country with which a Double Tax Avoidance Agreement ('DTAA') is in force, the tax should be deducted at the rate provided in the Finance Act of the relevant year or at the rate provided in the DTAA, whichever is more beneficial to the assessee. In order for the Unit holder to obtain the benefit of a lower rate available under a DTAA, the Unit holder will be required to provide the Mutual Fund with a certificate obtained from his Assessing Officer stating his eligibility for the lower rate.

4.

Set-off and carry forward of losses


The capital loss resulting from sale of units would be available for set off against other capital gains made by the investor and would reduce the tax liability of the investor to that extent. However, losses on transfer of long-term capital assets would be allowed to be set-off only against gains from transfer of long-term capital assets. Further, as the long-term gains arising on transfer of units of equity oriented funds are not subject to tax then the long-term capital losses from such units would not be allowed to be set off or carry forward.

5.

Units held as Stock-in-trade and rebate of STT


Where the units are treated as 'stock in trade' and the profits arising from the sale of units are taxed under the head "Profits & Gains of business or profession" are taxed under normal rates of taxation and an amount equal to the STT paid by the unit holder can be claimed as a rebate from the tax payable on the income from such sale of units by virtue of the provisions of section 88E of the Act. No deduction would be allowed for STT while calculating capital gains or business profits.

11. Religious and Charitable Trusts


Investment in units of the Fund by Religious and Charitable Trusts is an eligible investment under Section 11(5) of the Act, read with Rule 17C of the Income Tax Rules, 1962.

6.

Additional provisions applicable to income from units


Where a person buys any units within a period of three months before the record date, sells such units within nine months after such date and the income distributed on such units is exempt from tax, the loss on such sale to the extent of the income distributed on units shall be ignored while computing the income chargeable to tax.

12. Wealth Tax Act, 1957


Units held under the Scheme of the Fund are not treated as assets as defined under section 2(ea) of the WealthTax Act, 1957 and therefore, would not be liable to wealthtax.

B) FOR THE FUND


1. Income of the Mutual Fund
Fidelity Mutual Fund is a Mutual Fund registered with the Securities and Exchange Board of India and its entire income is exempt from tax under section 10(23D) of the Act.

7.

Additional provisions applicable to bonus


Where a person buys units (original units) within a period of three months before the record date, receives bonus units on such original units, and then sells the original units within a period of nine months from the record date and continues to hold the bonus units, then the loss incurred on the original units shall be ignored while computing the income chargeable to tax but shall be deemed to be the cost of acquisition of the bonus units.

2.

Dividend Distribution Tax


Under Section 115R(2) of the Act, a Mutual Fund shall be liable to pay Distribution Tax (including applicable Surcharge and Education Cess) at the rate of 14.025% on income distributed to any person being an individual or Hindu Undivided Family; and 22.44% on income distributed to any other person. No Distribution Tax is payable by an equity oriented fund. The Union Budget proposes 2007 presented by Finance minister on February 28, 2007 proposes to amend the rates of Distribution Tax (including applicable Surcharge and Education Cess) as under: 14.1625% on income distributed by money market mutual fund or a liquid fund 14.1625% on income distributed to any person being an individual or Hindu Undivided Family; and 22.66% on income distributed to any other person. The exemption of no distribution tax to an equity oriented fund continues. For this purpose, "Money Market Mutual Fund" is defined to mean a money market mutual fund as defined in the sub-clause (p) of clause 2 of the Securities and Exchange Board of India (Mutual Fund) Regulations, 1996 and "Liquid fund" has been defined to mean a scheme or plan of a mutual fund which is classified by the Securities Exchange Board of India as a 'Liquid fund' in accordance with the guidelines issued by it in this behalf under the Securities and Exchange Board of India Act, 1992 or the regulations made there under.

8.

Switching from one scheme to another


As stated in Chapter VII - Units and the Offer, switching from one Scheme/option to another Scheme/option will be effected by way of redemption of units of the relevant Scheme/option and reinvestment of the redemption proceeds in the other Scheme/option selected by the unit holder. Hence switching will attract the same implications as applicable on transfer of such units.

9.

Additional provisions to an ELSS Scheme


In case of Fidelity Tax Advantage Fund, the unit holder would not be permitted to transfer or switch to another scheme / option before completion of 3 years from the date of allotment of units (1 year in the event of death of an investor).

10. Tax withholding


No deduction of tax at source shall be made from income credited or paid by a mutual fund to a Unit holder. However, dividend distribution tax, as applicable would be payable by the mutual fund.

