Liquid Fund. (An open-ended Liquid scheme) Credit Risk Rating mfa1+ by ICRA Limited*

Transcription

1 Offer Document Liquid Fund (An open-ended Liquid scheme) Credit Risk Rating mfa1+ by ICRA Limited* An offer for Rs.1000/- each during the New Fund Offer Period and at NAV based prices thereafter. New Fund Offer Opens On : New Fund Offer Closes on : Scheme re-opens for continuous sale and repurchase on or before : th 27 February, 2008 rd # 3 March, 2008 th 7 March, 2008 This Offer Document sets forth concisely the information about the Scheme that a prospective investor ought to know before investing. The Offer Document should be read in its entirety before making an application for the Units and should be retained for future reference. The particulars of MIRAE ASSET LIQUID FUND have been prepared in accordance with Securities and Exchange Board of India (Mutual Funds) Regulations, 1996 as amended till date and filed with SEBI, and the units being offered for public subscription have not been approved or disapproved by SEBI nor has SEBI certified the accuracy or adequacy of the Offer Document. This Offer Document will remain effective till a material change (other than a change in fundamental attributes and within the purview of this Offer Document) occurs and thereafter the changes shall be filed with the Securities and Exchange Board of India and circulated to all the existing Unit holders along with the quarterly/half yearly reports. An addendum shall be attached to the offer document containing the changes. The offer document shall be updated at least once in every two years. Investors may also like to ascertain about any further changes after the date of offer document from the mutual fund/ its investor service centers/ distributors. th This offer document is dated 26 February, 2008 # The Trustee reserves the right to extend the closing date by suitable notification subject to the condition that the New Fund Offer shall not be kept open for more than 30 days. SPONSOR : Mirae Asset Investment Management Company Limited TRUSTEE : Mirae Asset Trustee Company Private Limited REGISTRAR : Karvy Computershare Private Limited INVESTMENT MANAGER : Mirae Asset Global Investment Management (India) Private Limited Unit No. 606, Windsor Building, Off. C.S.T Road, Kalina, Santacruz (East), Mumbai Tel. No.: Fax Nos.: Website: miraeasset@miraeassetmf.co.in *The above rating should however, not be construed as an indication of the performance of the Mutual Fund Scheme or of volatility in its returns, nor the said rating should be treated as a recommendation to buy, sell or hold the units issued.

2 SPONSOR Mirae Asset Investment Management Company Limited 45-I, Yoido-Dong, Youngdeungpo-Gu, Seoul, Korea TRUSTEE Mirae Asset Trustee Company Private Limited Registered Office : Unit No.606, Windsor Building, Off. C.S.T Road, Kalina, Santacruz (East), Mumbai INVESTMENT MANAGER Mirae Asset Global Investment Management (India) Private Limited Registered & Corporate Office : Unit No.606, Windsor Building, Off. C.S.T Road, Kalina, Santacruz (East), Mumbai Tel. No.: Fax No.: STATUTORY AUDITORS S. R. Batliboi & Co., Chartered Accountants 6th Floor, Express Towers, Nariman Point, Mumbai REGISTRAR & TRANSFER AGENT Karvy Computershare Private Limited Karvy Plaza; H No , Avenue 4 Street No.1, Banjara Hills, Hyderabad CUSTODIAN Standard Chartered Bank 23-25, Mahatma Gandhi Road, Fort, Mumbai MIRAE ASSET LIQUID FUND 2

3 TABLE OF CONTENTS Contents Page No Contents Page No 1. Highlights 4 2. Definitions and Abbreviations Definitions Abbreviations 8 3. Risk Factors and Special Considerations Standard Risk Factors Associated 9 With Scheme 3.2 Standard Risk Factors Associated 9 With Securities 3.3 Scheme Specific Risk Factors Special Considerations Due Diligence Certificate Summary Constitution of the Mutual Fund The Mutual Fund The Sponsor The Trustee The Asset Management Company (AMC) The Investments of The Scheme Type of Scheme Investment Objective Investment Strategy Investment Pattern & Asset Allocation Policies & Regulations Applicable 30 to Investments of Scheme 8. Load, Fees & Expenses Applicable To Scheme Load Structure For The Scheme Investment Management Fees & 40 Recurring Expenses of the Scheme 9. Units and the Offer Units on Offer Purchase of Units Redemption of Units Suspension of Purchase & 52 Redemption of Units 9.5 Right to Limit Purchase & Redemptions Unit Holders' Rights & Services Unit Holders' Rights Voting Rights of the Unit Holders Account Statement & Units Certificates NAV Information Disclosure of Information under 54 the Regulations 10.6 Duration of The Scheme Procedure And Manner of Winding Up Services to Unit Holders Tax Treatment of Investments in Mutual Fund To The Fund Securities Transaction Tax To The Unitholders Tax Deduction at Source Other Matters Power to Make Rules Power to Remove Difficulties Penalties and Pending Litigation Scheme to Be Binding on the Unit Holders Register of the Scheme's Unit Holders Website Omnibus Clause Documents Available for Inspection 60 List of Collection Banks 62 MIRAE ASSET LIQUID FUND 3

4 1. HIGHLIGHTS Scheme Investment Objective An open ended Liquid Scheme. The Scheme does not guarantee any returns. The investment objective of the scheme is to seek to generate reasonable returns with low volatility and higher liquidity through a portfolio of debt and money market instruments. The Scheme does not guarantee any returns. Plans & Options The Scheme shall have three Plans - Regular, Institutional and Super Institutional. Each Plan offers investors three investment options : (a) Growth Option, (b) Bonus Option, and (c) Dividend Option. Dividend Option shall have the choice of dividend payout, dividend reinvestment and dividend transfer options. All Plans will have a common portfolio. However, the returns under each Plan are expected to vary having regard to the specified expense ratio under the relevant Plan. Systematic Withdrawal Plan ("SWP") / Systematic Transfer Plan ("STP") will be available in the Scheme under the Regular Plan. Minimum Application Amount (i) Regular Plan - Investors can invest in this plan during the New Fund Offer period and thereafter with a minimum investment of Rs.5,000/- and in multiples of Re. 1/- thereafter. Additional investments in an existing folio can be made for Rs.1000 and in multiples of Re.1/- thereafter. (ii) Institutional Plan - Investors can invest in this plan during the New Fund Offer period and thereafter with a minimum investment of Rs. 1 Crore and in multiples of Re.1/- thereafter. Additional investments in an