OFFER DOCUMENT
                                      RELIANCE MUTUAL FUND

                                Reliance Gold E...
The Scheme particulars have been prepared in accordance with the Securities and Exchange Board of
India (Mutual Funds) Reg...
The Exchange does not in any manner:-
   i) warrant, certify or endorse the correctness or completeness of any contents of...
I. HIGHLIGHTS, RISK FACTORS AND DUE DILIGENCE ............................................................ 6
II. DEFINITIO...
20. TRANSMISSION ............................................................................................................
I. HIGHLIGHTS, RISK FACTORS AND DUE DILIGENCE

HIGHLIGHTS
1. The Sponsor of the Mutual Fund is Reliance Capital Limited (R...
The fund manager would not make any judgment about the investment merit of a particular security
    nor will it attempt t...
•   Zero concerns about physical security, theft or adulteration when faced with the tasks of custody
    and spot transac...
RISK FACTORS AND SPECIAL CONSIDERATIONS

GENERAL RISK FACTORS

•   Mutual funds and securities investments are subject to ...
d. Geo political issues: any uncertainty on the political front or any war-like situation always
           acts as a boos...
•   Competition Risks: An investment in RGETF may be adversely affected by competition from other
    methods of investing...
• Asset Class Risk : The domestic price of gold may vary from time to time. Further, the returns from
the types of securit...
Gold is subject to indirect tax not restricted to the following : Sales Tax, Octroi, VAT, Stamp Duty, and
Custom Duty.

MI...
DUE DILIGENCE CERTIFICATE

It is confirmed that:

• The Draft Offer Document of Reliance Gold Exchange Traded Fund, forwar...
II. DEFINITIONS AND ABBREVIATIONS

In this Offer Document, the following words and expressions shall have the meaning spec...
Indian Rupees / Rs : The lawful currency of India
Investment Management Agreement (IMA): The Agreement entered into betwee...
Tracking Error: Tracking error means the variance between daily returns of the underlying benchmark
(gold in this case) an...
III. SUMMARY OF THE SCHEME

SCHEME FEATURES:

Scheme: Reliance Gold Exchange Traded Fund

Type: An open-ended Gold Exchang...
Listing: The Fund would endeavor to get the units of the Scheme listed on the National Stock Exchange
and any other stock ...
Miscellaneous and other charges                      0.03
Total                                                2.50
The ab...
IV. CONSTITUTION AND MANAGEMENT OF THE FUND


1. THE FUND
Reliance Mutual Fund
Reliance Mutual Fund has been established a...
RCL has contributed Rupees One Lac as the initial contribution to the corpus for the setting up of the
Mutual Fund. RCL is...
Mr. A. N. Shanbhag*                   Director: MCS Ltd
           96/11, Mohini Mansion, 2nd Floor,     Proprietor: Wonde...
(vi) Prepared a compliance manual and designed internal control mechanisms including
          internal audit systems; and...
(a) A written communication about the proposed change is sent to each unitholder and an
         advertisement is given in...
ii)   The Trustees shall review the desirability or continuance of the Asset Management Company if
      substantial irreg...
ab. The Trust Deed shall not be amended without obtaining the prior approval of SEBI, and the
        unitholders approval...
to financial management etc. are considered in the subsequent Board meeting of AMC and
     Trustees.
3.   Trusteeship Fee...
RCAM has been registered as a portfolio manager vide SEBI Registration No. INP000000423 and
renewed effective 1st August, ...
Mr. Kanu Doshi                            Chairman:
       102, Shivala, Khatau Road,                Matrix Advisors (Indi...
Reliancegold Etf Offer Document
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Reliancegold Etf Offer Document

  1. 1. OFFER DOCUMENT RELIANCE MUTUAL FUND Reliance Gold Exchange Traded Fund An open-ended Gold ETF Sale of units at Rs.100/- per unit during the New Fund Offer Period and thereafter at applicable NAV based prices as set out in this Offer Document New Fund Offer Opens on ___________________, 2007 Closes on ___________________, 2007 SPONSOR Reliance Capital Limited Corporate Office: H Block, 1st Floor, Dhirubhai Ambani Knowledge City, Koparkhairne, Navi Mumbai - 400 710. Tel. 022 – 30327000, Fax. 022 - 30327202 TRUSTEE Reliance Capital Trustee Co. Limited Corporate Office: Express Building (4th & 6th Floor), 14, 'E' Road, Churchgate, Opp. Churchgate Station, Mumbai 400 020. Tel. 022 – 3041 4800, Fax. 022 – 3041 4899 INVESTMENT MANAGER Reliance Capital Asset Management Limited Corporate Office: Express Building (4th & 6th Floor), 14, 'E' Road, Churchgate, Opp. Churchgate Station, Mumbai 400 020. Tel. 022 – 3041 4800, Fax. 022 – 3041 4899 REGISTRAR Karvy Computershare (P) Limited Karvy Plaza, 21, Road No.4, Street No.1, Banjara Hills, Hyderabad – 500 034 Tel: 040- 2331 2454, Fax: 040 –2331 1968 CUSTODIAN: Deutsche Bank Kodak House, Ground Floor, Mumbai – 400 001 AUDITORS TO THE SCHEME Haribhakti & Co. 42, Free Press House, Nariman Point, Mumbai - 400 021 INVESTORS SHOULD NOTE THAT This Offer Document sets forth concisely the information that a prospective investor ought to know before investing. Investors should carefully read the Offer Document before making an investment decision. Investors are advised to consult their legal / tax and other professional advisors in regard to tax/legal implications relating to their investments in the Scheme and before making decision to invest in the Scheme or redeem the Units in the Scheme. This Offer Document remains effective until a ‘material change’ (other than a change in Fundamental Attributes and within the purview of the offer document) occurs. Material changes will be filed with Securities and Exchange Board of India (SEBI) and circulated to the Unitholders or may be publicly notified by advertisements in the newspapers, subject to the applicable Regulations. The Unit holders of the Scheme are not being offered any guaranteed returns. 1
  2. 2. The Scheme particulars have been prepared in accordance with the Securities and Exchange Board of India (Mutual Funds) Regulations, 1996, as amended till date and the Offer Document has been filed with SEBI. The Units being offered for public subscription have neither been approved nor disapproved by SEBI, nor has SEBI certified the accuracy or adequacy of this Offer Document. No person has been authorized to give any information or to make any representations not confirmed in this Offer Document, in connection with the Offer Document or the issue of Units, and any information or representations not contained herein must not be relied upon as having been authorized by the Mutual Fund or the Asset Management Company. Exchange Traded Funds (ETFs) Exchange Traded Funds are usually passively managed funds tracking a benchmark index and reflect the performance of that index. They have the flexibility of trading like a share on the stock exchange. Reliance Gold Exchange Traded Fund Reliance Gold Exchange Traded Fund (RGETF) an open ended Gold Exchange Traded Fund will track the performance of Gold Bullion. The units issued under the scheme will represents the value of gold held in the scheme. The units being offered will have a face value of Rs.100/- each and will be issued at a premium equivalent to the difference between the allotment price and the face value of Rs.100/-. RGETF offers investors a new, innovative, relatively cost efficient and secure way to access the gold market. The units are intended to offer investors a means of participating in the gold bullion market by buying and selling without the necessity of taking physical delivery of gold. The introduction of units of RGETF is intended to lower many of the barriers, such as purity, access, custody and transaction costs, that have prevented some investors from investing in gold. ETFs are bought/sold as mentioned below: a. Large investors and authorized participants swap creation units for gold in physical form or in the form of cash. b. The secondary markets where the ETFs are traded like units of common securities on the stock exchange(s) during the trading hours. The advantages of RGETF over direct investment in gold : 1. Investors who want a cost effective and convenient way to invest in gold can get instantaneous exposure to a physical asset viz gold. 2. Its units can be traded like a share and therefore it provides the ability to buy and sell them quickly at the ruling market price unlike gold that can be sold only for a discount and by a cumbersome process. 3. The expenses incurred in buying and selling units and the schemes ongoing expenses will be less than the costs associated with buying and selling of gold and storing and insuring gold bullion in a traditional gold bullion market. 4. Minimum investment in ETF in secondary markets is one unit representing approximately one gram of gold in the beginning and the weight of gold representing 1 unit keeps reducing to the extent of expenses. 5. Helps investors to diversify across asset classes. 6. Investor’s get an opportunity to access to Gold Bars conforming to LBMA Good Delivery status, in a cost effective manner. Reliance Gold Exchange Traded Fund will be listed on NSE and any other stock exchange(s) as may be decided by the Reliance Capital Asset Management Ltd. after the closure of the New Fund Offer in the form of Gold Exchange Traded Fund tracking the prices of Gold bullion. 2
  3. 3. The Exchange does not in any manner:- i) warrant, certify or endorse the correctness or completeness of any contents of this Offer Document; or ii) warrant that the Units of the Scheme will be listed or will continue to be listed on the Exchange; or iii) take any responsibility for the financial or other soundness of this Mutual Fund, its promoters, its management or any scheme or project of this Mutual Fund; and it should not for any reason be deemed or construed that this offer document has been cleared or approved by the Exchange. Every person who desires to apply for or otherwise acquires any Units of RGETF may do so pursuant to independent inquiry, investigation and analysis and shall not have any claim against the Exchange whatsoever by reason of any loss which may be suffered by such person consequent to or in connection with such subscription / acquisition whether by reason of anything stated or omitted to be stated herein or for any other reason whatsoever. This Offer Document is dated ___________ and was approved by the Board of AMC and the Trustees on February 15, 2007. The Trustees have ensured that Reliance Gold Exchange Traded Fund approved by them is a new product offered by Reliance Mutual Fund and is not a minor modification of the existing scheme/fund/product PLEASE RETAIN THIS OFFER DOCUMENT FOR FUTURE REFERENCE. 3