Consolidated Tax Benefits

10.1.Resident Investors
As per Circular no. 715 dated August 8, 1995 issued by the CBDT in case of resident Unit holders, no tax is required to be deducted at source from capital gains arising at the time of repurchase or redemption of the units.

3.

Securities Transaction Tax


As specified in Chapter VII of the Finance (No. 2) Act, 2004, as and when the mutual fund purchases and sells equity shares/units, it would be required to pay the STT applicable on such purchases and sales to the concerned Recognised Stock Exchange at the prescribed rates. Further, in case of equity oriented funds, the Fund would also be liable to collect STT from every person who sells such units to the Fund at the rate of 0.25% and pay the same to the credit of the Central Government within the specified time limits.

10.2.Foreign Institutional Investors


Under section 196D of the Act, no tax is required to be deducted at source on income by way of capital gains earned by a FII.

10.3.Non-resident Investors other than FIIs


Under Section 195 of the Act, in case of schemes other than equity oriented scheme, the Mutual Fund is required to deduct tax at source at the rate of 20% on any long52

X. Other Matters
A. Transactions with the Sponsor / Associates
Fidelity Mutual Fund was registered on February 17, 2005 and has not had any transactions with the Sponsor or any of the Sponsor's associates from the date of registration till the date of the Offer Document. The AMC may however, for purposes of providing certain services utilise the services of Sponsor, group companies and any other subsidiary or associate company of the Sponsor established or to be established at a later date, who is in a position to provide the requisite services to the AMC. The AMC, on behalf of the Fund, shall conduct its business with the aforesaid companies (including their employees or relatives) on commercial terms and on arms-length basis and at mutually agreed terms and conditions to the extent permitted under the SEBI Regulations. The AMC, has entered into an agreement with Fidelity Investments Management (Hong Kong) Limited ("FIMHKL"), appointing them for execution of equity trade orders placed by the fund managers of the Equity Schemes of the Fund. FIMHKL places the orders with the brokers registered with SEBI in India. The cost of obtaining such services is entirely borne by the AMC and is not charged to the Schemes. The AMC has entered into an agreement with Fidelity Business Services India Private Limited, for the purpose of availing certain services in the nature of some of the back office operations of the AMC. The fees for such services are borne by the AMC and not charged to the Schemes.

expenses as prescribed under the Regulations and guidelines thereunder. The details of calculation for charging such expenses shall be reported to the Boards of AMC and trustees and shall also be disclosed in the Annual Report of the Schemes. The Fund will appoint a dedicated Fund Manager for making investments in overseas securities and where necessary, shall appoint other intermediaries of repute as advisors, sub-managers, or sub-custodians for managing and administering such investments. The appointment of such fund manager / intermediaries shall be in accordance with the applicable requirements, if any, of SEBI.

C. Dividends and Distributions


(a) FEF, FISSF, FTAF:
The Trustee may decide to distribute by way of dividend, the surplus by way of realised profit, dividends and interest, net of losses, expenses and taxes, if any, to Unit Holders in the dividend option of the Scheme if such surplus is available and adequate for distribution in the opinion of the Trustee. The Trustee's decision with regard to availability and adequacy, rate, timing and frequency of distribution shall be final. The dividend will be due to only those Unit Holders whose names appear in the register of Unit Holders in the Dividend option of the Scheme on the record date which will be fixed by the Trustees and announced in advance. Further, the NAV shall be adjusted to the extent of dividend distribution and statutory levy, if any, at the close of business hours on record date. Within one day of the decision by the Trustees regarding the dividend distribution rate and the record date, AMC shall issue notice to the public, communicating the decision including the record date. The record date shall be 5 calendar days from the issue of notice. Such notice shall be 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. The Unit Holders have the option of receiving the dividend or reinvesting the same. The dividend will be reinvested at the Applicable NAV of the immediately following Business Day. The AMC shall despatch to the Unit Holders, the dividend warrants within 30 days of the date of declaration of dividend.