existing folio can be made for Rs. 1 lakh and in multiples of Re.1/ - thereafter. (iii) Super Institutional Plan - Investors can invest in this plan during the New Fund Offer period and thereafter with a minimum investment of Rs. 10 Crores and in multiples of Re.1/- thereafter. Additional investments in an existing folio can be made for Rs. 10 lakhs and in multiples of Re.1/- thereafter. Minimum Redemption Amount The minimum amount of an application for redemption under the scheme /switch-out of units into any other scheme must be of Rs and in multiples of Re.1 thereafter or 5 units, whichever is lower. If the unit balance after any such redemption is less than or equal to 1 unit and is identified at the time of processing such request, the AMC reserves the right to redeem such fractional units along with the redemption request received. New Fund Offer Price Rs per Unit Load Structure during New Entry Load Fund Offer & Ongoing Offer Load Periods For Each Purchase Type (% of Rs or Applicable NAV as the case may be) Regular Plan NIL Institutional Plan NIL Super Institutional Plan NIL Systematic Transfer Plan / Systematic Withdrawal Plan NIL By Fund of Funds (regardless of amount) NIL By Dividend Reinvestment NIL Exit Load For Each Redemption Type Load (% of Applicable NAV) Regular Plan NIL Institutional Plan NIL Super Institutional Plan NIL For Systematic Transfer Plan / Systematic Withdrawal Plan NIL Switch-In and Switch-Out are considered as Purchase and redemption, the entry and exit loads will be charged accordingly, if levied, from time to time. No Entry/Exit Load is chargeable in case of switches made between different options of scheme. In case any load is levied in future, it will not be applicable in the case of issuance of Bonus units under Bonus option. MIRAE ASSET LIQUID FUND 4

5 Liquidity Facility Transparency Earnings of the Fund Benchmark Index As per SEBI Circular No. SEBI/IMD/CIR No.10/ /07 dated December 31, 2007, no entry load would be charged for all existing / prospective investors of the scheme in case of direct applications received by the AMC i.e. applications received through the internet (as and when this facility is made available) or submitted to the AMC collection centre / Investor Service centre directly by the investor and not routed through any distributor / agent / broker. These provisions shall be applicable for investments in all the existing schemes, if any, with effect from January 4, These shall also be applicable to additional purchases done directly by the investor under the same folio and switch-in to a scheme from other schemes if such a transaction is done directly by the investor. However, investors should note the following instructions for ensuring that the application is treated as a direct application: 1. Broker code, if already printed on the forms must be struck off and countersigned by the investors. 2. Ensure that the broker code block in the form is not left blank (i.e. it should be either struck off or indicated 'direct' or NA) 3. The list of official collection points for depositing forms is available on the website of the AMC The Scheme being offered through this Offer Document is an open ended Scheme. The Scheme will offer units for sale and repurchase at NAV based prices on all business days on an ongoing basis, commencing not later than 30 days from the closure of New Fund Offer period. The Fund will endeavour to dispatch the redemption cheque / draft within 10 business days from the date of acceptance of valid redemption request. NAVs will be disclosed at the close of every business day. A complete statement of the portfolio of the Scheme will either be sent to all Unit holders, or published by way of an advertisement, before the expiry of one month from the close of each half year, that is the 31st of March and the 30th of September, in one English daily newspaper circulating in the whole of India and in a newspaper published in the language of the region where the head office of the Trustee is situated. The same will also be posted on the website of the Fund. Earnings of the fund are totally exempt from income tax under Section 10(23D) of the I.T Act. CRISIL Liquid Fund Index MIRAE ASSET LIQUID FUND 5

6 2.1 Definitions 2. DEFINITIONS AND ABBREVIATIONS The following definitions/terms apply throughout this Offer Document unless the context requires otherwise: Applicable NAV For applications for Purchases / Redemptions, accepted during the Ongoing Offer Period at the Designated Investors' Service Centers of the Fund on a Business Day up to the Cut-off time of the Scheme, the NAV of that day; and For applications for Purchases / Redemptions accepted during the Ongoing Offer Period at the Investors' Service Centers of the Fund on a Business Day after the Cut-off time of the Scheme, the NAV of the next Business Day.. Application Form/Key A form meant to be used by an investor to open a folio and Purchase Units in the Scheme. Any modifications to the Application Form will be made by way of an addendum, which will be attached thereto. On issuance of such addendum, the Application Form will be deemed to be updated by the addendum. Asset Management Mirae Asset Global Investment Management (India) Private Limited, the asset management company, set up under the Companies Act, 1956, having its registered office at Unit No. 606, 6th Floor, Windsor, Off CST Road, Kalina, Santacruz (E), Mumbai authorized by SEBI to act as an Asset Management Company / Investment Manager to the schemes of Mirae Asset Mutual Fund. Board Board of Directors of Mirae Asset Global Investment Management (India) Private Limited. Business Day A day not being: (a) A Saturday or Sunday; (b) A day on which the Stock Exchanges, the BSE and the NSE are closed; (c) A day on which Purchase and Redemption of Units is suspended or a book closure period is announced by the Trustee / AMC; or (d) A day on which normal business cannot be transacted due to storms, floods, bandhs, strikes or such other events as the AMC may specify from time to time. (e) A day on which the banks and RBI are closed for business/clearing in India. All applications received on these non-business days will be processed on the next business day at Applicable NAV. The AMC reserves the right to change the definition of Business Day. The AMC reserves the right to declare any day as a Business Day or otherwise at any or all Investors' Service Centers. Custodian Standard Chartered Bank, Mumbai branch registered under the SEBI (Custodian of Securities) Regulations, 1996, or any other custodian who is approved