goldetf offer document

8/9/2019 GoldETF Offer Document

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OFFER DOCUMENT

QUANTUM MUTUAL FUND

Quantum Gold Fund

QUANTUM GOLD FUND(An Open ended Exchange Traded Fund with no assured returns)

ASSET MANAGEMENT COMPANY : Quantum Asset Management Company Private Limited

Issue of units of Rs.100/- per unit during the New Fund Offer (NFO) Period. The units being offered under this schemewill have a face value of Rs.100/- (Rupees One Hundred Only) each and will be issued at a premium equivalent todifference between allotment price and the face value of Rs.100/- each plus entry load as applicable. During the

continuous offer, units will be issued at NAV based prices.

NEW FUND OFFER OPENS ON : January 24, 2008

NEW FUND OFFER CLOSES ON : February 8, 2008

SCHEME RE-OPENS FOR CONTINUOUS SALE AND REPURCHASE ON LISTING OF UNITS IN NSE

The Trustee/AMC reserves the right to extend the closing date of the New Fund Offer period subject to the conditionthat the subscription to the New Fund Offer shall not be kept open for more than 30 days.

The particulars of Quantum Gold Fund (QGF) have been prepared in accordance with the Securities and ExchangeBoard of India (Mutual Funds) Regulations, 1996 as amended till date and filed with Securities & Exchange Board ofIndia (SEBI) and the units being offered for public subscription have neither been approved nor disapproved by SEBInor has SEBI certified the accuracy or adequacy of the offer document.

This Offer Document sets forth concisely information that a prospective Investor ought to know before making aninformed investment decision in the Scheme described herein. Investors should carefully read the Offer Document, prior

to making an investment decision and retain the Offer Document for future reference.As required, a copy of this Offer Document has been submitted 1to National Stock Exchange of India Limited(hereinafter referred to as NSE). NSE has given vide its letter No. NSE/LIST/58964-V dated October 24, 2007 permissionto the Mutual Fund to use the Exchange's name in this Offer Document as one of the stock exchange on which theMutual Fund's units are proposed to be listed subject to, the Mutual Fund fulfilling the various criteria for listing. TheExchange has scrutinized this offer document for its limited internal purpose of deciding on the matter of granting theaforesaid permission to the Mutual Fund. It is to be distinctly understood that the aforesaid permission given by NSEshould not in any way be deemed or construed that the Offer Document has been cleared or approved by NSE; nordoes it in any manner warrant, certify or endorse the correctness or completeness of any of the contents of this OfferDocument; nor does it warrant that the Mutual Fund's units will be listed or will continue to be listed on the Exchange;nor does it take any responsibility for the financial or other soundness of the Mutual Fund, its promoters, itsmanagement or any scheme or project of the Mutual Fund.

Every person who desires to apply for or otherwise acquire any units of the Mutual Fund may do so pursuant toindependent inquiry, investigation and analysis and shall not have any claim against the Exchange whatsoever byreason 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 any other reason whatsoever.

The Scheme is an open-ended exchange traded Scheme. The Offer Document is dated January 18, 2008. This OfferDocument shall remain effective until a 'material change' (other than a change in fundamental attributes and within thepurview of the Offer Document) occurs. As per the SEBI directive, the Offer Document will be fully revised and reprintedat least once in two years. Till the time the Offer Document is revised and reprinted, an addendum giving details ofeach change will be attached to the Offer Document. Investors are requested to retain the Offer Document for futurereferences. Investors are also requested that before investing, they should also ascertain about any further changes inthe Offer Document after the date of this Offer Document from the Mutual Fund / Investment Manager / Website /Investor Service Centres.

This offer document is dated January 18, 2008.

C M Y K

C M Y


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SPONSOR Quantum Advisors Private LimitedRegistered Office : #103-104, 1st Floor,

Regent Chambers, Nariman Point,Mumbai - 400021

INVESTMENT MANAGER Quantum Asset Management Company Private Ltd.Registered Office : #107-108, 1st Floor,Regent Chambers, Nariman Point,Mumbai - 400021Tel. No. : 022-2287 5923Toll Free no. 1800 22 3863Website : www.QuantumAMC.com

TRUSTEE Quantum Trustee Company Private LimitedRegistered Office : #107-108, 1st Floor,

Regent Chambers, Nariman Point,Mumbai - 400021Tel. No. : 022-2287 5923

REGISTRAR & TRANSFER AGENTS Deutsche Investor Services Private Limited (DISPL)Logitech Park, M.V. Road,Sakinaka,Andheri (East),Mumbai - 400072

CUSTODIAN Deutsche Bank AG6th Floor, Nicholas Piramal Tower,Peninsula Corporate Park,Ganpatrao Kadam Marg,Lower Parel,Mumbai 400 013

BANKER TO THE ISSUE HDFC Bank LtdManeckji Wadia Bldg,Nanik Motwani Marg,Mumbai-400023

STATUTORY AUDITORS M/s Haribhakti & Co., Chartered Accountants42, Free Press House, 4th Floor,215, Nariman Point,Mumbai - 400 021

INTERNAL AUDITORS M/s Kalyaniwala Mistry & Associates,Chartered AccountantsKalpataru Heritage,127, Mahatma Gandhi Road,Mumbai - 400 023


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QUANTUM MUTUAL FUND

Quantum Gold Fund

INDEX

PARTICULARS PAGE NO.

Definitions ...................................................................................................................................................... 5

Risk Factors ................................................................................................................................................... 10

Highlights ....................................................................................................................................................... 16

Due Diligence by the Asset Management Company .................................................................................... 18

SECTION I

Overview of Gold and Background of Gold Exchange Traded Funds .......................................................... 19

Constitution of The Mutual Fund.................................................................................................................... 23

The Mutual Fund ................................................................................................................................. 23

The Sponsors ...................................................................................................................................... 23

The Trustee Company ......................................................................................................................... 24

The Asset Management Company ...................................................................................................... 29

Modifications to the Scheme.......................................................................................................................... 35Auditors of the Scheme.................................................................................................................................. 36

The Registrar and Transfer Agents ............................................................................................................... 36

The Custodian ............................................................................................................................................... 36

SECTION II - SCHEME SUMMARY, INVESTMENT OBJECTIVES AND POLICY

Type of the Scheme ....................................................................................................................................... 38

Post-NFO Creation of Units ........................................................................................................................... 38

Working of Gold ETF - Indicative Flow Chart................................................................................................. 39

Investment Objective ...................................................................................................................................... 40

Principal Investment Strategies ..................................................................................................................... 40

Asset Allocation (Investment Pattern) ............................................................................................................ 41

Change in Investment Pattern ....................................................................................................................... 41

Investment Process ........................................................................................................................................ 41Manner of holding assets of the Scheme ...................................................................................................... 42

Portfolio Turnover .......................................................................................................................................... 42

Listing............................................................................................................................................................. 42

Mode of Investment........................................................................................................................................ 43

Investment restrictions for the Scheme.......................................................................................................... 43

Recording of Investment Decisions ............................................................................................................... 45

Change in Fundamental Attributes ................................................................................................................ 45

Fundamental Attributes.................................................................................................................................. 45

Determination of NAV .................................................................................................................................... 46

Accounting Policies & Standards .................................................................................................................. 51

Benchmark ..................................................................................................................................................... 55

Trading in derivatives .................................................................................................................................... 55

SECTION III - NEW FUND OFFER

New Fund Offer .............................................................................................................................................. 56

New Fund Offer Period .................................................................................................................................. 56

New Fund Offer Price ..................................................................................................................................... 56

Extension/Termination of New Fund Offer Period ......................................................................................... 57

Minimum Amount for Application/Minimum Subscription Amount ................................................................ 57

Investing Directly in the Fund ........................................................................................................................ 58

Minimum number of Investors and maximum holding by single Investor..................................................... 60


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Allotment & Refund ........................................................................................................................................ 60

Dividend & Distribution .................................................................................................................................. 61

Who can invest ?............................................................................................................................................ 62Who cannot invest ? ...................................................................................................................................... 62

How to apply ? ............................................................................................................................................... 63

Mode of payment ........................................................................................................................................... 64

Cheque Bouncing .......................................................................................................................................... 65

Single Folio Facility ........................................................................................................................................ 65

Account statement ......................................................................................................................................... 65

Units with Depository ..................................................................................................................................... 65

Joint Holders .................................................................................................................................................. 65

Nomination facility ......................................................................................................................................... 66

Householdings ............................................................................................................................................... 66

Web Transactions .......................................................................................................................................... 67