B. Policy on Offshore Investments by the Schemes


SEBI has vide its circular dated August 02, 2006, permitted mutual funds to invest in ADRs / GDRs issued by Indian companies, equity of overseas companies listed on stock exchanges overseas, foreign debt securities in 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 by Standard & Poor, P-1 / AAA by Moody's, F1 / AAA by Fitch IBCA, etc, government securities where the countries are AAA rated, units / securities issued by the overseas mutual funds or unit trusts which invest in the aforesaid securities or are rated as mentioned above and are registered with overseas regulators. The mutual funds can make investments in ADRs / GDRs / Foreign Securities within an overall ceiling of US$3bn. with a sub-ceiling for individual mutual funds which shall not exceed 10% of the net assets managed by them as on March 31 of each relevant year, subject to a maximum of US$ 150 mn per mutual fund. It is the Investment Manager's belief that overseas securities offer new investment and portfolio diversification opportunities into multi-market and multi-currency products. However, such investments also entail additional risks. Such investment opportunities may be pursued by the Investment Manager provided they are considered appropriate in terms of the overall investment objectives of the Schemes of the Fund. The Schemes may then, if necessary, seek applicable permission from SEBI to invest abroad in accordance with their investment objectives and in accordance with any guidelines issued by SEBI from time to time. Since the Schemes may invest only partially in overseas securities, there may not be readily available and widely accepted benchmarks to measure performance of such Schemes. Offshore investments shall be made subject to any necessary approvals or conditions stipulated by SEBI and the expenses charged to the Schemes shall not exceed the total limits on

(b) FSTIF:
The Trustee may decide to distribute by way of dividend, the surplus by way of realised profit, dividends and interest, net of losses, expenses and taxes, if any, to Unit Holders in the dividend option of the Scheme if such surplus is available and adequate for distribution in the opinion of the Trustee. The frequency of declaration of dividend under the Plans will be as follows: Institutional Plan: The dividend under the Dividend option of this Plan will be declared monthly on the 25th of each calendar month. If that day is a non Business Day, the dividend will be declared on the immediately next Business Day. Non Institutional Plan: The dividend under the Dividend option of this Plan will be declared monthly on the 25th of each calendar month. If that day is a non Business Day, the dividend will be declared on the immediately next Business Day. The Trustee's decision with regard to availability and adequacy and rate of distribution shall be final. The dividend will be due to only those Unit Holders whose names appear in the register of Unit Holders in the Dividend option of the Scheme on the 25th or the next Business Day as the case may be, of each month specified above. These days will be considered as the Record Dates. The Unit Holders have the option of receiving the dividend or reinvesting the same. The dividend will be reinvested at the Applicable NAV of the immediately following Business Day. The AMC shall despatch to the Unit Holders, the dividend warrants within 30 days of the date of declaration of dividend.

53

Other Matters

Combined Offer Document Fidelity Mutual Fund

(c) FCF:
The Trustee may decide to distribute by way of dividend, the surplus by way of realised profit, dividends and interest, net of losses, expenses and taxes, if any, to Unit Holders in the dividend option of the Scheme if such surplus is available and adequate for distribution in the opinion of the Trustee. The frequency of declaration of dividend under all plans will be as follows: Dividend payout facility: The dividend payout facility offers the following dividend declaration frequency: a) Monthly (The record date for declaration of dividend shall be 25th of each calendar month.)

value of a scheme and the schemes of the Fund have invested in the company during the period specified by Regulation 25 (11). Name of the Company Scheme in which investment is made by the Company Investment made by schemes of the Fund in that Company / its subsidiary Fidelity Equity Fund Fidelity Tax Advantage Fund Fidelity India Special Situations Fund Aggregated for the period under Regulation 25 (11) At Cost (Rupees in Lakhs) 2,556.17 572.54 Outstanding as at February 20, 2007 at Market / Fair Value (Rupees in Lakhs) 3,223.72 695.07

Dividend re-investment facility: The dividend re-investment facility offers the following dividend declaration frequencies: (a) Daily (The record date for declaration of dividend will be all days for which NAV is published on www.amfiindia.com / www.fidelity.co.in websites.) (b) Weekly (The record date for declaration of dividend shall be every Monday.) (c) Monthly (The record date for declaration of dividend shall be 25th of each calendar month) For the weekly and monthly dividend declaration frequencies, if any of the record date(s) as mentioned above falls on a non - Business Day, the record date shall be the immediately following Business Day. The Trustee's decision with regard to availability and adequacy and rate of distribution shall be final. The dividend will be due to only those Unit Holders whose names appear in the register of Unit Holders in the Dividend option of the Scheme on the record dates as mentioned above or the next Business Day as the case may be. Under the monthly dividend declaration frequency, the Unit Holders have the option of receiving the dividend or reinvesting the same while under the daily and weekly dividend declaration frequencies the dividend will be compulsorily reinvested. The dividend will be reinvested at the ex-dividend NAV announced immediately after the record date. In respect of Unit Holders opting for the dividend payout facility, the AMC shall despatch the dividend warrants within 30 days of the date of declaration of dividend. The dividend proceeds under the aforesaid Schemes / plans may be paid by way of direct credit / EFT / SEFT / RTGS / Wired Transfer / any other manner through which the investor's bank account specified in the Registrar's records is credited with the dividend proceeds

Gujarat Fluorochemicals Limited

Fidelity MultiManager Cash Fund

1,777.81

2,278.08

The aforesaid investments are made by the Fund based on the strong fundamentals of the company.

