want to be crorepati? - Offer Document

OFFER DOCUMENT

ž     1. Offer Document is the most important source of information about a mutual fund scheme for investors.
      2. žAn abridged (summary) version of the OD is Key Information Memorandum (KIM).
ž     3. Investors are required to read and understand the OD.
ž     4. Investors sign the form stating that they have read the OD. No recourse is available to investors for not reading the OD or KIM.
     5. The cover page of OD contains details of scheme being offered, the name of the sponsor, trustee, AMC etc
     6. Mandatory disclaimer clause of SEBI should also be on the cover page of the OD.
     7. The format and contents of the OD must be as per SEBI guidelines.
ž     8. The OD is issued by the AMC on behalf of the trustees.
ž     9. The AMC is responsible for the information in the OD
ž     10. Close-ended funds issue an OD at the time of the IPO.
     11. Open-ended funds have to update OD at least once in 2 years.
ž     12. Trustees approve the contents of the OD and KIM.
ž     13. KIM is compulsorily made available with every application form.
ž     14. SEBI does not approve or certify the contents of the OD.
ž     15. Investor's rights are stated in the OD

žThe OD contains detailed info, while KIM is the summary document.

ž 16. If any information is crucial to the investor, it will be found in both OD and KIM. For eg. details of guarantee, if the scheme is an assured return scheme.

What are the mandatory disclosures to be made on the cover page ( Front Page)
of the OD?

•Name of the mutual fund.
•Name of the scheme.
•Type of scheme.
•Major Objective
•Name of the AMC.
•Classes of units offered for sale.
•Price of units plus applicable load.
•Name of the guarantor in case of assured return schemes.
•Opening , closing and earliest closing date of offer.
•Mandatory statements.
•Date of its publications.

What are the standard risk factors?

• Mutual fund and securities are subject to market risk and there is no assurance that the objective will be achieved

• NAV of units issued under the scheme can go up or down depending on factors and forces affecting capital markets.

• Past performance of the sponsor/AMC/ Mutual fund does not indicate the future performance of the scheme.

• The name of the scheme does not in any manner indicate any either the quality of the scheme or the future performance of the scheme.

What are the initial issue expenses ?

Expenses that are incurred in the launch of the fund are called as initial issue expenses.

∙ The costs of registration and fund formation

∙ Legal and advisory expenses

∙ Costs of launching the scheme

∙ Advertisement and promotion expenses

∙ Distribution costs

∙ Commissions to selling agents

SEBI imposes a ceiling of 6% on these expenses.