Transfer facility ............................................................................................................................................... 67

Listing............................................................................................................................................................. 67Pledge of Units ............................................................................................................................................... 68

Suspension of Sale/Repurchase/Redemption/Switching Options of Units .................................................. 69

Personal Identification Number (PIN) ............................................................................................................ 70

Prevention of Money Laundering, Know-Your-Customer and Investor Protection ...................................... 70

Identification Documents ............................................................................................................................... 71

Freezing/ Seizure of Accounts ....................................................................................................................... 71

SECTION IV - LOAD STRUCTURE AND RECURRING EXPENSES

Load Structure ............................................................................................................................................... 72

Fees & Expenses of the Scheme................................................................................................................... 73

Initial Issue Expenses .................................................................................................................................... 73

Annual Scheme Recurring Expenses ........................................................................................................... 74

Impact of Expenses on NAV of units.............................................................................................................. 75Condensed Financial Information ................................................................................................................. 76

SECTION V - UNITHOLDERS RIGHTS & SERVICES

Investor Service ............................................................................................................................................. 77

Ease of Transaction ....................................................................................................................................... 77

Problem Resolution ....................................................................................................................................... 78

Information about the Scheme....................................................................................................................... 78

NAV Information ............................................................................................................................................. 78

Rights of Unitholders of Scheme ................................................................................................................... 79

Duration of Scheme and winding up ............................................................................................................. 79

Procedure and manner of winding up ........................................................................................................... 80

Tax Benefits/Consequences of Investing in Mutual Funds ........................................................................... 80

SECTION VI - OTHER MATTERS

Unitholders Grievances Redressal Mechanism ............................................................................................ 85

Associate transactions ................................................................................................................................... 85

Penalties & Pending litigations ...................................................................................................................... 86

Power to make rules ...................................................................................................................................... 87

Power to remove difficulties........................................................................................................................... 87

Scheme to be binding on the Unitholders ..................................................................................................... 87

Documents available for inspection .............................................................................................................. 87


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QUANTUM MUTUAL FUND

Quantum Gold Fund

DEFINITIONS

In this Offer Document, the following words and expressions shall have the meaning specified herein, unless the context

otherwise requires:"AMC" or "Asset Management Company" Quantum Asset Management Company Private Limited, incorporatedor "Investment Manager" under the provisions of the Companies Act, 1956 and approved by the

Securities and Exchange Board of India to act as the Asset ManagementCompany for the Scheme(s) of Quantum Mutual Fund.

'Authorised Participant' 'Authorised Participant' means a Member of the National Stock Exchangeor any other recognized stock exchange or any other person who isappointed by the AMC to act as an Authorised Participant on enteringinto a Participant Agreement with the AMC and who would be creating/redeeming units in creation unit size.

Allotment Price Allotment price is the price of half () gram of physical gold in thedomestic market.

"Benchmark " The benchmark for the scheme is the price of physical gold in the domesticmarket. The benchmark may be changed in future if a benchmark bettersuited to the investment objective of the scheme is available.

"Bills" A bill of exchange is a document ordering the payment of money; drawnby one person or bank on another. The bill can be further discounted toreceive in advance a sum which is less than the face value.

"Business Day" A day other than:

( i) Saturday and Sunday; or

(ii) A day on which the banks in Mumbai and/RBI are closed or

(iii) A day on which the Bombay Stock Exchange and/or National StockExchange are closed; or

(iv) A day on which there is no RBI Clearing/settlement of securities

(v) A day, which is a public and/or bank holiday at a Investor ServiceCentre where the application is received; or

(vi) A day on which Sale and/or Repurchase and/or Redemption and/or switches of Units is suspended by the Trustee/AMC; or

(vii) A Book closure period as may be announced by Trustee/AMC

(viii) A day on which normal business cannot be transacted due tostorms, floods, bandhs, strikes, other force majeure events or suchother events as the AMC may specify from time to time.

The AMC reserves the right to declare any day as a Business Day orotherwise at any or all Investor Service Centres. The day(s) on which themoney markets are closed/not accessible, shall not be treated as businessday(s) for the purpose of the Scheme.

"Business Hours" Presently 9.30 a.m. to 5.30 p.m. on any Business Day or such other timeas may be decided by the Asset Management Company from time totime and the same may be different for different ISCs.


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'Creation Unit Size' 'Creation Unit Size' is the number of units of the Scheme, which isexchanged against a predefined quantity and purity of physical Gold(held with the sub-custodian) called the Portfolio Deposit and a CashComponent.

For redemption of units it is vice versa i.e. a certain number of units ofScheme are exchanged for Portfolio Deposit and Cash Component. ThePortfolio Deposit and Cash Component may change from time to timeand is discussed separately under this Offer Document.

"Custodian" A person who has been granted a certificate of registration to carry onthe business of custodian of securities under the Securities and ExchangeBoard of India (Custodian of Securities) Regulations 1996, which for thetime being is Deutsche Bank AG.

"Call Money Market" Call money market refers to the market for short term funds ranging fromovernight funds to a maximum tenor of 14 days

"Call money/Money at Call" Refers to the money invested by the Funds in the overnight Money Market,

subject to necessary regulatory approvals.

"Certificate of Deposits" or "CD's" CD's are short term borrowings by banks. CD's can be issued formaturities between 7 days up to a year from the date of issue

"Col lateralised Borrowing and CBLO's are a discounted money market instrument available in electronicLending Obligat ion" or "CBLO" book entry form for the maturity period ranging from one day to ninety

days. It is a product developed by CCIL (Clearing Corporation Of IndiaLtd).

"Commercial Paper " or "CP's" CP's are a short term instrument to enable non-banking companies toborrow funds for the short term. It is an unsecured money marketinstrument issued in the form of promissory note. CP's can be issued formaturities between 7 days up to a year from the date of issue.

"Corporate Debt Securities" (Bonds and Debentures) - Debt securities issued by the corporates. It

can be further classified into bonds/debentures issued by the public sectorand private sector companies.

"Depository" Depository as defined in the Depository Act, 1996 (22 of 1996)

'Depository Participant' 'Depository Participant' means a person registered as such under sub-section (1A) of section 12 of the Securities and Exchange Board of IndiaAct, 1992.

"Dividend" Income distributed under the Scheme on the Units.

'Domestic Prices of Gold' 'Domestic Prices of Gold' means price calculated using valuationmethodology described in the chapter 'Valuation Policy and Determinationof NAV.'

"Entry Load" or "Sales Load" Load on Sale/Switch in of Units.

"Exit Load" or "Repurchase Load" or Load on Repurchase/Redemption/Switch out of Units."Redemption Load"

'Exchange/Market' 'Exchange/Market' means the National Stock Exchange (NSE) and suchother recognized stock exchange(s) where the units of the Scheme arelisted.

'Exchange Traded Fund/ETF' 'Exchange Traded Fund/ETF' means a fund whose units is listed on anexchange and can be bought/sold at prices which may be close to theNAV of the Scheme.


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QUANTUM MUTUAL FUND

Quantum Gold Fund

"Eligible Investors" or "Large Investors" "Eligible Investors" or "Large investors" means investors who are eligibleto invest in the Scheme and who would be creating units of QuantumGold Fund in creation unit size by depositing predefined quantity andpurity of physical gold which should be acceptable by the Custodian forsuch purposes. Further eligible/large investors would also mean thoseinvestors who would be redeeming units of Quantum Gold Fund increation unit size.

"FII" Foreign Institutional Investor, registered with SEBI under the Securitiesand Exchange Board of India (Foreign Institutional Investors) Regulations,1995, as amended from time to time.

"Floating rate Instruments" Floating rate instruments are debt/money market instruments, with interestrates that are re-set periodically. The periodicity of interest reset could bedaily, monthly, annually, or any other periodicity that may be mutuallyagreed between the issuer and the Fund.

"Government Securities" or "G-secs" Securities created and issued by the Central Government and/or a State

Government (including Treasury Bills) or Government Securities as definedin the Public Debt Act, 1944, as amended or re-enacted from time totime.

"Investment Management Agreement" The Investment Management Agreement dated 7th October, 2005 enteredinto between Quantum Trustee Company Private Limited and QuantumAsset Management Company Private Limited, as amended from time totime.

"Investor Service Centres" or "ISCs" Designated branches of Quantum Asset Management Company PrivateLtd. or Deutsche Investor Services Private Limited (DISPL) and suchother centres/offices as may be designated by the AMC/DISPL from timeto time. All these locations are also the official points of acceptance oftransactions and cut-off time as mentioned in the Offer Document shallbe reckoned at these official points.