F. General Information
1. Power to make Rules
Subject to the Regulations, the Trustee may, from time to time, prescribe terms and make rules for the purpose of giving effect to the Scheme and may authorise the AMC to add to, alter or amend all or any of such terms and rules.

2.

Power to remove Difficulties

If any difficulties arise in giving effect to the provisions of the Scheme, the Trustee may, subject to the Regulations, do anything not inconsistent with such provisions, which appears to it to be necessary, desirable or expedient, for the purpose of removing such difficulty.

3.

Penalties and Pending Litigation

All penalties awarded by SEBI under the SEBI Act or any of the Regulations against the Sponsor or any company associated with the Sponsor in any capacity (including the AMC, the Trustee Company or any of the directors or key personnel (specifically the fund managers) of the AMC and the Trustee Company) shall be disclosed. The nature of the penalty must also be disclosed. - None For the Sponsor and its associates - other than any penalties mentioned above - the penalties awarded by any financial regulatory body, including stock exchanges, for defaults in respect of shareholders, debenture holders and depositors shall also be disclosed. Additionally, penalties awarded for any economic offence and violation of any securities laws shall be disclosed. - Please see (A) below. Any pending material litigation proceedings incidental to the business of the Fund to which the Sponsor or any company associated with the Sponsor in any capacity (including the AMC, the Trustee Company or any of the directors or key personnel as above) is a party. - None Any pending criminal cases against the Sponsor or any company associated with the Sponsor in any capacity (including the AMC, the Trustee Company or any of the directors or key personnel as above) should also be disclosed separately. - Please see (B) below. Any deficiency in the systems and operations of the Sponsor or any company associated with the Sponsor in any capacity (including the AMC or the Trustee Company) which SEBI has specifically advised to be disclosed in the Offer Document, or

D. Inter-Scheme Transfers
Transfers of investments from one scheme to another scheme may be made only if: (a) such transfer is done at the prevailing market price for quoted instruments on spot basis; and (b) the security(ies) so transferred is / are in conformity with the investment objective of the scheme to which such transfer has been made.

E. Disclosure under Regulation 25(11)


In case any company has invested more than 5% of the Net Asset Value of any scheme of the Fund, investment made by that scheme or any other scheme of the Fund in that company or its subsidiaries is required to be disclosed as required by Regulation 25(11). As on February 20, 2007 the following company has invested more than 5 per cent of the net asset

54

Other Matters

which has been notified by any other regulatory agency, shall be disclosed. - None Any enquiry / adjudication proceedings under the SEBI Act and the Regulations that are in progress against the Sponsor or any company associated with the Sponsor in any capacity (including the AMC, the Trustee Company or any of the directors or key personnel as above) shall be disclosed. - None A. Fidelity Investments International, a company incorporated in England and Wales and regulated by the Financial Services Authority, received a warning ("avertissement") from the Conseil de Discipline de la Gestion Financiere (Financial Management Disciplinary Committee) in France on May 12, 2003. The basis of the warning was that, between 1994 and 1998, Fidelity Currency Funds (a Bermudadomiciled range of funds) were publicly offered in France before registration, even though there was no active marketing or promotion of the products at that time. The issue first arose in 1998, when Fidelity Investments International was simply informed by the French regulatory authority (La Commission des Operations de Bourse ("COB")) that an investigation was proceeding. No investor complaints were received by Fidelity Investments International and the notification from the COB did not indicate that any such complaints had been made to the COB. The funds have since all been registered. Fidelity Investments International is a subsidiary of Fidelity Investment Management Limited, also incorporated in England and Wales, which in turn is a subsidiary of Fidelity International Limited, the holding company of FIIA. A Director of the Sponsor, Mr. Brett Goodin, has been the subject of various vexatious actions made to the Taipei District Attorney's Office, Taipei, Taiwan by an ex-employee of Fidelity Investments (Taiwan) Limited. A total of more than 30 allegations that have been made have so far been dismissed with only two remaining to be heard. These constitute two allegations of violation of the Securities and Exchange Laws. Both allegations continues to be vigorously denied.

are not subject to any local requirements which restrict or prohibit them from so doing. Information other than that relating specifically to the AMC / the Fund and its products, is for information purposes only and should not be relied upon as a basis for investment decisions. The AMC cannot be held responsible for any information contained in any website linked from this website.