by the Trustee. Cut-off time A time prescribed in this Offer Document up to which an investor can submit a Purchase request / Redemption request, to be entitled to the Applicable NAV for that Business Day. Collection Bank(s) The bank(s) with which the AMC has entered into an agreement, from time to time, to enable customers to deposit their applications for units during the NFO period. The names and addresses are mentioned at the end of this Offer Document. Designated Collection (NFO) Investors' Services Centers and branches of Collection Bank(s) designated by the AMC where the applications shall be received. Designated Collection ISCs designated by the AMC where the applications shall be received.the names and Centers during Ongoing Offer addresses are mentioned at the end of this offer document. Entry Load A Load charged to an investor on Purchase of Units based on the amount of investment per application or any other criteria decided by the AMC. Exit Load A Load (other than CDSC) charged to the Unit Holder on exiting (by way of Redemption) based on period of holding, amount of investment, or any other criteria decided by the AMC. Foreign Institutional An entity registered with SEBI under Securities and Exchange Board of India (Foreign Institutional Investors) Regulations, 1995 as amended from time to time. Mirae Asset Investment The Sponsor of Mirae Asset Mutual Fund. Management Company Limited / MAIM Fund of Funds / FOF A mutual fund scheme that invests primarily in other schemes of the same mutual fund or other mutual funds. Fund / Mutual Fund Mirae Asset Mutual Fund, a Trust registered with SEBI under the Regulations, vide Registration No.: MF/055/07/03 dated November 30, Investment Management The agreement dated October 11, 2007 entered into between Mirae Asset Trustee Company Agreement/IMA Private Limited and the AMC, as amended from time to time. MIRAE ASSET LIQUID FUND 6

7 Investor Service Centre / ISC Load Net Asset Value / NAV New Fund Offer / NFO New Fund Offer Period / NFO Period Non-Resident Indian / NRI Offer Document Ongoing Offer Ongoing Offer Period Person of Indian Origin Purchase / Subscription Purchase Price Registrar and Transfer Agent Redemption Redemption Price Regulatory Agencies Scheme SEBI Regulations / Securities Sponsor Systematic Transfer Plan / STP Systematic Withdrawal Plan/SWP Official points of acceptance of transaction / service requests from investors. These will be designated by the AMC from time to time. The names and addresses are mentioned at the end of this Offer Document A charge that may be levied to an investor at the time of Purchase of Units of the Scheme or to a Unit Holder at the time of Redemption of Units from the Scheme. Net Asset Value of the Units of the Scheme (including options there under) calculated in the manner provided in this Offer Document or as may be prescribed by the Regulations from time to time. The NAV will be computed upto four decimal places. The offer for Purchase of Units at the inception of the Scheme, available to the investors during the NFO Period. The period being 27 th February, 2008 to 3 rd March, 2008 subject to extension, if any. A person resident outside India who is a citizen of India or is a person of Indian origin as per the meaning assigned to the term under Foreign Exchange Management (Investment in Firm or Proprietary concern in India) Regulations, This document issued by Mirae Asset Mutual Fund offering Units of MIRAE ASSET LIQUID FUND for subscription. Any modifications to the Offer Document will be made by way of an addendum which will be attached to Offer Document. On issuance of addendum, the Offer Document will be deemed to be updated by the addendum. Offer of Units under the Scheme when it becomes open ended after the closure of the New Fund Offer Period on or before 7 th March, The period during which the Units under the Scheme are offered for subscription/redemption after the closure of New Fund Offer Period. A citizen of any country other than Bangladesh or Pakistan, if (a) he at any time held an Indian passport; or (b) he or either of his parents or any of his grandparents was a citizen of India by virtue of the Constitution of India or the Citizenship Act, 1955 (57 of 1955); or (c) the person is a spouse of an Indian citizen or a person referred to in sub-clause (a) or (b); Subscription to / Purchase of Units by an investor from the Fund. The price (being Applicable NAV plus Entry Load, if Applicable) at which the Units can be purchased and calculated in the manner provided in this Offer Document. Karvy Computershare Pvt. Ltd. appointed as the registrar and transfer agent for the Scheme, or any other registrar that may be appointed by the AMC. Repurchase of Units by the Fund from a Unit Holder. The price (being Applicable NAV minus Exit Load, if Applicable) at which the Units can be redeemed and calculated in the manner provided in this Offer Document. SEBI and any other governmental or regulatory bodies to which the Trustee Company and/or the Mutual Fund and/or the Investment Manager (as the case may be) is subject. MIRAE ASSET LIQUID FUND (including as the context permits, the options there under) Securities and Exchange Board of India (Mutual Funds) Regulations, 1996 as amended from time to time, including by way of circulars or notifications issued by SEBI and the Government of India. As defined under Section 2(h) of the Securities Contracts (Regulations) Act, 1956 of India; and also include shares, stocks, bonds, debentures, warrants, instruments, obligations, money market instruments, debt instruments or any financial or capital market instrument of whatsoever nature made or issued by any statutory authority of body corporate, incorporated or registered by or under any law; or any other securities, assets or such other investments as may be permissible from time to time under the regulations. Mirae Asset Investment Management Company Limited (MAIM), being the Sponsor of Mirae Asset Mutual Fund. A plan enabling Unit Holders to transfer sums on a monthly / quarterly basis from the Scheme to other schemes launched by the Fund from time to time by giving a single instruction. A plan enabling Unit Holders to withdraw amounts from the Scheme on a monthly / quarterly basis by giving a single instruction. MIRAE ASSET LIQUID FUND 7

