INDEX Particulars Page No. Trustee Report 3-30 Independent Auditor s Report 31-32 Balanced Sheet 33-36 Revenue Account 37-48 Schedules to the Financial Statements 49-104 Cash Flow Statement 105-116 Annexure(s) Annexure I - Industrywise Statement of Portfolio Holding 117-147 Annexure II - 5% Cross holding Report under Regulation 25(11) 148-154 Annexure III - Transactions with any of the related parties mentioned in (14), as defined under Accounting Standard 18 and Regulation 25(8) of the SEBI (Mutual Funds) Regulations, 1996 155-162 Annexure IV - Commission Paid to Associates / Related Parties / Group Companies of Sponsor AMC 163-172 Annexure V - Historical Per Unit Statistics 173-185 1
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PRINCIPAL MUTUAL FUND Exchange Plaza, B Wing, Ground Floor, NSE Building, Bandra Kurla Complex, Bandra (E), Mumbai-400 051. TRUSTEE REPORT To the Unitholders, Directors of Principal Trustee Company Private Limited have the pleasure in presenting the Nineteenth Annual Report along with the audited financial statements of the Schemes of Principal Mutual Fund for the Financial Year 2012-2013. 1. Scheme Performance, Future Outlook and Operations of the Scheme: (a) Equity Schemes - Overview during Financial Year 2012-2013 The performance of Emerging markets in general remained subdued in 2012-2013 with MSCI EM Index marginally down by about 0.8%. The Indian markets did slightly better with the BSE Sensex and the CNX Nifty up by 8.2% and 7.3% respectively. The broad market however performed poorly relatively with the CNX Midcap Index down 3% in the same period. Most of the gains in the market came in the first half of the year. This was despite the weak macros and concerns on policy inaction. FII inflows remained strong during the year at over $26 billion, probably based upon the premise that the slowdown in India was more cyclical than structural and that India was relatively better placed in terms of growth in the context of a global slowdown. Domestic investors however remained net sellers of over $ 4 billion, influenced in part by the negative news flow locally and unappreciative of the fact that India still remained one of the fastest growing economies globally. The early part of the year saw the markets lackluster due to macro concerns and negative news related to several scandals. However, in September, Government finally broke the ice and announced two significant policy decisions - one permitting FDI in retail and aviation and the other being long-pending hike in diesel prices by ` 5/- litre and a cap in subsidized LPG cylinders to six per household. The sentimental impact of these measures was significant on the market which was eagerly awaiting steps to control the ballooning fiscal deficit. The other macro challenge that dominated the year was the persistently high inflation which constrained the RBI from cutting interest rates to provide a fillip to sagging growth. For a large part of the year the WPI was in the range of 7%-7.5%, well above the RBI comfort zone of 6%. The rupee also remained under pressure due to the large current account deficit as a result of high oil and gold prices and sticky imports. All this resulted in stress on the Rupee, which was down 6.7% during the year. The earnings for the Sensex companies saw some moderation in expectations. The results for the first three quarters were in line to marginally better than expectations but the outlook for the fourth quarter remains relatively muted given the weakening demand scenario. Overall, it is expected that the earnings for Sensex companies would grow by 5% in FY2013. In the context of a global slowdown, a weak rupee and slowing growth domestically, defensive sectors performed better due to flight to safety. 28-Mar-13 Index 1 Mth 3 Mth 6 Mth 1 Yr Broad Markets CNX Nifty 5683-2.94-3.20-0.36 7.31 S&P BSE Sensex 18836-2.57-2.53 0.39 8.23 S&P BSE100 5679-3.36-4.37-0.40 6.84 S&P BSE200 2288-3.55-4.95-0.85 6.03 S&P BSE 500 7085-3.81-5.89-1.69 4.81 S&P BSE Mid Cap 6142-5.93-12.72-7.04-3.22 S&P BSE Small Cap 5805-10.36-20.72-17.29-12.44 Sectoral Performance S&P BSE Auto 9994-7.33-11.91-4.02-1.39 S&P BSE Bankex 13033-5.68-9.06-0.80 10.91 S&P BSE Capital Goods 9018-5.23-16.91-17.70-10.08 S&P BSE Consumer Durables 7095-0.27-6.66 2.23 10.81 S&P BSE FMCG 5919 4.60 0.05 7.48 31.74 S&P BSE Metal 8758-7.40-20.19-16.81-22.81 S&P BSE Oil & Gas 8327-7.12 0.17-3.87 2.96 S&P BSE Tech 6885 2.34 22.54 16.26 13.21 S&P BSE-Health Care 8008-0.17-1.66 6.37 20.86 Source: Internal Performance of Equity / Balanced / Equity Linked Savings Scheme / Fund of Funds Schemes as on March 28, 2013: EQUITY SCHEMES - Principal Dividend Yield Fund (An open ended Equity Scheme) Period Date Appreciation(%) NAV^ CNX Dividend Opportunities Index Regular Plan Last 1 Year 30-Mar- 12 3.38 2.52 Last 3 Years 31-Mar-10 4.42 9.23 Last 5 Years 31-Mar-08 6.30 10.48 Since Inception 15-Oct-04 10.57 N.A. Direct Plan Since Inception 01-Jan-13 (12.25) (10.81) Note: Past performance may or may not be sustained in the future. During the Financial Year 2012-13, the Regular Plan under the Scheme outperformed its benchmark. The same was essentially due to the Scheme being overweight in IT, Pharma, Auto sectors while being underweight on Energy, Metals and Construction sector. 3
Further, Direct Plan under the scheme, since its inception (in January' 2013), underperformed the benchmark. The same was essentially due to lesser exposure to outperforming sectors such as Energy and IT and underperformance of some of top holdings of the Fund. However, it is a very short period to judge performance because selection of stocks is done with a 2-3 year view and there could be periods of underperformance in between. The net assets of the Scheme amounted to ` 99.13 Crs as at March 28, 2013 as compared to ` 105.16 Crs as at March 31, 2012. Principal Growth Fund (An open ended Equity Scheme) Period Date Appreciation(%) NAV^ S&P BSE 200 Index Regular Plan Last 1 Year 30-Mar-12 10.55 6.06 Last 3 Years 31-Mar-10 1.30 1.33 Last 5 Years 31-Mar-08 (0.09) 3.44 Since Inception 25-Oct-00 14.30 14.88 Direct Plan Since Inception 01-Jan-13 (10.08) (7.12) Note: Past performance may or may not be sustained in the future. During the Financial Year 2012-13, the Regular Plan under the Scheme outperformed its benchmark. The out performance was primarily due to overweight on Pharma, Media and Automobile sectors while being underweight on Metals, Cement, and Industrial manufacturing sectors. Further, Direct Plan under the scheme, since its inception underperformed the benchmark. The same was essentially due to lesser exposure to outperforming sectors such as Energy and IT and underperformance of some of top holdings of the fund. However, it is a very short period to judge performance because selection of stocks is done with a 2-3 year view and there could be