7.

Omnibus Clause

Besides the AMC, the Trustee / Sponsor may also absorb expenditures in addition to the limits laid down under Regulation 52 of the SEBI Regulations. Further, any amendment / clarification and guidelines including in the form of notes or circulars issued from time to time by SEBI for the operation and management of mutual fund shall be applicable.

8.

Documents Available for Inspection

Copies of the following documents will be available for inspection on all Business Days during the NFO Period and afterwards, between 10 a.m. and 3 p.m. at the Registered Office of the AMC at 56, 5th Floor, Maker Chambers VI, 220, Nariman Point, Mumbai - 400 021.
u

Copy of Memorandum and Articles of Association of the Trustee Company and of the AMC. Copy of the Custodian Agreement dated February 17, 2005 between the Trustee and J P Morgan Chase Bank. Copy of the Investment Management Agreement dated August 9, 2004 between the Fund and the AMC. Copy of the Trust Deed dated August 9, 2004. Copy of the Fund Registration Certificate dated February 17, 2005 from SEBI. Copy of Securities and Exchange Board of India (Mutual Funds) Regulations, 1996. Copy of Indian Trusts Act, 1882. Copy of the Registrar and Transfer Agent Agreement dated September 10, 2004 between the AMC and CAMS. Copy of letter of consent of Auditors and Legal Advisors.

B.

u u

u u

4.

Scheme to be binding on the Unit Holders


u

Subject to the Regulations, the Trustee may, from time to time, add or otherwise vary or alter all or any of the features of investment options and terms of the Schemes, if necessary, after obtaining the prior permission of SEBI and Unit Holders and the same shall be binding on all the Unit Holders of the Schemes and any person or persons claiming through or under them as if each Unit Holder or such person expressly had agreed that such features and terms shall be so binding. Any additions / variations / alternations shall be done only in accordance with the Regulations.

NOTES: NOTWITHSTANDING ANYTHING CONTAINED IN THIS OFFER DOCUMENT, THE PROVISIONS OF THE SEBI (MUTUAL FUNDS) REGULATIONS, 1996 AND THE GUIDELINES THEREUNDER SHALL BE APPLICABLE. ALL POINTS MENTIONED IN THE STANDARD OBSERVATIONS ISSUED BY SEBI VIDE THEIR 'INSTRUCTIONS FOR FILING OFFER DOCUMENT WITH SEBI' DATED DECEMBER 26, 2003 HAVE BEEN INCORPORATED IN THIS OFFER DOCUMENT. THE TERMS OF FEF, FTAF, FISSF, FSTIF AND FCF WERE APPROVED BY THE TRUSTEE AT THEIR MEETINGS HELD ON SEPTEMBER 29, 2004, AUGUST 31, 2005, FEBRUARY 9, 2006, APRIL 24, 2006 AND JULY 25, 2006 RESPECTIVELY. For and on behalf of the Board of Directors of Fidelity Fund Management Private Limited (Asset Management Company for Fidelity Mutual Fund) Ashu Suyash Managing Director and Country Head Place : Mumbai
Other Matters

5.

Register of the Schemes' Unit Holders

Registers of Unit Holders of each scheme, containing necessary particulars, will be maintained at the Registered office of the AMC at Mumbai and at the office of the Registrar at Chennai and at such other places as the Trustee may decide.

6.

Website

The website of the Fund / AMC is intended solely for the use of Resident Indians, NRIs, PIOs and FIIs registered with SEBI. It should not be regarded as a solicitation for business in any jurisdiction other than India. In particular, the information is not for distribution and does not constitute an offer to sell or the solicitation of an offer to buy securities in any jurisdiction where such activity is prohibited, including the United States of America. Any persons resident outside India who nevertheless intend to respond to this material must first satisfy themselves that they

