Mutual Funds Offer Document

Section 1
Offer Document
Section 2 Content of Offer Document
Section 3
Key information memorandum
What is an offer document?

sponsor
new Launches
AMC
Mutual Fund scheme
Have to form
Detail of scheme
and Register with SEBI before subscribe to Inviting investors and
Announcing the scheme
What is an offer document?

new Mutual Fund scheme Is called Launching New fund offer Document details Of new fund offer
Are
prepared by
AMC
Sponsor
Offer document
Offer document in US Is called Prospectus
invites and
gives
investor
information
New fund offer
Offer document
Close end Fund prospectus
In
Is issued Once at the time Of issue Primary market
because
units Are not repurchased from
investor
Offer document
Open end Mutual fund the
can issued
and
at repurchased
Any time continuously
Offer document Has to be revised
valid
From time of launch
till amendment
as Every 2 years
Stated by SEBI
Importance for investors

Offer document
Is
Important source
of information
to
Prospective investor
And
gives to Which helps regarding Valid information
Scheme details
and
Subscribing to New issues
Make decisions
Fundamental attributes are the essence of the scheme and includes

scheme
contains Key information Such as and objectives terms
Can be With From investors
changed
approval
investor
Must study
Offer document
to
What he understand is
buying
Funds obligation to investor

Mutual fund Must provide information regards Disclosure in Offer document to
has
Investment decisions
To make
Investment vehicles
To Ask for right
Funds obligation to investor

Investor advisor
Must
read
and
Acquaint himself
through
With documents
conclusion
vet trustees
Offer document
before
issuing
because
SEBI
Not approved
Offer Document Contains statements
Content of offer document

Offer document issued by Mutual fund requires SEBI
To include
Sponsor & AMC details Terms of issue
Investors rights & services
Scheme description Investment objective
Historical statistics
Content of offer document

Offer document
Is usually distributed
with
Along with
Application form
Abridged version Of Offer document
Known as
Key Information memorandum
conclusion
Lays
SEBI down format includes Other disclosures That are Considered material by Investors point trustees Standardized Offer document &
SEBI guidelines include
SEBI guidelines
Validity of offer document for new Fro the date of scheme receipt by AMC
of the letter containing observation from SEBI
Offer document
Launched for
valid New scheme

for 6 months
Not Launched
request Within 6 months AMC To file fresh Offer document
Investors right to information on material changes

Filed Offer document with SEBI before
Launching New scheme
3
Valid till
contains
remains Essential/ detail Information of scheme valid
conclusion
Offer document
needs To be renewed
when
Material changes Occur over a period Of time
Eg.
Reconstituting Of AMC
Adjudication proceed Referred by SEBI Against sponsors Imposing key personals Of he existing schemes
Change in management
Fresh litigation cases
Periodic revision Required in Offer document

Offer document Has to be Fully revised
&
At least
1 year
Periodic revision Required in Offer document

Open end scheme Has completed 1 year then
Offer document
Should include
KIM
Addendum to Offer document
Have to be In form of
Subsequent years
of
Condensed financial Information of The scheme
Distribution of revised document specified

Offer document
& Key Information memorandum
Has to be
attached
with
addendum
Offer document Is revised And reprinted

Has to addendum be So they Attach to Offer document or Abridged Offer Document Already In stock
Circulated to
send
brokers
distributors
Existing Unit holders

Offer document Should contain Date of revision Of offer document

Mutual fund
Has
to
Display modifications
in
Offer documents a
Through
Notice in all Investor service centers
& advertisement
Press release
Website of Mutual fund
brokers distributors
* All changes have to be filed with SEBI
Were to obtain the updates of offer document

Offer document
gives
comprehensive
about Authentic information scheme
investor

has investor Legal right To ask Detail Offer document carefully
Has to
obtain Copy of Offer document
and
study
from
Fund office AMC distributor

KIM Can be
Consise
version of
Offer document
obtained
banks
by
distributors
from
investors Distribution points like broker
Contents of offer document
Contents of offer document