periods of underperformance in between. The net assets of the Scheme amounted to ` 240.27 Crs as at March 31, 2013 as compared to ` 197.44 Crs as at March 31, 2012. Principal Large Cap Fund (An open ended Equity Scheme) Period Date Appreciation(%) NAV^ S&P BSE 100 Index Regular Plan Last 1 Year 30-Mar- 12 6.53 6.88 Last 3 Years 31-Mar-10 2.76 1.73 Last 5 Years 31-Mar-08 7.11 3.53 Since Inception 11-Nov-05 15.09 11.21 Direct Plan Since Inception 01-Jan-13 (9.48) (6.49) Note: Past performance may or may not be sustained in the future. During the Financial Year 2012-13, the Regular Plan under the Scheme marginally underperformed its benchmark. The underperformance in Q4, FY13 due to lesser exposure to IT and energy sectors led to this. The scheme remained underweight on Metals and Construction sectors which did not do well in FY13. Further, Direct Plan under the scheme, since its inception underperformed the benchmark. The same was essentially due to lesser exposure to outperforming sectors such as Energy and IT and underperformance of some of top holdings of the fund. However, it is a very short period to judge performance because selection of stocks is done with a 2-3 year view and there could be periods of underperformance in between. The net assets of the Scheme amounted to ` 337.51 Crs as at March 31, 2013 as compared to ` 404.49 Crs as at March 31, 2012. Principal Index Fund (An open ended Index Scheme) Period Date Appreciation(%) Regular Plan NAV^ CNX Nifty Index Last 1 Year 30-Mar- 12 7.45 7.35 Last 3 Years 31-Mar-10 2.81 2.69 Last 5 Years 31-Mar-08 3.13 3.72 Since Inception 27-Jul-99 10.45 11.32 Direct Plan Since Inception 01-Jan-13 (4.79) (5.18) Note: Past performance may or may not be sustained in the future. During the Financial Year 2012-13, the Regular Plan under the Scheme has marginally outperformed its benchmark. This was essentially due to differences in the timing in inflows/ outflows and the corresponding purchases/sales of Nifty baskets, inclusions/exclusions of stocks in the Nifty (necessitating modifications in the portfolios accordingly), as well as transaction costs. In case of Direct Plan, the Scheme has slightly out performed the Benchmark. The net asset of the Scheme is ` 22.66 Crs as at March 31, 2013 as compared to ` 13.36 crs as at March 31, 2012. Principal Emerging Bluechip Fund (An open ended Equity Scheme) Period Date Appreciation(%) NAV^ CNX Midcap Index Regular Plan Last 1 Year 30-Mar- 12 13.84 (4.02) Last 3 Year 31-Mar-10 1.74 (1.33) Since Inception 12-Nov-08 29.52 17.45 Direct Plan Since Inception 01-Jan-13 (9.81) (14.27) Note: Past performance may or may not be sustained in the future. During the Financial Year 2012-13, the Scheme outperformed its benchmark. The Fund was overweight in Auto and 4
Consumers and IT and underweight Industrials, Metals and Construction pack which largely helped its performance. Further, Direct Plan under the scheme, since its inception outperformed the benchmark. The same was essentially due to stock selection and being overweight in consumers and IT which have done well. The net assets of the Scheme amounted to ` 257.77 Crs as at March 31, 2013 as compared to ` 282.93 crs as at March 31, 2012. Principal Smart Equity Fund (An open ended Equity Scheme) Period Date Appreciation(%) NAV^ Crisil Balanced Fund Index Regular Plan Last 1 Year 30-Mar-12 7.75 8.23 Since Inception 16-Dec-10 3.26 1.81 Direct Plan Since Inception 01-Jan-13 (7.14) (2.80) Note: Past performance may or may not be sustained in the future. The Scheme aims to provide the benefit of automatic asset allocation to investment based on market valuations and to protect the investors from high volatility in the markets and at the same time providing growth. The underperformance was due to the performance in Q4 FY13, when the fund had relatively less exposure to IT and Energy sectors which had a good performance in that quarter. The Direct Plan under the scheme, since its inception underperformed the benchmark. The same was essentially due to lesser exposure to outperforming sectors such as Energy and IT and underperformance of some of top holdings of the fund. However, it is a very short period to judge performance because selection of stocks is done with a 2-3 year view and there could be some periods of underperformance in between. The net assets of the Scheme amounted to ` 80.75 Crs as at March 31, 2013 as compared to ` 151.55 crs as at March 31, 2012. Principal Retail Equity Savings Fund [Erstwhile known as Principal Conservative Growth Fund] (An open ended Equity Scheme) Period Date Appreciation(%) NAV^ S&P BSE 100 Index Regular Plan Last 1 Year 30-Mar-12 5.05 6.88 Last 3 Years 31-Mar-10-0.91 1.73 Last 5 Years 31-Mar-08 2.40 3.53 Since Inception 07-Jan-98 14.85 12.60 Direct Plan Since Inception 01-Jan-13 (7.77) (6.49) Note: Past performance may or may not be sustained in the future. During the Financial Year 2012-13, Regular Plan under the Scheme underperformed its benchmark. The fund had slightly higher levels of cash which hurt the fund performance when markets rallied. Also, the volatility in mid cap stocks in the portfolio hurt the performance. Further, Direct Plan under the scheme, since its inception underperformed the benchmark. The same was essentially due to lesser exposure to outperforming sectors such as Energy and IT and underperformance of some of top holdings of the fund. However, it is a very short period to judge performance because selection of stocks is done with a 2-3 year view and there could be periods of underperformance in between. The net assets of the Scheme amounted to ` 21.57 Crs as at March 31, 2013 as compared to ` 23.35 crs as at March 31, 2012. EQUITY LINKED SAVINGS SCHEME(S) - Principal Tax Savings Fund (An open ended Equity Linked Savings Scheme) Period Date Appreciation(%) NAV ## S&P BSE 200 Index Regular Plan Last 1 Year 30-Mar- 12 11.11 6.06 Last 3 Years 31-Mar-10 1.86 1.33 Last 5 Years 31-Mar-08-1.08 3.44 Since Inception 31-Mar-96 15.57 11.76 Direct Plan Since Inception 01-Jan-13 (9.95) (7.12) Note: Past performance may or may not be sustained in the future. ## Returns have been calculated assuming that the Dividend have been re-invested During the Financial Year 2012-13, the Regular Plan under the Scheme outperformed its benchmark. The out performance was primarily due to overweight on Pharma, Media and Automobile sectors while being underweight on Metals, Cement, and Industrial manufacturing sectors. Further, Direct Plan under the scheme, since its inception underperformed the benchmark. The same was essentially due to lesser exposure to outperforming sectors such as Energy and IT and underperformance of some of top holdings of the fund. However, it is a very short period to judge performance because selection of stocks is done with a 2-3 year view and there could be periods of underperformance in between. The net assets of the Scheme amounted to ` 199.08 Crs as at March 31, 2013 as compared to ` 221.07 crs as at March 31, 2012. 5