"Load" In the case of Repurchase/Redemption/Switch out of a Unit, the sum ofmoney deducted from the Applicable NAV on the Repurchase/Redemption/Switch out and in the case of Sale/Switch in of a Unit, asum of money to be paid by the prospective Investor on the Sale/Switchin of a Unit in addition to the Applicable NAV.

"Liquidity Window" For the purposes of this Scheme, "Liquidity Window" would mean thedays on which the Mutual Fund will issue or repurchase units directlyfrom Investors, as may be decided by the Mutual Fund, at its discretionfrom time to time during the continuous offer. Presently the LiquidityWindow is "on all business days" open only for Authorised Participantsand Eligible Investors.

"MIBOR" or "Mumbai Inter Bank Offer Rate" MIBOR is a polled reference rate for 1 day, 14 days, I month and 3months published by NSE and the Fixed Income Money Market andDerivatives Association of India (FIMMDA) daily.

"Mutual Fund" or "the Fund" Quantum Mutual Fund, a trust set up under the provisions of the IndianTrusts Act, 1882 and registered with SEBI under the Securities andExchange Board of India (Mutual Funds) Regulations, vide RegistrationNo. MF/051/05/02 dated December 2, 2005.


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"Money Market Instruments" Commercial Papers, Commercial Bills, Treasury Bills, GovernmentSecurities having an unexpired maturity upto one year, call or noticemoney, certificate of deposit, usance bills, and any other like instrumentsas specified by the Reserve Bank of India from time to time

"NAV" Net Asset Value per Unit of the Scheme, calculated in the mannerdescribed in this Offer Document or as may be prescribed by the SEBIRegulations from time to time.

'NSE' 'NSE' means the National Stock Exchange of India Ltd., a Stock Exchangerecognized by the Securities and Exchange Board of India.

"New Fund Offer" or NFO Offer for subscription of Units during the New Fund Offer Period.

"New Fund Offer Period" or NFO Period The date on or the period during which the initial subscription of Units ofthe Scheme can be made.

"NRE Account" Non-Resident External Account.

"NRI" A Non-Resident Indian or a person of Indian origin residing outside India.

"NRSR Account" Non-Resident Special Rupee Account.

"OCB" Overseas Corporate Bodies means firms and societies which are helddirectly or indirectly but ultimately to the extent of at least 60% by NRIsand trusts in which at least 60% of the beneficial interest is heldirrevocably by such persons.

"Offer Document" This document issued by Quantum Mutual Fund, inviting offer forsubscription to the Units of the Scheme.

"Official Points of Acceptance" The HDFC Bank branches, BNP Paribas branches and the InvestorService Centres of the AMC, Quantum Information Services Pvt. Ltd. andDeutsche Investor Services Private Limited (DISPL) as stated in the backcover of this Offer Document.

"Quantum Advisors" Quantum Advisors Private Limited, the sponsors."RBI" Reserve Bank of India, established under the Reserve Bank of India Act,

1934.

"Registrar and Transfer Agent" Deutsche Investor Services Private Limited (DISPL) registered under theSEBI (Registrars to an Issue and Share Transfer Agents) Regulations1993, currently acting as the registrar to the Scheme or any other registrarappointed by the AMC from time to time.

"Repurchase/Redemption" Repurchase/Redemption of Units of the Scheme as outlined under theSection "Repurchase/Redemption of Units" in this Offer Document

"Repo/Reverse Repo" Sale/Purchase of Government Securities as may be allowed by RBI fromtime to time with simultaneous agreement to Repurchase/resell them at alater date

"Sale/Subscription" Sale or allotment of Units to the Unitholder upon subscription by theinvestor/applicant under the Scheme.

"Scheme" or "QGF" Means Quantum Gold Fund (QGF) offered under this offer document inthe form of a Exchange Traded Fund to be listed on one or moreExchanges, (including, as the context permits, all the Plan(s) and Option(s)under any Plan under this Scheme).

"SEBI" Securities and Exchange Board of India, established under the Securitiesand Exchange Board of India Act, 1992.


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QUANTUM MUTUAL FUND

Quantum Gold Fund

"SEBI Regulations" or "Regulations" Securities and Exchange Board of India (Mutual Funds) Regulations,1996, as amended from time to time.

"Short term debt instruments" Debt instruments which have residual maturity of less than 1 year.

"Sponsors" or "Settlors" Quantum Advisors Private Limited.

"Stock Exchanges" means the Bombay Stock Exchange or the National Stock Exchange.

"Switch" or "Lateral Shift" Repurchase/Redemption of a Unit in any Scheme (including the Plans/ Options therein) of the Mutual Fund against sale of a Unit in anotherScheme (including the plans/options therein) of the Mutual Fund, subjectto completion of lock-in period, if any, of the Units of the Scheme(s) fromwhere the Units are being switched and applicable load structure.

"Switchover Fee" A charge incurred to switch from one scheme to another within the MutualFund or to switch from one Plan to another within the Scheme.

"Treasury Bills" or "T-Bills" T-Bills are short term debt instruments issued by Central Government.

Currently Treasury Bills are issued with - 91 day, 182 day and 364 daymaturity period.

"Trustee Company" Quantum Trustee Company Private Ltd., incorporated under the provisionsof the Companies Act, 1956.

"Trust Deed" The Trust Deed dated 7th October, 2005 made by and between theSponsor and Quantum Trustee Company Private Limited ("Trustee"), asamended from time to time, establishing an irrevocable trust, calledQuantum Mutual Fund.

"Trust Fund" Amounts settled/contributed by the Sponsors towards the corpus of theQuantum Mutual Fund and additions/accretions thereto.

"Tracking Error" Tracking Error means the extent to which the NAV of the fund moves ina manner inconsistent with the movements of the benchmark (price of

physical gold in the domestic market) on any given day or over anygiven period of time due to any cause or reason whatsoever includingbut not limited to expenditure incurred by the scheme, dividend payoutsif any, whole cash not invested at all times as it may keep a portion offunds in cash to meet redemption etc.

"Unit" The interest of the Unitholder which consists of one undivided share inthe net assets of the Scheme.

"Unitholder" or "Investor" or "Client" A person holding Units in the Scheme offered under this Offer Document.

Words and expressions used in this offer Document and not defined will have same meaning as assigned to them inTrust Deed. Interpretation For all purposes of this Offer Document, except as otherwise expressly provided or unless thecontext otherwise required:

the terms defined in this Offer Document include the singular as well as the plural.

pronouns having a masculine or feminine gender shall be deemed to include the other.


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RISK FACTORS

Standard Risk Factors:

Mutual Funds and securities investments are subject to market risks and there is no assurance or guarantee thatthe Scheme objectives will be achieved.

Quantum Gold Fund (QGF) is the name of the Scheme and does not in any manner indicate either the quality ofthe Scheme or its future prospects and the returns. Investors are therefore urged to study the terms of offer carefullyand consult their Investment Advisor before they invest in the Scheme.

As with any investment in securities, the NAV of the units issued under the Scheme can go up or down dependingon the various factors and forces affecting the gold markets, capital markets and money markets.

Past performance of the Sponsor and its affiliates/AMC/Mutual Fund does not indicate the future performance of theSchemes of the Mutual Fund and may not necessarily provide a basis of comparison with other investments.

Investors should study this Offer Document carefully in its entirety before investing and retain the Offer Document

for future references.Unitholders in the Scheme are not being offered any guaranteed/assured returns.

As per SEBI circular ref. SEBI/IMD/CIR No. 10/22701/03 dated December 12, 2003 read with circular ref. SEBI/IMD/CIRNo. 1/42529/05 dated June 14, 2005, it is specified inter alia that each portfolio under a scheme should have a minimumof 20 investors and no single investor should account for more than 25% of the corpus of such portfolio.

Determining the breach of the 25% limit by an Investor - The average net assets of the Scheme would be calculateddaily and any breach of the 25% holding limit by an investor would be determined. At the end of the quarter, the averageof daily holding by each such investor is computed to determine whether that investor has breached the 25% limit overthe quarter. If there is a breach of limit by any investor over the quarter, a rebalancing period of one month would beallowed and thereafter the investor who is in breach of the rule shall be given 15 days notice to redeem his exposureover the 25% limit. Failure on the part of the said investor to redeem his exposure over the 25% limit within the aforesaid15 days would lead to automatic redemption by the Mutual Fund on the applicable Net Asset Value on the 15th day ofthe notice period.