  4. 4. I. HIGHLIGHTS, RISK FACTORS AND DUE DILIGENCE ............................................................ 6 II. DEFINITIONS AND ABBREVIATIONS .................................................................................... 15 III. SUMMARY OF THE SCHEME ................................................................................................ 18 IV. CONSTITUTION AND MANAGEMENT OF THE FUND......................................................... 21 1. THE FUND ................................................................................................................................ 21 2. SPONSOR COMPANY ............................................................................................................. 21 3. THE TRUSTEE.......................................................................................................................... 22 4. ASSET MANAGEMENT COMPANY (AMC) ............................................................................. 28 5. AUDITORS ................................................................................................................................ 39 6. THE CUSTODIAN ..................................................................................................................... 39 7. THE REGISTRAR ..................................................................................................................... 41 8. BANKERS TO THE ISSUE ....................................................................................................... 41 V. INVESTMENT FOCUS, OBJECTIVES, POLICIES & LIMITATIONS OF THE SCHEME ....... 44 1. INVESTMENT OBJECTIVE ...................................................................................................... 42 2 ASSET ALLOCATION PATTERN .............................................................................................. 42 3. BENCHMARK INDEX................................................................................................................ 42 4. INVESTMENT STRATEGY ....................................................................................................... 42 5. INVESTMENT PROCESS......................................................................................................... 43 6. CASE FOR INVESTING IN GOLD ........................................................................................... 43 7. TRACKING ERROR ................................................................................................................. 44 8. FUNDAMENTAL ATTRIBUTES ................................................................................................ 44 9. INVESTMENT PHILOSOPHY AND FOCUS............................................................................ 45 10. DEBT MARKET IN INDIA........................................................................................................ 46 11. PORTFOLIO TURNOVER ...................................................................................................... 47 12. INVESTMENT LIMITATIONS/RESTRICTIONS...................................................................... 47 13.UNDERWRITING BY THE SCHEME....................................................................................... 49 14. BORROWING BY THE MUTUAL FUND................................................................................. 49 15.COMPUTATION OF NET ASSET VALUE ............................................................................... 49 16. VALUATION OF ASSETS ....................................................................................................... 50 14. ACCOUNTING POLICIES & STANDARDS ............................................................................ 52 15. INVESTMENT BY THE AMC IN THE FUND .......................................................................... 55 16. DEPOSITORY ......................................................................................................................... 55 17. POLICY FOR INTER-SCHEME TRANSFERS ....................................................................... 55 VI. UNITS AND OFFER ................................................................................................................ 56 1. (A) NEW FUND OFFER (NFO) ................................................................................................. 56 (B) CONTINUOUS OFFER ........................................................................................................... 56 2. MINIMUM TARGET................................................................................................................... 56 3. MINIMUM NUMBER OF INVESTORS IN SCHEME/PLAN ...................................................... 56 4. PURCHASE OF UNITS............................................................................................................. 57 5. ALLOTMENT PRICE / PURCHASE PRICE.............................................................................. 57 6. ROUNDING OFF OF UNITS ..................................................................................................... 57 7. EXPENSES OF NEW FUND OFFER ....................................................................................... 57 8. CONSIDERATION FOR RGETF UNITS DURING THE NEW FUND OFFER PERIOD........... 57 9. PURITY OF GOLD .................................................................................................................... 58 10. CREATION UNIT..................................................................................................................... 58 11. DEMATERIALISATION ........................................................................................................... 59 12. LISTING................................................................................................................................... 59 13. WHO CAN INVEST ................................................................................................................. 59 14. JOINT APPLICANTS............................................................................................................... 60 15. ALLOTMENT STATEMENT .................................................................................................... 61 16. APPLICABLE NAV FOR PURCHASE / CREATION /REDEMPTION OF UNITS DIRECTLY FROM THE FUND ................................................................................................. 61 17. HOW TO APPLY FOR RGETF UNITS ................................................................................... 62 18. SETTLEMENT OF PURCHASE/SALE OF RGETF UNITS ON THE STOCK EXCHANGE... 62 19. TRANSFER / PLEDGE/ ASSIGNMENT OF UNITS................................................................ 63 4
  5. 5. 20. TRANSMISSION ..................................................................................................................... 64 21. DIVIDEND PAYOUT OPTION................................................................................................. 64 22. POLICY ON UNCLAIMED REDEMPTION AND DIVIDEND AMOUNTS ............................... 65 23. PROCEDURE FOR CREATING RGETF IN CREATION UNIT SIZE ..................................... 65 24. PREVENTION OF MONEY LAUNDERING ............................................................................ 65 25. MODE OF PAYMENT ............................................................................................................. 66 26. WHERE TO SUBMIT APPLICATION FORMS........................................................................ 67 27. SYSTEMATIC INVESTMENT PLAN (SIP).............................................................................. 68 28. NOMINATION ......................................................................................................................... 68 29. REDEMPTION OF UNITS:..................................................................................................... 68 30. PROCEDURE FOR REDEEMING RGETF IN CREATION UNIT SIZE .................................. 69 31. MINIMUM ACCOUNT BALANCE............................................................................................ 70 32. PAYMENT OF PROCEEDS .................................................................................................... 70 33. RIGHT TO LIMIT REDEMPTION ............................................................................................ 71 35. DURATION OF THE SCHEME ............................................................................................... 72 VII. LOADS AND RECURRING EXPENSES ............................................................................... 73 A. LOAD STRUCTURE OF THE SCHEME .................................................................................. 73 B. APPLICABLE LOAD STRUCTURE .......................................................................................... 73 C. FEES AND EXPENSES OF THE SCHEME............................................................................. 73 VIII. UNITHOLDER'S RIGHTS AND SERVICES.......................................................................... 78 A. UNIT HOLDERS' RIGHTS ........................................................................................................ 78 B. REGISTER OF UNIT HOLDERS .............................................................................................. 79 C. VOTING RIGHTS OF THE UNIT HOLDERS ........................................................................... 79 D. DISPATCH OF ACCOUNT STATEMENT / UNIT CERTIFICATE............................................ 79 E. NAV INFORMATION................................................................................................................. 79 F. DISCLOSURE OF INFORMATION UNDER THE REGULATIONS.......................................... 80 G. SERVICES TO UNIT HOLDERS.............................................................................................. 80 IX. TAX BENEFITS OF INVESTING IN THE MUTUAL FUND .................................................... 84 X. CONDENSED FINANCIAL INFORMATION ........................................................................... 88 XI. OTHER MATTERS ................................................................................................................ 100 XII.PENALTIES & PENDING LITIGATION ................................................................................ 144 5