A glossary of defined terms Investment objectives and policies
(As per the format specified by SEBI)
)
Constitution of Mutual funds
Risk factors
Legal and regulatory Compliance
Financial information
Management of the fund
Offer document related information
1.
Summary information (cover page)
Front page of the offer documents
Provides
Information about
Scheme at glance Date of its publication
Name and type of the Fund

Name and type of the Fund
Name of mutual fund Classes of units offered for sale
Name of the scheme
Type of scheme
Name of AMC
Price of units
Name of guarantor in case of assured return scheme
Opening ,closing and earliest closing date for the offer

Statement To the effect Documents contains information
What it should be
And
Retained for future reference
Statement
To the effect
Document is prepared
As per SEBI regulation
Filed with
SEBI

Scheme Has not been Approved/Disapproved
By nor SEBI Has certified Accuracy and adequacy of offer document
This is
Disclaimer clause by SEBI

Just as in Primary shares Issue Prospectus
It is the Investor
Whether document gives all the Who Judge information

& Investor takes
Investment risk

That Takes
It is AMC
Legal responsibility
For the accuracy
Of the statement of offer document.
CONCLUSION
From the This section
Investors perspective
Provides at a glance
Fundamental attributes
and
Other key Elements of the scheme Back
2 Glossary of defined term.

Glossary of defined term
Define
The terms
Commonly used in
Offer document
Glossary of defined term.

Offer document
Must make
Investor
aware
Therefore by the Risk factor faced by the fund
Glossary of defined term
Risk factors can be
Standard risk factor
Scheme specific risk factor

Are market driven & Common to all schemes
Would be conversant with To the Novice investor
Regular investor
Back

Have direct bearing On investors choice
Therefore need to be evaluated
By the investor
Back
3 Risk factor Disclosure of risk factor must include the following
Specific standard risk factor

investments Are subject to Market risk
or Absence of liquidity in markets Resulting in
Fluctuation in market prices beyond the control of the managers
Investment objective of the Scheme not being achieved

NAV Can move up down or
On the basis of
Capital market movements
Past performance
of
Sponsor/AMC/ Mutual fund
Is not indicative of
Future performance Of the scheme.

Name of the scheme Do not indicate Its quality and prospects
Risk associated with
The use of
Derivative instrument
If the fund plans
As permitted by SEBI
Specific standard risk factors

Schemes investment objectives/strategy Arising from And Proposed asset allocation
Non diversification if any

Investing in a closed-end schemes

For assured return scheme Until the maturity of the scheme It must be stated That is on the basis of guarantee given by sponsor/trustee/AMC
If assurance is
If assurance is For a specific period It must be stated That there is no guarantee for sustaining the assured return for the remaining duration of the scheme

If AMC has no previous experience In managing a fund Disclosure to that effect must be made
Back
4 Legal and regulatory compliance

Responsible officer of AMC
Stands guarantee
For the information Contained in the document
AND Certifies the fulfillment of
Funds legal and procedural obligation.
Legal and regulatory compliance

AMC Must confirm Due diligence certificate
Signed by
Compliance officer
CEO/ Managing director/ Whole time director
Executive of the AMC
Been submitted to SEBI
Legal and regulatory compliance Certificate has to confirm

That Draft offer document
Certificate has to confirm
Forwarded to
SEBIS Regulation
SEBI

That Certificate has to confirm
All legal requirements

Connected with launching
The scheme have been complied with

Certificate has to confirm
Disclosure made in the Offer document
are
That
True and fair
and
That
Adequate to enable the investor Intermediaries named in the offer document Are registered With SEBI To make
Well informed Decision regarding investment in proposed scheme.
back
5 Financial information
Expenses To be incurred by
Offer document
Must contain on
Expenses estimated
The scheme
Adverse variation between Must be explained
Estimates for the scheme on offer
Actuals for the scheme
5 Financial information Specifically following items must be included

Sales load contingent deferred charges Redemption load & Switchover/exchange fee
All this as a % of NAV