The Sponsor is not responsible or liable for any loss or shortfall resulting from the operation of the Scheme beyond theinitial contribution of Rs. 1,00,000 (Rupees One Lakh only) made by it towards setting up the Mutual Fund. The associatesof the sponsor are not responsible or liable for any loss or shortfall resulting from the operation of the Scheme.

Scheme Specific Risk Factors:

The Scheme is subject to the principal risks described below. Some or all of these risks may adversely affectScheme's NAV, trading price, yield, total return and/or its ability to meet its objectives.

The Scheme's NAV will react to the Gold price movements. The Investor may lose money over short or long period dueto fluctuation in Scheme's NAV in response to factors such as economic and political developments, changes in interestrates and perceived trends in bullion prices, market movement and over longer periods during market downturns.

The concept of exchange-traded funds is relatively new to Indian capital markets. Trading in QGF units could therefore berestricted due to which market price may or may not reflect the true NAV of the QGF units at any point of time. Although

the units described in this Offer Document are to be listed on the Exchange, there can be no assurance that an activesecondary market will develop or be maintained.

The market price of ETF units, like any other listed security, is largely dependent on two factors, viz., (1) the intrinsicvalue of the unit (or NAV), and (2) demand and supply of units in the market.

Sizeable demand or supply of the units in Exchange may lead to market price of the units to quote at premium ordiscount to NAV. Hence the price of QGF units is less likely to hold significant variance (large premium or discount) fromthe latest declared NAV all the time.


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QUANTUM MUTUAL FUND

Quantum Gold Fund

Trading in QGF units on the Exchange may be halted because of market conditions or for reasons that in view ofExchange Authorities or SEBI, trading in QGF units is not advisable. In addition, trading in QGF units is subject to tradinghalts caused by extraordinary market volatility and pursuant to Exchange and SEBI 'circuit filter' rules. There can be no

assurance that the requirements of Exchange necessary to maintain the listing of QGF units will continue to be met or willremain unchanged.

Any changes in trading regulations by the stock exchange (s) or SEBI may affect the ability of Authorised Participant toarbitrage resulting into wider premium/ discount to NAV. Any changes in the regulations relating to import and export ofgold or gold jewellery (including customs duty, sales tax and any such other statutory levies) may affect the ability of thescheme to buy/sell gold against the purchase and redemption requests received.

The units of the Scheme may trade above or below their NAV. The NAV of the Scheme will fluctuate with changes in themarket value of Scheme's holdings. The trading prices of QGF units will fluctuate in accordance with changes in theirNAV as well as market supply and demand for the units. However, given that QGF units can be created and redeemedin Creation Units Size directly with the Fund, it is expected that large discounts or premiums to the NAV of QGF units willnot sustain due to arbitrage opportunity available.

The units will be issued only in dematerialized form through depositories. The records of the depository are final with

respect to the number of units available to the credit of a unit holder.The formula for determining NAV of the units is based on the imported (landed) value of gold. The landed value of goldis computed by multiplying international market price by US dollar value. The value of gold or NAV, therefore will dependupon the conversion value of US dollar into Indian rupee and attracts all the risks attached to such conversion.

Tracking error may have an impact on the performance of the scheme. However QAMC will endeavour to keep thetracking error as low as possible.

There is no Exchange for physical gold in India. The Fund may have to buy or sell gold from the open market, which maylead to counter party risks for the Fund for trading and settlement.

The Fund has to sell gold only to bullion bankers/traders who are authorized to buy gold. Though, there are adequatenumbers of players (commercial or bullion bankers) to whom the Fund can sell gold, the Fund may have to resort todistress sale of gold if there is no or low demand for gold to meet its cash needs for redemption or expenses.

There is a risk that part or all of the Scheme's gold could be lost, damaged or stolen. Access to the Scheme's gold could

also be restricted by natural events or human actions.

Any of these actions may have adverse impact on the operations of the scheme and consequently on investment in units.

The Trustee, in the general interest of the unit holders of the Scheme offered under this Offer Document and keeping inview the unforeseen circumstances/unusual market conditions, may limit the total number of Units which can be redeemedon any Business Day.

Investors may note that even though this is an open-ended scheme, the Scheme would ordinarily sell and/or repurchaseunits only in creation unit size during the Liquidity Window. Investors holding less than creation unit size can sell theirunits through the secondary market on Exchange. Retail Investors would be allowed to invest only during the NFO periodand the units allotted to Retail Investors during NFO can be sold only through the Secondary Market.

Buying and selling units on stock exchange requires the investor to engage the services of a broker and are subject topayment of margins as required by the stock exchange/broker, payment of brokerage, securities transactions tax andsuch other costs

The returns from physical Gold in which the Scheme invests may under perform returns from the various generalsecurities markets or different asset classes. Different types of securities tend to go through cycles of out-performanceand under-performance in comparison of the general securities markets.

The Scheme is not actively managed. The Scheme may be affected by a general price decline in the Gold prices. TheScheme invests in the physical Gold regardless of their investment merit. The AMC does not attempt to take defensivepositions in declining markets.


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The NAV of the units is determined based on the formula for valuation of gold prescribed by SEBI whereas the actualprice of gold in the domestic market may be different from the value of gold arrived at based on the prescribed formula.This may lead to extreme conditions like NAV being far too different from the domestic market price of gold. In such

extreme conditions, the trustees reserve the right to delay or suspend the sale/redemption of units.

For the valuation of QGF units, indirect taxes like customs duty, VAT, etc would also be considered. Hence, any changein the rates of indirect taxation would affect the valuation of QGF units.

The Fund may have to sell gold to meet recurring expenses. In such an event, irrespective of whether the price of goldgoes up or not, the NAV of the Fund will go down due to such expenses.

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 ofinvestments. It is possible that the future changes in the Indian political situation, including political, social or economicinstability, diplomatic developments and changes in tax laws, changes in SEBI/ Stock Exchange/ RBI regulations andother applicable laws/regulations could have an effect on such investments and valuation thereof. Expropriation, confiscatorytaxation or other relevant developments could affect the value of investments.

Common Risks Associated with Investments in Debt and Money Market Instruments

Given below are some of the common risks associated with investments in fixed income and money market securities.These risks include but are not restricted to:

Liquidity and Settlement Risks

This refers to the ease at which a security can be sold at or near its true value. The primary measure of liquidity risk isthe spread between the bid price and the offer price quoted by a dealer. Liquidity risk is characteristic of the Indian fixedincome market.

The liquidity of the Scheme's investments may be inherently restricted by trading volumes, transfer procedures andsettlement periods. From time to time, the Scheme will invest in certain debt securities of certain companies, industries,sectors, etc. based on its investment objectives and policies as outlined in this Offer Document. Reduced liquidity in thesecondary market may have an adverse impact on market price and the Scheme's ability to dispose of particularsecurities, when necessary, to meet the Scheme's liquidity needs or in response to a specific economic event or duringrestructuring of the Scheme's investment portfolio.

Investment Risks

The value of, and income from, an investment in the Scheme can decrease as well as increase, depending on a varietyof factors which may affect the values and income generated by the Scheme's portfolio of debt securities. The returns ofthe Scheme's investments are based on the current yields of the securities, which may be affected generally by factorsaffecting capital markets such as price and volume, volatility in the stock markets, interest rates, currency exchange rates,foreign investment, changes in Government and Reserve Bank of India policy, taxation, political, economic or otherdevelopments, closure of the Stock Exchanges etc. Different types of securities in which the Scheme would invest asstated in the offer document carry different levels and types of risk. Accordingly the Scheme's risk may increase ordecrease depending upon its investment pattern. e.g. corporate bonds carry a higher amount of risk than Governmentsecurities. Further even amongst corporate bonds, bonds which are AAA rated are comparatively less risky than bondswhich are AA rated. The Scheme will endeavour to invest in highly researched securities offering relative yield for thecommensurate risks. However the erosion in the value of the investments/portfolio in the case of the capital and financialmarkets passing through a bearish phase is a distinct possibility.

Interest Rate Risk

Changes in interest rate may affect the Scheme's net asset value. Generally the prices of instruments increase as interestrates decline and decrease as interest rates rise. Prices of long-term securities fluctuate more in response to suchinterest rate changes than short-term securities. Indian debt and government securities markets can be volatile leading tothe possibility of price movements up or down in fixed income securities and thereby to possible movements in the NAV.


