TMI BlogMaster Circular for Mutual FundsX X X X Extracts X X X X X X X X Extracts X X X X ..... aster Circular includes circulars issued upto June 05, 2018. 2. In case of any inconsistency between the master circular and the applicable circulars, the contents of the relevant circular shall prevail. 3. Master Circular is a compilation of all the existing/applicable circulars issued by Investment Management Department of SEBI to Mutual Funds. Efforts have been made to incorporate certain applicable provisions of existing circulars (as on date ) issued by other Departments/Divisions of SEBI relevant to Mutual Funds. INDEX ABBREVIATIONS ....................................... 5 CHAPTER 1 .......................................... 7 OFFER DOCUMENT FOR SCHEMES ......................... 7 CHAPTER 2 ......................................... 22 CONVERSION AND CONSOLIDATION OF SCHEMES AND LAUNCH OF ADDITIONAL PLAN................................. 22 CHAPTER 3 ......................................... 33 NEW PRODUCTS ...................................... 33 CHAPTER 4 ......................................... 42 RISK MANAGEMENT SYSTEM ............................ 42 CHAPTER 5 ......................................... 47 DISCLOSURES REPORTI ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Compound Annual Growth Rate CAGR Depository Participant DP External Commercial Borrowings ECB Financial Action Task Force FATF Fixed Maturity Plans FMP(s) Global Depository Receipt GDR Gold Exchange Traded Fund GETF Gold Monetization Scheme GMS Hindu Undivided Family HUF International Organization of Securities Commission IOSCO Investor Service Center ISC Key Information Memorandum KIM Know Your Client KYC Monthly Cumulative Report MCR Monthly Average Assets Under Management MAAUM Multilateral Memorandum of Understanding MMOU National Stock Exchange NSE ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Mutual Funds Regulations SEBI Circular No. IIMARP/MF/CIR/01/428/97 dated February 28, 1997. 1.1.3 All offer documents (ODs) of Mutual Fund schemes shall be filed with SEBI in terms of the Regulations Regulation 28 (1) of SEBI (Mutual Funds) Regulation 1996 . 1.1.3.1 Filing of Draft SID: a. Draft SID of schemes of Mutual Funds filed with the Board shall also be available on SEBI s website www.sebi.gov.in for 21 working days from the date of filing. b. AMC shall submit a soft copy of draft SID to the Board in HTML or PDF format. For this purpose, AMC shall be fully responsible for the contents of soft copies of the SID. AMC shall also submit an undertaking to the Board while filing the soft copy of draft SID certifying that the information contained in the soft copy matches exactly with the contents of the hard copy filed with the Board. c. In case of any inaccurate filing, the SID will be returned and refiling will be required. 21 working days Regulation 29(3) of SEBI (Mutual Funds) Regulation 1996 shall be calculated from the date of refiling; SEBI Circular No. IIMARP/MF/CIR/01/428/97 dated February 28, 1997. d. If any changes to the SID are ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly trustee report. 1.2 Updation of SID SAI 1.2.1 Updation of SID 1.2.1.1 For the schemes launched in the first half of a financial year, the SID shall be updated within 3 months from the end of the financial year. However, for the schemes launched in the second half of a financial year, SID shall be updated within 3 months of the end of the subsequent financial year. (For example, for a scheme launched in May, 2016 the SID shall be updated by June 30, 2017 and for a scheme launched in December 2015, the SID shall be updated by June 30, 2017) Thereafter, the SID shall be updated once every year. 1.2.1.2 The procedure to be followed in case of changes to the scheme shall be as under: a. In case of change in fundamental attributes in terms of Regulation Regulation 18 (15A) of SEBI (Mutual Funds) Regulation, 1996 , SID shall be revised and updated immediately after completion of duration of the exit option. b. In case of other changes: 1. The AMC shall be required to issue an addendum and display it on its website. 2. The addendum shall be circulated to the entire distributors/brokers/Investor Service Centre (ISC) so that the same can be attached ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the date of the letter. In case of lapse of six-month period, the AMC shall be required to refile the SID alongwith filing fees. 1.3.2 The scheme shall be launched within six months from the date of the issuance of final observations from SEBI. If the AMC intends to launch the scheme at a date later than six months, it shall refile the SID with SEBI under Regulation 28 (1) along with filing fees. 1.4 Undertaking from Trustees for new Scheme SEBI Cir No IMD/CIR No.5/70559/06 dated June 30,2006 1.4.1 In the certificate submitted by Trustees with regard to compliance of AMC with Regulations, Regulation 18 (4) of SEBI ( Mutual Funds) Regulations, 1996. the Trustees are required to certify as follows: The Trustees have ensured that the (name of the scheme/Fund) approved by them is a new product offered by (name of the Mutual Fund) and is not a minor modification of any existing scheme/fund/product. 1.4.2 This certification shall be disclosed in the SID along with the date of approval of the scheme by the Trustees. 1.4.3 This certification is not applicable to close ended schemes except for those close ended schemes which have the option of conversion into o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ebt oriented and balanced fund schemes SEBI Circular No. MFD/CIR/01/071/02 dated April 15, 2002. developed by research and rating agencies recommended by the AMFI on a regular basis shall be used by the Mutual Funds. 1.8.3 In case of sector or industry specific schemes, Mutual Funds may select any sectoral indices as published by the Stock Exchanges and other reputed agencies. 1.8.4 These benchmark indices may be decided by the AMC(s) and Trustees. Any change at a later date in the benchmark index shall be recorded and reasonably justified SEBI Circular No. MFD/CIR/16/400/02 dated March 26, 2002. Also please note that for review of scheme performance with benchmark indices please refer to section on governance norms. 1.8.5 Examples of benchmarks are illustrated below SEBI Circular No. MFD/CIR/4/51/2000 dated June 5, 2000: 1.8.5.1 Growth funds maintaining minimum 65% of their investments in equities shall always be compared against The Bombay Stock Exchange Ltd. (BSE) Sensex or The National Stock Exchange Ltd. (NSE) Nifty or BSE 100 or CRISIL 500 or similar standard indices. 1.8.5.2 Income funds maintaining 65% or more of investments in debt instruments sh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e closure of the initial subscription SEBI Circular No. CIR/IMD/DF/02/2013 dated February 6, 2013. 1.10 Restriction on Redemption in Mutual Funds SEBI Circular No. SEBI/HO/IMD/DF2/CIR/P/2016/57 dated May 31, 2016 1.10.1 Presently in terms of circular SEBI/IMD/CIR No.5/126096/08 dated May 23, 2008, facility of restriction on redemption under any scheme of the mutual fund can be made only after the approval from the Board of Directors of the Asset Management Company (AMC) and the Trustees. The provisions are general in nature and do not specifically spell out the circumstances in which restriction on redemption may be applied; leading to discretionary disclosures and practices in the industry. 