Date : March 09, 2007

55

Combined Offer Document Fidelity Mutual Fund

LIST OF INVESTOR SERVICE CENTRES


Fidelity Fund Management Private Limited
u u u u u u u u u u

Ahmedabad* : 301, Raindrops Building, Opp. Cargo Motors, C. G. Road, Ellis Bridge, Ahmedabad - 380 006. Bangalore* : #205-207, 2nd Floor, Phoenix Towers, 16 & 16 / 1, Museum Road, Bangalore - 560 025. Chandigarh* : SCO 180-182, First Floor, Sector 9 C, Chandigarh - 160 017 Chennai* : Old No. 90, New No. 104, Ganesha Towers, Dr. Radhakrishnan Salai, Mylapore, Chennai - 600 004. Kolkata* : 408, 4th Floor, Azimganj House, 7 Camac Street, Kolkata - 700 017 Lucknow* : North West Side, Ground Floor, Dube Complex, 1, Sapru Marg, Lucknow - 226 001 Mumbai* : 57, 5th Floor, Maker Chambers VI, 220, Nariman Point, Mumbai - 400 021 New Delhi* : 4th Floor, Narain Manzil, 23, Barakhamba Road, New Delhi - 110 001 Pune* : Unit No. 406, 4th Floor, Nucleus Mall, 1, Church Road, Camp, Pune - 411 001. Secunderabad* : No. 1-8-304-307, 3rd Floor, Kamala Towers, Pattigadda Street No. 1, (above Mody Ford showroom), Begumpet, Secunderabad - 500 003

Computer Age Management Services Private Limited (CAMS)


u u

u u u u u u u u u u u u u u u u u u u u

u u u u u u u u u u u u u u u u u u u u u u

Agra : F-39 / 203, Sky Tower, Sanjay Place, Agra - 282 002 Ahmedabad* : 402-406, 4th Floor - Devpath Building, Off C G Road, Behind Lal Bungalow, Ellis Bridge, Ahmedabad - 380 006 Ajmer : Shop No. S-5, Second Floor, Swami Complex, Ajmer - 305 001 Allahabad : # 07, 1st Floor, Behari Bhawan, 3, S. P. Marg, Civil Lines, Allahabad - 211 001 Alwar : 256 A, Scheme No.1, Arya Nagar, Alwar - 301 001 Amaravati : 81, Gulsham Tower, 2nd floor, Near Panchsheel Talkies, Amaravati - 444 601 Amritsar : 378-Majithia Complex, 1st Floor, M. M. Malviya Road, Amritsar - 143 001 Anand : 101, A.P. Tower, Behind Sardar Gunj, Next to Nathwani Chambers, Anand - 388 001 Asansol : Block - G, 1st Floor, P.C. Chatterjee Market Complex, Rambandhu Talab, P.O. Ushagram, Asansol - 713 303 Aurangabad : Office No 1, 1st Floor, Amodi Complex, Juna Bazar, Aurangabad - 431 001 Bangalore* : Trade Centre, 1st Floor, 45, Dikensen Road (Next to Manipal Centre), Bangalore - 560 042 Belgaum : Tanish Tower, CTS No. 192 / A, Guruwar Peth, Tilakwadi, Belgaum - 590 006 Bhavnagar : 305-306, Sterling Point, Waghawadi Road, Opp. HDFC Bank, Bhavnagar - 364 002 Bhilai : 209, Khichariya Complex, Opp. IDBI Bank, Nehru Nagar Square, Bhilai - 490 020 Bhilwara : C / o Kodwani & Associates, F-20-21, Apsara Complex, Azad Market, Bhilwara - 311 001 Bhopal : C-12, Near City Bank, Above