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Quantum Gold Fund

Credit Risk

Credit risk or Default risk refers to the risk that an issuer of a fixed income security may default (i.e. the issuer will be

unable to make timely principal and interest payments on the security). Because of this risk, debentures are sold at ahigher yield above those offered on Government Securities which are sovereign obligations and free of credit risk.Normally, the value of fixed income securities will fluctuate depending upon the changes in the perceived level of creditrisk as well as any actual event of default. The greater the credit risk, the greater the yield required for someone to becompensated for the increased risk.

Re-investment Risk

Investments in fixed income securities may carry re-investment risk as interest rates prevailing on the interest or maturitydue dates may differ from the original coupon of the bond. Consequently, the proceeds may get invested at a lower rate.

This risk refers to the interest rate levels at which cash flows received from the securities in the Scheme or frommaturities in the Scheme are reinvested. The additional income from reinvestment is the "interest on interest" component.The risk refers to the fall in the rate for reinvestment of interim cash flows.


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Special Considerations

Debt securities are subject to the risk of an Issuer's inability to meet principal and interest payments on the obligations

(credit risk). Debt securities may also be subject to price volatility due to such factors as interest sensitivity, marketperception or the creditworthiness of the Issuer and general market liquidity (market rate risk). As mentioned earlier debtsecurities which are AAA rated are comparatively less risky than securities which are AA rated.

Given that the liquidity of the investments made by the Scheme could, at times, be restricted by trading volumes andsettlement periods, the time taken by the Mutual Fund for Repurchase/Redemption of Units may be significant in theevent of an inordinately large number of Repurchase/Redemption requests or a restructuring of the Scheme. In view ofthe above, the Trustee has the right, in its sole discretion, to limit Repurchase/Redemptions (including suspendingRepurchases/Redemptions) under certain circumstances, as described on Page No. 69 under the section titled "Right toLimit Repurchases/Redemptions".

Certain focus areas are already enjoying favourable tax treatment as provided by the Government of India and theScheme may also receive favourable tax treatment in other focus areas. If these tax benefits are removed or amended,it is possible that the changes may have a material adverse impact on the entire revenue and earnings of companiesengaged in business in such focus areas.

The entire Initial issue expenses will be borne by the AMC.

Repurchase/Redemption by the Unitholder due to change in the fundamental attributes of the Scheme or due to anyother reasons may entail tax consequences. The Trustee, AMC, Mutual Fund, their directors or their employees shall notbe liable for any such tax consequences that may arise.

The Trustee, AMC, Mutual Fund, their directors or their employees shall not be liable for any of the tax consequencesthat may arise, in the event that the Scheme is wound up for the reasons and in the manner provided for in Page No. 88.

The tax benefits described in this Offer Document are as available under the present taxation laws and are availablesubject to relevant conditions. The information given is included only for general purpose and is based on the AMC'sinterpretation regarding the law and practice currently in force in India and the Unitholders should be aware that therelevant fiscal rules or their interpretation may change. As is the case with any investment, there can be no guaranteethat the tax position or the proposed tax position prevailing at the time of an investment in the Scheme will endureindefinitely. In view of the individual nature of tax consequences, each Unitholder is advised to consult his/her/their own

professional tax advisor before investing in the units of the scheme.Neither this Offer Document nor the Units have been registered in any jurisdiction.

This offer document is meant for circulation only in India and therefore has not been registered in any other jurisdiction.The distribution of this Offer Document in certain jurisdictions may be restricted or totally prohibited due to registrationrequirements and accordingly, persons who come into possession of this Offer Document are required to inform themselvesabout such regulations/restrictions and to observe any such restrictions and/or compliance requirements.

This Offer Document is not meant for circulation in USA or for use of U.S. Persons, as defined by the Regulations underThe Securities Act 1933, of the United States of America or other person in such country where it is not lawful to makesuch an issue.

No person has been authorised to issue any advertisement or to give any information or to make any representationsother than that contained in this Offer Document. Circulars in connection with this offering not authorised by the MutualFund and any information or representations not contained herein must not be relied upon as having been authorised by

the Mutual Fund.Investors should study this Offer Document carefully in its entirety and should not construe the contents hereof as advicerelating to legal, taxation, investment or any other matters. Investors are advised to consult their legal, tax, investment andother professional advisors to determine possible legal, tax, financial or other considerations of subscribing to orrepurchasing Units, before making a decision to invest/Repurchase Units.

The Benchmark for the Scheme is the price of physical gold in the domestic market. Performance comparisons for theScheme will be made vis--vis the Benchmark. However, the Scheme's performance may not be strictly comparable withthe performance of the Benchmark due to tracking error. Tracking Error means the extent to which the NAV of the fund


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Quantum Gold Fund

moves in a manner inconsistent with the movements of the benchmark (price of physical gold in domestic market) on anygiven day or over any given period of time due to any cause or reason whatsoever including but not limited to expenditureincurred by the scheme, dividend payouts if any, whole cash not invested at all times as it may keep a portion of funds

in cash to meet redemption etc., The Trustee/AMC reserves the right to change the benchmark for evaluation of performanceof the Scheme from time to time in conformity with the investment objectives and appropriateness of the Benchmarksubject to the SEBI Regulations, and other prevailing guidelines, if any. The performance of this Scheme will also becompared with its peers in the industry. The performance will be placed before the Investment Committee as well as theBoard of Directors of the AMC and the Trustee Company in each of their meetings.

The Mutual Fund may disclose details of the Unitholder's account and transactions thereunder to the Bankers, as may benecessary for the purpose of effecting payments to the Investor and to the Central Government/State Government or anystatutory authority to fulfill its legal obligations if any under any applicable law.

NOTE: THE ASSET MANAGEMENT COMPANY HAS NO PREVIOUS EXPERIENCE IN MANAGING A GOLD SCHEME.THIS IS THE FIRST GOLD SCHEME BEING LAUNCHED UNDER ITS MANAGEMENT.


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HIGHLIGHTS

Sponsors - The Sponsor of the Mutual Fund is Quantum Advisors Private Limited a SEBI registered Portfolio Managerengaged in the business of portfolio management and advisory services. Quantum Asset Management Company PrivateLimited, the Asset Management Company (AMC) of Quantum Mutual Fund is a wholly owned subsidiary of QuantumAdvisors Private Limited

Scheme - Quantum Gold Fund (QGF) is an Open Ended Fund, which will be listed on the Exchange in the form of anExchange Traded Fund (ETF) tracking domestic prices of gold through investments in physical Gold.

Investment Objective - The investment objective of the scheme is to generate returns that are in line with the performanceof gold and gold related instruments, subject to tracking errors. However, investments in gold related instruments will bemade if and when SEBI permits mutual funds to invest in gold related instruments. QGF is designed to provide returnsthat, before expenses, closely correspond to the returns provided by Gold.

Issue Price - Each unit of QGF being offered will have a face value of Rs.100/- each and will be issued at a premiumequivalent to difference between the allotment price and the face value of Rs.100/-.

Each unit of QGF issued under the scheme will be approximately equal to price of half () gram of Gold.

Subscription - During the NFO period the minimum investment amount for opening account is Rs. 5,000/- and inmultiples of Rs.1,000/- thereafter. On an ongoing basis direct purchases from the Fund would be restricted to onlyAuthorised Participants and Eligible Investors. Authorised Participants and Eligible Investors can buy/redeem in creationunit size directly from the Fund on a daily basis. Direct purchase from the Fund by retail investors is not permitted. Unitsof QGF can be bought/sold like any other stock on the National Stock Exchange of India Ltd. (NSE) or on any other stockexchange where it is listed.

As Authorised Participants and Eligible Investors can buy/sell QGF units directly from the Fund, this mechanism providesefficient arbitrage between the traded prices and the NAV, thereby reducing the incidence of QGF units being traded ata high premium/discount to NAV.

Units in Dematerialised Form - QGF units will be issued only in dematerialized form through depositories. The recordsof the depository are final with respect to the number of units available to the credit of a unit holder. This will help in

consolidating with other portfolio holdings and will eliminate need for physical storage thereby eliminating risk.Target Corpus - The minimum subscription (target) amount for the Scheme is Rs.10 lacs. There is no maximum subscription(target) amount for the Scheme therefore, subject to the applications being in accordance with the terms of this offer, fulland firm allotment will be made to the Unitholders.

Benchmark - The benchmark to evaluate the performance of the Scheme shall be the price of physical Gold in domesticmarket.

Liquidity - All investors including Authorised Participants and Eligible 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. In addition, mutual fund will repurchaseunits from Authorised Participants and Eligible Investors on a daily basis in creation unit size.