Principal Personal Tax Saver Fund (An open ended Equity Linked Savings Scheme) Period Date Appreciation(%) NAV ## S&P BSE 100 Index Regular Plan Last 1 Year 30-Mar- 12 6.81 6.88 Last 3 Years 31-Mar-10 0.82 1.73 Last 5 Years 31-Mar-08 1.21 3.53 Since Inception 31-Mar-96 21.51 11.45 Direct Plan Since Inception 01-Jan-13 (9.51) (6.49) Note: Past performance may or may not be sustained in the future. ## Returns have been calculated assuming that the Dividend have been re-invested During the Financial Year 2012-13, the Regular Plan under the Scheme performed in line with its benchmark. This was primarily due to being overweight on Pharma, IT sectors while being underweight on Metals and Construction sectors. Further, Direct Plan under the scheme, since its inception underperformed the benchmark. The same was essentially due to lesser exposure to outperforming sectors such as Energy and IT and underperformance of some of top holdings of the fund. However, it is a very short period to judge performance because selection of stocks is done with a 2-3 year view and there could be periods of underperformance in between. The net assets of the Scheme amounted to ` 362.82 Crs as at March 31, 2013 as compared to ` 464.71 crs as at March 31, 2012. BALANCED SCHEME - Principal Balanced Fund (An open ended Balanced Scheme) Period Date Appreciation(%) NAV^ Crisil Balanced Fund Index Regular Plan Last 1 Year 30-Mar- 12 9.71 8.23 Last 3 Years 31-Mar-10 2.71 4.64 Last 5 Years 31-Mar-08 4.91 5.78 Since Inception 14-Jan-00 9.30 NA Direct Plan Since Inception 01-Jan-13 (6.33) (2.80) Note: Past performance may or may not be sustained in the future. During the Financial Year 2012-13, the Regular Plan under the Scheme outperformed its benchmark. The out performance was primarily due to overweight on Pharma, Media and Automobile sectors while being underweight on Metals, Cement, and Industrial manufacturing sectors. Further, Direct Plan under the scheme, since its inception (in January 2013) underperformed the benchmark. The same was essentially due to lesser exposure to outperforming sectors such as Energy and IT and underperformance of some of top holdings of the fund. However, it is a very short period to judge performance because selection of stocks is done with a 2-3 year view and there could be periods of underperformance in between. The net assets of the Scheme amounted to ` 14.66 Crs as at March 31, 2013 as compared to ` 17.55 crs as at March 31, 2012. FUND OF FUNDS SCHEME - Principal Global Opportunities Fund (An Open ended Fund of Funds Scheme) Period Date Appreciation(%) NAV^ MSCI World Index Regular Plan Last 1 Year 30-Mar- 12 9.05 11.76 Last 3 Years 31-Mar-10 9.95 5.73 Last 5 Years 31-Mar-08 5.56 0.65 Since Inception 29-Mar-04 8.72 2.87 Direct Plan Since Inception 01-Jan-13 (2.95) (7.05) Note: Past performance may or may not be sustained in the future. During the Financial Year 2012-13, the Regular Plan under the Scheme underperformed its benchmark. The developed markets have performed well in FY13 compared to the Emerging markets which has led to the fund underperforming the MSCI World Index. The fund has however, beaten the Indian market benchmarks. The underlying fund continued to prefer companies with positive fundamental change, earnings revision and attractive valuations. The net assets of the Scheme amounted to ` 31.13 Crs as at March 31, 2013 as compared to ` 37.00 Crs as at March 31, 2012. (b) Debt Schemes - Overview during Financial Year 2012-2013 FY 2013 was characterized by low GDP growth, high inflation, worsening current account deficit and tight banking system liquidity. RBI initiated cuts in key rates on fall in WPI core inflation, fall in GDP growth to below 5% and to ease tight liquidity conditions. Cumulatively, RBI cut repo and reverse repo rates by 100 bps each and CRR by 75 bps during FY13. While WPI fell from 7.69% in March 2012 to 6.84% in Feb 2013, CPI (Consumer Price Index) showed a divergent trend and rose from 9.38% in March 2012 to 10.91% in Feb 2013. As per latest data available, India's current account deficit for the quarter upto Dec 2012 widened sharply to US$ 32.63 billion equivalent to 6.7% of GDP. The government tried to curtail the Current Account Deficit (CAD) by raising duties 6
on gold imports, while also rationalising debt limits for FIIs and liberalising ECB norms. A significant policy step during the financial year was cutting diesel subsidy by effecting marginal hikes in range of 50 paise per month from January 2013 onwards which was taken positively by markets as it reduces element of suppressed inflation and helps in controlling the fiscal deficit. A cap per household on subsidized LPG cylinders was also introduced. The G sec yields exhibited a declining trend during FY13 though with intermittent volatility. The 10 yr G sec benchmark ended March 2013 at 7.96% a fall of almost 60 bps as compared to a year ago. Corporate Bond yields also fell gradually through the year. The 10 yr Bloomberg AAA benchmark ended March 2013 at 8.90%, a fall of 60 bps from March 2012. Money market yields fell even more sharply during FY 13. Three month CD (Certificate of deposit) yields fell by 200 bps in March 2013 as compared to March 2012. In summary, all segments of debt market witnessed declining trend in yields due to rate cuts, slowing growth, OMOs (Open Market Operations) by RBI, banks' SLR demand, falling credit growth and inflows into debt mutual funds. Banking system liquidity remained in deficit mode throughout the financial year in the range of ` 30,000 cr to ` 1,75,000 cr. RBI used a range of liquidity infusing instruments including OMOs, CRR cuts and increase in export refinance facility to keep the overall deficit within +/- 1% of NDTL (Net demand and Time liabilities) of the banking system most of the time. In its Union Budget announced for FY 14, the Finance Minister pegged the Fiscal deficit estimate for FY14 at 4.8% and gross borrowing at ` 5.79 lakh crores. For FY13 fiscal deficit is expected to be below 5.2% as per revised estimates. This corresponds favourably with market expectations during the year when there were fears that fiscal deficit may be far higher in range of 5.5% to 5.8% as compared to initial Budget estimates of 5.1% During the year we saw some significant regulatory changes by SEBI and AMFI for mutual fund debt schemes. These include change in guidelines for valuing money market and debt instruments, sector exposure norms, guidelines for investment in FMPs and introduction of direct plans. Performance of Debt and Liquid Schemes / Plans as on March 31, 2013: Principal Debt Opportunities Fund - Conservative Plan (An open ended Debt Scheme) Period Date Appreciation(%) NAV^ CRISIL Liquid Fund Index Regular Plan