OFFER S S L E . F I DE L I T Y LOSE IT DON'T USE IT.
The difference is Fidelity
When putting money aside for your future, it makes sense to use all the tax benefits offered to you. Moreover, the good news is that the government has made a host of individual savings ‘tax-deductible' under one simple umbrella called Section 80C. Your tax adviser can take you through the entire list but some of the popular savings include Life Insurance, Provident Fund(PF), Public Provident Fund (PPF), National Savings Certificates (NSCs) and ELSS - Equity Linked Savings Schemes. You can invest in one or a combination of tax savers to reduce your taxable income by up to Rs. 1 lakh and save up to Rs. 30,000* in taxes. *This does not consider the applicable surcharge and the education cess.
Get the tax saving
advantage
The chart below shows how much tax you can save. For instance, if your taxable income is Rs.1,20,000 for the year, you would need to invest just Rs.20,000 in a tax saver to reduce your taxable income by up to Rs.1,00,000 and drop your tax to zero. In fact, you don't even need to invest an entire lakh to cut your tax bill.
HOW MUCH CAN YOU SAVE?
Your annual taxable income (Rs.)
Your applicable tax before investment (Rs.)
Optimal amount to invest (Rs.)
Your applicable tax Your ‘new’ after taxable income investment (Rs.) (Rs.)
Your savings (Rs.)
1,20,000
2,000
20,000
1,00,000
0
2,000
1,50,000
5,000
50,000
1,00,000
0
5,000
2,00,000
15,000
1,00,000
1,00,000
0
15,000
2,50,000
25,000
1,00,000
1,50,000
5,000
20,000
3,00,000
40,000
1,00,000
2,00,000
15,000
25,000
4,00,000
70,000
1,00,000
3,00,000
40,000
30,000
5,00,000
1,00,000
1,00,000
4,00,000
70,000
30,000
9,00,000
2,20,000
1,00,000
8,00,000
1,90,000
30,000
Calculations based on income slabs for FY 2005-06. Tax amounts indicated do not include any applicable surcharge and the educational cess. It is assumed that the total taxable income specified above is after considering all deductions except deductions under Section 80C of the Income Tax Act 1961 (Finance Act, 2005). The above example is used only as an illustration
What is an ELSS and why should you invest in it? An ELSS or Equity Linked Savings Scheme allows you to harness the growth potential of equities. Despite market volatility in the short term, equity funds have been known to create true wealth over the long term. So how much can you expect to earn in returns from different types of investments? Here's an example to give you a clear picture: Three investors invested Rs. 1,000 into NSCs, PPF and infrastructure bonds. Alongside, another investor invested Rs. 1,000 in an ELSS. As you can see in the graph on the opposite page, the ELSS investment experienced greater volatility than the other options over the short term. But over time, its performance proved to be far stronger. And here's the eye opener: The Rs. 1,000 invested in an ELSS in January 1998 would be worth approximately Rs. 7,200 today. In sharp contrast, none of the fixed rate savings would be worth more than Rs. 2,400. If you are willing to ride the ups and downs of the market, you may find that an ELSS could be an ideal way to save tax and to grow your investment for the future.
ELSS VERSUS OTHER TAX SAVING INSTRUMENTS
8,000 7,500 7,000 6,500 5,500
7240
PPF NSC Infrastructure Bonds
5,000 4,500 4,000 3,500 3,000 2,500 2,000 1,500
2307 2147 1737
1,000 n-9 8 Ju l-9 8 Ja n-9 9 Ju l-9 9 Ja n-0 0 Ju l-0 0 Ja n-0 1 Ju l-0 1 Ja n-0 2 Ju l-0 2 Ja n-0 3 Ju l-0 3 Ja n-0 4 Ju l-0 4 Ja n-0 5 Ju l-0 5
500 Ja
Value (Rs.)
6,000
ELSS
To represent ELSS, we have taken a simple average of the NAVs of 15 of the largest ELSS funds that have a track record of at least nine years. Sources: ELSS NAV data - Credence Analytics. PPF data - Post Office internal document. NSC data - Maharashtra Govt., Directorate of Small Savings. Infrastructure bond data - IDBI Bank. Methodology: ELSS - NAVs are as of the first of every month. Each data point represents a simple average of the NAVs of the 15 largest ELSS schemes (as of 31/10/05, or latest available date from Credence) with reported NAVs before 01/11/96. Assumes an investment of Rs. 1000 effective Jan 1, 1998. PPF - Assumes Rs. 1000 invested in the Public Provident Fund. For the purposes of simplicity, rate changes announced in the middle of the month are assumed to be effective from the first date of the month after rate change is deemed effective by the government. Monthly compounding rate is extracted from announced annual PPF rate and is applied to each month individually. NSC - Assumes Rs. 1000 invested in NSC at the prevailing interest rates, held for duration of certificate and rolled over into a new certificate at the prevailing interest rate. Assumes half-yearly compounding based on published annual rates. Infrastructure Bonds - Assumes Rs. 1000 invested into IDBI Flexibonds. Assumes investment is made into cumulative option for the tenure with the highest available interest rate. Assumes the relevant bond is held to maturity and rolled over into the cumulative option of the next available issue at the highest available interest rate. Assumes annual compounding. Past performance may or may not be sustained in future. Rs. 1,000 may be lower than the minimum amount actually required for these investments. The graph is used only for illustrative purposes.