1.10.2 As a philosophy, restriction on redemption should apply during excess redemption requests that could arise in overall market crisis situations rather than exceptional circumstances of entity specific situations. The circumstances calling for restriction on redemption should be such that illiquidity is caused in almost all securities affecting the market at large, rather than in any issuer specific securities. 1.10.3 Therefore, in order to bring more clarity and to p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rcumstances and the time limit for which it can be restricted. 1.10.5 The circular shall be applicable immediately for (i) all schemes to be launched on or after the date of this circular and (ii) all the existing schemes with effect from July 01, 2016. 1.11 Discontinuation of the nomenclature Liquid Plus Scheme(s) SEBI/IMD/CIR No.13/150975 / 09 dated January 19, 2009 1.11.1 The nomenclature Liquid Plus Scheme(s) has been discontinued from January 2009 since it gives a wrong impression of added liquidity. 1.12 Fundamental Attributes SEBI Circular No- IIMARP/MF/CIR/01/294/98 dated February 4, 1998 1.12.1 The words fundamental attributes Clause (d) of sub-regulation (15) of Regulation 18 of SEBI (Mutual Funds) Regulations, 1996 are elaborated below: 1.12.1.1 Type of a scheme a. Open ended/Close ended/Interval scheme b. Sectoral Fund/Equity Fund/Balance Fund/Income Fund/Debt Fund/Index Fund/Any other type of Fund 1.12.1.2 Investment Objective(s) a. Main Objective - Growth/Income/Both. b. Investment pattern - The tentative Equity/Debt/Money Market portfolio break-up with minimum and maximum asset allocation, while retaining the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... holdings in part or in full shall be allowed to exit at the NAV applicable for the day on which the request is received, without charging exit load. PART II CONSOLIDATION OF SCHEMES 2.2 Consolidation of Schemes SEBI Circular No. SEBI/MFD/CIR No.5/12031/03 dated June 23, 2003. 2.2.1 Any consolidation or merger of Mutual Fund schemes will be treated as a change in the fundamental attributes of the related schemes and Mutual Funds shall be required to comply with the Mutual Funds Regulations in this regard Regulation 18(15A) of the Mutual Funds Regulations. 2.2.2 Further, in order to ensure that all important disclosures are made to the investors of the schemes sought to be consolidated or merged and their interests are protected; Mutual Funds shall take the following steps: 2.2.2.1 Approval by the Board of the AMC and Trustee(s): a. The proposal and modalities of the consolidation or merger shall be approved by the Board of the AMC and Trustee(s), after they ensure that the interest of unit holders under all the concerned schemes have been protected in the said proposal. 2.2.2.2 Disclosures: a. Subsequent to approval from the Board of the AMC a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bruary 4, 1998 of the surviving scheme do not change. The surviving scheme means the scheme which remains in existence after the merger. b. Mutual Funds are able to demonstrate that the circumstances merit merger or consolidation of schemes and the interest of the unitholders of surviving scheme is not adversely affected. c. After approval by the Boards of AMCs and Trustees, the mutual funds shall file such proposal with SEBI. SEBI would communicate its observations on the proposal within the time period prescribed Regulation 29(3) of SEBI (Mutual Funds) Regulations, 1996 . d. The letter to unitholders shall be issued only after the final observations communicated by SEBI have been incorporated and final copies of the same have been filed with SEBI. PART III LAUNCH OF ADDITIONAL PLANS SEBI Circular No. SEBI / IMD / CIR No 14 / 187175/ 2009 dated December 15, 2009 2.3 Launch of Additional Plans 2.3.1 Additional plans sought to be launched under existing open ended schemes which differ substantially from that scheme in terms of portfolio or other characteristics shall be launched as separate schemes in accordance with the regulatory provisions. 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as been decided to categorize the MF schemes as given below: 2.6 Categories of Schemes, Scheme Characteristics and Type of Scheme (Uniform Description of Schemes): 2.6.1 The Schemes would be broadly classified in the following groups: i. Equity Schemes ii. Debt Schemes iii. Hybrid Schemes iv. Solution Oriented Schemes v. Other Schemes The details of the scheme categories under each of the aforesaid groups along with their characteristics and uniform description are given in the Annexure 8. 2.6.2 As per the annexure, the existing type of scheme (presently mentioned below the scheme name in the offer documents/ advertisements/ marketing material/etc.) would be replaced with the type of scheme (given in the third column of the tables in the Annexure) as applicable to each category of scheme. This will enhance the existing disclosure. 2.6.3 In case of Solution oriented schemes, there will be specified period of lock in as stated in the Annexure 8. However, the said lock- in period would not be applicable to any existing investment by an investor, registered SIPs and incoming STPs in the existing solution oriented schemes as on the date on which such ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 03. 3.1.1 The SID and the advertisements pertaining to Fund of Funds Scheme Regulation 2(ma) of the Mutual Funds Regulations introduced vide Gazette Notification No. S.O 632(E) dated May 29, 2003. shall disclose that the investors are bearing the recurring expenses of the scheme, in addition to the expenses of other schemes in which the Fund of Funds Scheme makes investments. 3.1.2 AMCs shall not enter into any revenue sharing arrangement with the underlying funds in any manner and shall not receive any revenue by whatever means/head from the underlying fund. Any commission or brokerage received from the underlying fund shall be credited into concerned scheme s account SEBI Circular No. SEBI/IMD/CIR No 18 / 198647 /2010 dated March 15, 2010 . 3.1.3 Fund of funds mutual fund schemes shall adopt the total expense structures laid out in Regulations Regulation 52(6)(a) of SEBI (Mutual Funds) Regulations, 1996 , which Asset Management Companies shall clearly indicate in the SIDs. 3.2 Gold Exchange Traded Fund Scheme SEBI Circular No. SEBI/IMD/CIR. No.4/58422/06 dated January 24, 2006, SEBI Circular No. SEBI/IMD/CIR No.2/65348/06 dated April 21, 2006, SEBI Cir ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... anuary 15, 2007 read with Gazette Notification F. No. SEBI/LAD/DoP/82534/2006 dated December 20, 2006. 3.2.3 Determination of Net Asset Value SEBI Circular No. SEBI/IMD/CIR No.2/65348/06 dated April 21, 2006. 3.2.3.1 The NAV of units under the GETF Scheme shall be calculated up to four decimal points as shown below: Market or Fair Value of Scheme's investments + Current Assets - Current Liabilities and Provision NAV (in Rs. terms) =____________________________________________________ Number of Units outstanding under Scheme on the Valuation Date 3.2.4 Recurring Expenses SEBI Circular No. SEBI/IMD/CIR No.2/65348/06 dated April 21, 2006. 3.2.4.1 The recurring expenses limits applicable to equity schemes Regulation 52(6) of the SEBI (Mutual Funds) Regulations, 1996. shall be applicable to GETF Scheme(s). 3.2.5 Benchmarks for GETF Scheme SEBI Circular No. SEBI/IMD/CIR No.2/65348/06 dated April 21, 2006. 3.2.5.1 GETF Scheme(s) shall be benchmarked against the price of gold. 3.2.6 Half yearly report by Trustees SEBI Circular No. Cir/IMD/DF/20/2010 dated Decembe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in Census Statistics of India (2001) at www.censusindia.gov.in. A printout of cities which appear in the foresaid categories taken from the said website is attached for ready reference at Annexure 4. 