Last 1 Year 30-Mar- 12 9.51 8.22 Last 3 Years 31-Mar-10 8.50 7.62 Last 5 Years 31-Mar-08 7.86 7.06 Since Inception 14-Sep-04 7.54 6.60 Direct Plan Since Inception 01-Jan-13 2.03 1.85 Note: Past performance may or may not be sustained in the future. During the Financial Year 2012-13, Regular Plan under the Scheme out performed its benchmark. This was on account of prudent Asset Liability management and the fund remaining invested in a judicious mix of Certificate of Deposits and Commercial Papers. The average maturity of the scheme was managed dynamically as the money market rates, though coming down, remained volatile throughout the year. The fund also took opportunistic advantage of usually higher rates at quarter ends. Further, the Direct Plan under the scheme, since its inception has outperformed the benchmark. The net assets of the Plan under the Scheme accounted to ` 284.07 crs as at March 31, 2013 as compared to ` 114.72 crs as at March 31, 2012. Principal Debt Opportunities Fund - Corporate Bond Plan (An open ended Debt Scheme) Period Date Appreciation(%) NAV^ CRISIL Composite Bond Fund Index Regular Plan Last 1 Year 30-Mar- 12 9.15 9.29 Last 3 Years 31-Mar-10 8.22 7.33 Last 5 Years 31-Mar-08 7.59 6.95 Since Inception 14-Sep-04 7.31 6.10 Direct Plan Since Inception 01-Jan-13 1.92 1.69 Note: Past performance may or may not be sustained in the future. During the Financial Year 2012-13, Regular Plan under the Scheme has marginally under performed its benchmark. It was primarily on account of lack of exposure to government securities where yields fell sharply. The fund avoids investments in government securities as its investment mandate is primarily exposure to corporate debt. However, Direct Plan under the scheme, since its inception (in January '13) outperformed the benchmark. The net assets of Plan under the Scheme to ` 5.14 crs as at March 31, 2012 as compared to ` 5.83 crs as at March 31, 2012. Principal Bank CD Fund (An open ended Debt Scheme) Period Date Appreciation(%) NAV^ CRISIL Liquid Fund Index Regular Plan Last 1 Year 30-Mar- 12 9.18 8.22 Last 3 Years 31-Mar-10 8.26 7.62 Last 5 Years 31-Mar-08 7.73 7.06 Since Inception 06-Nov-07 7.82 7.06 Direct Plan Since Inception 01-Jan-13 1.84 1.85 Note: Past performance may or may not be sustained in the future. 7
During 2012-13, the Regular Plan under the Scheme out performed its benchmark. This was essentially on account of prudent deployment of the funds in a judicious mix of Certificates of Deposit, CBLOs and minimum exposure to NCDs. The fund was managed with optimum proportion of MTM Assets as mandated by the Scheme. Further, Direct Plan under the scheme, since its inception performance in line with the benchmark. It has been managed in a manner similar to the regular plan. The net assets of the Scheme amounted to ` 10.94 Crs as at March 31, 2013 as compared to ` 17.45 Crs as at March 31, 2012. Principal Government Securities Fund (An open ended dedicated Gilt Scheme investing in Government Securities) Period Date Appreciation(%) NAV^ I-Sec Composite Index Regular Plan Last 1 Year 30-Mar- 12 9.76 11.71 Last 3 Years 31-Mar-10 6.33 8.27 Last 5 Years 31-Mar-08 5.82 8.38 Since Inception 23-Aug-01 7.64 NA Direct Plan Since Inception 01-Jan-13 2.00 2.14 Note: Past performance may or may not be sustained in the future. During the Financial Year 2012-13, the Regular Plan under the Scheme underperformed its benchmark. This was partly due to maintaining lower duration to keep volatility low in view of the unfavorable macro economic situation. Further, Direct Plan under the scheme, since its inception outperformed the benchmark. The same was essentially due to restructuring of portfolio to liquid securities and a lower average maturity on expectation of rise in yields post Union Budget. The net assets of the Scheme accounted to ` 66.98 Crs as at March 31, 2013 as compared to ` 183.51 crs as at March 31, 2012. Principal Income Fund - Long Term Plan (An open ended Income Scheme) Period Date Appreciation(%) NAV^ Crisil Composite Bond Fund Index Regular Plan Last 1 Year 30-Mar-12 9.99 9.29 Last 3 Years 31-Mar-10 8.67 7.33 Last 5 Years 31-Mar-08 8.44 6.95 Since Inception 9-May-03 7.37 5.69 Direct Plan Since Inception 01-Jan-13 2.04 1.69 Note: Past performance may or may not be sustained in the future. During the Financial Year 2012-13, Regular Plan under the Scheme out performed its benchmark. The same was essentially on account of active duration management and investment in high yield, short tenor corporate bonds where yields fell. Further, Direct Plan under the scheme, since its inception outperformed the benchmark. The same was essentially due to active trading, reduction of G sec exposure post Budget and investment in good quality corporate bonds. The net assets of the Plan amounted to ` 128.35 Crs as at March 31, 2013 as compared to ` 37.63 crs as at March 31, 2012. Principal Income Fund - Short Term Plan (An open ended Income Scheme) Period Date Appreciation(%) NAV^ Crisil Short Term Bond Fund Index Regular Plan Last 1 Year 30-Mar-12 9.73 9.10 Last 3 Years 31-Mar-10 8.43 7.48 Last 5 Years 31-Mar-08 8.66 7.62 Since Inception 9-May-03 7.59 6.48 Direct Plan Since Inception 01-Jan-13 2.02 1.88 Note: Past performance may or may not be sustained in the future. During the Financial Year 2012-13, Regular Plan under the Scheme out performed its benchmark. The same has been essentially on account of focusing on portfolio construction and actively managing duration and high accrual assets in the portfolio. The direct plan under the scheme, since its inception outperformed the benchmark. The net assets of the Plan accounted to ` 145.42 Crs as at March 31, 2013 as compared to ` 71.41 crs as at March 31, 2012. Principal Debt Savings Fund - Monthly Income Plan (An open-ended fund. Monthly Income is not assured and is subject to the availability of distributable surplus.) Period Date Appreciation(%) NAV^ Crisil MIP Blended Index Regular Plan Last 1 Year 30-Mar- 12 8.98 9.12 Last 3 Years 31-Mar-10 6.00 6.82 Last 5 Years 31-Mar-08 7.14 6.96 Since Inception 23-May-02 8.59 8.36 Direct Plan Since Inception 01-Jan-13 1.01 0.65 Note: Past performance may or may not be sustained in the future. During the Financial Year 2012-13, Regular Plan under the Scheme performed in line with its benchmark. The same has been essentially on account of portfolio construction and managing the average maturity dynamically and 8