Proposed Listing - The scheme is proposed to be listed on the National Stock Exchange (NSE) or such other exchangeas may be permitted and decided by the Trustees.

Transparency - The AMC will calculate and disclose the first Net Asset Value of the Scheme not later than 30 days fromthe closure of New Fund Offer Period. Subsequently, the NAV will be calculated and disclosed at the close of everyBusiness Day.

Switching Option - During the NFO period the Mutual Fund will allow investors to switch-in all or part of their investmentfrom any other open ended scheme/plan/option of the Fund to QGF. After the NFO, the Fund may at its own discretion,allow switch-in or switch-out into/from the Scheme.


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Quantum Gold Fund

Load Structure

(A) During New Fund Offer Period:

Investor Category Entry Load Exit Load

Authorised Participants Nil Nil

Eligible Investors Nil 0.50%

Retail Investors Nil Not Applicable*

*Retail Investors can exit the scheme only through Secondary Market.

(B) Ongoing Basis:

Investor Category Entry Load Exit Load

Authorised Participants Nil Nil

Eligible Investors Nil 0.50%

The load structure is, however, subject to change from time to time and such changes shall be implemented prospectively.

Tax benefits/Consequences

Conversion of the underlying physical Gold to QGF units may attract capital gains tax depending on acquisition cost andholding period of each individual stock to the investor. Repurchase of QGF units by the Fund or sale of QGF units on theStock Exchange may attract capital gain tax depending upon the holding period of the units.

Income distributed by the Scheme will be exempt from Income-Tax in the hands of the Unitholders. On the incomedistribution, if any, made by the Mutual Fund, additional income tax is payable by the Mutual Fund under Section 115Rof the Act (other than equity-oriented funds i.e. such fund where the investible funds are invested by way of equity sharesin domestic companies to the extent of more than 65% of the total proceeds of such fund). The additional income-tax ondistribution of income shall be payable by the Mutual Fund at the rate of 14.025% (including surcharge and educationcess) on income distributed to an individual/HUF and at the rate of 22.44% (including surcharge and education cess) onincome distributed to any other Unitholder. A gift of Units, purchased under the Scheme is exempt from Gift-Tax. Units of

the Scheme are not subject to Wealth-tax. There will also be no tax deduction at source on Repurchase/redemption,irrespective of the Repurchase/Redemption amount for resident investors. Under Section 195 of the Act, the Mutual Fundis required to deduct tax at source at the rate of 30% (plus applicable surcharge & education cess) on any short termcapital gains, and at the rate of 20% (plus applicable surcharge and education cess) on any long term capital gains, ifthe payee Unitholder is a non-resident.

Repatriation

Repatriation benefits would be available to NRIs/FIIs/PIOs subject to applicable conditions.


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DUE DILIGENCE BY THE ASSET MANAGEMENT COMPANY

A Due Diligence Certificate, duly signed by the Compliance Officer of Quantum Asset Management Company PrivateLimited, has been submitted to SEBI on October 10, 2007, which reads as follows:

DUE DILIGENCE CERTIFICATE

It is confirmed that:

1. The draft Offer Document forwarded to SEBI is in accordance with the Securities and Exchange Board of India(Mutual Funds) Regulations, 1996 and the guidelines and directives issued by SEBI from time to time.

2. All legal requirements connected with the launching of the Scheme as also the guidelines, instructions, etc. issuedby the Government of India and any other competent authority in this behalf, have been duly complied with.

3. The disclosures made in the Offer Document are true, fair and adequate to enable the Investors to make a well-informed decision regarding investments in the proposed Scheme.

4. The intermediaries named in the Offer Document are registered with SEBI and till date such registration is valid.

Place: Mumbai Signed: Sd/-Date: October 9, 2007 Name: Murali A. Krishnan

Designation: Compliance Officer

CERTIFICATE BY THE TRUSTEE

A certificate duly signed by the Chairman of Quantum Trustee Company Private Limited has been submitted to SEBI onOctober 10, 2007 which reads as follows:

"The Board of Directors of Quantum Trustee Company Private Limited have ensured that "Quantum Gold Fund" approvedby them on September 24, 2007 is a new product offered by Quantum Mutual Fund and is not a minor modification of theexisting scheme/fund/product of Quantum Mutual Fund."

Place: Mumbai Signed: Sd/-Date: October 9, 2007 Name: Jagdish Capoor

Designation: Chairman


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QUANTUM MUTUAL FUND

Quantum Gold Fund

SECTION 1

OVERVIEW OF GOLD AND BACKGROUND OF GOLD EXCHANGE TRADED FUNDS

History

Since the beginning of civilization, gold has been associated with wealth, prestige and power. It is a highly sought-afterprecious metal which, for many centuries, has been used as money, a store of value and in jewellery. The metal naturallyoccurs as nuggets or grains in rocks, underground veins and in alluvial deposits. Physically, it is a dense, soft, shiny,yellow metal and is the most malleable and ductile of the known metals.

Guarantee for currency

Historically, after paper currency became popular, gold was used to back currency under a system known as the goldstandard. A certain weight of gold was given the name of a unit of currency. For a long period, the United Statesgovernment set the value of the U.S. dollar such that one troy ounce of gold was equal to $20.67. In 1934, the dollar was

revalued to $35 per troy ounce. Over time, it was difficult to maintain this price and U.S. and European banks agreed tomanipulate the market to prevent further currency devaluation against increased gold demand. This could not be sustainedover the longer term. On March 17, 1968, economic circumstances caused the collapse of this gold pool and a two-tieredpricing scheme was established where international accounts were settled at the old rate of $35 /oz, but prices on theopen market were allowed to be determined by market forces. Over the early 1970s, this system was gradually abandonedand prices were freed from control.

Central Banks still hold gold reserves, although the level has gradually been declining.

Gold reserves, major official gold holders (tonnes)

Gold Holders 1990 1995 2000 2005

World 35,582.1 34,574.4 33,029.7 30826.7

IMF 3,217.0 3,217.0 3,217.3 3217.3

United States 8,146.2 8,139.8 8,136.9 8135.1

Japan 753.6 753.6 763.5 765.2

Austria 634.3 373.1 377.5 302.5

France 2,545.8 2,545.9 3,024.6 2825.8

Germany 2,960.5 2,960.4 3,468.6 3427.8

Italy 2,073.7 2,073.7 2,451.8 2451.8

Netherlands 1,366.7 1,081.5 911.8 694.9

Portugal 492.4 499.7 606.7 417.5

Spain 485.6 486.2 523.4 457.7

Switzerland 2,590.3 2,590.2 2,419.4 1290.1

United Kingdom 589.1 573.3 487.5 310.8

China 395.0 395.0 395.0 600.0

India 332.6 397.5 357.8 357.7

Taiwan 421.0 422.1 421.8 423.3

Russia 292.8 384.4 386.9

Venezuela 356.4 356.4 318.5 357.1

Source: World Gold Council


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Gold Prices

Being one of the most valuable and universally accepted metals, the price of gold is a keenly watched factor in global

economics. The prices are determined on the open market, but a procedure known as 'Gold fixing', that originated inLondon in September 1919 provides a daily benchmark figure.

International Prices of Gold

Source: Bloomberg

The Current Scenario

Even today, after gold has been officially delinked from currencies, it has a huge role to play in the global economy. Goldis still widely considered to be an asset whose intrinsic value and purchasing power will not be extensively subjected tothe vagaries of inflation. So, during times of high inflation or depreciating currencies, people have turned to gold as astore of value. As the economic factors which influence the value of gold is often contrarian to their impact on otherfinancial assets, gold is used as an effective asset-allocation and diversification tool. For instance, there is low tonegative correlation between returns on gold and those on stock markets.

Demand factors and Price Determinants

Today, the price of gold is ultimately driven by supply and demand. Unlike most other commodities and metals, gold hasvery limited utilitarian use as jewellery and in industrial use. As gold is primarily seen as a store of value, the hoardingand unhoarding of gold plays a greater role in influencing the price. The fact does remain that almost all the gold evermined still exists and can come to the market at the right price. Since the proportion of gold hoarded is huge whencompared to the annual mining and production of the metal, prices are affected mainly by sentiment changes, rather thanby changes in annual production or physical (jewellery and industrial) demand.