Details of Initial issue expenses
for the scheme
For other scheme launched during the last one fiscal year
By AMC
5 Financial information Specifically following items must be included

Estimated annual recurring expenses As a Percentage of Average weekly Net asset
Fund of funds
Incase of FOF
The offer document must disclose that in which FOF scheme makes investment .
The investor will have to bear the recurring expenses of the scheme
In addition to the expenses of Other scheme
5 Financial information Conclusion

This information is valuable for the investor
To decide Cost associated with his investment
Whether fund is load fund or a no load fund
To Compare with other AMCs expenses ratios
Whether expenses foreseen will still give him an acceptable return on the scheme on offer
Back
6 Constitution of mutual fund

This is important because details about Sponsor Trustees Other constituents Can offer
Useful pointers towards a fund potential
Fund managers strengths
Is Useful information for
Selection of fund family by the investor
6 Constitution of mutual fund The following information should be included in this section
Of the Brief description
Objectives of fund
constituents Functions and responsibilities of sponsor AMC Trustees custodian Activities of the sponsor Financial performance
And its
Names and addresses of Board of trustees
of
Details of principal occupations and current directorship

Separate Incase disclosure They are associate Of the sponsor OR AMC During the last 3 fiscal year
Summary of trust deed provision
Which
may be of
Material interest to unit holders
Trustship fees
Back
7 Investment objectives and policies

It is important for the investor
To ensure that
Funds investment objectives
Are in line
With his (investor ) objectives
Reviewing the fund objectives
is an important step
In selection of an appropriate fund
7 Investment objectives and policies.

The major disclosures under this head are
Short description of the types of securities will invest principally
Asset
allocation pattern
Policy of diversification

If the Schemes name Implies that It will invest primarily
in a particular type of security or in certain industry/industries
Its
Then Atleast 65% of the value of its asset
Policy should be
In the
To invest
Indicated type of security/industry
For open-end scheme
if
Illiquid asset
Are likely to be more than
10% of net assets
Than
policy
With respect to such asset
Must be disclosed
Justification of net worth of guarantor
Must be provided
For assured return schemes With respect to Meeting shortfalls in these scheme

Information on
Portfolio turnover policy
Investment limitation
Asset allocation
diversification
Essential for the investor
To assess
The likely risk level to which fund will be exposed to
Back
8 Management of the fund Offer document must disclose
Name and address of fund manager(s) and key personnel
Investor relations officer
AMC and its directors
custodian
Registrar, transfer agent & the statutory auditor
With services provided and compensation Back
Offer document
Offer related information

Needed by Investor & To make
Contain all practical information
distributor
Investment in proposed scheme.
Determine
Investors right & obligation
Required by SEBI
Major disclosures

1 Minimum Amount Maximum targeted amount
As per SEBI regulation
AND
2 Circumstances for refund
assured return
AND
Period within refund must carried out
Opening, closing
3
allotment & dispatch Of certificate
Calendar
indicating
account statement

4 Policy regarding
Re-issue of repurchase units

To convert
Including maximum extent
Re-issue & Entity Involved
Option
Closed end Scheme into
Open-end scheme
Right to freely retain or
Restriction on
Dispose of units

8 Maturity period and Circumstances under Duration may extended.
for
transfer
Procedure
and Transmission of unit
10

Operations of schemes.
Gives information
concerning
Detail required by investor

To asses the fund
A. Investment Procedure
Name and a address of collection bank & Investor servicing centre Accumulation plan, Dividend reinvestment plan
Investor
Should described
Special purchase plan
Minimum initial investment
Following should include
Detail who can invest, sales price fixation
Nomination Facilities
B. Schemes Policy On
1) DIVIDENDS AND DISTRIBUTION decide to distribute surplus
Trustee
Dividend Realized profit interest
Expenses and taxes
To Unit Holders
1) DIVIDENDS AND DISTRIBUTION