investing in high accrual assets in the portfolio. The exposure to Equity portfolio was kept low as the equity markets remained volatile for most of the year The Direct Plan under the scheme, since its inception outperformed the benchmark. The net assets of the Plan amounted to ` 35.56 Crs as at March 31, 2013 as compared to ` 45.79 Crs as at March 31, 2012. Principal Debt Savings Fund - Retail Plan (An open-ended income fund) Period Date Appreciation(%) NAV^ Crisil Composite Bond Fund Index Regular Plan Last 1 Year 30-Mar- 12 10.57 9.29 Last 3 Years 31-Mar-10 5.42 7.33 Last 5 Years 31-Mar-08 7.29 6.95 Since Inception 30-Dec-03 8.38 5.48 Direct Plan Since Inception 01-Jan-13 2.23 1.69 Note: Past performance may or may not be sustained in the future. During the Financial Year 2012-13, Regular Plan under the Scheme outperformed its benchmark. The same was essentially on account of managing the average maturity dynamically and investing in high accrual assets in the portfolio. The fund consistently generated higher than benchmark returns throughout the year. The Direct Plan under the scheme, since its inception outperformed the benchmark. The net assets of the Plan accounted to ` 49.79 Crs as at March 31, 2013 as compared to ` 61.97 crs as at March 31, 2012. Principal Cash Management Fund (An open ended Liquid Scheme) Period Date Appreciation(%) NAV^ Crisil Liquid Fund Index Regular Plan Last 1 Year 31-Mar-12 9.36 8.17 Last 3 Years 31-Mar-10 8.37 7.60 Last 5 Years 31-Mar-08 7.63 7.04 Since Inception 30-Aug-04 7.25 6.58 Direct Plan Since Inception 01-Jan-13 2.13 1.88 Note: Past performance may or may not be sustained in the future. During the Financial Year 2012-13, the Regular Plan under the Scheme out performed its benchmark. The same was essentially on account of prudent asset liability management, the fund remaining invested in a mix of Certificate of Deposits and Commercial Papers to generate the outperformance over the benchmark. The maturity of the scheme was increased only opportunistically towards quarter ends to take advantage of elevated levels of interest rates. The Direct Plan under the scheme, since its inception outperformed the benchmark. The net assets of the Scheme accounted to ` 996.90 Crs as at March 31, 2013 as compared to ` 883.63 crs as at March 31, 2012. Principal Retail Money Manager Fund (An open ended Liquid Scheme) Period Date Appreciation(%) NAV^ Crisil Liquid Fund Index Regular Plan Last 1 Year 31-Mar- 12 9.82 8.17 Last 3 Years 31-Mar-10 7.75 7.60 Last 5 Years 31-Mar-08 5.24 7.04 Since Inception 28-Dec-07 5.34 7.05 Direct Plan Since Inception 01-Jan-13 2.27 1.88 Note: Past performance may or may not be sustained in the future. During the Financial Year 2012-13, the Regular Plan under the Scheme out performed its benchmark. The same was essentially on account of prudent Asset Liability management, the fund remaining invested in a mix of Certificate of Deposits and Commercial Papers to generate outperformance over the benchmark. The Direct Plan under the scheme, since its inception outperformed the benchmark. The net assets of the Scheme accounted to ` 2.32 crs as at March 31, 2013 as compared to ` 0.41 crs as at March 31, 2012. Principal Pnb Fixed Maturity Plan - Series A4 (A close ended debt Scheme offering Fixed Maturity Plan of 367 days) Period Date Appreciation(%) NAV^ Crisil Short Term Bond Fund index Since Inception 29-Mar-12 10.27 9.05 Note: Past performance may or may not be sustained in the future. Principal Pnb Fixed Maturity Plan - Series B1 (A close ended debt Scheme offering Fixed Maturity Plan of 370 days) Period Date Appreciation(%) NAV^ Crisil Short Term Bond Fund index Since Inception 28-Jun-12 7.05 6.64 Note: Past performance may or may not be sustained in the future. 9
Principal Pnb Fixed Maturity Plan - Series B2 (A close ended debt Scheme offering Fixed Maturity Plan of 1098 days) Period Date Appreciation(%) NAV^ Crisil Short Term Bond Fund index Since Inception 27-Sep-12 4.27 4.05 Note: Past performance may or may not be sustained in the future. The scheme(s) under the Fixed Maturity Plans since their inception have over performed its benchmark. The same has essentially been on account of the scheme(s) being Fixed Maturity Plan(s) which required locking in investments till maturity of the Scheme(s) and better timing and stock selection. ^ Growth Option Note: Returns less than one year are calculated on absolute basis and returns for more than one year are calculated on Compounded Annualised basis Outlook and Operations of the Scheme: a. Equity Market: Our outlook on the market remains cautious in the near term. The slowdown in GDP continues with no signs of pick up in investment activity. A silver lining has been the recent moderation in inflation to below 6% (40-month low) and the core inflation to 3.5%.. The recent correction in gold and crude oil prices also augurs well for the Indian market, if they sustain at these lower levels. The political environment remains volatile with periodic fears of early polls leading to possibility of policy inaction. Earnings growth expectations for FY2014 is around 10% and the market trades at a forward P/E of around 14.5. At these levels the market is neither expensive nor cheap, leading to a possibility of a range bound market in the near term. For the year as a whole, we do expect returns of around 12-15% from the current levels, driven by a pick up in growth going forward, and gradual upward revision in earnings estimates. b. Debt Market: The key drivers for debt market in FY 2013-14 would be the RBI monetary policy stance, Inflation, Banking system liquidity conditions and demand supply dynamics for G-Sec/ Corporate debt. Government steps to rein in the large current account deficit would also be crucial for debt market. RBI is expected to maintain a pro growth stance, however their primary concern on inflation and large current account deficit would remain. We expect RBI to cut key rates by another 25-50 bps in FY14. Inflation in the first half is expected to slow down to 6% levels in terms of WPI. However, CPI may continue to remain elevated in the range of 9% to 10.50% in first half and then may fall in second half of FY14 and converge to WPI levels. Global crude oil prices would continue to remain an important indicator in terms of fuel inflation, oil import growth and subsidy bill of government. Any fall in prices to below US$100 on account of global growth concerns would be positive for debt market. Banking system liquidity is expected to remain in deficit mode in FY14 as well given seasonal currency leakage, large government borrowing programme and tight rein on government spending to maintain fiscal deficit. We expect that in second half the liquidity deficit may worsen and stay above Rs.1 lakh crore (in terms of borrowing at RBI's LAF Repo auction) and prompt RBI to conduct Open Market Operations to infuse liquidity. As compared to last year, the gross supply of government securities in first half of FY 14 is lower at 59% of the total dated G sec borrowing programme of Rs.5.79 lakh crores. The government also plans to conduct buyback (swap) of short tenor G sec and issue fresh long dated G sec of an equivalent amount. However the timing and modalities are not yet clear. If the swap is done in the market it