8 Transaction Slip Trustee / Trustee Company Trust Deed Trust Property Unit Unit Capital of the Scheme Unit Holder Valuation Day Words and Expressions used in this offer document and not defined A form meant to be used by Unit Holders seeking additional Purchase or Redemption of Units in the Scheme, change in bank account details, switch-in or switch-out and such other facilities offered by the AMC and mentioned in the Transaction Slip. Mirae Asset Trustee Company Private Limited, a company set up under the Companies Act, 1956, to act as the Trustee to Mirae Asset Mutual Fund. The Trust Deed dated October 11, 2007 made by and between the Sponsor and the Trustee, establishing Mirae Asset Mutual Fund, as amended from time to time Amounts settled/contributed by the sponsor towards the corpus of Mirae Asset Mutual Fund and all other contributions in cash or in kind, additions and accretions to the Mutual Fund, the Unit Capital, and any other investments for the time being representing the same and income thereof and include properties of any kind whatsoever or any part thereof to which the same may be converted from time to time. The interest of an investor in the scheme consisting of each unit representing one undivided share in the assets of the scheme, and includes any fraction of a unit which shall represent the corresponding fraction of one undivided share in the assets of the Scheme. The aggregate of the face vale of the units issued under the Scheme. Any registered holder for the time being, of a Unit of the Scheme offered under this offer document including persons jointly registered. Business Day Same meaning as in the Trust Deed 2.2 Abbreviations The following abbreviations have been used in this Offer Document : AMC : Asset Management Company AMFI : Association of Mutual Funds in India AOP : Association of Persons BOI : Body of Individuals BSE : Bombay Stock Exchange Limited CDSC : Contingent Deferred Sales Charge ECS : Electronic Clearing System EFT : Electronic Funds Transfer FII : Foreign Institutional Investor FOF : Fund of Funds GOI : Government of India HUF : Hindu Undivided Family IMA : Investment Management Agreement ISC : Investor Service Centre MAIM : Mirae Asset Investment Management Company Limited (The Sponsor of Mirae Asset Mutual Fund) MAGIM : Mirae Asset Global Investment Management (India) Private Limited (the AMC) MAMF : Mirae Asset Mutual Fund MIBOR : Mumbai Inter-Bank Offer Rate MOF/ RBI : Ministry of Finance / Reserve Bank of India NAV : Net Asset Value NFO : New Fund Offer NRI : Non-Resident Indian NSE : National Stock Exchange of India Limited PAN : Permanent Account Number PIO : Persons of Indian Origin POA : Power of Attorney RTGS : Real Time Gross Settlement SEBI : Securities and Exchange Board of India established under the SEBI Act, 1992 SEBI Act : Securities and Exchange Board of India Act, 1992 SEFT : Special Electronic Funds Transfer STP/SWP : Systematic Transfer Plan / Systematic Withdrawal Plan SI : Standing Instructions MIRAE ASSET LIQUID FUND 8

9 3. RISK FACTORS AND SPECIAL CONSIDERATIONS 3.1 Standard Risk Factors Associated With Scheme Mutual funds, like securities investments, are subject to market risks and there is no guarantee against loss in the Scheme or that the objective(s) of the scheme are achieved. As with price of any financial security, the NAV of the Units issued under the Scheme can go up or down depending on various factors and forces affecting capital markets and money markets. Past performance of the Sponsor/AMC/Fund or of that of any Scheme of Fund does not indicate the future performance of the Scheme. Investors in the Scheme are not being offered a guaranteed or assured rate of return. MIRAE ASSET LIQUID FUND is the name of the Scheme, and this does not in any manner indicate the quality of the Scheme and its future performance. The changes in tax laws may affect the return on investment in units. In the event of receipt of very large number of redemption requests or very large value redemption requests or of the restructuring of the scheme's portfolio, there may be delays in the redemption of units Trustees may temporarily suspend the liquidity window at their discretion if trustees is satisfied that liquidity window cannot be offered due to any emergency beyond the control of MAMF, however any such suspension will be notified on the website of MAMF Minimum number of investors and minimum holding by single investor As per SEBI circular dated December 12, 2003 ref SEBI/ IMD/CIR No. 10/22701/03, each scheme and individual plan(s) under the schemes should have a minimum of 20 investors and no single investor should account for more than 25% of the corpus of such scheme/plan(s). In case of non-fulfillment with either of the above two conditions in a three months time period or the end of succeeding calendar quarter, whichever is earlier, from the close of the New Fund Offer (NFO) or on an ongoing basis for each calendar quarter, the schemes /plans shall be wound up by following the guidelines prescribed by SEBI and the investor's money would be redeemed at applicable NAV. The two conditions mentioned above shall also be complied with in each subsequent calendar quarter thereafter on an average basis, as specified by SEBI. SEBI has, vide its Circular No. SEBI/IMD/CIR No.1/42529/05 dated June 14, 2005, further clarified that the aforesaid circular would be applicable at the Portfolio level. For determining the holding by single investor above 25% limit, the average of daily holding by each such investor over the quarter would be considered. If the holding by such investor exceeds 25% limit over the quarter, rebalancing period of one month would be allowed and thereafter 15 days notice shall be given to the investor to redeem his exposure over the 25% limit. In case, if the investor fails to redeem his exposure over 25%, it would lead to automatic redemption by the Mutual Fund on the applicable NAV on the 15th day of the notice period. AMFI has suggested that in order to track the investor's holding rather than the folio/account's holdings, the Fund Houses are recommended to track the investors at the master folio/master account (whatever be the terminology used by the fund houses) level. In addition since there is a possibility of an investor holding multiple Accounts, it is suggested that the account is identified for the purpose of aggregation to comply with 20/25 Rule by using a common parameter like PAN. In case of multiple folios, the sequence or the order of the compulsory redemption is left to the discretion of the fund house in consultation with the investor. Investors should study this Offer Document carefully in its entirety and should not construe the contents hereof as an advice relating to legal, taxation, investment or any other matters. Investors may, if they