  6. 6. I. HIGHLIGHTS, RISK FACTORS AND DUE DILIGENCE HIGHLIGHTS 1. The Sponsor of the Mutual Fund is Reliance Capital Limited (RCL) having a net worth of over Rs.4122.46 crores as on March 31, 2006. 2. Reliance Capital Asset Management Ltd. (RCAML) is the Investment Manager for the schemes of Reliance Mutual Fund, managing assets of over Rs. 39,000 crores of over 3 million unit holders’ accounts as on January 31, 2007. 3. Reliance Gold Exchange Traded Fund (“RGETF”) is an open ended Gold ETF of Reliance Mutual Fund and will be listed on NSE and any other stock exchange(s) as may be decided by the Reliance Capital Asset Management Ltd. after the allotment of the New Fund Offer period in the form of an Exchange Traded Fund (“ETF”) tracking the domestic price of gold through investments in physical gold, money market instruments, and other securities as may be permitted by SEBI from time to time. 4. RGETF is designed to provide returns that closely correspond to the returns provided by the domestic price of gold. 5. Each unit of RGETF being offered will have a face value of Rs.100/-. The number of units allotted would be the total amount invested divided by the Allotment Price. Allotment price of RGETF per unit will be based on the cost of investments. In other words, RGETF being offered will have a face value of Rs100/- each and will be issued at a premium equivalent to the difference between the allotment price and the face value of Rs. 100/-. 6. After the NFO, “RGETF” will be listed on NSE and any other stock exchange(s) as may be decided by the Reliance AMC after the closure of the New Fund Offer period, subsequent buying or selling by investors can be made from the secondary market on the NSE. RGETF can be bought/sold like any other stock on the Exchange. The minimum number of units that can be bought or sold is 1 (one) unit. Alternatively Authorised Participant and Large Investors can directly buy /sell in blocks from the fund in ‘Creation Unit’ Size, as defined below. 7. The Authorised Participants and Large Investors can directly buy/sell with the Fund in Creation Units. As RGETF can be bought/sold directly from the Fund, this mechanism provides efficient arbitrage between the traded prices and the NAV, thereby reducing the incidence of RGETF being traded at premium/discounts to NAV. RGETF will be available in dematerialized form. This will help in consolidating with other portfolio holdings and will eliminate need for physical storage thereby eliminating risks. The applicant under the Scheme will be required to have a beneficiary account with a Depository Participant of NSDL/CDSL and will be required to indicate in the application the DP’s name, DP ID Number and its beneficiary account number with DP. Since RGETF are to be issued / repurchased and traded compulsorily in dematerialized form, no request for rematerialisation of RMF will be accepted. 8. Investment Objective: The investment objective is to seek to provide returns that closely correspond to returns provided by price of gold through investment in physical Gold and Gold related securities. However, the performance of the scheme may differ from that of the domestic prices of Gold due to expenses and or other related factors. 9. Investment Strategy: The Fund manager would use a ‘passive’ approach to try and achieve the investment objective of the Scheme. The scheme does not try to ‘‘beat’’ the gold market but aims to replicate the returns which commensurate the returns generated by gold during that period. It will however endeavor to seek temporary defensive positions when markets decline or appear over valued to the extent of its investment in money market or other debt securities. 6
  7. 7. The fund manager would not make any judgment about the investment merit of a particular security nor will it attempt to apply any economic, financial or market analysis. This style of Passive Fund Management would eliminate the risks involved with active management with regard to over / underperformance vis-à-vis a benchmark. 10. Transparency: • The AMC will calculate and disclose the first NAV not later than 30 days from the closure of New Fund Offer Period. Subsequently, the NAV will be calculated and uploaded on the AMFI site by 9.00 pm on every Working Day and also Reliance Mutual Fund’s website i.e. www.reliancemutual.com. The NAV shall be released to at least two daily newspapers to be published on the next day. • Publication of abridged half-yearly un-audited financial results in the newspapers or as may be prescribed under the Regulations from time to time. • Communication of portfolio on a half-yearly basis to the Unit holders directly or through the publications or as may be prescribed under the Regulations from time to time. • Dispatch of the annual reports of the respective Scheme within the stipulated period as required under the Regulations. 11. Liquidity: All investors including Authorised Participants, Large Investors and other investors may sell their units in the stock exchange(s) on which these units are listed on all the trading days of the stock exchange. Alternatively Authorised Participant and Large Investors can directly buy /sell in blocks from the fund in ‘Creation Unit’ Size, as defined below. 12. Switch Facility: Switch-in into RGETF from other schemes will be allowed during the New Fund Offer period at the applicable loads. 13. Repatriation: Full Repatriation benefits would be available to NRIs/FIIs subject to applicable conditions. 14. Benefits of RGETF: The Macro view: • India is a major player in the global gold market, both through ownership and annual flow of purchases of gold, and through enormous success in the labour-intensive export-oriented jewellery business. • Modernisation of the gold market has been a long-standing policy goal in India. A key element of modernising any financial market is shifting away from closed clubs of dealers engaging in private transactions and bilateral negotiation, to a framework with anonymous trading taking place between participants from all across the country, all of whom are on a level playing field. An essential feature of modernisation of finance is the removal of entry barriers, so that it is easy for finance companies to enter and exit any kind of financial activity. The Gold ETF promises to be a step forward for the gold spot market in offering such a trading framework, characterised by nationwide participation by households and without entry barriers faced by finance companies. • The Gold ETF is a gold spot instrument, which is distinct from gold futures. However, there are synergies between both initiatives, since they both strengthen different aspects of the gold market. A strong gold ETF market helps to strengthen the gold futures market, and vice versa. The Micro View From the narrow viewpoint of a household also, the RGETF offers many benefits. Gold is a part of the portfolio of millions of households in the country. For households, the gold ETF offers the following advantages: 7
  8. 8. • Zero concerns about physical security, theft or adulteration when faced with the tasks of custody and spot transactions. • A transparent secondary market, which will offer reduced transactions costs when compared with existing over the counter (“OTC”) transactions on the gold spot market. The existing unregulated spot market suffers from acute problems of wide bid -offer spreads, and penalisation of customers on questions of purity. • Once banks and other moneylenders accept the transparency and liquidity of the Gold ETF, it would become possible to pledge Gold ETF units as collateral for loans. This would greatly assist many low-income households by easing the credit constraints that they face. A household which may possess physical gold today would, in comparison, obtain more limited credit access owing to concerns about the purity and liquidity of the physical gold. In contrast, the Gold ETF units will eliminate concerns about purity, and will offer assured secondary market liquidity. • RGETF is likely to trade in units which correspond to 1 gram of gold. This would make transactions accessible to a large number of households who presently find it difficult to do transactions of 1 gram or 1 tola of gold. 8
  9. 9. RISK FACTORS AND SPECIAL CONSIDERATIONS GENERAL RISK FACTORS • Mutual funds and securities investments are subject to market risks and there is no assurance or guarantee that the objectives of the Scheme 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 the factors and forces affecting the capital market / bullion market. • Past performance of the Sponsor/AMC/Mutual Fund is not indicative of the future performance of the Scheme. • Investors in the scheme are not being offered any guaranteed or assured returns. • The investment decision made by the AMC may not always be profitable. • Reliance Gold Exchange Traded Fund is only the name of the Scheme and does not in any manner indicate either the quality of the Scheme; it's future prospects or returns. • The Sponsor is not responsible or liable for any loss resulting from the operation of the Scheme beyond their initial contribution of Rs.1 lakh towards the setting up of the Mutual Fund and such other accretions and additions to the corpus. • The Mutual Fund is not guaranteeing or assuring any dividend. The Mutual Fund is also not assuring that it will make periodical dividend distributions, though it has every intention of doing so. All dividend distributions are subject to the availabilty of distributable surplus in the Scheme. SCHEME SPECIFIC RISK FACTORS: • Market Risk: Mutual funds and securities investments are subject to market risks and there is no assurance or guarantee that the objectives of the Scheme will be achieved. The NAV of the Scheme will react to the prices of gold, Gold Related Instruments and stock market movements. The Unit holder could lose money over short periods due to fluctuation in the NAV of the Scheme in response to factors such as economic and political developments, changes in interest rates and perceived trends in stock prices market movements, and over longer periods during market downturns. • Additionally, the prices of gold may be affected by several factors such as global gold supply and demand, investors’ expectations with respect to the rate of inflation, currency exchange rates, interest rates, etc. Crises may motivate large-scale sales of gold, which could decrease the domestic price of gold. Some of the key factors affecting gold prices are: a. Central banks’ sale: central banks across the world hold a part of their reserves in gold. The quantum of their sale in the market is one of the major determinants of gold prices. A higher supply than anticipated would lead to subdued gold prices and vice versa. Central banks buy gold to augment their existing reserves and to diversify from other asset classes. This acts as a support factor for gold prices. b. Producer mining interest: Bringing new mines on-line is a time consuming and at times economically prohibitive process that adds years onto potential supply increases from mining production. On the other hand, lower production has a positive effect on gold prices. Conversely excessive production capacities would lead to a downward movement in gold prices as the supply goes up. c. Macro-economic factors: A weakening dollar, high inflation, the massive US trade deficits all act in favor of gold prices. The global trend of rising interest rates also had a positive impact on gold prices. Gold being regarded as a physical asset would lose its luster in a deflationary environment as gold is used effectively as an inflation hedge. 9