3.5 Rajiv Gandhi Equity Savings Scheme SEBI Circular No. CIR/MRD/DP/32/2012 dated December 6, 2012 , 2012 3.5.1 As announced in the Union Budget 2012-13, the Finance Act 2012 has introduced a new section 80CCG on Deduction in respect of investment made under an equity savings scheme to give tax benefits to new investors who invest up to ₹ 50,000 and whose gross total annual income is less than or equal to ₹ 10 lakhs. The objective of the scheme is to encourage flow of savings in the financial instruments and improve the depth of the domestic capital market. 3.5.2 Vide notification 51/2012 dated November 23, 2012, the scheme has been notified by the Department of Revenue, Ministry of Finance (MoF). The notification is available on the website of Income Tax Department under section Notifications . 3.5.3 AMCs / Trustees shall ensure that RGESS eligible Exchange Traded Funds (ETFs) and Mutual Funds (MFs) schemes are in compliance with the aforementioned noti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3.6 Infrastructure Debt Schemes SEBI Circular No. CIR/IMD/DF/7/2013 dated April 23, 2013 3.6.1 Placement Memorandum: 3.6.1.1 Private Placement to less than 50 investors has been permitted as an alternative to New Fund Offer to the public, in case of Infrastructure Debt Funds (IDF). In case of private placement, the mutual funds would have to file a Placement Memorandum with SEBI instead of a Scheme Information Document and a Key Information Memorandum. However, all the other conditions applicable to IDFs offered through the NFO route like kind of investments, investment restrictions, etc. would be applicable to IDFs offered through private placement. 3.6.1.2 In terms of regulation 49-OA of the SEBI (Mutual Funds) Regulations, 1996, the Placement Memorandum shall be filed with SEBI as per the prescribed format Please refer to section on Formats for requisite Formats. 3.6.2 The Asset Management Companies shall ensure that the Placement Memorandum is uploaded on their respective websites after allotment of units, and on the website of such recognized Stock Exchange, where it is proposed to be listed, at the time of listing of the scheme. 3.6.3 FPIs which a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nternal Risk Management Committee or to an external agency a. Disaster Recovery and Business Contingency plans, and b. Insurance cover against certain risks. 4.2.3 Best Practices to be followed by Mutual Funds: 4.2.3.1 Mutual Funds shall adopt these practices as a part of their due diligence exercise after considering the size of their operations. 4.3 Implementation of the Risk Management System 4.3.1 Mutual Funds shall adopt the following approach to implement the Risk Management System: 4.3.2 Identification of observance of each recommendation: 4.3.2.1 Mutual Funds shall identify areas of current adherence as well as non-adherence of various Risk Management practices under each of the three categories. They shall examine the areas where development or improvement of systems is required. 4.3.2.2 After identifying the same, Mutual Funds shall review the progress made on implementation of the systems on a monthly basis and place the progress report in periodical meetings of the Board of the AMC and Trustees. 4.3.3 Review of Progress of implementation by Board of AMC and Trustee(s): 4.3.3.1 The Board of the AMC and Trustee(s) shall review the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l, it would be required to bring it to the notice of the Trustees and take corrective action as deemed necessary, to reinforce their robustness. Each AMC should also be required to have documented guidelines, to deal with the adverse situation effectively. 4.4.2.6 Such stress-testing policy shall be reviewed by the Board of AMC and Trustees, at least on an annual basis, in light of the evolving market scenarios and should cover the following aspects: i. Adequacy of the documentation for various elements of the stress testing framework ii. Scope of coverage of the stress testing policy and the levels of stress applied iii. Integration of the stress testing framework in the day-to-day risk management processes iv. Adequacy of the corrective actions and the efficacy of the systems for their activation. 4.4.2.7 Further, Trustees shall be required to report compliance with this circular and steps taken to deal with adverse situations faced, if any, in the Half Yearly Trustee Report submitted to SEBI. 4.5 Internal Credit Risk Assessment SEBI Circular No. SEBI/HO/IMD/DF2/CIR/2016/42 dated March 18, 2016., Will be effective from May 01, 2016.: 4.5.1 In order ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch as ratios, etc.) subject to compliance with the Advertisement Code. 5.1.4. The format for disclosure for monthly and half yearly portfolio is placed at format section. 5.2 Disclosure of derivatives in Half Yearly Portfolios SEBI Circular Cir/ IMD/ DF/ 11/ 2010 dated August 18, 2010 5.2.1 A format For formats on disclosure of derivatives, please refer to the section on Formats for the purpose of uniform disclosure of investments in derivative instruments by Mutual Funds in half yearly portfolio disclosure, annual report or in any other disclosures is prescribed. 5.2.2 Further, while listing net assets, the margin amounts paid should be reported separately under cash or bank balances. 5.3 Unaudited Half Yearly Financials SEBI Circular MFD/CIR/1/200/2001 dated April 20, 2001 SEBI Circular No. IMD/CIR No.8/132968/2008 dated July 24, 2008 5.3.1 The publication of the unaudited half-yearly results shall be made in line with provisions of the Regulations Regulation 59 of SEBI (Mutual Funds) Regulations, 1996 , in the format prescribed in Twelfth Schedule. 5.3.2 The half yearly disclosures SEBI Circular No. CIR/IMD/DF/21/2012 dated September 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tronic copy of the scheme wise annual report or abridged summary thereof. Such advertisement shall be published in the all India edition of at least two daily newspapers, one each in English and Hindi. 5.4.6 Mutual Funds/ AMCs shall provide a physical copy of the abridged summary of the Annual Report, without charging any cost, on specific request received from a unitholder. 5.4.7 The opt-in facility to receive physical copy of the scheme-wise annual report or abridged summary thereof shall be provided in the application form for new subscribers. 5.4.8 These websites should also be linked with AMFI website so that the investors and analyst(s) can access the annual reports of all mutual funds at one place SEBI Cir No MFD/CIR/15/041/2002 dated March 14,2002 . However, as per the Regulations Regulation 56(1) 56(3) of SEBI (Mutual Funds) Regulations, 1996 , a copy of Scheme wise Annual Report shall be also made available to unitholder(s) on payment of nominal fees. 5.5 Disclosure of large unit holdings SEBI Circular No. MFD/CIR No.3/211/2001 dated April 30, 2001. 5.5.1 The number of investors holding over 25 % of the NAV For further details, refer Sec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... SEBI Circular No.Cir/IMD/DF/13/2011 dated August 22, 2011 5.7.1 Mutual Funds / AMCs shall disclose on their respective websites the total commission and expenses paid to distributors who satisfy one or more of the following conditions with respect to non-institutional (retail and HNI) investors:- 5.7.1.1 Multiple point of presence (More than 20 locations) 5.7.1.2 AUM raised over ₹ 100 crore across industry in the non institutional category but including high networth individuals (HNIs). 