Delhi Prakashan Agency, Zone-I, M. P. Nagar, Bhopal - 462 011 (M.P.) Bhubaneswar* : 101/ 5, Janpath, Unit - III, Near Hotel Swosti, Bhubaneswar - 751 001 Bokaro : HC-3, 1st Floor, City Centre, Sector - 4, Bokaro Steel City, Bokaro - 827 004 Burdwan : 399, G.T. Road, Opposite Talk of the Town, Burdwan - 713 101 Calicut : 17 / 28 H, 1st Floor, Manama Building, Mavoor Road, Calicut - 673 001 Chandigarh* : Deepak Towers SCO 154-155, 1st Floor, Sector 17-C, Chandigarh -160 017 Chennai* : Ground Floor No.178 / 10, Kodambakkam High Road, Opp. Hotel Palmgrove, Nungambakkam, Chennai - 600 034 Cochin* : 40 / 9633 D, Veekshanam Road, Near International hotel, Cochin - 682 035 Coimbatore* : Old # 66 New # 86, Lokamanya Street (West) , Ground Floor, R.S.Puram, Coimbatore - 641 002 Cuttack : First Floor, Cantonment Road, Mata Math, Cuttack -753 001 Davangere : 13, Ist Floor, Akkamahadevi Samaj Complex, Church Road, P.J. Extension, Davangere - 577 002 Dehradun : 204 / 121, Nari Shilp Mandir Marg, Old Connaught Place, Dehradun - 248 001 Dhanbad : Urmila Towers, Room No: 111(1st Floor), Bank More, Dhanbad - 826 001 Durgapur* : 4/2, Bengal Ambuja Housing Development Ltd. City Centre, Durgapur - 713 216 Erode : 171-E,Sheshaiyer Complex, First Floor, Agraharam Street, Erode - 638 001 Faridabad : B-49, Ist Floor, Nehru Ground, Behind Anupam Sweet House, NIT, Faridabad - 121 001 Ghaziabad : 207 / A-14, IInd Floor, Devika Chamber, RDC, Raj Nagar, Ghaziabad - 201 002 Goa* : No.108, 1st Floor, Gurudutta Bldg, Above Weekender, M G Road, Panaji Goa-403 001 Gorakhpur : Shop No.3, 2nd floor Cross Road, A. D. Chowk, Bank Road, Gorakhpur - 273 001 Guntur : Door No.5-38-44, 5 / 1 BRODIPET, Near Ravi Sankar Hotel, Guntur - 522 002 Gurgaon : 2319, 1st Floor, Block no.3, Opp. Air Force Golden Jubilee School, Delhi Road, Sector 14, Gurgaon - 122 001 Guwahati : Old post office lane, A. K. Azad Lane, Rehabari, Guwahati - 781 008 Gwalior : 1st Floor, Singhal Bhavan, Daji Vitthal Ka Bada, Old High Court Road, Gwalior - 474 001 Hubli : No.208, 'A' Block, 1st Floor, Kundagol Complex, Opp.Court, Club Road, Hubli - 580 029 Hosur : Shop No.8, J D Plaza, Opp. TNEB Office, Royakotta Road, Hosur - 635 109 Indore* : 101, Shalimar Corporate Centre, 8-B, South Tukoganj, Opposite Green Park, Indore - 452 001 Jabalpur : 975, Chouksey Chambers, Near Gitanjali School, 4th Bridge, Napier Town, Jabalpur - 482 001 Jaipur* : G-III, Park Saroj, Behind Ashok Nagar Police Station, R-7, Yudhisthir Marg, C-Scheme, Jaipur - 302 001 Jalandhar : 367 / 8, Central Town, Opp. Gurudwara Diwan Asthan, Jalandhar - 144 001