is likely to lead to rise in long term yields. The absolute supply of dated G sec remains large. With the supply of G sec likely to outpace demand, the quantum of OMOs to be conducted by RBI would remain a key factor in movement of gilt yields. This year, the large current account deficit has become a focus area of concern for the regulators as well as the government. Government has already initiated steps towards stabilizing the same early this calendar year like increasing duty on gold imports, rationalizing and increasing FII debt limits and reducing subsidy on diesel/lpg in a phased manner. We expect further steps to be taken in FY14 including measures to revive exports, quick approvals to FDI proposals, liberalization of ECB rules and the most important step for debt market; reduction in withholding tax on income from debt investments made by FIIs which is currently at 20% for most categories. This would again have a positive impact on gilts and corporate bonds. Overall while we may expect volatility in rates in the various asset classes, the overall environment should remain conducive for debt markets. Operations: Principal Mutual Fund (PMF) as at March 31, 2013 offers twenty four Schemes. These include nine Equity Schemes (including two Equity Linked Savings Schemes, of which one has been closed for subscription since September 02, 2011), one Balanced Scheme, one Hybrid Scheme, one Fund of Fund Scheme (Overseas), nine Debt Schemes/ Plans including two Liquid Schemes, and three Fixed Maturity Plans. The total assets under management across all these Schemes as on March 31, 2013 was ` 3,659 Crore. The AMC operates out of 16 branches, including Mumbai. Increased use of technology coupled with optimum allocation and utilization of resources has helped us to enhance operational efficiency at PMF. During the year, SEBI has introduced significant changes to the MF regulations which has impacted the industry as a whole. PMF has continued to modify its processes, wherever required, to remain compliant with the said regulations at all times. Brief background of Sponsors, Trust, Trustee Co. and AMC Co. A. Constitution of the Mutual Fund Principal Mutual Fund (formerly known as IDBI-PRINCIPAL Mutual Fund and herein referred to as the "Mutual Fund") 10
has been constituted as a trust on November 25, 1994 in accordance with the provision of the Indian Trusts Act, 1882 (2 of 1882). The Fund was initially set up by Industrial Development Bank of India (IDBI) in 1994 by execution of a Trust Deed, under which IDBI was the sole Settlor, Sponsor and Principal Trustee and an initial amount of ` 1 lakh and additional amount of ` 24.99 Crore was settled as the trust corpus. Accordingly the Board of Trustees were vested with all the rights, duties and responsibilities vis-à-vis functioning of the Mutual Fund. The said Trust Deed has been registered under the Indian Registration Act, 1908 and the Mutual Fund was registered with SEBI on December 13, 1994 under Registration Code - MF/019/94/0. Subsequently, on March 31, 2000, Principal Financial Services Inc.,USA, became the deemed sponsor (along with the IDBI) by acquiring 50% stake in IDBI-PRINCIPAL Asset Management Company Limited, where after and pursuant to the SEBI letter dated October 18, 2002 all rights, responsibilities and duties of the Board of Trustees were transferred in favour of IDBI - Principal Trustee Company Ltd. On June 23, 2003, Principal Financial Services Inc. USA became the sole sponsor by acquiring 100% stake in IDBIPRINCIPAL Asset Management Company Limited, through its wholly owned subsidiary Principal Financial Group (Mauritius) Limited (Principal Mauritius). Principal Mauritius thus became the sole settlor of the Fund and the name of the Trustee Company and of the Asset Management Company was changed respectively to Principal Trustee Company Pvt. Ltd. and Principal Asset Management Company Private Limited to reflect the change in ownership. In tune with the industry standards and practices, Principal Mauritius, the Settlor, maintains a corpus of ` 25 lakh in the Trust in place of the original contribution of ` 1 lakh and additional contribution of ` 24.99 crore vide execution of a supplemental trust deed dated April 16, 2004. On May 5, 2004, Punjab National Bank (PNB) and Vijaya Bank (VB) became equity shareholders and they hold equity shares to the extent of 30% and 5% respectively of the equity capital of both Principal Trustee Company Private Limited and Principal Pnb Asset Management Company Private Limited (earlier name - Principal Asset Management Company Private Limited). Pursuant to this change in ownership, certain amendments have been made to the Principal Mutual Fund vide Supplemental Trust Deed dated 5th May 2004, to reflect, amongst other amendments, the addition of Punjab National Bank and Vijaya Bank as the co-settlors to the Fund. Accordingly, Principal Mauritius, Punjab National Bank and Vijaya Bank have 65%, 30% and 5% rights, title, interest and obligations respectively as co-settlors to Principal Mutual Fund. B. Principal Trustee Company Private Limited ("the Trustee") The Trustee is the exclusive owner of the Trust Fund and holds the same in trust for the benefit of the Unitholders. The Trustee has been discharging its duties and carrying out its responsibilities as provided in the SEBI (Mutual Funds) Regulations, 1996 and the Trust Deed. The Trustee seeks to ensure that the Fund and the Schemes floated there under are managed by the AMC in accordance with the Trust Deed, the Regulations, directions and guidelines issued by the SEBI, the Association of Mutual Funds in India and other regulatory agencies. 2. Liabilities and Responsibilities of Trustee and Settlor The key responsibility of the Trustee is to safeguard the interest of the Unit holders and inter-alia ensure that Principal Pnb Asset Management Company Private Limited functions in the interest of investors and as laid down under the Securities and Exchange Board of India (Mutual Funds) Regulations, 1996, the provisions of the Investment Management Agreement, Statement of Additional Information and Scheme Information Document of the respective Schemes. From the information provided to the Trustees and the reviews the Trustee has undertaken, the Trustee believes Principal AMC has operated in the interests of the Unit holders. The Sponsor and any of its associates including co-settlors is not responsible or liable for any loss resulting from the operations of the Mutual Fund beyond the initial contribution of an amount of ` 25 lakhs towards setting up of Principal Mutual Fund. 3. Investment Objectives and Policy of Investment of the Current Scheme(s) EQUITY SCHEMES: i. Principal Dividend Yield Fund (An open ended Equity Scheme) The Investment Objective of the Scheme would be to provide capital appreciation and / or dividend distribution