5.7.1.3 Commission received of over ₹ 1 crore p.a. across industry 5.7.1.4 Commission received of over ₹ 50 lakh from a single Mutual Fund/AMC. 5.7.2 Mutual Fund / AMCs shall, in addition to the total commission and expenses paid to distributors, make additional disclosures SEBI Circular No. CIR/IMD/DF/21/2012 dated September 13, 2012. regarding distributor-wise gross inflows (indicating whether the distributor is an associate or group company of the sponsor(s) of the mutual fund), net inflows, average assets under management and ratio of AUM to gross inflows on their respective website on an yearly basis. In case the data mentioned above suggests tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ayed on the website of the mutual funds. It should also be mentioned in the annual report of the mutual fund schemes that the unitholders, if they so desire, may request for a copy of the annual report of the asset management company. 5.10 Submission of bio data of key personnel IIMARP/CIR /08/845/97 dated May 7,1997,IIMARP/MF/CIR/05/788/97 date April 28,1997 5.10.1 AMCs are required to submit the bio data of all key personnel to Trustees and the Board. For this purpose, key personnel would be the Chief Executive Officer (CEO), fund manager(s), dealer(s) heads of other departments of the AMC For format of bio-data of key personnel, please refer the section on Formats. 5.11 Disclosure Of Executive Remuneration SEBI Circular No. SEBI/HO/IMD/DF2/CIR/P/2016/42 dated March 18, 2016 and SEBI/HO/IMD/DF2/CIR/P/2017/35 dated April 28, 2017 With the underlying objective to promote transparency in remuneration policies so that executive remuneration is aligned with the interest of investors, MFs /AMCs shall make the following disclosures pertaining to a financial year on the MF/AMC website under a separate head 'Remuneration': 5.11.1 Name, designat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and the SAI, shall be made in the format as prescribed Please refer to the section on Formats . 5.14 Mutual Funds/ AMCs shall make continuous efforts to update email ID and mobile number of all unitholders. The said contact details shall be used for sending e-mails and SMS as envisaged in the circular. SEBI/HO/IMD/DF2/CIR/P/2018/92 dated June 05, 2018 PART II REPORTS 5.15 Monthly Cumulative Report (MCR) SEBI circular MFD/CIR/07/206/2001 dated July 19, 2001, SEBI circular No IMD/Cir No.15/87045/2007 dated February 22, 2007, SEBI circular SEBI/IMD/CIR No 3/124444/08 dated April 30, 2008, SEBI Circular No. SEBI/HO/IMD/DF2/CIR/P/2016/42 dated March 18, 2016 5.15.1 Date and Mode of Submission: 5.15.1.1 MCR For format of MCR please refer to section on Formats. shall be submitted to the Board by 3rd working day of each month by way of an email. Hard copy should also be sent by hand delivery/courier. 5.15.2 Other Guidelines: 5.15.2.1 Details of the new schemes launched shall be reported in the MCR for the month in which the allotment is done. For example, if an NFO closes in the month of July and the allotment is done in the month of August, then ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y 20,2006, 5.18.1 AMC should submit the annual statistical report to SEBI in the prescribed format by 30th of April each year For format of ASR refer the section on Formats Quarterly Movement of Net Assets- SEBI CIR IIMARP/MF/CIR/05/788/97 dated April 28, 1997 required mutual funds to submit the statement for quarterly movement of net assets. However, SEBI circular MFD/CIR/12/16588/02 dated August 28,2002 stated that such Statement of movement of net assets /portfolios are no more to be submitted. 5.19 Daily Transaction Report SEBI Circular No.MFD/CIR/07/384/99 dated December 17, 1999 and MFD/CIR/08/23026/99 dated December 23, 1999 5.19.1 All Mutual Funds shall submit details of transactions in secondary market on daily basis in the prescribed format For format of daily transaction report, please refer the section on formats . Accordingly, Mutual Funds are advised to make necessary arrangements with their custodians for the submission of reports on a daily basis. The report is to be submitted to the Board in both hard as well as soft copy. 5.19.2 It must be ensured by the compliance officers of the custodians as well as that of Mutual Funds that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... accuracy of the data furnished by your office for the Financial Year 2004-05 and ensure that all the columns are correctly filled-in and submit a Supplementary Information Report , if need be, to the Income Tax Department. The AIRs for the financial year 2005-2006 are required to be filed before August 31, 2006. 5.21.1 Mutual Funds are required to submit the Annual Information Return under section 285 BA in the Income-tax Act. As per this requirement, Trustees of Mutual Funds or such other person managing the affairs of the Mutual Funds (as may be duly authorized by the trustees in this behalf) have to report specified financial transactions in electronic media to Income Tax Department giving PAN of the transacting parties in an Annual Information Return (AIR). 5.21.2 Some common errors in these returns have been pointed out by the Directorate of Income Tax (Systems) as: 5.21.2.1 Not mentioning PAN or mentioning invalid PAN. 5.21.2.2 Entering incomprehensible/ incomplete names of transacting parties, e.g. names of 2 or 3 letters. 5.21.2.3 Entering incomprehensible/ incomplete addresses of transacting parties, e.g. Nil , N/A , _ , in all address fields, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Regulations, 1996 and SEBI Circular No. MFD/CIR No.010/024/2000 dated January 17, 2000. 6.3 Role of Independent Director on the Board of the AMC and Independent Trustees SEBI Circular No. MFD/CIR/11/354/2001 dated December 20, 2001, SEBI Circular No. MFD/CIR/13/16799/2002 dated August 29, 2002, SEBI Circular No. MFD/CIR/17/21105/2002 dated October 28, 2002. 6.3.1 An Independent Trustee shall not be associated in any manner with the Sponsor(s) Regulation 16(5) of the SEBI (Mutual Funds) Regulations, 1996. The independent directors on the Board of the AMC shall not be associate of, or associated in any manner with, the sponsor or any of its subsidiaries or the trustees Regulation 21(d) of the SEBI (Mutual Funds) Regulations, 1996 . 6.3.2 An associate shall be defined as: 6.3.2.1 Relatives As defined under Section 6 of the Companies Act 1956 of Sponsor(s) or directors of the Sponsor Company or relatives of Associate Directors of the AMC(s) and Trustee. 6.3.2.2 Persons providing any type of professional service to the Mutual Funds, the AMC and the Trustees and the Sponsor(s). Also, persons having a material pecuniary relationship with the above ment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ustees and independent directors, it has been decided that: 6.4.1.1 An independent trustee and independent director shall hold office for a maximum of 2 terms with each term not exceeding a period of 5 consecutive years. 6.4.1.2 No independent trustee or independent director shall hold office for more than two consecutive terms, however such individuals shall be eligible for re-appointment after a cooling-off period of 3 years. During the cooling-off period, such individuals should not be associated with the concerned MF, AMC its subsidiaries and / or sponsor of AMC in any manner whatsoever. 