  10. 10. d. Geo political issues: any uncertainty on the political front or any war-like situation always acts as a booster to gold prices. The prices start building up war premiums and hence such movements. Stable situations would typically mean stable gold prices. e. Seasonal demand: Since the demand for Gold in India is closely tied to the production of jewellery pices tend to increase during the times of year when the demand for jewelry is the greatest, the demand for metals tends to be strong a few months ahead of these festive seasons, especially Dussera, Diwali, Akshaya Trithya festival and summer wedding season in in India. Christmas, Mothers Day, Valentine’s Day, are also major festive and shopping for Gold. f. Change in duties & levies. • The gold held by the Custodian of RGETF may be subject to loss, damage, theft or restriction of access due to natural event or human actions. The Trustees may not have adequate sources of recovery if its gold is lost, damaged, stolen or destroyed and recovery may be limited, even in the event of fraud, to the market value of gold at the time the fraud is discovered. • The custodian will maintain adequate insurance for its bullion and custody business. The liability of the Custodian is limited under the agreement between the AMC and the Custodian which establish the Mutual Fund’s custody arrangements, or the custody agreements. Market Trading Risks • Absence of Prior Active Market: Although RGETF units described in this Offer Document are to be listed on the Exchange, there can be no assurance that an active secondary market will develop or be maintained. • Lack of Market Liquidity: Trading in RGETF on the Exchange may be halted because of market conditions or for reasons that in the view of the market authorities or SEBI, trading in RGETF is not advisable. In addition, trading in RGETF is subject to trading halts caused by extraordinary market volatility and pursuant to Stock Exchange(s) and SEBI ‘‘circuit filter’’ rules. There can be no assurance that the requirements of the market necessary to maintain the listing of RGETF will continue to be met or will remain unchanged. RGETF may suffer liquidity risk from domestic as well as international market. • Time lag in procurement/redemption of physical gold: - Procurement of gold bars may take upto 1 month in case of adverse shortage of gold bars. It may not be possible to sell gold bar intentionally and may delay redemption depending on the market conditions. • RGETF may trade at prices other than NAV: RGETF may trade above or below its NAV. The NAV of RGETF will fluctuate with changes in the market value of Scheme’s holdings. The trading prices of RGETF will fluctuate in accordance with changes in their NAVs as well as market supply and demand of RGETF. However, given that RGETF can be created and redeemed only in “Creation Units” directly with the fund, it is expected that large discounts or premiums to the NAVs of RGETF may not sustain due to arbitrage possibility available. • Operational Risks: GETF are relatively new product and their value could decrease if unanticipated operational or trading problems arise. • Regulatory Risk: Any changes in trading regulations by the Exchange or SEBI may affect the ability of Authorised Participant and or Large Investors to arbitrage resulting into wider premium/ discount to NAV. Although RGETF are proposed to be listed on Exchange, the AMC and the Trustees will not be liable for delay in listing of Units of the Scheme on Exchange / or due to connectivity problems with the depositories due to the occurrence of any event beyond their control. • Political Risks: Whereas the Indian market was formerly restrictive, a process of deregulation has been taking place over recent years. This process has involved removal of trade barriers and protectionist measures, which could adversely affect the value of investments. It is possible that the future changes in the Indian political situation, including political, social or economic instability, diplomatic developments and changes in laws and regulations could have an effect on the value of investments. Expropriation, confiscatory taxation or other relevant developments could affect the value of investments. 10
  11. 11. • Competition Risks: An investment in RGETF may be adversely affected by competition from other methods of investing in gold. The value of the units relates directly to the value of the gold held by the scheme and fluctuations in the price of gold could adversely affect investment value of the units. The RGETF is designed to mirror as closely as possible the performance of the price of gold bullion and the value of units directly relate to the value of the Gold held by the Scheme less the Scheme’s liabilities (including accrued but unpaid expenses). Gold prices have been quite volatile historically. The price of gold has fluctuated from a low of $530 to a high of $726 between Jan-06 and Feb-07 between based on the London AM Fix Several factors may affect the price of gold, including: Global gold supplies and demand, which is influenced by factors such as forward selling by gold producers, purchases made by gold producers to unwind gold hedge positions, central bank purchases and sales, and productions and cost levels in major gold producing countries such as the South Africa, the United States and Australia. ➤ Investors’ expectations with respect to the rate of inflation; ➤ Currency exchange rates; ➤ Interest rates; ➤ Investment and trading activities of hedge funds and commodity funds; and ➤ Global or regional political, economic or financial events and situations. In addition, investors should be aware that there is no assurance that gold will maintain its long-term value in terms of purchasing power in the future. In the event that the price of gold declines, the value of investment in units is expected to decline proportionately. Changes in indirect taxes like custom duties for import, sales tax, VAT or any other levies will have an impact on the valuation of gold and consequently the NAV of the scheme. Although, the objective of the Fund is to seek to provide returns that closely correspond to returns provided by price of gold through investment in physical Gold and Gold related securities, the performance of the scheme may differ from that of the domestic prices of Gold due to expenses and or other related factors. Credit & Interest Rate Risk The Fund may also invest in Gold Related Instruments, money market instruments, bonds, securitised debts & other debt securities as permitted under the Regulations which are subject to price, credit and interest rate risk. Trading volumes and settlement periods and transfer procedures may restrict liquidity in debt investments. • Right to Limit Redemptions: The Trustee, in the interest of the Unit holders of the Scheme offered in this Offer Document and keeping in view of the unforeseen circumstances / unusual market conditions, may limit the total number of Units, which can be redeemed on any Working Day depending on the total “Underlying Stock of Gold” that can be readily sold in the local market available with the fund. • Redemption Risk – The Unit Holders may note that even though this is an open-ended scheme, the Scheme would ordinarily repurchase Units in Creation Unit size. Thus unit holdings less than the Creation Unit size can normally only be sold through the secondary market, unless no quotes are available on the Exchange for 2 trading days consecutively. Further, the price received upon the redemption of RGETF units may be less than the value of the gold represented by them. The result obtained by subtracting the Fund’s expenses and liabilities on any day from the price of the gold owned by the fund on that day is the net asset value of the fund which, when divided by the number of units outstanding on that date, results in the net asset value per unit, or NAV. 11
  12. 12. • Asset Class Risk : The domestic price of gold may vary from time to time. Further, the returns from the types of securities in which a Scheme invests may under perform returns from the various general securities markets or different asset classes. Different types of securities tend to go through cycles of out-performance and under performance in comparison of the general securities markets. • Passive Investments: As RGETF is not actively managed, the underlying investments may be affected by a general decline in the domestic price of gold and other instruments invested under the plan. RGETF invests in the Gold & securities mentioned in the asset allocation regardless of their investment merit. The AMC does not attempt to take defensive positions in declining markets. Further, the fund manager does not make any judgment about the investment merit nor shall attempt to apply any economic, financial or market analysis. • Tracking Error Risk: Tracking error means the variance between daily returns of the underlying benchmark (gold in this case) and the NAV of the scheme for any given period. NAV of the Scheme is dependant on valuation of gold. Gold has to be valued as per the formula provided by SEBI in its circular no. SEBI/IMD/CIR No. 2/65348/06 dated April 21, 2006. NAV so computed may vary from the price of Gold in the domestic market. Factors such as the fees and expenses of the Scheme, cash balance, changes to the Underlying assets and regulatory policies may affect AMC’s ability to achieve close correlation with the Underlying assets of the scheme. The Scheme’s returns may therefore deviate from those of its Underlying assets. Tracking error could be the result of a variety of factors including but not limited to: Delay in the purchase or sale of gold due to o Illiquidity of gold, o Delay in realisation of sale proceeds, o Creating a lot size to buy the required amount of gold The scheme may buy or sell the gold at different points of time during the trading session at the then prevailing prices which may not correspond to its closing prices. The potential for trades to fail, which may result in the Scheme not having acquired gold at a price necessary to track the benchmark price. The holding of a cash position and accrued income prior to distribution of income and payment of accrued expenses. Disinvestments to meet redemptions, recurring expenses, dividend payouts etc. Execution of large buy / sell orders Transaction cost (including taxes and insurance premium) and recurring expenses Realisation of Unit holders’ funds The scheme will endeavor to minimise the tracking error by Setting off of incremental subscriptions against redemptions, during liquidity window Use of gold related derivative instruments, as and when allowed by regulations Rebalancing of the portfolio Given the structure of RGETF, the AMC expects the tracking error to be lower. The AMC will endeavor to keep the tracking error as low as possible. Under normal circumstances, such tracking errors are not expected to exceed 2% per annum. However this may vary when the markets are very volatile. Tax Issues: Repurchase of “RGETF” by the Fund or sale of RGETF by the investor on the Stock Exchange may attract short or long term capital gain tax depending upon the holding period of the Units. Moreover, converting RGETF units to Gold may also attract Wealth tax. 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 advise received by the AMC regarding the law and practice currently in force in India and the 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 or redemption 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. 12