56

u u u u u u u u u u u

u u u u u u

u u u u u u u u u u u u u u u u u u u u u u u u u u u u

u u

u u

Jalgaon : Right Infotech, F-16, IInd Floor, Golani Market, Jalgaon - 425 001 Jamnagar : 217 / 218, Manek Centre, P. N. Narg, Jamnagar - 361 001. Jamshedpur : New Millennium Tower, Room No. 15, First Floor, Bistupur, Jamshedpur - 831 001 Jodhpur : 1 / 5, Nirmal Tower, 1st Chopasani Road, Jodhpur - 342 003 Kanpur* : 1st Floor 106-108, City Centre Phase II, 63 / 2, The Mall, Kanpur - 208 001 Kolhapur : AMD Sofex Office No.7, 3rd Floor, Ayodhya Towers, Station Road, Kolhapur - 416 001 Kolkata* : "LORDS Building", 7 / 1,Lord Sinha Road, Ground Floor, Kolkata - 700 071 Kota : B-33 'Kalyan Bhawan', Triangle Part, Vallabh Nagar, Kota - 324 007 Kottayam : Door No. IX / 1276, Amboorans Building, Manorama Junction, Kottayam - 686 001 Lucknow* : Off # 4,1st Floor,Centre Court Building, 3/C, 5-Park Road, Hazratganj, Lucknow - 226 001 Ludhiana* : U/GF, Prince Market, Green Fields, Near Traffic Lights, Sarabha Nagar Pulli, Pakhowal Road, Above Dr. Virdi's Lab, P.O: Model Town, Ludhiana - 141 002 Madurai* : 86 / 71 - A. Tamil Sangam Road, (Opp. Bell Hotel), Madurai - 625 001 Mangalore* : No.G4 & G5, Inland Monarch, Opp.Karnataka Bank, Kadri Main Road, Kadri, Mangalore - 575 003 Manipal : Academy Annex, 1st Floor, Opp. Corporation Bank, Upendra Nagar, Manipal - 576 104 Meerut : 108, 1st Floor, Shivam Plaza, Opposite Eves Cinema, Hapur Road, Meerut - 250 002 Moradabad : B-612 'Sudhakar', Lajpat Nagar, Moradabad - 244 001 Mumbai* : Rajabahdur Compound, Ground Floor, Opp Allahabad Bank, Behind ICICI Bank, 30, Mumbai Samachar Marg, Fort, Mumbai - 400 023 Muzaffarpur : Brahman Toil, Durga Asthan, Gola Road, Muzaffarpur - 842 001 Mysore : No.1, 1st Floor, CH.26 7th Main, 5th Cross(Above Trishakthi Medicals), Saraswati Puram, Mysore - 570 009 Nagpur* : 145 Lendra Park, Behind Indus Ind Bank, New Ramdaspeth, Nagpur - 440 010 Nasik : "Varsha Bungalow", 1st Floor, Near Rungtha High School, 493, Ashok Stambh, Nasik - 422 001 Nellore : Shop No.13, First Floor, KAC Plaza, R R Street, Nellore - 524 001 New Delhi* : 304-305 III Floor, Kanchenjunga Building, 18, Barakhamba Road, Connaught Place, New Delhi - 110 001 Panipat : 83, Devi Lal Shopping Complex, Opp. ABN Amro Bank, G.T. Road, Panipat - 132 103 Patiala : 35, New Lal Bagh Colony, Patiala - 147 001 Patna* : Kamlalaye Shobha Plaza (1st Floor), Behind RBI, Near Ashiana Tower, Exhibition Road, Patna - 800 001 Pondicherry : S-8, 100, Jawaharlal Nehru Street, (New Complex, Opp. Indian Coffee House), Pondicherry - 605 001 Pune* : Nirmiti Eminence, Off No. 6, I Floor, Opp Abhishek Hotel, Mehandale Garage Road, Erandawane, Pune - 411 004 Raipur : C-23, Sector 1, Devendra Nagar, Raipur - 492 004 Rajahmundry : Cabin 101 D.no 7-27-4, 1st Floor Krishna Complex, Baruvari Street, T Nagar, Rajahmundry - 533 101 Rajkot : 111, Pooja Complex, Harihar Chowk, Near GPO, Rajkot - 360 001 Ranchi : 223, Tirath Mansion (Near Over Bridge), 1st Floor, Main Road, Ranchi - 834 001 Rourkela : 1st Floor, Mangal Bhawan, Phase II, Power House Road, Rourkela - 769 001 Salem : 28, I Floor, Advytha Ashram Road, Salem - 636 004 Sambalpur : C / o Raj Tibrewal & Associates, Opp Town High School, Sansarak, Sambalpur - 768 001 Secunderabad* : 102, First Floor, Jade Arcade, Paradise Circle, Secunderabad - 500 003 Siliguri : No 8, Swamiji Sarani, Ground Floor, Hakimpara, Siliguri - 734 401 Surat* : Office No.2, Ahura - Mazda Complex, First floor, Sadak Street, Timalyawas, Nanpura, Surat - 395 001 Thiruppur : 1(1), Binny Compound, IInd Street, Kumaran Road, Thiruppur - 641 601 Trichur : Adam Bazar, Room No. 49, Ground Floor, Rice Bazar (East), Trichur - 680 001 Trichy : No 8, I Floor, 8th Cross West Extn., Thillainagar, Trichy - 620 018 Trivandrum : R. S. Complex, Opposite of LIC Buildings, Pattom P. O., Trivandrum - 695 004 Udaipur : 32, Ahinsapuri, Fatehpura Circle, Udaipur - 313 004 Vadodara* : 109 - Silver Line, Besides World Trade Centre, Sayajigunj, Vadodara - 390 005 Valsad : C / o. CAD House, Siddhivinayak Complex, F-1, First Floor,Avenue Building, Near R.J.J. School, Tithal Road, Valsad - 396 001 Varanasi : C 27 / 249 - 22A, Vivekanand Nagar Colony, Maldhaiya, Varanasi - 221 002 Vijayawada* : 40-1-68, Rao & Ratnam Complex, Near Chennupati Petrol Pump, M.G Road, Labbipet, Vijayawada - 520 010 Visakhapatnam* : 47 / 9 / 17, 1st Floor, 3rd Lane , Dwaraka Nagar, Visakhapatnam - 530 016 Warangal : F - 13, 1st floor, BVSS Mayuri Complex, Opp. Public Garden, Lashkar Bazaar, Hanamakonda, Warangal - 506 001

Financial Transactions in Fidelity Cash Fund should be submitted only at the locations marked with asterisk (*). Further, CAMS will be the official point of acceptance for electronic transactions received from specified banks, financial institutions, distribution channels, etc (mobilised on behalf of their clients) with whom the AMC has entered / may enter into specific arrangements for purchase / sale / switch of units.

graphics

alok