Trustee's decision Regard to
Availability and adequacy
Rate
Timing and frequency Of distribution
shall be final
1) DIVIDENDS AND DISTRIBUTION have the option
Unit Holders
Receiving the dividend
or Reinvesting the same will reinvested
at the Applicable NAV immediately following Business Day
1) DIVIDENDS AND DISTRIBUTION
dispatch AMC
Dividend warrants
within
30 days of date of declaration
Dividend distribution procedure
shall be
Accordance with the Regulations
B. Schemes Policy On
2) INTER-SCHEME TRANSFERS done only if
from /to Transfer of Investments Scheme
to/from Another schemes
are on Such transfers spot basis and
Prevailing market price
2) INTER-SCHEME TRANSFERS
Nonperforming assets
will not acquired of other schemes
by the Scheme
SEBI restricts
C. Associates/group companies transaction

In companies forming part of Mutual Fund Investment Same group as AMC
For the interest Of investors
required to make disclosure s Historical information for last 3fiscal years
Impact on the performance of scheme.
Underwriting obligation
Disclosure of units to associate companies Disclosure include Detail of sponsors their affiliates & associates. Policy for investing in associate companies of sponsor including aggregate market value of investment & % of aggregate NAV If scheme has invested more than 25% of its net assets in associates companies.
D. Borrowing Policy
Fund is allowed to borrow
Meet temporary liquidity needs
for the purpose
Repurchase, Redemption of units
Payment of interest
Dividend to The unit Holders
D. Borrowing Policy
as per Regulations duration of such borrowin g More than 20% shall not borrow of the net assets of the Scheme
The Fund
shall not exceed a period of six months.
E. NAV and Valuation

Calculation of NAV =
(Market or fair value of the scheme's investments + receivables + accrued income + other assets) (accrued expenses + payables + other liabilities and provisions)
No. of Units outstanding under the Scheme
NAV
Calculated and announced
within a period of 30 days
Announced on all Business Days.
After the close of the NFO Period

not traded on stock exchange for 30 days Prior to the Valuation Day
Security
such Security is treated as non-traded Security

valuation norms of Non-traded securities Nontraded securities Becomes important
Fund invested
valuation norms
in calculation of NAV
F. Procedure for redemption and re-purchase

for Redemptio n shall be Minimum amount after Redemptio n shall be Minimum number of Units
Rs 5,000 In case the balance falls all remaining units will be automatically redeemed
Rs 5,000
Below

Has purchased Units
Investor
on more than one Business Day
Units will be redeemed
on a first-infirst-out basis

How to redeem
A transaction slip
used by the Unit Holder
to request a Redemption
requisite details
submitted at an ISC.
entered in the transaction slip

Paid by cheques, Marked "A/c Payee only"
Redemptio n proceeds
drawn in the name of sole holder

dispatch the Redemption proceeds
within 3 Business Days from
acceptance of Redemption request

but not beyond otherwise 10 Business Days
Interest shall Borne by AMC.
Paid to Unit Holder
interest @15% p.a.
G. Descriptions of accounting policies NAV and valuation

Maintain Proper Books of Accounts, Records
Describe
Accounting policies that it follows
Should be in accordance with
SEBI (MF) Regulation 1996
H. Tax Treatment of investment

Describe Tax Treatment of investment
also tell Tax Element
Applicable to
Investors
Who invest in fund

Is very important if Tax Treatment of investment Fund income
Is subjected to
Tax
Or
In the hand of mutual fund
Tax in investors hand
Tax information
In offer document
General in Nature
Objective not offer tax advice

Income-tax rates indicated below are as per the Finance Bill, 2007, For Unit Holders
sale of units
of an equity oriented fund to Mutual Fund
required to pay a STT of

Unit Holder
0.25 per cent on the value of the sale
TDS Rates under the Act
Residents
FIIs
NRIs / Other foreign entities (excluding FIIs)

30 per cent for foreign noncorporates 40 per cent for foreign corporate entities 10 per cent
Short-term capital gains
Non-equity oriented fund
NIL
NIL
Equity oriented Fund Long-term capital gains Non-equity oriented fund
NIL
NIL
NIL
NIL
10 per cent for specified overseas financial organisations 20 per cent for other foreign entities
Equity oriented Fund