  13. 13. Gold is subject to indirect tax not restricted to the following : Sales Tax, Octroi, VAT, Stamp Duty, and Custom Duty. MINIMUM NUMBER OF INVESTORS & LIMIT OF HOLDING BY A SINGLE INVESTOR: As per SEBI circular dated December 12, 2003 ref SEBI/IMD/CIR No.10/22701/03 and dated June 14, 2005 ref SEBI/IMD/CIR NO.1/42529/05, 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) at portfolio level within a period of three months or at the end of the succeeding calendar quarter, whichever is earlier from the close of the New Fund Offer (NFO). After the NFO and the 3 months balancing period, in each subsequent quarter thereafter, on an average basis, the scheme shall meet with both the conditions of minimum number of investor and holding as a percentage of the corpus. Determining the breach of 25% limit - The average net assets of the scheme would be calculated daily and any breach of the 25% holding limit by an investor would be determined. At the end of the quarter, the average of daily holding by each such investor is computed to determine whether that investor has breached the 25% limit over the quarter. If there is a breach of limit by any investor over the quarter, a rebalancing period of one month would be allowed and thereafter the investor who is in breach of the rule shall be given 15 days notice to redeem his exposure over the 25 % limit. Failure on the part of the said investor to redeem his exposure over the 25 % limit within the aforesaid 15 days would lead to automatic redemption by the Mutual Fund on the applicable Net Asset Value on the 15th day of the notice period. SPECIAL CONSIDERATIONS The Mutual Fund is not assuring or guaranteeing that it will be able to make regular/periodical distributions to its Unit holders. Periodical distributions will be dependent on the availability of distributable surplus The Trustees have the right in their sole discretion; to limit redemptions under certain circumstances mentioned elsewhere in the Offer Document. Investors should study this Offer Document carefully in its entirety before investing in this Scheme and should not construe the contents hereof as advise relating to legal, taxation, investment or any other matters. Investors are advised to 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 and to retain this Offer Document for future reference. 13
  14. 14. DUE DILIGENCE CERTIFICATE It is confirmed that: • The Draft Offer Document of Reliance Gold Exchange Traded Fund, forwarded to SEBI, is in accordance with the SEBI (Mutual Funds) Regulations, 1996 and the guidelines and directives issued by SEBI from time to time. • All the legal requirements in connection with the launch of the Scheme as also the guidelines, instructions etc., issued by the Government and any other competent authority in this behalf, have been duly complied with. • The disclosures made in the Offer Document are true, fair and adequate to enable the investors to make a well-informed decision regarding investment in the Scheme. • According to the information provided to us, Deutsche Bank, the Custodian, Karvy Computershare Pvt. Ltd., the Registrar and the Collecting Bankers are registered with SEBI and until the date, such registrations are valid. • The contents of the Offer Document including figures, data, yields etc. have been checked and are factually correct. Place: Mumbai Name: Balkrishna Kini Date: March 15, 2007 Designation: Head – Legal & Compliance Note : The Due Diligence Certificate as stated above was submitted to the Securities and Exchange Board of India on March 15, 2007. 14
  15. 15. II. DEFINITIONS AND ABBREVIATIONS In this Offer Document, the following words and expressions shall have the meaning specified below, unless the context otherwise requires: Applicable NAV: Applicable NAV is the Net Asset Value per Unit at the close of the Working Day on which the application for purchase or redemption is received at the designated investor service centre and is considered accepted on that day. An application is considered accepted on that day, subject to it being complete in all respects and received prior to the cut-off time on that Working Day. Asset Management Company/AMC/Investment Manager/RCAM: Reliance Capital Asset Management Limited, the Asset Management Company incorporated under the Companies Act 1956, and authorized by SEBI to act as the Investment Manager to the Schemes of Reliance Mutual Fund (RMF). Allotment Price: Allotment price is the price at which each unit will be allotted and will be equal to the face value of Rs100/- plus premium equivalent to the difference between the face value and price of one gram of gold on the date of allotment. . Application Form: Application form for subscribing to Units of RGETF as specified in this Offer Document. AMFI : Association of Mutual Fund in India. Authorised Participants: Member of the National Stock Exchange or any other recognised stock exchange or any other person who is appointed by the AMC to act as Authorised Participant as decided by the AMC. Collecting Bank: Branches of Banks for the time being authorized to receive application(s) for units, as mentioned in this document. Continuous Offer: Offer of the Units when the Scheme becomes open ended, after closure of the New Fund Offer. Custodian: Deutsche Bank, Mumbai, acting as Custodian to the Scheme, or any other custodian who is appointed by the Trustee. Crore: Ten Million Indian Rupees Creation unit: Creation unit is the number of units of scheme, which is exchanged against a predefined quantity and purity of physical Gold called the Portfolio Deposit and a Cash Component. For redemption of units it is vice-versa i.e. fixed number of units of scheme are exchanged for Portfolio Deposit and Cash Component. The Portfolio Deposit and Cash Component will change from time to time and is discussed separately under the scheme. CDSL: Central Depository Services (India) Ltd. Designated Investor Service Centres (DISC): Any official point of acceptance for transaction as may be designated by the Asset Management Company from time to time, where investors can tender the request for subscription, redemption or switching of units etc. Depository: Depository means a body corporate as defined in the Depositories Act, 1996 (22 of 1996) and includes National Securities Depository Ltd (NSDL) and Central Depository Services Ltd (CDSL). Entry Load: Load on subscriptions / switch in Exit Load: Load on redemptions / switch out. ETF: Exchange Traded Fund. Exchange: The Stock Exchange Limited, Mumbai or The National Stock Exchange of India Limited or any other exchange where the Units are listed. FII: Foreign Institutional Investors, registered with SEBI under the Securities and Exchange Board of India (Foreign Institutional Investors) Regulations, 1995. Gold Related Instruments: Instrument having gold as underlying security, as may be specified by SEBI from time to time; 15
  16. 16. Indian Rupees / Rs : The lawful currency of India Investment Management Agreement (IMA): The Agreement entered into between Reliance Capital Trustee Co. Limited and Reliance Capital Asset Management Limited by which RCAM has been appointed the Investment Manager for managing the funds raised by RMF under the various Schemes, and all amendments thereof. Lakh : One hundred thousand LBMA :London Bullion Market Association Large investor: Large investor means investors who are eligible to invest in the Scheme and who would be creating units of RGETF in creation unit size by depositing predefined quantity and purity of physical gold or cash which should be acceptable by the Custodian for such purposes. Further large investor would also mean those investors who would be redeeming units of RGETF in creation unit size. Load: A charge that may be levied as a percentage of NAV at the time of entry into the scheme or at the time of exiting from the scheme. Local Cheque: A Cheque handled locally and drawn on any bank, which is a member of the banker's clearing house located at the place where the application form is submitted. NAV / Net Asset Value: Net Asset Value of the Units in the Scheme is calculated in the manner provided in this Offer Document or as may be prescribed by Regulations from time to time. The NAV will be computed upto four decimal places. NRI: Non-Resident Indian. New Fund Offer Period : The dates on or the period during which the initial subscription to units of the scheme can be made if any, such offer period not being more than thirty days. NSDL: National Securities Depository Ltd Offer Document: The document issued by Reliance Mutual Fund, offering units of Reliance Gold Exchange Traded Fund for subscription. OTC : Over the counter. Purchase Price: Purchase Price to the investor of Units computed in the manner indicated in this Offer Document. Portfolio Deposit: These are LBMA Good Delivery physical gold bars imported by Banks authorized by RBI to deal in Gold and other securities. The value of gold and other instruments will be linked to the domestic prices of gold. Portfolio Deposit can change from time to time. Regulations/ Mutual Fund Regulations: Securities and Exchange Board of India (Mutual Funds) Regulations as amended from time to time and such other regulations as may be in force from time to time to regulate the activities of Mutual Funds. RBI / Reserve Bank of India: Reserve Bank of India, established under the Reserve Bank of India Act, 1934. RMF /Mutual Fund/the Fund: Reliance Mutual Fund, (formerly known as Reliance Capital Mutual Fund), a Trust under Indian Trust Act, 1882 and registered with SEBI vide registration number MF/022/95/1 dated June 30, 1995. RCTC/Trustee/Trustee Company: Reliance Capital Trustee Co. Limited, a Company incorporated under the Companies Act, 1956, and authorized by SEBI and by the Trust Deed to act as the Trustee of Reliance Mutual Fund. RCL/Sponsor/Settlor: Reliance Capital Limited Redemption / Repurchase Price : Redemption Price to be paid to Authorised Participants and / or Unitholders of Units computed in the manner indicated in this Offer Document. Registrar /Karvy: Karvy Computershare Pvt Ltd., who have been appointed as the Registrar or any other Registrar who is appointed by RCAM. Scheme: Scheme means Reliance Gold Exchange Traded Fund SEBI / Regulator: Securities and Exchange Board of India. Trust Deed: The Trust Deed entered into on April 25, 1995 between the Sponsor and the Trustee, and all amendments thereof. Trust Fund: The corpus of the Trust, unit capital and all property belonging to and/or vested in the Trustee. 16
  17. 17. Tracking Error: Tracking error means the variance between daily returns of the underlying benchmark (gold in this case) and the NAV of the scheme for any given period. Unit: The interest of the investors in the scheme which consists of each Unit representing one undivided share in the assets of the scheme. Unitholder: A person who holds Unit(s) under the scheme. Underlying Stock / Securities: Instruments invested in by the Fund manager, other than gold and Gold Related Instruments, for the scherme, subject to the approval of the Regulator and / or in compliance with the Regulations. Working Day: Any day, other than a Saturday or Sunday or any day on which Banks in Mumbai are Closed for commercial transactions or The Stock Exchange, Mumbai and/or National Stock Exchange are closed for transactions or a day on which banks are open but The Stock Exchange, Mumbai and/or The National Stock Exchange are closed for transactions or a day on which sale of units is suspended by the AMC / Trustee or a day on which normal business could not be transacted due to storms, floods, bandhs, strikes or any other calamities, etc, subject to modifications by RCAM from time to time. Words and Expressions used in this Offer Document and not defined shall have the same meaning as in the Regulations. Words in singular shall include the plural and vice versa. 17