6.4.1.3 Existing independent trustees and independent directors shall hold office for a maximum of 10 years (including all preceding years for which such individual has held office). In this respect, the following may be noted: a. Individuals who have held office for less than 9 years (as on November 30, 2017) may continue for the residual period of service. b. Individuals who have held office for 9 years or more (as on November 30, 2017) may comply the aforesaid provision in a phase manner, within a period of 2 years. SEBI Circular No. SEBI/HO/IMD/DF2/CIR/P/2018/19 dated Feb ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... norms for investment and/or trading in securities by their employees. The Board of the AMC and Trustees shall ensure compliance with these Guidelines on a continuous basis and shall report any violations and remedial action taken by them in the periodical reports submitted to the Board Regulation 25(9) 23(b) of SEBI (MF) Regulations, 1996 . 6.6.1 Guidelines for Investment and/or Trading in Securities by Employees of AMC(s) and Trustees: 6.6.1.1 Applicability a. These Guidelines shall be applicable to all employees of AMC(s) and Trustees and shall form a part of the Code of Conduct for employees adopted by the AMC(s) and/or Trustees. New employees shall be bound by these Guidelines from the date of joining the AMC(s) and/or Trustees. b. These Guidelines shall cover transactions for sale or purchase of securities made SEBI Circular No. SEBI/HO/IMD/DF2/CIR/P/2016/124 dated November 17, 2016. : i. In the name of employees, either individually or jointly, ii. In the name of the employees spouse, iii. As a member of HUF, iv. In the name of employees parent, sibling and child of such employee or of the spouse, any of whom is either dependent financiall ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es which are being bought and/or sold by the Mutual Fund of which the AMC is the investment manager. 6.6.2.3 Prior approval of personal investment transactions: a. All access persons except Compliance Officer shall apply in the form prescribed by the AMC(s) and/or Trustees to the Compliance Officer for prior approval of transactions for sale or purchase of securities other than those expressly stated to be exempt under these guidelines. The Compliance Officer shall apply to the Head of the AMC(s). The decision of the Compliance Officer shall be final and binding on the employee. b. In these Guidelines, in the case of the Compliance Officer s own transactions for purchase or sale of securities or disclosure or any other related matter, the term Compliance Officer wherever it appears, shall be read as Head of the AMC. c. The Compliance Officer may coordinate with the Fund Management Department of the Mutual Fund, wherever necessary, to clear requests of investment and/or trading in securities by the employees. d. The approval of Compliance Officer for carrying out a transaction of sale or purchase of a security by the access person shall not be valid for more than ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... olders and/or debenture holders of such companies. Details of such applications made shall be intimated to the Compliance Officer. c. The employees of the AMC(s) and/or Trustees including access person may apply for any rights offer of any company in which they are already shareholders. Applications for additional rights (over and above the normal rights entitlement) shares may be made by the employees including access person without getting the clearance from the Compliance Officer. An employee including access person may also sell and/or renounce his rights entitlement without getting the clearance from the Compliance Officer. However, if an access person wishes to purchase the Rights renunciations he shall get the clearance of the Compliance Officer for the same. Such purchases shall be done only at market prices. Details of any applications made in any rights issue, whether in the normal course, or through purchase of rights renunciations, shall be intimated to the Compliance Officer. 6.6.3.2 Investments through the secondary markets: a. An access person who wishes to make a secondary market transaction shall submit a written application to that effect to the Complia ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hase or sale of a security, including the date of the request, the name of the access person, the details of the proposed transaction and whether the request was approved or denied and waivers given, if any, and its reasons. e. No employee shall purchase any security (including derivatives) on a Carry Forward basis or indulge in Short Sale of any security (including derivatives) i.e. employees who effect any purchase transaction(s) shall ensure that they take delivery of the securities purchased, before selling them. f. Any transaction of Front Running by any employee directly or indirectly is strictly prohibited. For this purpose, Front Running means any transaction of purchase and/or sale of a security carried by any employee whether for self or for any other person, knowing fully well that the AMC also intends to purchase and/or sell the same security for its Mutual Fund operations. To ascertain that the employee had no prior knowledge of the Mutual Fund's intended transactions, the Compliance Officer may take a declaration in this regard from the employee. Such declaration may be included in the application form itself. g. Any transaction of self dealing by a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Mutual Fund of which the AMC is the investment manager, details of their personal transactions of purchase or sale of securities to the Compliance Officer. The details to be submitted are as follows: a. Details of transactions effected for purchase and/or sale of securities including transactions in rights entitlements through the secondary market within 7 calendar days from the date of transaction; b. Details of allotment received against application for public and rights issues within 7 calendar days from the date of receipt of the allotment advice; c. A statement of holding in securities as on March 31 within 30 calendar days from the end of every financial year ending March 31. 6.6.5.2 All employees other than access persons shall submit, in the form prescribed by the Mutual Fund, to the Compliance Officer: a. Details of each of their transactions for purchase or sale of securities including allotment in public and rights issues within 7 calendar days. b. A statement of holding in securities as on March 31 within 30 calendar days from the end of every financial year ending March 31. c. A declaration shall also be included in the reporting form on the li ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... two conditions. 6.9.1.3 In case the Scheme / Plan(s) does not have a minimum of 20 investors in the stipulated period, the provisions of Regulation Regulation 39(2)(c) of the SEBI (MF) Regulations, 1996 would become applicable automatically without any reference from SEBI and accordingly the Scheme / Plan(s) shall be wound up and the units would be redeemed at applicable NAV. 6.9.1.4 If there is a breach of the 25% 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. 6.9.1.5 The two conditions mentioned above shall also be complied within each subsequent calendar quarter thereafter, on an average basis, as specified by SEBI. 6.9.1.6 The Fund shall adhere to the requirements prescribed by SEBI from time to time in this regard. 6.9.2 Applicability for a Close end ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Circular No. Cir/IMD/DF/15/2014 dated June 20, 2014 6.10.1 It has been observed that many debt oriented schemes are operating with a very low AUM. In the interest of investors, it is important that debt oriented schemes have an adequate corpus to ensure adherence to the investment objectives as stated in Scheme Information Document and compliance with investment restrictions specified under SEBI (Mutual Funds) Regulations, 1996. 