ELSS More than just a tax saver, a wealth creator An ELSS fund is very similar to an equity fund. The main difference however, is a three-year lock-in period - the time when you cannot withdraw your money. This may seem a bit harsh at the start, but it works in your favour. How? The fund manager does not need to worry about holding large amounts of cash to service redemptions. He has the freedom to devote a larger portion of the fund's portfolio to stocks that he believes have the potential to out-perform over time.
So does this mean that ELSS funds, in general, do better than other equity funds?
The graph on the opposite page compares the composite of the 15 ELSS funds shown previously with a composite of 15 open ended equity funds over the same nine-year period. While past performance does not guarantee future returns, you can see that the ELSS lock-in rule has provided the impetus for out-performance over the past nine years. This is one reason why you could consider investing in an ELSS, whether you are looking for tax savings or not.
CUMULATIVE GROWTH 1996-2005
100
90
ELSS
80
84
Equity Funds
Value (Rs.)
70 60 50 47
40 30
20 10
N ov -0 5
N ov -0 4
N ov -0 3
N ov -0 2
N ov -0 1
N ov -0 0
N ov -9 9
N ov -9 8
N ov -9 7
N ov -9 6
0
To represent ELSS, we have taken a simple average of the NAVs of 15 of the largest ELSS funds that have a track record of at least nine years. Source: Credence Analytics. Methodology: ELSS - NAVs are as of the first of every month. Each data point represents a simple average of the NAVs of the 15 largest ELSS funds (as of 31/10/05, or latest available date from Credence) with reported NAVs before 01/11/96. Equity Funds - NAVs are as of the first of every month. Each data point represents a simple average of the NAVs of the 15 largest open-ended diversified equity schemes (as of 31/10/05 or latest available date from Credence) with reported NAVs before 01/11/95. Past performance may or may not be sustained in future. Returns are compounded annually. The graph is used only for illustrative purposes.
ER F AN ELSS OFF
ROM FIDELIT
'T LO USE IT. DON
•
Y
SE IT.
One goal - 'make customers money grow' - unchanged since inception
•
Established 'bottom-up' stock picking approach focuses entirely on the core strengths of a company and on in-depth, in-house research
•
Unrivalled global team of 600 in-house investment professionals, including those of Fidelity's US affiliate FMR Co.
•
Along with its US affiliate FMR Co., Fidelity covers 95% of world market capitalization
•
Over 100 awards won for investment excellence in 2005 alone
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Almost 10 years' experience of investing in India with over US$ 4 Bn (over Rs.18,000 Crores) invested in Indian equities
•
The Fidelity Equity Fund, which launched in March 2005, has already become the largest equity scheme in India (as at November 30, 2005 according to www.amfiindia.com)
Introducing
The difference is Fidelity The new Fidelity Tax Advantage Fund offers you all the tax benefits of an ELSS but with the difference you would expect from Fidelity. And what is the Fidelity difference? Our experience and expertise for a start - we're true investment specialists - investing is all we do and all we've ever done. An absolute dedication to building our customers' wealth over the long term, through market ups and downs, and our results have kept us true to our unique investment approach - 'The Fidelity Way': •
THE DIFFERENCE IS QUALITY 'Bottom-up' stock picking approach - each stock is hand-picked for its core strengths and stock selection is underpinned by thorough, in-house research
•
THE DIFFERENCE IS SIMPLICITY The fund manager has the freedom to hold companies of all sizes - no cap bias, no sector bias, no trend bias
•
THE DIFFERENCE IS DIVERSITY About 60 - 80 stocks. The fund manager will rarely allocate more than 4% to one stock
The difference is Fidelity
KEY BENEFITS
•
Fidelity's 'bottom-up' stock picking approach - focuses on a company's core strengths and stock selection is underpinned by thorough, in-house research
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Three-year lock-in helps the fund manager to maximise potential returns from equities
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Tax saving plus a smarter investment for the future
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Ideal core investment - 'go anywhere' approach - has no cap bias, no sector bias, no trend bias
•
Well-diversified for greater risk control with rarely more than 4% of the fund in one stock
•
Systematic Investment Plan available
FUND FACTS Fund Objective
To generate long-term capital growth from a diversified portfolio of predominantly equity and equity-related securities
Fund Manager
Arun Mehra
Benchmark index
BSE-200
Lock-in period
3 years
SIP availability
Yes
Options
Growth and Dividend options available. The Dividend option offers payout and reinvestment facilities
MINIMUM INVESTMENT For Lump Sum
Rs. 500 and multiples of Rs. 500
For SIP
Rs. 3,000 (Six instalments of Rs.500 each)
ENTRY LOAD*
Lump sum
2.25% for each purchase of less than Rs. 5 Crores For amount > Rs. 5 Crores, by an FOF or on div. reinvestment - NIL
SIP
1.25% (applicable to each SIP instalment)
EXIT LOAD Lump sum and SIP
NIL
* For load on switches, refer to the Offer Document.