wish, consult their legal, tax, investment and other professional advisors to determine possible legal, tax, financial or other considerations of subscribing to or redeeming Units, before making a decision to invest/redeem Units. The tax benefits described in this Offer Document are as available under the present taxation laws and are available subject to relevant conditions. The information given is included only for general purpose and is based on advice received by the AMC regarding the law and practice currently in force in India and the Investors should be aware that the relevant fiscal rules or their interpretation may change. As is the case with any investment, there can be no guarantee that the tax position or the proposed tax position prevailing at the time of an investment in the Scheme will endure indefinitely. In view of the individual nature of tax consequences, each Investor is advised to consult his / her own professional tax advisor. Neither this Offer Document nor the Units have been registered in any jurisdiction. The distribution of this Offer Document in certain jurisdictions may be restricted or totally prohibited due to registration requirements and accordingly, persons who come into possession of this Offer Document are required to inform themselves about and to observe any such restrictions and or legal compliance requirements. No person has been authorized to issue any advertisement or to give any information or to make any representations other than that contained in this Offer Document. Circulars in connection with this offering not authorized by the Mutual Fund and any information or representations not contained herein must not be relied upon as having been authorized by the Mutual Fund Standard Risk Factors Associated With Securities Risk Factors associated with Debt and Money Market Instruments Interest Rate Risk / Price Risk From the perspective of coupon rates, debt securities can be classified in two categories, i.e., Fixed coupon bearing securities and Floating coupon bearing securities. In Fixed coupon bearing securities, the coupon rate is determined at the time of investment and paid/received at the predetermined frequency. In the floating coupon bearing securities, on the other hand, the coupon rate changes - 'floats' - with the underlying benchmark rate, e.g., MIBOR, 1 yr. Treasury bill. Fixed income securities (such as Government Securities, bonds, debentures and money market instruments) where a fixed return is offered, run MIRAE ASSET LIQUID FUND 9

10 price-risk. Generally, when interest rates rise, prices of fixed income securities fall and when interest rates drop, the prices increase. The extent of fall or rise in the prices is a function of the existing coupon, the payment-frequency of such coupon, days to maturity and the increase or decrease in the level of interest rates. The prices of Government Securities (existing and new) will be influenced only by movement in interest rates in the financial system and liquidity. Whereas, in the case of corporate or institutional fixed income securities, such as bonds or debentures, prices are influenced not only by the change in interest rates but also by credit rating of the security and liquidity thereof Reinvestment Risk Investments in fixed income securities may carry reinvestment risk as interest rates prevailing in the market may differ from the original coupon of the bond. Consequently the proceeds from regular coupon and principal payments on due date may get invested at a lower rate Credit Risk Credit Risk comprises three components. Default Risk Securities carry a risk of repayment of principal or interest by the borrower. This is called as default risk. The default risk depends on micro economic factors such as financial soundness and ability of the borrower and macro economic factors such as industry performance, competition, trade barriers etc. Downgrade Risk It is the risk that credit rating agency downgrades the rating of an issuer based on earnings and cash flows generating capacity. The credit rating migration of issuance leads to increase in the credit spread and thus reduces the price of corporate bond. Spread Risk Though the sovereign yield curve might remain constant, investments in corporate bonds are exposed to the risk of spread widening between corporate bonds and gilts. Typically, if this spread widens, the prices of the corporate bonds tend to fall and so could the NAV of the Debt Schemes. Similar risk prevails for the investments in the floating rate bonds, where the benchmark might remain unchanged, but the spread over the benchmark might vary. In such an event, if the spread widens, the price and the NAV could fall Risk Factors associated with Securitized Debt Securitized debt papers carry credit risk of the Obligors and are dependent on the servicing of the PTC / Contributions etc. However these are offset suitably by appropriate pool selection as well as credit enhancements specified by Rating Agencies. In cases where the underlying facilities are linked to benchmark rates, the securitized debt papers may be adversely impacted by adverse movements in benchmark rates. However this risk is mitigated to an extent by appropriate credit enhancement specified by rating agencies. Securitized debt papers also carry the risks of prepayment by the obligors. In case of prepayments of securities debt papers, it may result in reduced actual duration as compared to the expected duration of the paper at the time of purchase, which may adversely impact the portfolio yield. These papers also carry risk associated with the collection agent who is responsible for collection of receivables and depositing them. The Investment team evaluates the risks associated with such investments before making an investment decision. The underlying assets in the case of investment in securitized debt could be mortgages or other assets like credit card receivables, automobile / vehicle / personal / commercial / corporate loans and any other receivables / loans / debt. The risks associated with the underlying assets can be described as under : Credit card receivables are unsecured. Automobile / vehicle loan receivables are usually secured by the underlying automobile / vehicle and sometimes by a guarantor. Mortgages are secured by the underlying property. Personal loans are usually unsecured. Corporate loans could be unsecured or secured by a charge on fixed assets / receivables of the company or a letter of comfort from the parent company or a guarantee from a bank / financial institution. As a rule of