6.10.2 In this regard, it has been decided that: a) The minimum subscription amount of debt oriented and balanced schemes at the time of new fund offer shall be at least 20 crore and that of other schemes shall be at least 10 crore. b) An average AUM of 20 crore on half yearly rolling basis shall be maintained for open ended debt oriented schemes. c) The existing open ended debt oriented schemes shall comply with point (b) stated above within one year from the date of issue of this circular. d) In case of breach of points (b) and (c) above, the AMC shall scale up the AUM of such scheme within a period of six months so as to comply with point (b) stated above, failing which the provisions of Regulation 39 (2) (c) of SEBI (Mutual Funds) Re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he date of inception of the fund. The benchmark TRI values are available from June 30, 1999. The calculation of a composite benchmark performance return in CAGR terms would be as given below: The aforesaid is explained with an example: Example: Consolidated Benchmark CAGR (PRI and TRI) Date Benchmark PRI values Benchmark TRI values 02/08/1995 1007.57 30/06/1999 1187.70 1256.38 30/11/2017 10226.55 13966.58 CAGR 12.20% Thus, in the above example (for advertisements in the month of December, 2017 the last of the preceding month would be November 30, 2017), CAGR= [(1187.70/1007.57)*(13966.58/1256.38) ^ (1/22.3452)]-1 [1 year= 365x days] CAGR= 12.20% (iii) Mutual funds shall use the composite CAGR as explained above, subject to making the following disclosure: *As TRI data is not available since inception of the scheme, benchmark performance is calculated using composite CAGR of X ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ructure, including increases and decreases of capital and preferred stock issuances. 6.21.3 Stock option plans and other management compensation issues; 6.21.4 Social and corporate responsibility issues. 6.21.5 Appointment and Removal of Directors. 6.21.6 Any other issue that may affect the interest of the shareholders in general and interest of the unit-holders in particular. 6.22 AMCs shall be required to record and disclose specific rationale supporting their voting decision (for, against or abstain) with respect to each vote proposal SEBI Circular No. CIR/IMD/DF/05/2014 dated March 24, 2014 . 6.23 AMCs shall additionally be required to publish summary of the votes cast across all its investee company and its break-up in terms of total number of votes cast in favor, against or abstained from. 6.24 AMCs shall be required to make disclosure of votes cast on their website (in spreadsheet format) on a quarterly basis, within 10 working days from the end of the quarter. Further, AMCs shall continue disclosing voting details in their annual report. The votes cast by the Mutual Funds may be given in the revised format For formats, please refer to chapter on Fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o.2/46603/05 dated August 10, 2005. Further, in this regard, circulars issued by SEBI from time to time may be considered 7.3.1 Mutual Funds are not permitted to operate in the securities market without furnishing a valid Unique Client Code (UCC). SEBI Circular No. SMDRP/Policy/Cir-39/2001 dated July 18, 2001. Mutual Funds are required to obtain UCC from the Bombay Stock Exchange Ltd. (BSE) or The National Stock Exchange Ltd. (NSE) whenever a new scheme(s) or plan(s) (wherever the portfolio of the plans is different) is launched SEBI Circular No. SEBI/IMD/CIR No.01/1756/04 dated January 27, 2004. Such UCC should be obtained before commencing the trading on behalf of the scheme(s)/plan(s). At the time of entering an order, the UCC pertaining to the parent Mutual Fund shall be provided and the allocation to individual schemes shall be done in the post closing session. SEBI Circular No. MRD/DoP/SE/Cir-35/2004 dated October 26, 2004. The UCC can be shared with the unit holders to facilitate tax benefits linked to payment of Securities Transaction Tax (STT). 7.4 Trading in Exchange Traded Derivatives Contracts SEBI Circular No. DNPD/Cir-29/2005 dated September 14 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7.5 Trading in Interest Rate Derivatives SEBI Circular No. SEBI/MFD/CIR No.03/158/03 dated June 10, 2003. 7.5.1 Mutual Fund schemes are permitted to undertake transactions in Forward Rate Agreements and Interest Rate Swaps with banks, PDs FIs as per applicable RBI Guidelines RBI Circular dated November 1, 1999., mutual funds can also trade in interest rate derivatives through the Stock Exchanges subject to requisite disclosures in the SID SEBI Circular No. SEBI/MFD/CIR No.03/158/03 dated June 10, 2003. 7.5.2 The following position limits SEBI Circular No. CIR/MRD/DRMNP/26/2014 dated September 15, 2014 in IRF shall be applicable for Mutual Fund level and scheme level: a. Mutual Funds shall have position limits as applicable to trading members presently. b. Schemes of Mutual Funds shall have position limits as applicable to clients presently. 7.6 Transactions of mutual funds in Government Securities in dematerialised form SEBI Circular No. MFD/CIR/05/432/2002 dated June 20, 2002 7.6.1 According to Regulation Regulation 44(1A) of SEBI (Mutual Funds) Regulations, 1996 , the Mutual Funds having an aggregate of securities worth ₹ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ective website, AMFI website and Scheme Information Documents, etc. 8.1.6 In case the NAVs are not available before the commencement of business hours on the following day due to any reason, Mutual Funds shall issue a press release giving reasons for the delay and explain when they would be able to publish the NAVs SEBI Circular No. SEBI/IMD/CIR No.5/63714/06 dated March 29, 2006. 8.2 Rounding off NAVs SEBI Circular No. MFD/CIR/08/514/2002 dated July 22, 2002, SEBI Circular No. MFD/CIR/11/16159/2002 dated August 22, 2002. 8.2.1 To ensure uniformity, Mutual Funds shall round off NAV up to four decimal places for index funds and all types of debt liquid/money market schemes. 8.2.2 For all equity oriented and balanced fund schemes, Mutual Funds shall round off NAVs up to two decimal places. However, Mutual Funds can round off the NAVs up to more than two decimal places in case of equity oriented and balanced fund schemes also, if they so desire SEBI Circular No. MFD/CIR/11/16159/2002 dated August 22, 2002. Relevant disclosure in this regard shall be made in the SID/SAI SEBI Circular No. MFD/CIR/08/514/2002 dated July 22, 2002. 8.3 Uniform Cut off Ti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for such purchase: a. where the application is received upto 2.00 p.m. on a day and funds are available for utilization before the cut-off time without availing any credit facility, whether, intra-day or otherwise the closing NAV of the day immediately preceding the day of receipt of application; b. where the application is received after 2.00 p.m. on a day and funds are available for utilization on the same day without availing any credit facility, whether, intra-day or otherwise the closing NAV of the day immediately preceding the next business day ; and c. irrespective of the time of receipt of application, where the funds are not available for utilization before the cut-off time without availing any credit facility, whether, intra-day or otherwise the closing NAV of the day immediately preceding the day on which the funds are available for utilization. 