  18. 18. III. SUMMARY OF THE SCHEME SCHEME FEATURES: Scheme: Reliance Gold Exchange Traded Fund Type: An open-ended Gold Exchange Traded Fund that tracks the domestic prices of gold through investments in physical Gold. Investment Pattern: Instruments % Risk Profile Gold or Gold Related Instruments as permitted by 90%- 100% Medium regulators from time to time Money Market instruments, Bonds, Debentures, 0– 10% Low to Government Securities including T-Bills, Securitised Medium Debt* & other debt securities as permitted by regulators from time to time *Upto 10% in securitised debt It may be clearly understood that the percentages above are only indicative and not absolute. For further details on investment allocation please refer to section V of the Offer Document. Investment Objective: The investment objective is to seek to provide returns that closely correspond to returns provided by price of gold through investment in physical Gold and Gold related securities. However the performance of the scheme may differ from that of the domestic prices of Gold due to expenses and or other related factors. Net Asset Value: Calculated & declared every Working day Options: Only Dividend Pay-out Option Minimum Application Amount: Minimum of Rs 5000/- (Rupees Five thousand) and in multiples of Re 1/- thereafter. Portfolio Disclosures: Half-yearly Load Structure: During NFO and Continuous Offer Entry & Exit Load : Maximum load of 7% under the scheme. The redemption price shall not be lower than 93% of NAV and the purchase price shall not be higher than 107% of the NAV and the difference between the redemption price and purchase price shall not exceed 7% of the purchase price. No entry or exit load will be levied on transactions with Authorised Participants and large investors during NFO or continuous offer. 18
  19. 19. Listing: The Fund would endeavor to get the units of the Scheme listed on the National Stock Exchange and any other stock exchange(s) as may be decided by the Reliance AMC within 30 days from the closure of the New Fund Offer period. Liquidity : After the close of the NFO, as RGETF would be listed on the Exchange, subsequent buying or selling by Unit holders can be made from the secondary market. The minimum number of Units that can be bought or sold on the exchange is 1 (one) unit. All investors including Authorised Participants and large investors may sell their units in the stock exchange(s) on which these units are listed on all the trading days of the stock exchange. The trading will be as per the normal settlement cycle. Alternatively, Authorised Participants and Large investors can directly buy / sell Units in blocks from the Fund in ‘Creation Unit’ size, as defined in this Offer Document on all working days. Mutual fund will repurchase units from Authorised Participants and Large investors on any business day provided the units offered for repurchase is not less than 100 units . Switch Facility: Switch-in into RGETF from other schemes will be allowed during the New Fund Offer period at the applicable loads. Redemption Cheques Issued: Mutual Fund shall issue redemption cheque to Authorised Participants and Large investors for redemption in Creation Unit size and to Unit Holders in certain circumstances within 10 Working days. Minimum Redemption: Minimum number of units that can be bought or sold is 1 (one) unit. Reliance AMC will redeem units only in Creation Unit size. Mutual fund will repurchase units from Authorised Participants and Large investors on any business day provided the units offered for repurchase is not less than 100 units. Cut off time : 3:00 p.m. on working days as defined in the Offer Document Nomination Facility: Since the units of the scheme will be issued in electronic form in the Demat account of the investor, the nomination as registered with the Depository Participant will be applicable to the units of the scheme. Mode of Holding (applicable for Individuals): Single, Joint or Anyone or Survivor Benchmark Index: As there are no indices catering to the gold sector/securities linked to Gold, currently GETF shall be benchmarked against the price of Gold. Purity of Gold: All gold bullion held in the scheme’s allocated account with the custodian must be of fineness (or purity) of 995 parts per 1000 (99.5%) or higher. Recurring Expenses: Items % of average daily net assets (estimated) Investment Management and Advisory Fees 0.50 Cost relating to Investors communication 0.25 Custodial Fees 0.50 Registrars Fees & Processing Charges 0.10 including stamp duty, if any Licensing Fees 0.01 Listing Fees 0.01 Marketing & Sales Promotion 1.10 19
  20. 20. Miscellaneous and other charges 0.03 Total 2.50 The above expenses are estimates only and are subject to change inter se as per actual expenses incurred. Subject to SEBI Regulations, the AMC reserve the right to modify the above estimate for recurring expenses on a prospective basis. Allotment of Units: 1. Each unit of RGETF will be approximately equal to the closing price of 1 (one) gram of gold on the date of allotment. 2. Each unit of RGETF being offered will have a face value of Rs.100/-. The number of units allotted would be the total amount invested divided by the Allotment Price. Allotment price of “RGETF” per unit will be based on the cost of investments. In other words The RGETF being offered will have a face value of Rs100/- each and will be issued at a premium equivalent to the difference between the allotment price and the face value of Rs. 100/-. 2. RGETF will be available in the Dematerialized form. 3. The applicant under the Scheme will be required to have a beneficiary account with a Depository Participant of NSDL/CDSL and will be required to indicate in the application the DP’s name, DP ID Number and its beneficiary account number with DP. 4. Authorised Participant and Large investors can directly buy / sell Units in blocks from the Fund in ‘Creation Unit’ size, as defined in this Offer Document on all working days.Since RGETF are to be issued / repurchased and traded compulsorily in dematerialized form, no request for rematerialisation of RMF will be accepted. Allotment of units in respect of applications received during NFO will be made within one month from date of closure of the NFO (subject to realization of cheque/draft and subject to receipt of minimum amount of investment during the New Fund Offer). For Subscriptions received after re-opening for continuous offer at the DISC's within the cut-off timings and considered accepted for that day, the units will be allotted as per the applicable NAV. RCAM, in consultation with the Trustees reserves the right to discontinue/ add more options at a later date subject to complying with the prevailing SEBI guidelines and Regulations. RCAM, in consultation with the Trustees, reserves the right to change the Load structure if it so deems fit in the interest of smooth and efficient functioning of the Scheme, on a prospective basis. Duration of New Fund Offer Opening Date : ____________2007 Closing Date : _____________2007 The Trustees reserve the right to extend the new fund offer (but not more than 30 days). New Fund Offer price: During the NFO, the RGETF units offered will have a face value of Rs.100/- each and will be issued at a premium equivalent to the difference between the allotment price and the face value of Rs.100/- as on the date of allotment. New Fund Offer Expenses: The Scheme shall meet the entire expenses incurred during the new fund offer from the entry load in accordance with SEBI Circular dated April 4, 2006, being an open- ended scheme. Any expenses over & above the entry load amount shall be borne by the AMC. 20
  21. 21. IV. CONSTITUTION AND MANAGEMENT OF THE FUND 1. THE FUND Reliance Mutual Fund Reliance Mutual Fund has been established as a Trust under the Indian Trusts Act, 1882 with Reliance Capital Limited, as the Settlor/Sponsor and Reliance Capital Trustee Co. Limited, as the Trustee. RMF has been registered with the Securities & Exchange Board of India (SEBI) vide registration number MF/022/95/1 dated June 30, 1995. The name of the Mutual Fund has been changed from Reliance Capital Mutual Fund to Reliance Mutual Fund effective March 11, 2004 vide SEBI's letter no. IMD/PSP/4958/2004 date March 11, 2004. Reliance Mutual Fund was formed to launch various schemes under which units are issued to the public with a view to contribute to the capital market and to provide investors the opportunities to make investments in diversified securities. The main objects of the Trust are: - i. To carry on the activity of a Mutual Fund as may be permitted by law and formulate and devise various collective Schemes of savings and investments for people in India and abroad and also ensure liquidity of investments for the Unitholders; ii. To deploy Funds thus raised so as to help the Unitholders earn reasonable returns on their savings; and iii. To take such steps as may be necessary from time to time to realise the effects without any limitation. 2. SPONSOR COMPANY Reliance Capital Limited Reliance Capital Asset Management Limited is a wholly owned subsidiary of Reliance Capital Limited, the sponsor. The entire paid-up capital (100%) of Reliance Capital Asset Management Limited is held by Reliance Capital Limited. Reliance Mutual Fund (RMF) has been sponsored by Reliance Capital Ltd. (RCL). The promoters of RCL are Reliance Industries Limited and AAA Enterprises Private Limited. Reliance Capital Limited is a Non Banking Finance Company engaged in leasing, investment and other fund based activities. The networth of RCL is Rs. 4122.46 crores as on March 31, 2006. Given below is a summary of RCL's financials: (Rs. in crores) Particulars 2005-2006 2004-2005 2003-04 Total Income 652.02 356.79 458.78 Profit Before Tax 550.61 105.79 102.63 Profit After Tax 537.61 105.79 102.63 Reserves & Surplus 3849.58 1271.84 1208.50 Net Worth 4122.46 1399.81 1336.33 Earnings per Share (Rs.) 29.74 8.31 8.06 (Basic + Diluted) (Basic+ Diluted) Book Value per Share (Rs.) 112.95 109.96 104.54 Dividend (%) 30% 29% 29% Paid up Equity Capital 223.40 127.84 127.83 21
  22. 22. RCL has contributed Rupees One Lac as the initial contribution to the corpus for the setting up of the Mutual Fund. RCL is responsible for discharging its functions and responsibilities towards the Fund in accordance with the SEBI Regulations. The Sponsor is not responsible or liable for any loss resulting from the operation of the Scheme beyond the contribution of an amount of Rupees one lakh made by them towards the initial corpus for setting up the Fund and such other accretions and additions to the corpus. 3. THE TRUSTEE Reliance Capital Trustee Co. Limited Registered Office: Corporate Office : EO1, Reliance Greens, Express Building (4th & 6th Floor), 14, 'E' Road, Churchgate, Village Motikhavdi, Opp. Churchgate Station, P.O. Digvijaygram, Mumbai 400 020. District Jamnagar - 361140 Tel. 022 – 3041 4800, (GUJARAT) Fax. 022 – 3041 4899 Reliance Capital Trustee Co. Limited (RCTC), a company incorporated under the Companies Act, 1956, has been appointed as the Trustee to the Fund vide the Trust Deed dated April 25, 1995 executed between the Sponsor and the Trustee. RCTC has been appointed as the Trustee to “Reliance India Power Fund”, a Venture Capital Fund registered with the SEBI vide registration number IN/VCF/05-06/062 dated June 16, 2005 but this activity is yet to commence. An application has also been filed for registration of “Reliance Venture Capital Fund” with SEBI. 1. The Directors Directors of RCTC are: Name and Address Other Directorships Mr. S. P. Talwar Director: Venragiri Power Generation Limited, 162, Kshitij, 16th Floor, Reliance General Insurance Company Limited, 47, Napean Sea Road, Reliance Life Insurance Company Limited, Crompton Mumbai – 400036 Greaves Limited, Videocon Industries Limited, Reliance Asset Reconstruction Company Limited, (Former Deputy Governor Housing Development and Infrastructure Limited, of Reserve Bank of India) Reliance Communications Limited, Reliance Communications Infrastructure Limited Member: Advisory Committee – Ministry of Company Affairs, New Delhi Court of Jawaharlal Nehru University, New Delhi Mr. S. S. Bhandari Director: M/s Vaibhav Gems Limited, Jaipur, P-7, Tilak Marg, ‘C; Scheme, M/s. Asian Hotels Limited, Jaipur – 302005 Senior Partner: M/s S. Bhandari & Co. Chartered Acountants, Jaipur Chartered Accountant 22