Business income Non-equity and equity oriented mutual fund
NIL
NIL
NIL
NIL
30 per cent for non-corporate FIIs 40 per cent for corporate FIIs
30 per cent for foreign noncorporates 40 per cent for foreign corporate entities
I. Investors right & services

Must develop awareness They Expect from
Investors
right & services
Mutual fund

e.g. Review Document & obtain offer document
Investors
Right to
before
Invest in Mutual fund

Without reading Investment decisions are made Cannot complain
If rights not exercised
By investor
investor
To AMC
Provide facilities
Switching within the fund family Cheque writing
Some funds

Require
Detailing of
For Inspection
SEBI
Documents available
Such as
Trust deed
Investment management
Custodian agreement
Memorandum SEBI & articles of Regulation, association 1996
Trust Act, 1882
Registrars
Transfer agents
Can access the information on
investor
NAV Computation
and
Unit Price
Friendly service
Who take care of their queries and complaints
Include details
Details of contact Of person
J. Investor Grievances And Redressal Mechanism

can enquire about NAVs, unit holdings, valuation, dividends,
or
Investors
lodge any service request
Resolve Investor Grievances promptly
and
Handle transactions efficiently
Service representatives
J. Investor Grievances And Redressal Mechanism

are redressed by the investor relations officer Mutual Fund
Investor complaints
received by
of
AMC and Registrar
K. Penalties, Pending Litigation or Proceedings
Pending cases
Should alert
Investors
Mutual fund
to
Assess the risk of loss
Key Information Memorandum

scheme provide Not only Offer about documents but Also provide Key information
history
Mutual fund
Provide information Offer documents investors and Available on request
Dislike to study details of
Expenses involved
Include
But in precise form
Offer documents
KIM
Refer
To develop depth prospective
Mutual fund
Investor

Can refer KIM Investing in Mutual fund
Investor
Prescribe Format for SEBI KIM That include
Investment objective
Assets allocation pattern
Plans and policy
Benchmark index & dividend policy
Names of fund manager & trustee company Performance of schemes over 1,3,5 years Expenses of the schemes
Sources for obtaining daily NAV

Investor Grievance Contact

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Section 1

Section 2 Content of Offer Document

Key information memorandum

What is an offer document?

Mutual Fund scheme

and Register with SEBI before subscribe to Inviting investors and

Announcing the scheme

What is an offer document?

New fund offer

units Are not repurchased from

Any time continuously

Offer document Has to be revised

From time of launch

Importance for investors

Subscribing to New issues

Fundamental attributes are the essence of the scheme and includes

Can be With From investors

Funds obligation to investor

To Ask for right

Funds obligation to investor

Offer Document Contains statements

Content of offer document

Sponsor & AMC details Terms of issue

Investors rights & services

Scheme description Investment objective

Content of offer document

Abridged version Of Offer document

Key Information memorandum

Key Information memorandum

SEBI guidelines include

valid New scheme

Investors right to information on material changes

Launching New scheme

remains Essential/ detail Information of scheme valid

Material changes Occur over a period Of time

Fresh litigation cases

Periodic revision Required in Offer document

Periodic revision Required in Offer document

Addendum to Offer document

Condensed financial Information of The scheme

Distribution of revised document specified

& Key Information memorandum

Offer document Is revised And reprinted

Distribution of revised document specified

Existing Unit holders

Distribution of revised document specified

Distribution of revised document specified

Notice in all Investor service centers

Website of Mutual fund

* All changes have to be filed with SEBI

Were to obtain the updates of offer document

Were to obtain the updates of offer document

Fund office AMC distributor

Were to obtain the updates of offer document

Contents of offer document

Contents of offer document

(As per the format specified by SEBI)

Legal and regulatory Compliance

Management of the fund

Offer document related information

Summary information (cover page)

Front page of the offer documents

Scheme at glance Date of its publication