For more information on the Fidelity Tax Advantage Fund, speak to your financial adviser or contact us:
• Scheme Classification: An open ended equity linked savings scheme. Investment Objective: To generate long-term capital growth from a diversified portfolio of predominantly equity and equity-related securities. • Normal Asset Allocation: Equity and equity related securities: 95%, money market instruments: 5% • Terms of issue: Units of Rs. 10 per Unit for cash plus applicable Entry Load during the New Fund Offer and at Applicable NAV plus applicable Entry Load thereafter. Minimum purchase amount:Rs. 500 per application. Minimum additional purchase amount: Rs. 500 per application. Minimum redemption amount/units:Rs. 500/50 Units. Offer Document, Key Information Memorandum and Application Forms / Transaction Slips available at the ISCs / distributors' offices. General Services: Investors can contact any of the ISCs at its toll-free number “1-600-180 8000”. NAVs will be calculated and published on all Business Days. Purchase on all Business Days. Redemption on all Business Days subject to completion of the lock in period of 3 years. • Loads-Entry: For Purchases < Rs. 5 Crores: 2.25%; For Purchases >= Rs. 5 Crores or by an FOF or as a result of dividend reinvestment: NIL; For Purchases through SIP (each instalment): 1.25%; Exit: NIL. A switch in will also attract Entry Load like a Purchase. No load for switches between the options of the Scheme. Risk factors: • Mutual funds, like securities investments, are subject to market risks and there is no guarantee against loss in the Scheme or that the Scheme's objectives will be achieved. • As with any investment in securities, the NAV of the Units issued under the Scheme can go up or down depending on various factors and forces affecting capital markets. • Past performance of the Sponsor /the AMC/the Mutual Fund does not indicate the future performance of the Scheme. • Fidelity Tax Advantage Fund is the name of the Scheme, and this does not in any manner indicate the quality of the Scheme, its future prospects or returns. • Units issued under the Scheme will not be redeemed until the expiry of 3 years from the date of their allotment and hence the ability to realise returns on such investments will be restricted for the first 3 years • Investments in the Scheme will be affected by trading volumes, settlement periods, volatility, price fluctuations, inability to sell securities, disinvestment of holdings of any unlisted stocks prior to target date of disinvestment, credit risk and interest rate risk. • The Scheme should have a minimum of 20 Unit Holders and no single Unit Holder should account for more than 25% of the corpus of the Scheme. In case of nonfulfilment with either of the aforesaid conditions in a three months time period or the end of succeeding calendar quarter, whichever is earlier, from the close of the NFO of the Scheme, the Scheme shall be wound up. The aforesaid conditions should also be met in each subsequent calendar quarters thereafter on an average basis. In case of non-fulfilment with the first condition i.e. minimum of 20 investors in the Scheme, on an ongoing basis for each calendar quarter as specified by SEBI, the Scheme shall be wound up by following the guidelines prescribed by SEBI. 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. Please read the Offer Document before investing. Before investing please consult your tax adviser. Statutory: Fidelity Mutual Fund ('the Fund') has been established as a trust under the Indian Trusts Act, 1882, by Fidelity International Investment Advisors (liability restricted to Rs. 1 Lakh). Fidelity Trustee Company Private Limited, a company incorporated under the Companies Act, 1956, with a limited liability is the Trustee to the Fund. Fidelity Fund Management Private Limited, a company incorporated under the Companies Act, 1956, with a limited liability is the Investment Manager to the Fund. CI00172