8.3.5.2 For allotment of units in respect of purchase in liquid schemes, it shall be ensured that: a. Application is received before the applicable cut-off time. b. Funds for the entire amount of subscription/purchase as per the application are credited to the bank account of the respective liquid schemes ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on par at the place where it is received closing NAV of day on which the cheque or demand draft is credited. In respect of purchase of units of mutual fund schemes (other than liquid schemes), the closing NAV of the day on which the funds are available for utilization shall be applicable for application amount equal to or more than ₹ 2 lakh, irrespective of the time of receipt of such application SEBI Circular No. CIR/IMD/DF/21/2012 dated September 13, 2012. 8.3.6.3 For allotment of units in respect of purchase in income/debt oriented mutual fund schemes/plans other than liquid schemes, it shall be ensured that SEBI Circular No SEBI/IMD/DF/15/2010 dated November 26, 2010 : 8.3.6.3.1 Application is received before the applicable cut-off time (3 pm). 8.3.6.3.2 Funds for the entire amount of subscription/purchase as per the application are credited to the bank account of the respective schemes before the cut-off time (3 pm). 8.3.6.3.3 The funds are available for utilization before the cut-off time (3 pm) without availing any credit facility whether intra-day or otherwise, by the respective scheme. 8.3.6.4 For allotment of units in respect of switch-in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Half Yearly Trustee Reports For Trustee report, please refer to the section on formats . 8.3.9.2 The Half Yearly Trustee Reports shall contain a declaration on whether the Trustees are satisfied with the systems and procedures of the Mutual Fund designed for the purpose of compliance with these Guidelines. 8.3.9.3 Further, the substance of these Guidelines shall be disclosed to investors in the SID or in any addendum thereto. 8.3.9.4 Encumbrance of the scheme property SEBI Circular No SEBI/IMD/DF/15/2010 dated November 26, 2010 Regulations Fourth Schedule of Securities and Exchange Board of India (Mutual Funds) Regulations, 1996 provides that the AMC shall not acquire any of the assets out of the scheme property which involves the assumption of any liability which is unlimited or which may result in encumbrance of the scheme property in any way. AMC s are advised to strictly adhere to the said provision. 8.4 Requirements with respect to time stamping machines [pursuant to Clause 8(3)] 8.4.1 For every machine, running serial number shall be stamped from the first number to the last number as per its capacity before repetition of the cycle. 8. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eamline the calculation of sale and repurchase price of mutual fund units Regulation 49(3) of the SEBI (Mutual Funds) Regulations, 1996., 8.5.1.2 To avoid variation in the amounts payable to investors and/or number of units allotted to them, and 8.5.1.3 To make the calculations more comprehensible to the investors. 8.5.2 Exit loads shall be charged as a percentage of the NAV i.e. applicable load as a percentage of NAV will be subtracted from the NAV to calculate the repurchase price. 8.5.3 The formula for the same is as follows: 8.5.3.1 Sale Price = Applicable NAV 8.5.3.2 Repurchase Price = Applicable NAV *(1 Exit Load, if any) CHAPTER 9 VALUATION 9.1 Definitions SEBI Circular No. MFD/CIR/8/92/2000 dated September 18, 2000, SEBI Circular No. MFD/CIR/14/088/2001 dated March 28, 2001 and SEBI Circular No. MFD/CIR/14/442/2002 dated February 20, 2002. 9.1.1 Non Traded Securities SEBI Circular No. MFD/CIR/8/92/2000 dated September 18, 2000. 9.1.1.1 When a security (other than Government Securities) is not traded on any Stock Exchange for a period of thirty days prior to the valuation date, the scrip shall be treated as a non tra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e at which it was traded on the principal Stock Exchange or any other Stock Exchange, as the case may be, on the earliest previous day may be used provided such date is not more than fifteen days prior to valuation date. When a debt security (other than Government Securities) is purchased by way of private placement, the value at which it was bought may be used for a period of fifteen days beginning from the date of purchase. 9.2.2 Non-Traded /and/or Thinly Traded Securities: SEBI Circular No. MFD/CIR/8/92/2000 dated September 18, 2000. 9.2.2.1 AMCs shall value non traded and/or thinly traded securities in good faith based on the Valuation norms prescribed below: 9.2.3 Non-traded/ and/or thinly traded equity securities: 9.2.3.1 Based on the latest available Balance Sheet, Net Worth shall be calculated as follows: a. Net Worth per share = [Share Capital+ Reserves (excluding Revaluation Reserves) Miscellaneous expenditure and Debit Balance in Profit and Loss Account] / Number of Paid up Shares. b. Average Capitalization rate (P/E ratio) for the industry based upon either BSE or NSE data (which shall be followed consistently and changes, if any, noted wit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n day they shall be valued on amortization basis. It is further clarified that in case of floating rate securities with floor and caps on coupon rate and residual maturity of up to 60 days then those shall be valued on amortization basis taking the coupon rate as floor. b. Valuation of money market and debt securities with residual maturity of over 602 SEBI Circular No. Cir/IMD/DF/6/2012 dated February 28, 2012 days: 1. All money market and debt securities, including floating rate securities, with residual maturity of over 60 days shall be valued at weighted average price at which they are traded on the particular valuation day. When such securities are not traded on a particular valuation day they shall be valued at benchmark yield/ matrix of spread over risk free benchmark yield obtained from agency (ies) entrusted for the said purpose by AMFI. 2. The approach in valuation of non traded debt securities is based on the concept of using spreads over the benchmark rate to arrive at the yields for pricing the non traded security. 3. The Yields for pricing the non traded debt security would be arrived at using the process as defined below. Step 1: A Risk Free Benchm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vestment grade. The matrices are dynamic and the spreads will be computed every week. The matrix will be built for all duration buckets for which the benchmark GOI matrix is built to effectively link the corporate matrix with the GOI securities matrix. Accordingly: a. All traded paper (with minimum traded value of ₹ 1 crore) will be classified by their ratings and grouped into 7 duration buckets; for rated securities, the most conservative publicly available rating will be used; b. For each rating category, average volume weighted yield will be obtained both from trades on the appropriate stock exchange and from the primary market issuances c. Where there are no secondary trades on the appropriate stock exchange in a particular rating category and no primary market issuances during the fortnight under consideration, then trades on appropriate stock exchange during the 30 day period prior to the benchmark date will be considered for computing the average YTM for such rating category; d. If the matrix cannot be populated using any or all of the above steps, then credit spreads from trades on appropriate stock exchange of the relevant rating category over the AAA tra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es, the yields would be marked up by adding discretionary discount as under: Category Discretionary discount Unrated instruments with duration upto 2 years Discretionary discount of upto +50 bps over and above mandatory discount of +50 bps Unrated instruments with duration over 2 years Discretionary discount of upto +50 bps over and above mandatory discount of +25 bps 2. The benchmark yield/ matrix of spreads over risk free benchmark yield obtained from any agency suggested by AMFI, must be applied for valuation of securities on the day of release of such bench mark yield/ matrix of spreads by the aforesaid agency. SEBI Circular No. MFD/CIR/14/442/2002 dated February 20, 2002. 