thumb, underlying assets which are secured by a physical asset / guarantor are perceived to be less risky than those which are unsecured. By virtue of this, the risk and therefore the yield in descending order of magnitude would be credit card receivables, personal loans, vehicle /automobile loans, mortgages and corporate loans assuming the same rating. Liquidity in Securitized Debt may be affected by trading volumes, settlement periods and transfer procedures. These factors may cause potential losses from being not able to sell the securitized debt instruments at its fair value Risk Factors associated with Derivatives The risks associated with the use of derivatives are different from or possibly greater than the risks associated with investing directly in securities and other traditional instruments. Such risks include mispricing or improper valuation and the inability of derivatives to correlate perfectly with underlying assets, rates and indices. Trading in derivatives carries a high degree of risk although they are traded at a relatively small amount of margin which provides the possibility of great profit or loss in comparison with the principal investment amount. Derivative products are highly leveraged instruments that require investment techniques and risk analyses different from those associated with traditional securities such as shares or bonds. Investment in derivatives also requires the maintenance of adequate controls to monitor the transactions entered into, the ability to assess the risk that a derivative adds to the portfolio and the ability to forecast price or interest rate movements correctly. The options buyer's risk is limited to the premium paid, while the risk of an options writer is unlimited. However the gains of an options writer are limited to the premiums earned. MIRAE ASSET LIQUID FUND 10

11 The writer of a call option bears a risk of loss if the value of the underlying asset increases above the exercise price. The loss can be unlimited as underlying asset can increase to any levels. The writer of a put option bears the risk of loss if the value of the underlying asset declines below the exercise price and the loss is limited to strike price. Investments in futures face the same risk as the investments in the underlying securities. The extent of loss is the same as in the underlying securities. However, the risk of loss in trading futures contracts can be substantial, because of the low margin deposits required, the extremely high degree of leverage involved in futures pricing and the potential high volatility of the futures markets. Interest Rate Swaps (IRS) are highly specialized instruments that require investment technique and risk analysis different from those associated with equity shares and other traditional securities. The use of a IRS requires not only an understanding of the referenced asset, reference rate, or index but also of the swap itself, without the benefit of observing the performance of the swap under all possible market conditions. Swap agreements are also subject to liquidity risk, which exists when a particular swap is difficult to purchase or sell. Swap agreements may be subject to pricing risk, which exists when a particular swap becomes extraordinarily expensive (or cheap) relative to historical prices or the prices of corresponding cash market instruments. IRS agreements are also subject to counterparty risk on account of insolvency or bankruptcy or failure of the counterparty to make required payments or otherwise comply with the terms of the agreement. The derivatives are also subject to liquidity risk as the securities in the cash markets. The derivatives market in India is nascent and does not have the volumes that may be seen in other developed markets, which may result in volatility in the values Risk Factors associated with Foreign Securities The risk of investing in foreign securities carries exchange rate risks related to depreciation of foreign currency and the country risks, in addition to the risks of securities in domestic securities. The country risks would include events such as change in regulations or political circumstances like introduction of extraordinary exchange rate controls, restrictions on repatriation of capital due to exchange rate controls, bi-lateral political tensions leading to immobilization of overseas financial assets and the prevalent tax laws of the respective jurisdiction for the execution of trades or otherwise Risk Factors associated with Unlisted Securities Securities which are not quoted on the stock exchanges are inherently illiquid in nature and carry a larger liquidity risk in comparison with securities that are listed on the exchanges or offer other exit options to the investors, including put options. The AMC may choose to invest in unlisted domestic securities that offer attractive yields within the regulatory limit. This may however increase the risk of the portfolio. Additionally, the liquidity and valuation of the Scheme's investments due to its holdings of unlisted securities may be affected if they have to be sold prior to the target date of disinvestment Liquidity Risk associated with Securities This refers to the ease at which a security can be sold at or near its true value. The primary measure of liquidity risk is the spread between the bid price and the offer price quoted by a dealer. Trading volumes, settlement periods and transfer procedures may restrict the liquidity of some of these investments. Different segments of the Indian financial markets have different settlement periods, and such periods may be extended significantly by unforeseen circumstances. The length of time for settlement may affect the Scheme in the event it has to meet an inordinately large number of redemption or of restructuring of the Scheme's investment portfolio Settlement Risk associated with Securities Different segments of the Indian financial markets have different settlement periods and such periods may be extended significantly by unforeseen circumstances. The inability of the Portfolio to make purchases in intended securities due to settlement problems could cause the Portfolio to miss certain investment opportunities Regulatory Risk associated with Securities The value of the securities may be affected by uncertainties such as changes in government policies, changes in taxation, and other developments in the laws and regulations Risk Factors associated with Securities Lending The risks in lending portfolio securities, as with other extensions of credit, consist of the failure of another party, in this case the approved intermediary, to comply with the terms of agreement entered into between the lender of securities i.e. the Scheme and the approved intermediary. Such failure to comply can result in the possible loss of rights in the collateral put up by the borrower of the securities, the inability of the approved intermediary to return the securities deposited by the lender and the possible loss of any corporate benefits accruing to the lender from the securities deposited with the approved intermediary. The Mutual Fund may not be able to sell such lent securities and this can lead to temporary illiquidity. 