by investing predominantly in a well-diversified portfolio of companies that have a relatively high dividend yield. The Scheme would invest predominantly (at least 65% of the net assets) in companies that have a relatively high dividend yield (i.e. last declared dividend divided by the current market price), at the time of making the investment. The Fund is defining dividend yield as "high" if it is in excess of 1.5 times that of the prevailing dividend yield of the NSE Nifty. ii. Principal Growth Fund (An open ended Equity Scheme) The investment objective of the Scheme is to achieve longterm capital appreciation. The scheme will invest its assets in a portfolio of equity and equity related instruments. The focus of the investment strategy would be to identify stocks which can provide capital appreciation in the long term. Companies selected for the portfolio which in the opinion of the AMC would possess some of the characteristics in the nature of superior management quality, distinct and sustainable competitive advantage, good growth prospects and strong financial strength. The aim will be to build a diversified portfolio across major industries and economic sectors by using "Fundamental Analysis" approach as its selection process. iii. Principal Large Cap Fund (An open ended Equity Scheme) The investment objective of the Scheme is to provide capital appreciation and /or dividend distribution by predominantly investing in companies having a large market capitalization. The Scheme would invest at least 65% of its assets in companies having a market capitalization greater than ` 750 crores as on the date of investment (or any such amount as 11
may be specified by India Index Services and Products Ltd. (IISL) from time to time) being the upper limit of market capitalisation as a criteria for inclusion of a company in CNX Midcap 200 Index. The scheme may also invest in companies other than large cap upto the permissible limits. iv. Principal Index Fund (An open ended Index Scheme) The investment objective of the scheme is to invest principally in securities that comprise CNX Nifty (NSE) and subject to tracking errors endeavour to attain results commensurate with the Nifty. The scheme has been designed with the intention of tracking the movement of securities (from time to time) included in the Nifty. The Scheme plans to do this by investing the entire corpus in the stocks that comprise the Nifty in similar weights to the weightage given by Nifty so that the portfolio would appreciate or depreciate (subject to tracking errors) in more or less the same manner as the Nifty. v. Principal Emerging Bluechip Fund (An open ended Equity Scheme) The primary objective of the Scheme is to achieve long term capital appreciation by investing in equity & equity related instruments of Mid Cap & Small Cap Companies. The investment strategy of the fund will be based on market cap of the stocks. The Scheme will predominantly invest in midcap stocks and small cap stocks to tap high growth opportunities offered by such stocks. For the purpose of maintaining liquidity or tap market opportunities; the Scheme may also invest in large cap stocks. Stocks selection will be primarily on bottom up approach on stock-by-stock basis. As part of its objective of maximizing investor's wealth creation potential over the longer duration, the fund may also invest in equity and equity related instruments of unlisted companies in line with SEBI regulations. A part of the portfolio will also tap arbitrage opportunities in the domestic markets like equity & equity related instruments, convertible preference shares, and convertible debentures. vi. Principal Smart Equity Fund (An open ended Equity Scheme) The primary objective of the scheme is to seek to generate long term capital appreciation with relatively lower volatility through systematic allocation of funds into equity; and in debt /money market instruments for defensive purposes. The Scheme will decide on allocation of funds into equity assets based on equity market Price Earning Ratio (PE Ratio) levels. When the markets become expensive in terms of 'Price to Earnings' Ratio; the Scheme will reduce its allocation to equities and move assets into debt and/or money market instruments and vice versa. The Scheme will decide on allocation of funds into equity assets based on equity market Price Earnings Ratio (PE Ratio) levels. The PE Ratio has traditionally been used as a tool to assess whether the equity markets are cheap or expensively priced. When the markets become expensive in terms of 'Price to Earnings' Ratio'; the Scheme will reduce its allocation to equities and move assets into debt and/or money market instruments and vice versa. Such a strategy is expected to optimize the risk-return proposition for the long term investor. vii. Principal Retail Equity Savings Fund (An open ended Equity Scheme) To provide long term capital appreciation and regular income by investing in equity and equity related instruments and also in debt and money market instruments. The Scheme would invest primarily in equity and equity related instruments besides debt securities. The equity securities shall be of such companies that have predictable earnings and which based on growth prospects which the fund manager believes are undervalued in the market place with the objective of capital appreciation. The Debt Securities shall be purchased for Capital appreciation purposes if the fund manager believes that declining interest rates may increase market value. The scheme may also invest, at the discretion of the Investment Manager, in the units of Liquid/ Money Market and Debt Mutual Fund Scheme(s). EQUITY LINKED SAVINGS SCHEME: viii. @ Principal Tax Savings Fund (An open ended Equity Linked Savings Scheme) The investment objective is to build a high quality growthoriented portfolio to provide long-term capital gains to the investors. The Scheme aims at providing returns through capital appreciation. The Scheme will invest its assets in a portfolio of equity and equity related instruments. The focus of the investment strategy would be to identify stocks which can provide capital appreciation in the long term. The aim will be to build a diversified portfolio across major industries and economic sectors by using "fundamental analysis" as its selection process. ix. Principal Personal Tax Saver Fund (An open ended Equity Linked Savings Scheme) The investment objective of the Scheme is to provide long term growth of capital. The Investment Manager will aim to achieve a return on assets in excess of the performance of BSE 100 Index. The strategy will be to allocate the assets of the Scheme between permissible securities in line with the portfolio profile described above, with the objective of achieving capital appreciation. The Fund Managers will follow an active investment strategy depending on the market situation and after considering the macroeconomic conditions including the prevailing political conditions, the economic environment (including interest rates and inflation) and to adhere to the need for a diversified portfolio in accordance with the applicable guidelines. @ Fresh sale of units (by way of purchase/switch-in) under the Scheme has been suspended effective 3.00 p.m. of September 2, 2011. BALANCED SCHEMES: x. Principal Balanced Fund (An open ended Balanced Scheme) The investment objective of the Scheme is to provide long term appreciation and current income by investing in a portfolio of equity & equity related securities and fixed income securities. The Scheme will invest in equity and equity related instruments as well as fixed income bearing instruments 12