Inflation and Interest Rates - Historically, gold prices have been positively correlated with inflation rates and negativelycorrelated with the US Dollar. Simply put, this means that as inflation rises, the price of gold also rises, as investors tryto hedge their positions. Unlike paper-backed assets, gold cannot be created at will. So, its value will remain relativelystable. When the dollar depreciates, gold prices usually appreciate, as investors holding positions in the U.S. Dollar and

U. S. Dollar backed assets would try to hedge their currency losses. Interest rates are also inversely correlated to gold.Under normal circumstance, rising interest rates takes some shine off the precious metal. During times of low interestrates (and rising inflation), investors seek the safe haven of gold.

Central Bank Sales - Central Banks and the International Monetary Fund also play in important role in the gold price. Asa group, they are one of the largest holders of gold and any significant movement by them could drive prices. Sellingwould create a supply glut and drive down prices. Any sign of increasing holdings can also start off a domino effect ofpurchases by others.

100

200300

400

500

600

700

800

900

1975 1979 1983 1987 1991 1995 1999 2003 2007

Price

($/ t. ounce)


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Quantum Gold Fund

Uncertainty - Society dislikes uncertainty. In times of national crises, emergencies or wars, there is insecurity aboutwhether assets may be seized or whether the currency will become worthless. Geopolitical strifes also have the samepsychological effect on people and there is a rush to transfer assets into gold.

Demand - Supply - The fundamental factors also support gold. Production over the past few years are showing adeclining trend. Global supply declined by almost 13% in 2004, and recovered in 2005 to just breach the 2003 levels. Onthe other hand, demand is increasing at a rapid rate. At the retail level, the demand for gold has been booming, drivenin part by the increasing prosperity of the middle classes in the growing economies of China and India. Both countrieshave strong cultural affinities to gold. As more investors become aware of the inherent benefits of investing in theprecious metal and more investment options become available, the demand-supply scenario is likely to be more stretched.

World Gold Supply and Demand (2003 - 2006) (In Tonnes)

2003 2004 2005 2006

Supply

Mine production 2,593 2,492 2,550 2,475

Net producer hedging -270 -422 -86 -369

Total mine supply 2,322 2,070 2,464 2,106Official sector sales 617 469 674 329

Old gold scrap 939 849 886 1,106

Total supply 3,879 3,388 4,025 3,541

Demand

Fabrication

Jewellery 2,478 2,614 2,707 2,279

Industrial & dental 380 411 427 452

Sub-total above fabrication 2,858 3,025 3,134 2,731

Bar & coin retail investment 310 398 411 411

Other retail investment -18 -60 -26 -28

ETFs & similar 39 133 208 260Total demand 3,189 3,496 3,727 3,374

Inferred investment 690 -108 297 167

London PM fix (US$/oz) 363.32 409.17 444.45 603.77

World Gold Council

Source: GFMS Ltd. Data in this table are consistent with those published by GFMS but adapted to the WGC's presentation and take account of theadditional demand data now available. The "inferred investment" figure differs from the "implied net (dis)investment" figure in GFMS' supply and demand table

as it excludes "ETFs and similar" and "other retail investment". Note that jewellery data refer to fabrication.

The Indian Scenario

Indians are the largest consumers of the metal. Traditionally, jewellery has been the primary driver of gold demand inthe country. Now, the investment appeal of gold is also attracting a lot of interest. Demand is bound to grow as Indianinvestors increase their allocations to alternative investments and larger numbers of investment avenues emerge.


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Investing

Investment in gold can be done directly through ownership, or indirectly through shares, futures etc. The downside in

physical buying is that additional costs have to be incurred in the form of storage, insurance and making charges. Thereis also the risk of theft and loss. Buying an equity share in a gold producing firm may not achieve the desired objectives.The investor will also be exposed to management risks. Producers could also undertake hedging strategies and enterinto fixed price contracts with consumers. As such, they may not be able to take advantage of any price increases. (Onthe other side, they will not be adversely affected by price declines too)

The launch of gold futures in India in 2003 after a gap of more than four decades has opened up a new investmentavenue. Investors should be cautious when dealing in futures as the potential for losses (and of course, profits) is muchmore. An inexperienced investor may lose more than he can afford.

From an investment perspective, ETFs are seen to be more secure and scientific than physically purchasing and holdingstock. Gold exchange-traded funds (or GETFs) are special types of exchange-traded funds (ETFs) tracking the price ofgold. Gold exchange-traded funds are traded on the major stock exchanges including London, Paris, New York and now,Mumbai.


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Quantum Gold Fund

CONSTITUTION OF THE MUTUAL FUND

THE MUTUAL FUND

Quantum Mutual Fund (the "Mutual Fund" or "the Fund") has been constituted as a Trust in accordance with theprovisions of the Indian Trusts Act, 1882 (2 of 1882) by execution of a Trust Deed dated October 7, 2005 which wasregistered with the Sub-Registrar, Mumbai on October 21, 2005.

The Mutual Fund was registered with SEBI on December 2, 2005 under registration no. MF/051/05/02.

Quantum Advisors Pvt Ltd has made an initial contribution of Rs. 1,00,000/- to the corpus of the Fund.

The objective of the Mutual Fund is to offer to the public and other eligible Investors, Units in one or more Schemes inthe Mutual Fund for making group or collective investments primarily in Indian Securities in accordance with and aspermitted under the directions and guidelines issued from time to time by SEBI.

The Corporate Office of the Mutual Fund is at 107, Regent Chambers, 1st Floor, Nariman Point, Mumbai - 400 021

THE SPONSORS

The Sponsor of the Quantum Mutual Fund is Quantum Advisors Private Limited (Quantum Advisors). Quantum Advisorsis a SEBI Registered Portfolio Manager (Registration No. PM/INP000000187) engaged in the business of renderingPortfolio Management and Advisory Services. The objective of the Sponsor is to build an India-focused InvestmentManagement Institution that can consistently generate returns for its clients.

Quantum Advisors has been in the business of providing equity research, investment advisory services and managingportfolio of securities since 1990. It proposes to further grow its business to become the country Advisor/Manager forForeign Institutional Investors and Indian retail and High Networth Clients.

The Sponsor is carrying on its portfolio managerial activities in compliance with the provisions of Regulation 24(2) ofSEBI (Mutual Funds) Regulations, 1996 and there is no conflict of interest i.e. there is segregation of office space, staff,systems access and all other requirements of Regulation 24(2) of SEBI (Mutual Funds) Regulations are being compliedwith.

A brief background of the history and activities undertaken by Quantum Advisors till date and its Founder Mr. Ajit Dayal

are given below:

Quantum Advisors Private Limited:

1990 : First pure Equity Research house in India. Did contractual research for Barrings, Kleinwort Benson,Asian Capital Partners and Jardine Fleming

1990-1998 : Published the annual Quantum Stock Market Year Book, except for three years (1993-1995) whenthe books were not published

1992 : Exclusive Equity Research and Advisory Services agreement with Jardine Fleming

1995 : Terminated Advisory Service agreement with Jardine Fleming

1996-1998 : Equity Research and advisory services for Walden International Investment Group

1996-1998 : Equity Research and advisory services for Prolific Asset Management Limited, UK

1998-2004 : Equity Research and advisory services for Hansberger Global Investors Inc., USA

2000 to date : Equity Research and Advisory Services to Foreign Institutional Investors & Portfolio ManagementServices for individual clients on discretionary basis

Ajit Dayal - Founder and Director:

Has over 21 years of experience in the Indian capital markets

8 years of experience in the international stock market as an analyst and a portfolio manager. Managed assets globallyfor Hansberger Global Investors (HGI)


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Deputy Chief Investment Officer of HGI; lead manager on the US$ 2 billion (Rs. 90 bn) Vanguard International ValueFund and on a US$ 300 m (Rs. 13,500 m) pension account between years 2000 & 2004

Founder of www.equitymaster.com and www.personalfn.com, India's premier financial websitesVoted # 1 Indian Equity Analyst by "AsiaMoney" in 1993 and 1994. Voted to All-Star Asian Team by "Institutional Investor'in 1994.

With Quantum Advisors since 1990.

He has a Bachelor of Arts degree in Economics (Bombay University) and an MBA from The University of North Carolinaat Chapel Hill.