3.3 Scheme Specific Risk Factors The AMC has no previous experience in managing a mutual fund in India and the Scheme being offered in this Offer Document is the initial Scheme being launched under its management. As per the investment objective and pattern of the scheme mentioned in section "THE INVESTMENTS OF SCHEME", the Scheme is subjected to risk factors associated with Debt and Money Market instruments, Securitized Debt, Derivatives, Foreign Securities and Unlisted Securities as detailed above in the section "STANDARD RISK FACTORS ASSOCIATED WITH SECURITIES". Besides, the scheme is also subjected to Liquidity Risk, Settlement Risk & Regulatory Risk associated with Securities and Risk Factors associated with Securities Lending as detailed in the section above. 3.4 Special Considerations The Sponsor is not responsible or liable for any loss resulting from the operation of the Scheme beyond the initial contribution of an amount of Rs. 1,00,000 (Indian MIRAE ASSET LIQUID FUND 11

12 Rupees One Lakh) collectively made by them towards setting up the Fund or such other accretions and additions to the initial corpus set up by the Sponsor. Neither this Offer Document nor the Units have been registered in any other jurisdiction. The distribution of this Offer Document in certain jurisdictions may be restricted or totally prohibited and accordingly, persons who come into possession of this Offer Document are required to inform themselves about, and to observe, any such restrictions. No person receiving a copy of this Offer Document or any accompanying application form in such jurisdiction may treat this Offer Document or such application form as constituting an invitation to them to subscribe for Units nor should they in any event use any such application form unless, in the relevant jurisdiction such an invitation could lawfully be made to them and such application form could lawfully be used without compliance of any registration or other legal requirements. Prospective investors should review / study this Offer Document carefully and in its entirety and shall not construe the contents hereof or regard the summaries contained herein as an advice relating to legal, taxation, or financial / investment matters and are advised to consult their own professional advisor(s) as to the legal, tax, financial or any other requirements or restrictions relating to the subscription, gifting, acquisition, holding, disposal (by way of sale, switch or redemption or conversion into money) of Units and to the treatment of income (if any), capitalization, capital gains, any distribution, and other tax consequences relevant to their subscription, acquisition, holding, capitalization, disposal (by way of sale, transfer, switch or conversion into money) of Units within their jurisdiction of nationality, residence, incorporation, domicile etc. or under the laws of any jurisdiction to which they or any managed funds to be used to Purchase / Units are subject, and also to determine possible legal, tax, financial or other consequences of subscribing, purchasing or holding Units before making an application for Units. The tax benefits described in this Offer Document are as available under the prevailing taxation laws. Investors / Unit Holders should be aware that the relevant fiscal rules or their interpretation may change. As is the case with any investment, there can be no guarantee that the tax position or the proposed tax position prevailing at the time of an investment in the Scheme will endure indefinitely. In view of the individual nature of tax consequences, each Unit Holder is advised to consult his / her / their own professional tax advisor. Mirae Asset Mutual Fund / the AMC have not authorized any person to give any information or make any representations, either oral or written, not stated in this Offer Document in connection with issue of Units under the Scheme. Prospective investors are advised not to rely upon any information or representations not incorporated in this Offer Document as the same have not been authorized by the Fund or the AMC. Any subscription, Purchase or Sale made by any person on the basis of statements or representations which are not contained in this Offer Document or which are inconsistent with the information contained herein shall be solely at the risk of the investor. From time to time and subject to the Regulations, funds managed by the affiliates / associates of the Sponsor may invest either directly or indirectly in the Scheme. The funds managed by these affiliates / associates may acquire a substantial portion of the Scheme's Units and collectively constitute a major investment in the Scheme. Accordingly, Redemption of Units held by such funds may have an adverse impact on the value of the Units of the Scheme because of the timing of any such Redemption and may affect the ability of other Unit Holders to redeem their respective Units. As the liquidity of the Scheme's investments may sometimes be restricted by trading volumes and settlement periods, the time taken by the Fund for Redemption of Units may be significant in the event of an inordinately large number of Redemption requests or of a restructuring of the Scheme's portfolio. In view of this, the Trustee has the right, in its sole discretion, to limit redemptions under certain circumstances - Please refer to section "Right to Limit Purchase & Redemptions". Special Facilities : The Fund reserves the right to amend or terminate or introduce special facilities in this Offer Document. Such facilities for the time being include Switch Facility, Systematic Withdrawal Plan, Systematic TransferPlan, Dividend Reinvestment Plan and any such facility/plan that may be introduced in the future. Anti Money Laundering and Know Your Customer (KYC) MAMF is committed to complying with all applicable anti money laundering and KYC laws and regulations. MAMF recognizes the value and importance of creating a