  23. 23. Mr. A. N. Shanbhag* Director: MCS Ltd 96/11, Mohini Mansion, 2nd Floor, Proprietor: Wonderland Investments Near D. S. High School, Sion(W), Consultants Mumbai-400 022 Member: UTI – Vigilance Committee Tax & Investment Consultant Mr. Anand Bhatt* Director: e-Serve International Limited, Shree Sadan, East Wing, 3rd Hitech Plast Limited floor, RPG Guardian Private Limited 4A, Carmichael Road, Foodworld Supermarkets Limited (M. L. Dahanukar Marg) Mumbai – 400 026 Senior Partner: Wadia Gandhy & Co. B.Com, L.L.B, Solicitor Mr. P. P. Vora Non-Executive Chairman – Jhagadia Copper Ltd. 503-504, Mount Everest, A wing, Director – National Securities Depository Ltd, Bhakti Park, Near I-Max Adlab Zandu Pharmaceuticals Ltd, Omaxe Limited Theatre Wadala, Mumbai – 400 037 Senior Partner: M/s P.P. Vora & Co., Chartered Accountants Chartered Accountant * Associate Director 2. Duties and Obligations of the Trustees In accordance with SEBI (Mutual Funds) Regulations, 1996 and the Trust Deed constituting the Mutual Fund, the Trustees are required to fulfill several duties and obligations, including the following: a. The Trustee and the Asset Management Company shall with the prior approval of SEBI enter into an Investment Management Agreement (IMA). b. The Investment Management Agreement shall contain such clauses as are mentioned in the Fourth Schedule of the SEBI (MFs) Regulations, 1996 and other such clauses as are necessary for the purpose of making investments. c. The Trustees shall have a right to obtain from the Asset Management Company such information as is considered necessary by the Trustees. d. The Trustee shall ensure before the launch of any scheme that the Asset Management Company possesses/has done the following: (i) Systems in place for its back office, dealing room and accounting; (ii) Appointed all key personnel including fund manager(s) for the Scheme(s) and submitted their bio-data which shall contain the educational qualifications, past experience in the securities market to SEBI, within 15 days of their appointment; (iii) Appointed Auditors to audit its accounts; (iv) Appointed a Compliance Officer to comply with regulatory requirement and to redress investor grievances; (v) Appointed Registrars and laid down parameters for their supervision; 23
  24. 24. (vi) Prepared a compliance manual and designed internal control mechanisms including internal audit systems; and (vii) Specified norms for empanelment of brokers and marketing agents. e. The Trustee shall ensure that the Asset Management Company has been diligent in empanelling the brokers, in monitoring securities transactions with brokers and avoiding undue concentration of business with any broker. f. The Trustee shall ensure that the Asset Management Company has not given any undue or unfair advantage to any associate or dealt with any of the associates of the Asset Management Company in any manner detrimental to interest of unitholders. g. The Trustee shall ensure that the transactions entered into by the Asset Management Company are in accordance with the SEBI (Mutual Funds) Regulations, 1996 and the Scheme. h. The Trustee shall ensure that the Asset Management Company has been managing the Mutual Fund Scheme independent of other activities and have taken adequate steps to ensure that the interest of investors of one Scheme are not compromised with those of any other scheme or of other activities of the Asset Management Company. i. The Trustee shall ensure that all the activities of the Asset Management Company are in accordance with the provisions of SEBI (Mutual Funds) Regulations, 1996. j. Where the Trustees have reason to believe that the conduct of the business of the Mutual Fund is not in accordance with the Regulations and the Scheme, they shall forthwith take such remedial steps as deemed necessary by them and shall immediately inform SEBI of the violation and the action taken by them. k. Each Trustee shall file the details of his transactions in securities (above Rs.1 Lac per transaction) with the Mutual Fund on a quarterly basis. l. The Trustees shall be accountable for and be the Custodian of the funds and property of the respective Schemes and shall hold the same in trust for the benefit of the unitholders in accordance with the SEBI (Mutual Funds) Regulations, 1996 and the provisions of the Trust Deed. m. The Trustees shall take steps to ensure that the transactions of the Mutual Fund are in accordance with the provisions of the Trust Deed. n. The Trustees shall be responsible for the calculation of any income due to be paid to the Mutual Fund and also of any income received in the Mutual Fund for the unitholders of any Scheme in accordance with the SEBI (Mutual Funds) Regulations, 1996 and the Trust Deed. o. The Trustees shall obtain the consent of the unitholders of the Scheme: (i) Whenever required to do so by SEBI in the interest of the unitholders; (ii) Whenever required to do so, on the requisition made by three-fourths of the unitholders of any Scheme under the Mutual Fund; (iii) When the majority of the Trustees decide to wind up the Scheme or prematurely redeem the Units; p. The Trustees shall ensure that no change in the fundamental attributes of any Scheme or the Trust or fees and expenses payable or any other change which would modify the Scheme and affects the interest of unitholders, shall be carried out unless :- 24
  25. 25. (a) A written communication about the proposed change is sent to each unitholder and an advertisement is given in one English daily newspaper having nationwide circulation as well as in a newspaper published in the language of the region where the head office of the Mutual Fund is situated; and (b) The unitholders are given an option to exit at the prevailing net asset value without any exit load. q. The Trustee shall call for the details of transactions in securities by the key personnel of the Asset Management Company in his own name or on behalf of the Asset Management Company and shall report to SEBI, as and when required. r. The Trustee shall quarterly review all transactions carried out between the Mutual Fund, Asset Management Company and its associates. s. The Trustee shall quarterly review the net worth of the Asset Management Company and shall ensure that the same is in accordance with the clause (f) of sub-regulation (1) of regulation 21 of SEBI (Mutual Funds) Regulations, 1996. t. The Trustee shall periodically review all service contracts such as custody arrangements, transfer agency of the securities and satisfy itself that such contracts are executed in the interest of the unitholders. u. The Trustee shall ensure that there is no conflict of interest between the manner of deployment of the net worth by the Asset Management Company and the interest of the unitholders. v. The Trustee shall periodically review the investor complaints received and the redressal of the same by the Asset Management Company. w. The Trustee shall abide by the Code of Conduct as specified in the Fifth Schedule of the SEBI (Mutual Funds) Regulations, 1996. x. The Trustee shall furnish to SEBI on a half-yearly basis the following: (i) A report on the activities of the Mutual Fund; (ii) A certificate stating that the Trustees have satisfied themselves that there have been no instances of self-dealing or front-running by any of the Trustees and by the directors and key personnel of the Asset Management Company; and (iii) A certificate to the effect that the Asset Management Company has been managing the Scheme independently of any other activities and in case any activities of the nature referred to in regulation 24(2) of the SEBI (Mutual Funds) Regulations, 1996 have been undertaken by the Asset Management Company, adequate steps to ensure that the interest of the unitholders are protected, have been taken. y. The independent Trustees referred to in sub-regulation (5) of Regulation 16 shall give their comments on the report received from the Asset Management Company regarding the investments by the Mutual Fund in the securities of group companies of the Sponsor. z. The Trustees shall exercise due diligence as under: General Due Diligence: i) The Trustees shall be discerning in the appointment of the directors on the Board of the Asset Management Company. 25
  26. 26. ii) The Trustees shall review the desirability or continuance of the Asset Management Company if substantial irregularities are observed in any of the Schemes and shall not allow the Asset Management Company to float new Schemes. iii) The Trustee shall ensure that the trust property is properly protected, held and administered by proper persons and by a proper number of such persons. iv) The Trustee shall ensure that all the service providers are holding appropriate registrations from SEBI or concerned regulatory authority. v) The Trustees shall arrange for test checks of service contracts. vi) The Trustees shall immediately report to SEBI of any special developments in the Mutual Fund. Specific Due Diligence: The Trustees shall: i) Obtain internal audit reports at regular intervals from independent auditors appointed by the Trustees. ii) Obtain compliance certificates at regular intervals from the Asset Management Company. iii) Hold meetings of the Trustees once in two calendar months and atleast six such meetings shall be held in every year. iv) Consider the reports of the independent auditor and compliance reports of Asset Management Company at the meetings of Trustees for appropriate action. v) Maintain records of the decisions of the Trustees at their meetings and of the minutes of the meetings. vi) Prescribe and adhere to a code of ethics by the Trustees, Asset Management Company and its personnel. vii) Communicate in writing to the Asset Management Company of the deficiencies and checking on the rectification of deficiencies. aa. The independent directors of the trustees shall pay specific attention to the following, as may be applicable, namely:- i) The Investment Management Agreement and the compensation paid under the agreement. ii) Service contracts with affiliates as to whether the Asset Management Company has charged higher fees than outside contractors for the same services. iii) Selection of the Asset Management Company ‘s independent directors iv) Securities transactions involving affiliates to the extent such transactions are permitted by Regulations. v) Selecting and nominating individuals to fill independent directors vacancies. vi) Code of ethics must be designed to prevent fraudulent, deceptive or manipulative practices by insiders in connection with personal securities transactions. vii) The reasonableness of fees paid to Sponsors, Asset Management Company and others for services provided. viii) Principal underwriting contracts and renewals ix) Any service contract with the associates of the Asset Management Company. 26