Given below is a brief summary of Audited financials of Quantum Advisors Private Limited for the last three years:

(In Rupees)

Description Year ended Year ended Year endedJune 30, 2007 June 30, 2006 June 30, 2005

Total Income 21,713,295 26,099,948 21,426,541

Profit Before Tax 1,962,456 2,938,848 946,546

Profit After Tax 1,292,211 2,609,855 199,148

Shareholders' Funds 201,263,035 199,970,824 121,360,969

Earnings per share (1.37) (0.14) 0.08

Equity Capital 18,321,430 18,321,430 18,321,430

Preference Capital 76,000,000 76,000,000 Nil

Free Reserves 106,941,605 105,649,394 103,039,539

Net-worth 201,263,035 199,970,824 121,360,969

Face Value per share

Equity 10.00 10.00 10.00

Preference 100.00 100.00 Nil

Book Value of Equity Share 68.36 67.66 66.24

Percentage of Dividend per share Nil Nil 0.50%

Dividend per share Nil Nil Rs. 0.05

THE TRUSTEE COMPANY

Quantum Trustee Company Private Ltd. (The "Trustee Company" or the "Trustee") is a Company incorporated under theCompanies Act, 1956. Under the Trust Deed dated 7th October, 2005, the Trustee Company has been appointed as atrustee for the Fund.

A brief background of the Directors on the Board of the Trustee Company is given below:

Jagdish Capoor, Chairman of HDFC Bank Ltd; former Chairman of Bombay Stock Exchange; former Deputy Governor ofthe Reserve Bank of India.

Hormazdiyaar Vakil, Partner, Mulla & Mulla & Craigie Blunt & Caroe; Advocate and Solicitor, Supreme Court of EnglandSatish Mehta, CEO of Quantum Advisors Private Limited.

Mr. Suresh Lulla, MD of Qimpro Consultants Pvt. Ltd.- focused quality management consultancy.


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Quantum Gold Fund

The Details of the Directors interest and directorships in other entities are given below:

Name & Address Occupation/Directorships

Mr. Jagdish Capoor Chairman of:(s/o Mr. Radhey Mohan Capoor) HDFC Bank LimitedRamon House, Churchgate, Director:Mumbai - 400 020 The Indian Hotels Co. Ltd.

Assets Care Enterprises Ltd.GHCL ltd.Bombay Stock Exchange LimitedMember of Board of Governors ofIndian Institute of Management, IndoreTrustee:Sumati Capoor Charitable Trust

Mr. Hormazdiyaar Vakil Partner(s/o Mr. Shiavax Vakil) Mulla & Mulla & Craigie Blunt & Caroe

Mulla & Mulla & Craigie Blunt & Caroe, Director:51, M. G. Road, Pennwalt LtdMumbai - 400 001 Neterson Technologies Pvt. Ltd

Alternate Director:Cosco (India) Shipping Pvt. Ltd.ASL Shipping & Logistics (India) Pvt. LtdTrustee:Fort Gratuitous DispensaryNariman Point Churchgate Citizens Welfare Trust

Mr. Satish Mehta * CEO(S/o Mr. Gordhan Tulsidas Mehta) Quantum Advisors Private Limited107, Regent Chambers, Director:Nariman Point, Mumbai 400021 Network Advertising Private Limited

Sparsh BPO Services Limited

Mr. Suresh Lulla Director & CEO:(S/o Satram Singh Lulla) Best Prax Club Private Limited7, Sindhu, Marine Drive, Director:G-Road, Mumbai Qimpro Consultants Private Limited - Managing Director

IOL Broadband Limited - Director

* Director is associated with the Sponsor.

Trustee Functions:

The Trustee Company shall carry out all its functions and obligations as prescribed in the SEBI Regulations and the TrustDeed. The Board of Directors of the Trustee shall meet atleast once every two months. The performances of all theSchemes will be placed before the Trustee and reviewed by them at such meetings. The report on statutory compliancesand Investor servicing will also be regularly placed at such meetings by the AMC. An Audit committee of the Trustee hasbeen constituted to inter-alia review the internal audit systems and the internal and statutory audit reports and the

recommendations made therein and to ensure that the rectification(s) as suggested by the internal and external auditorsare acted upon. An independent director of the Trustee Company shall be the Chairman of the Audit Committee.

3 & 6 Trustee Board Meetings were held in 2005-06 (for the period October 2005 to March 2006) and in 2006-07respectively. 5 Audit Committee Meetings of Trustee were held in 2006-07.


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Trusteeship Fees

Pursuant to the Trust Deed constituting the Fund, the Fund is authorised to pay the Trustee Company, a fee for theirservices, in addition to the reimbursement of all costs, charges and expenses, being a sum computed at the rate of0.11% of the amount, being the aggregate of the Trust Fund and Unit Capital of all the Schemes put together on 1st Aprileach year or a sum of Rs.10 Lacs, which ever is lower or such other sum as may be agreed upon between the Settlorand the Trustee Company from time to time subject to the condition that the Trusteeship Fees will not exceed the limitfor expenses prescribed by SEBI. The Trustee Company may charge further fees as permitted from time to time underthe Trust Deed and the Regulations.

General Power of the Trustee Company

It is hereby declared that the Trustee Company shall have and shall be deemed to have the legal ownership of the TrustFund and that the general superintendence, direction and management of the affairs of the Trust and all powers,authorities and discretions appurtenant to or incidental to the purpose of the trust shall absolutely vest in the Trustee,subject nevertheless to the provisions of the Trust Deed and this Offer Document. Subject to the aforesaid, the Trusteeshall as regards all trusts, powers, authorities and discretions hereby vested in them, have absolute and uncontrolleddiscretion as to the exercise thereof in relation to the mode and time for exercise thereof.

Trustee to Act Efficiently

The Trustee Company shall manage affairs of the Trust with utmost economy consistent with the maintenance ofefficiency of administration and act in interests of the Unitholders.

Summary of substantive provisions of the Trust Deed, which may be of material interest to the UnitholdersFunctions & Responsibilities of the Trustees.

Pursuant to the Trust Deed constituting the Mutual Fund and SEBI (Mutual Funds) Regulations, 1996 the Trustee hasseveral rights and obligations, as given below:

1. The Trustee shall be responsible for management of the Mutual Fund, for holding the Trust Fund, to provideinformation to the Unitholders, SEBI, the Sponsor and any other regulatory body, to ensure compliance by theMutual Fund and/or the AMC of all the statutory formalities, reporting requirements etc. and to ensure that theinterest of the Unitholders is protected.

2. The Trustee shall forbid the Mutual Fund to make or guarantee loans or to take up any activity in contravention of

the SEBI Regulations.

3. The Trustee shall ensure that the AMC complies with and does not contravene the SEBI Regulations, all guidelines,all circulars, applicable to mutual funds and that the decisions of the AMC do not exceed the powers conferredupon it.

4. The Trustee shall ensure before the launch of any Scheme that the AMC has :

a. systems in place for its back office, dealing room and accounting;

b. appointed key personnel including fund manager(s) for the Scheme and submitted their bio-data containingthe educational qualifications, past experience in the securities market with the trustees, within 15 days fromthe date of their appointment and the trustees are satisfied with the adequacy of the number of Key Personnel,considering the size of the Mutual Fund and the proposed scheme;

c. appointed auditors to audit its accounts;

d. appointed a compliance officer who shall be responsible for monitoring the compliance of the SEBI Act, 1992,

rules and regulations, notifications, guidelines, instructions issued by SEBI or the Central Government fromtime to time and for redressal of Investor grievances;

e. appointed Registrars and Share Transfer agents who are registered with SEBI and laid down parameters fortheir supervision;

f. Prepared a compliance manual which is updated by including all the provisions of regulations and guidelinesissued by SEBI from time to time and designed internal control mechanisms, including internal audit systems,commensurate with the size of the Mutual Fund;

g. specified norms for empanelment of brokers and marketing agents.


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QUANTUM MUTUAL FUND

Quantum Gold Fund

5. The Trustee shall with respect to the investments made by the Mutual Fund ensure that the applicable investmentrestrictions as laid down in the SEBI Regulations are complied with.

6. The Trustee shall ensure that the transactions entered into by the AMC and/or activities of the AMC are in accordancewith the SEBI Regulations and the Scheme.

7. The Trustee shall ensure that the AMC has been managing the Schemes independently of other activities and havetaken adequate steps to ensure that the interests of the Unitholders of one Scheme are not compromised withthose of any other Scheme or with other activities of the AMC.

8. If the Trustee has reason to believe that the conduct of the business of the Mutual Fund is not in conformity with theSEBI Regulations, it shall forthwith take such remedial steps as are necessary to rectify the situation and shallimmediately inform SEBI of the violation and the action taken by the Trustee.

9. It shall be the duty of the Trustee to take into its custody or under their control all the property of the Schemes ofthe Mutual Fund and hold these in trust for the Unitholders. The Trustee shall be accountable for and be thecustodian of the funds and property of the respective Scheme