business environment that strongly discourages money launderers from using MAMF. To that end, certain policies have been adopted by the AMC. The need to KYC is vital for the prevention of money laundering. With effect from January 01, 2008, PAN shall be the sole identification number for all investors (including joint applicants, guardians and NRIs) for transacting in the Scheme, irrespective of the amount of transaction. Accordingly, for investing in the scheme, investors shall be required to submit a photocopy of the PAN card issued to them by the Income Tax Department, provided that the photocopy shall either be verified with the original at the ISCs or be verified/attested by a Notary Public / Gazetted Officer / Manager of a Scheduled Commercial Bank or Multinational Foreign Banks (Name, Designation and Seal should be affixed on the copy). Kindly note un-attested photocopies of an original document or of notarised copies are not acceptable. Any application not accompanied by a copy of the PAN Card, will be liable to be rejected. Also, all investors (including guardians and power of attorney holders) need to complete the process of KYC by submitting a duly filled-up KYC application form along with photograph, photocopy of PAN card and proof of address for individuals or corporate documents for bodies corporate, in accordance with the Prevention of Money Laundering Act, 2002, Rules issued there under and related guidelines/circulars issued by SEBI. Investors shall note that completion of the KYC process is mandatory for any investment, whether by way of first time purchase or subsequent purchase, if the investment is for a value of Rs. 50,000 or more. To facilitate the MIRAE ASSET LIQUID FUND 12

13 KYC process, the mutual fund industry has collectively entrusted the responsibility of collection of documents for KYC, as well as related record keeping, to an independent agency (presently CDSL Ventures Limited) that will act as a central record keeping agency ('Central Agency'). Therefore, investors may submit their applications for KYC, along with the requisite documents, at any 'Point of Service' designated by the Central Agency. For addresses of the Points of Service, kindly log on to the website of AMFI, website of Central Agency, or the Fund, While making an application for KYC, investors shall submit all the requisite documents in original, along with a selfattested photocopy of each of them. The original documents will be returned across the counter, after verification. Investors may also submit notarized copies of these documents. Investors will receive an acknowledgement ('KYC Acknowledgement') which shall be submitted to the Fund along with their application form in the case of a first time purchase, or with their additional purchase request in the case of a subsequent purchase in the Scheme. Investors shall be required to complete the KYC process only once for transactions across a majority of mutual funds, which are registered with the Central Agency for KYC. Accordingly, investors who have already completed the KYC process through the Central Agency shall, when making first time or subsequent purchases in the Scheme(s), be required to submit to the Fund a copy of their KYC Acknowledgement. Submission of the KYC Acknowledgement when investing in the Scheme shall be deemed sufficient compliance of the PAN and KYC requirements, provided that submission of the original PAN card for verification, along with a self-attested photocopy thereof, shall have been done at the time of completing the KYC process. Investors are requested to note that all transactions, as mentioned above, shall be in compliance of the PAN and KYC requirements. Accordingly, transactions which are not in compliance of the PAN and KYC requirements, as mentioned above, are liable to be rejected. Investors/Unit Holders may contact their distributors, if any, or the ISCs for any additional information/clarification. Permanent Account Number (PAN) In accordance with SEBI circulars dated April 27, 2007 and June 25, 2007, with effect from July 02, 2007, PAN issued by the Income Tax authorities will be used as the sole identification number for all investors transacting in the securities market including mutual funds, irrespective of the amount of transaction. Thus, on and from January 01, 2008, it will be mandatory for all investors to provide a certified* copy of the PAN card for all transactions in units of the Scheme. In case of investors who do not provide a certified* copy of the PAN card, the application for transaction in units of the Scheme could be rejected. *Investors are requested to submit a copy along with the original for verification at the investor service centers of the Fund/KARVY, which will be returned across the counter. A Bank Manager's attestation or a Notarized copy will also be accepted. Suspicious Transaction Reporting If after due diligence, the AMC believes that the transaction is suspicious in nature as regards money laundering, the AMC shall report any suspicious transactions to competent authorities under the PMLA and rules / guidelines issued there under by SEBI and RBI, furnish any such information in connection therewith to such authorities and take any other actions as may be required for the purposes of fulfilling its obligations under the PMLA without obtaining the prior approval of the investor / Unit Holder / a person making the payment on behalf of the investor. Investor Protection The Scheme is designed to support long-term investment and active trading is discouraged. Short term or excessive trading into and out of the Scheme may affect its performance by disrupting portfolio management strategies and by increasing expenses. The Fund and the distributors may refuse to accept applications for Purchase, especially where transactions are deemed disruptive, particularly from market timers or investors who, in their opinion, have a pattern of short term or excessive trading or whose trading has been or may be disruptive for the Scheme. If in the opinion of the AMC, a Unit Holder is indulging in short term or excessive trading as above, it shall, under powers delegated by the Trustee, have absolute discretion to reject any application, prevent further transaction by the Unit Holder or redeem the Units held by the Unit Holder at any time prior to the expiry of 30 Business Days from the date of the application. Investors are urged to study the terms of the Offer carefully before investing in the Scheme and to retain this Offer Document for future reference. MIRAE ASSET LIQUID FUND 13