  27. 27. ab. The Trust Deed shall not be amended without obtaining the prior approval of SEBI, and the unitholders approval would be obtained where it affects the interest of unitholders. Where SEBI Regulations provide for seeking the approval of the Unit Holders for any purpose, the Trustee may adopt any of the following procedures: (i) Seeking approval by postal ballot or (ii) Approval of the Unit-holders present and voting at a meeting to be specifically convened by the Trustee for the purpose. For this purpose, the Trustees shall give 21 days notice to the Unit Holders and the Trustees may lay down guidelines for the actual conduct and accomplishment of the voting at the meeting and announcement of the results. Under the Trust Deed, duties and obligations also include the following: i) In carrying out its responsibility, the Trustee and its directors shall maintain arms length relationship with other companies, or institutions or financial intermediaries or any body corporate with which they may be associated. ii) The Directors of the Trustee shall not participate in any decision-making process/resolutions of its board meetings for any investment in which they may be interested. iii) All the Trustees shall furnish to the Board of Trustees or Trustee Company particulars of interest which he may have in any other company, or institution or financial intermediary or any corporate by virtue of his position as Director, partner or with which he may be associated in any other capacity. iv) The Trustee shall not acquire or allow the AMC to acquire any asset out of the Trust Fund and/or Unit Capital, which involves the assumption of unlimited liability or results in encumbrance of Trust Fund and/or Unit Capital in any way. v) The Trustee shall not make or guarantee loans or take up any activity in contravention of SEBI Regulations except with the prior approval of SEBI nor shall it allow the AMC to do so. However, as and when there is an addition / modification / deletion in the duties and responsibilities of the Trustee, due to a change in the SEBI Regulations, such addition / modification / deletion shall be applicable here, accordingly. The Trustee shall not be held liable for acts done in good faith if they have exercised adequate due diligence honestly. The Trustees shall meet at least once in two calendar months and at least six such meetings shall be held in every year to review the information / reports submitted by the AMC in accordance with the Regulations. As per Regulations prevailing during the year ended March 31, 2006, eight meetings of the Board of Directors of the Trustee Company were held. The Trustees have also appointed the statutory auditors to verify the books of accounts and to ascertain the true and fair representation of the state of affairs as on a particular day and to ascertain profit/ loss of the Mutual Fund, as at the end of the financial year. The Board of Trustees has constituted an Audit Committee, chaired by an independent Trustee. The Committee meets periodically to discuss the internal control systems, the scope of audit of the internal auditors, as well as the observations made by them. It also reviews the half-yearly and annual financial accounts. Recommendations, if any, of the audit committee on any matter relating 27
  28. 28. to financial management etc. are considered in the subsequent Board meeting of AMC and Trustees. 3. Trusteeship Fees Pursuant to the Trust Deed constituting the Fund, the Fund is authorised to pay the Trustee, a fee for their services, in addition to the reimbursement of all costs, charges and expenses, sum computed at the rate of 0.05% of the amount, being the aggregate of the Trust Fund and Unit Capital of all the Schemes put together on 1st April each year or a sum of Rs.5 Lacs, which ever is lower or such other sum as may be agreed upon between the Settlor and the Trustee from time to time. The Trustee may charge further fees as permitted from time to time under the Trust Deed and the Regulations. 4. ASSET MANAGEMENT COMPANY (AMC) Reliance Capital Asset Management Limited Reliance Capital Asset Management Limited (RCAM), a company registered under the Companies Act, 1956 was appointed to act as the Investment Manager of Reliance Mutual Fund. Reliance Capital Asset Management Limited is a wholly owned subsidiary of Reliance Capital Limited, the sponsor. The entire paid-up capital (100%) of Reliance Capital Asset Management Limited is held by Reliance Capital Limited. Reliance Capital Asset Management Limited was approved as the Asset Management Company for the Mutual Fund by SEBI vide their letter no IIMARP/1264/95 dated June 30, 1995. The Mutual Fund has entered into an Investment Management Agreement (IMA) with RCAM on May 12, 1995 which was amended on August 12, 1997 in line with SEBI (Mutual Funds) Regulations, 1996. Pursuant to the IMA, RCAM is authorised to act as Investment Manager of the Mutual Fund. The networth of the Asset Management Company including Preference shares as on March 31, 2006 was Rs. 61.36crores. The Mutual Fund has launched twenty nine Schemes till date, namely: Reliance Growth Fund (September 1995) Reliance Vision Fund (September 1995) Reliance Income Fund (December 1997) Reliance Liquid Fund (March 1998) Reliance Medium Term Fund (August 2000) Reliance Short Term Fund (December 2002) Reliance Fixed Term Scheme (March 2003) Reliance Banking Fund (May 2003) Reliance Gilt Securities Fund (July 2003) Reliance Diversified Power Sector Fund (March 2004) Reliance Monthly Income Plan (December Reliance Floating Rate Fund (August 2004) 2003) Reliance Pharma Fund ( May 2004) Reliance NRI Equity Fund (October 2004) Reliance Media & Entertainment Fund Reliance Index Fund (February 2005) (September 2004) Reliance NRI Income Fund (October 2004) Reliance Fixed Maturity Fund – Series I (March 2005) Reliance Equity Opportunities Fund (February Reliance Regular Savings Fund (May 2005) 2005) Reliance Fixed Maturity Fund – Series II (April Reliance Tax Saver (ELSS) Fund (July 2005) 2005) Reliance Liquidity Fund (June 2005) Reliance Equity Fund (February 2006) Reliance Fixed Tenor Fund (November 2005) Reliance Fixed Horizon Fund (April 2006) Reliance Fixed Horizon Fund I (August 2006) Reliance Fixed Horizon Fund II ( November 2006) Reliance Long Term Equity Fund (November 2006) 28
  29. 29. RCAM has been registered as a portfolio manager vide SEBI Registration No. INP000000423 and renewed effective 1st August, 2003. RCAM has commenced these activities. It has been ensured that key personnel of the AMC, the systems, back office, bank and securities accounts are segregated activity wise and there exists systems to prohibit access to inside information of various activities. As per SEBI Regulations, it will further ensure that AMC meets the capital adequacy requirements, if any, separately for each such activity. Further, the AMC confirms that, there exists no conflict of interest in the various business activities undertaken by it. RCAM has been appointed as the Investment Manager of “Reliance India Power Fund”, a Venture Capital Fund registered with the SEBI vide registration number IN/VCF/05-06/062 dated June 16, 2005. However, there is no conflict of interest between various business activities carried on by Asset Management Company. 1. Name and Address of the Asset Management Company for the Mutual Fund Reliance Capital Asset Management Limited Registered Office: Corporate Office : EO1, Reliance Greens, Express Building (4th & 6th Floor), 14, 'E' Road, Churchgate, Village Motikhavdi, Opp. Churchgate Station, P.O. Digvijaygram, Mumbai 400 020. District Jamnagar - 361140 Tel. 022 – 3041 4800, (GUJARAT) Fax. 022 – 3041 4899 2. Shareholders of AMC Reliance Capital Asset Management Limited is a wholly owned subsidiary of Reliance Capital Limited, the sponsor. The entire paid-up capital (100%) of Reliance Capital Asset Management Limited is held by Reliance Capital Limited. 3. Directors The Directors of RCAM are: Name and Address Other Directorships Mr. Amitabh Chaturvedi * Director: Reliance Asset Management Raheja Empress, Flat No. 1201/1202, (Singapore) Pte Limited; Reliance Asset 12th Floor, Veer Savarkar Marg, Management (Mauritius) Limited, Opp. Siddhi Vinayak Temple, Reliance Infoinvestments Limited, Prabhadevi, Mumbai - 400 025 Financial Planning Standards Board of India, Reliance General Insurance Company Senior Corporate Executive Limited, Reliance Life Insurance Company Limited, Reliance Money Limited, Association of Mutual Funds in India 29
  30. 30. Mr. Kanu Doshi Chairman: 102, Shivala, Khatau Road, Matrix Advisors (India) Private Limited Cuffe Parade, Mumbai – 400 005 Director: BOB Capital Markets Limited, Peoples Chartered Accountant Financial Services Limited, Alphaplus Investment Management Private Limited Mr. Manu Chadha Director: C – 35, Malcha Marg, TRC Financial Services Limited, Himalayan Chankyapuri, Crest Power Limited, GIC Housing Finance New Delhi – 110 021 Limited, Kotla Hydro Power Limited, Ispat Industries Limited, TRC Corporate Consulting Chartered Accountant (P) Limited, Brady Air Limited, Partner: M/s T. R. Chadha & Co., Chartered Accountants Mr. S. C. Tripathi Director: 27, Sector 15A, IL&FS Infrastructure Development Corporation NOIDA - 201 301(UP) Former Secretary, Govt. of India, Petroleum / Education Ministries * Associate Director 4. Duties and Obligations of the Asset Management Company In accordance with SEBI (Mutual Funds) Regulations, 1996, the Trust Deed and the Investment Management Agreement, the Investment Manager has several duties and obligations, including the following: 1. The Asset Management Company shall take all reasonable steps and exercise due diligence to ensure that the investment of funds pertaining to any scheme is not contrary to the provisions of SEBI (Mutual Funds) Regulations, 1996 and the Trust Deed. 2. The Asset Management Company shall exercise due diligence and care in all its investment decisions as would be exercised by other persons engaged in the same business. 3. The Asset Management Company shall be responsible for the acts of commissions or omissions by its employees or the persons whose services have been procured by the Asset Management Company. 4. The Asset Management Company shall submit to the Trustees quarterly reports on its activities and the compliance with SEBI (Mutual Funds) Regulations, 1996, amended up-to- date. 5. The Trustees, at the request of the Asset Management Company, may terminate the assignment of the Asset Management Company at any time provided that such termination shall become effective only after the Trustees have accepted the termination of assignment and communicated their decision in writing to the Asset Management Company. 6. Notwithstanding anything contained in any contract or agreement or termination, the Asset Management Company or its directors or other officers shall not be absolved of any liability 30

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