rated investment grade or higher or otherwise comparable. The Scheme shall not take high risks in managing equity portion of the portfolio. For the equity portion of the portfolio, companies would be selected after research covering areas such as quality of management, competitive position and financial analysis. FUND OF FUND SCHEME: xi. Principal Global Opportunities Fund (An Open ended Fund of Funds Scheme) The investment objective of the Scheme is to provide long term capital appreciation by predominantly investing in overseas mutual fund schemes, and a certain portion of its corpus in Money Market Securities and/or units of Money Market / Liquid Schemes of Principal Mutual Fund. The Scheme will be predominantly investing in overseas mutual fund schemes. Currently Principal Global Investors - Emerging Market Equity Fund (PGI-EMEF) - a fund advised by Principal Global Investors - LLC (USA) has been identified as the overseas mutual fund portfolio for the purpose. Trustees, at their discretion, may decide to shift full or part of the investments to any other similar overseas mutual fund Scheme(s). The Scheme may also invest, in the units of other similar overseas mutual fund Schemes, which may constitute a significant part of its corpus, and a certain portion of its corpus in Money Market Securities and/or units of Money Market / Liquid Schemes of Principal Mutual Fund, in order to meet liquidity requirement from time to time. DEBT SCHEMES: xii. Principal Debt Opportunities Fund - Conservative Plan (An open ended Debt Scheme) The investment objective of the Scheme is to generate regular income & Capital appreciation through investments in debt securities and money market instruments. The assets of the Plan will be invested in money market and debt instruments. The Plan will seek to optimize the risk return proposition for the benefit of investors. The investment process will focus on macro - economic research, credit risk and liquidity management. The Plan will maintain a judicious mix of cash, short term and medium term instruments based on the mandates of the respective plans. As part of credit risk assessment, the Plan will also apply its credit evaluation process besides taking guidance from ratings of rating agencies. In order to maintain liquidity, the fund will maintain a reasonable proportion of the Scheme's investments in relatively liquid investments. Principal Debt Opportunities Fund - Corporate Bond Plan (An open ended Debt Scheme) The primary objective is to generate income and capital gains through investments in a portfolio of securities issued by Private and Public Sector Companies. The Plan will invest primarily in Debt & Money Market securities issued by Private and Public sector companies. The Investment manager will be taking calls on interest rates and credit while making investments in such securities. The average maturity profile of the portfolio may reach up to 5 years. The Investment Manager will take active strategic and tactical positions with key source of returns being Interest Rates and Credit. xiii. Principal Bank CD Fund (An open ended Debt Scheme) The objective is to generate returns by primarily investing in Bank CDs. Bank CDs provide liquidity and a relatively lower credit risk. The Scheme will primarily invest in Certificate of Deposits issued by Banks. Bank CDs tend to carry higher credit quality. Bank CDs help the investors who are seeking exposure to money market while taking relatively lower credit risk and aiming to generate reasonable returns. xiv. Principal Government Securities Fund (An open ended dedicated Gilt Scheme) The investment objective of the Scheme is to generate return through investment in sovereign securities and thus provide capital gains and income distribution to its Unitholders. To achieve the investment objective, assets under the Scheme will be invested solely in government securities. However to meet temporary liquidity needs the Scheme may invest in overnight call money /notice money/bank deposits and/or repos. The Scheme may also invest a part of its assets in financial derivatives such as options and futures & IRS (comprising of government securities) that are permitted or may become permissible under SEBI/RBI Regulations. xv. Principal Income Fund - Long Term Plan (An open ended Income Scheme) The investment objective of the Scheme is to generate regular income and capital appreciation/ accretion through investment in debt instruments and related securities besides preservation of capital. The Scheme will aim to invest its assets in a portfolio of debt instruments and related securities of government, quasigovernment, corporate issuers and money market instruments with varying risks - rated investment grade or higher or otherwise comparable (if not rated). Principal Income Fund - Short Term Plan (An open ended Income Scheme) The investment objective of the Scheme is to generate regular income and capital appreciation/ accretion through investment in debt instruments and related securities besides preservation of capital and has been designed to achieve stable returns over short-term investment horizons. The Scheme aims to invest its assets in a portfolio of debt instruments and related securities of government, quasigovernment, corporate issuers and money market instruments (rated investment grade or higher or other-wise comparable, if not rated) with average residual maturity of upto 36 months and varying risks. xvi. Principal Debt Savings Fund - Monthly Income Plan (An open-ended Income fund. Monthly Income is not assured and is subject to the availability of distributable surplus.) The Investment Objective of the scheme is to generate regular income through investments in fixed income securities so as to make periodical income distribution to the Unitholders and also to generate long-term capital appreciation by investing a portion of the Scheme's assets in equity and equity related instruments. The Scheme will invest in a wide range of fixed income and money market instruments and a small part of its assets in 13