9.3.3.2 Chief Executive Officer (whatever his designation may be) of the AMC shall give prior approval to the use of discretionary mark up or down limit. 9.4 Valuation of securities with Put/Call Options: SEBI Circular No. MFD/CIR/8/92/2000 dated September 18, 2000. 9.4.1 The option embedded securities would be valued as follows: 9.4.1.1 Securities with cal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o the prescribed limits would not be applicable and at all time the excess over 15% or 20% shall be assigned nil value 9.6.1 Aggregate value of illiquid securities under a scheme, which are defined as non-traded, thinly traded and unlisted equity shares, shall not exceed 15 per cent of the total assets of the scheme and any illiquid securities held above 15 per cent of the total assets shall be assigned zero value. 9.6.2 All Mutual Funds shall disclose as on March 31 and September 30 the scheme wise total illiquid securities in value and percentage of the net assets while disclosing Half Yearly Portfolios to the unit holders. In the list of investments, an asterisk mark shall be given against all such investments which are recognised as illiquid securities. 9.6.3 Mutual Funds shall not be allowed to transfer illiquid securities among their schemes. 9.7 Guidelines for Identification and Provisioning for Non-Performing Assets (Debt Securities) SEBI Circular No. MFD/CIR/8/92/2000 dated September 18, 2000. 9.7.1 Definition of a Non Performing Asset (NPA) 9.7.1.1 An asset shall be classified as NPA if the interest and/or principal amount have not been rec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... date of interest i.e. 6 months from the date of classification of the asset as NPA. c. Another 20 percent of the book value of the assets shall be provided for after 12 months past due date of interest i.e. 9 months from the date of classification of the asset as NPA. d. Another 25 percent of the book value of the assets shall be provided for after 15 months past due date of interest i.e. 12 months from the date of classification of the asset as NPA. e. The balance 25 percent of the book value of the asset shall be provided for after 18 months past due date of the interest i.e. 15 months from the date of classification of the assets as NPA. 9.7.4.3 Book value for the purpose of provisioning for NPAs shall be taken as a value determined as per the prescribed valuation method. 9.7.4.4 This can be explained by an illustration: a. Let us consider that interest income is due on a half yearly basis and the due date falls on 30.06.2000 and the interest is not received till 1st quarter after due date i.e. 30.09.2000. The provisioning will be done in the following phased manner: 10% provision 01.01.2001 6 months past due d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ereafter on accrual basis. The asset will be continued to be classified as NPA for these two quarters. b. During this period of two quarters although the asset is classified as NPA no provision needs to be made for the principal if the same is not due and outstanding. c. If part payment is received towards principal, the asset continues to be classified as NPA and provisions are continued as per the norms set at 9.7.4 above any excess provision will be written back. 9.7.7 Classification of Deep Discount Bonds as NPAs 9.7.7.1 Investments in Deep Discount Bonds can be classified as NPAs, if any two of the following conditions are satisfied: a. If the rating of the Bond comes down to Grade BB (or its equivalent) or below b. If the company is defaulting in their commitments in respect of other assets, if available. c. Full Net worth erosion. 9.7.7.2 Provision should be made as per the norms set at 9.7.4 above as soon as the asset is classified as NPA. 9.7.7.3 Full provision can be made if the rating comes down to Grade D (or its equivalent). 9.7.8 Reschedulement of an asset 9.7.8.1 In case a company defaults in payment of either interest or prin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e sheet, Net Worth shall be calculated as the lower of item (1) and (2) below: 1. Net Worth per share = [Share Capital + Free Reserves (excluding revaluation reserves) - Miscellaneous expenditure not written off or deferred revenue expenditure, intangible assets and accumulated losses] / Number of Paid up Shares. 2. After taking into account the outstanding warrants and options, Net Worth per share shall again be calculated and shall be = [Share Capital + consideration on exercise of Option and/or Warrants received/receivable by the Company + Free Reserves (excluding Revaluation Reserves) - Miscellaneous expenditure not written off or deferred revenue expenditure, intangible assets and accumulated losses] / Number of Paid up Shares plus Number of Shares that would be obtained on conversion and/or exercise of Outstanding Warrants and Options. 3. The lower of (1) and (2) above shall be used for calculation of Net Worth per share and for further calculation in (c) below. b. Average capitalisation rate (P/E ratio) for the industry based upon either BSE or NSE data (which shall be followed consistently and changes, if any, noted with proper justification thereof) shall be ta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nvestments in their periodical meetings SEBI Circular No. MFD/CIR/6/73/2000 dated July 27, 2000.. 9.8.4 Reporting of Compliance 9.8.4.1 Comments on compliance of these Guidelines shall be indicated by the AMCs and Trustees in their CTRs For CTR format please refer to the section on formats and Half Yearly Reports For Half Yearly Reports, please refer to the section on formats filed with the Board. 9.9 Valuation of securities not covered under the current valuation policy SEBI/IMD/CIR No.16/193388/2010 dated February 02, 2010 and Cir/IMD/DF/4/2010 dated June 21, 2010 : 9.9.1 In case of securities purchased by mutual funds do not fall within the current framework of the valuation of securities then such mutual fund shall report immediately to AMFI regarding the same. Further, at the time of investment AMCs shall ensure that the total exposure in such securities does not exceed 5% of the total AUM of the scheme. 9.9.2 AMFI has been advised that the valuation agencies should ensure that the valuation of such securities gets covered in the valuation framework within six weeks from the date of receipt of such intimation from mutual fund. 9.9.3 In the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 13, 2012. can be charged up to 30 basis points on daily net assets of the scheme as per Regulation 52 Regulation 52 of the Mutual Funds Regulations,1996 , if the new inflows from beyond top 30 cities SEBI Circular No. SEBI/HO/IMD/DF2/CIR/P/2018/16 dated February 02, 2018. are at least (a) 30% of gross new inflows in the scheme or (b) 15% of the average assets under management (year to date) of the scheme, whichever is higher. In case inflows from beyond top 30 cities is less than the higher of (a) or (b) above, additional TER on daily net assets of the scheme shall be charged as follows: Daily net assets X 30 basis points X New inflows from beyond top 30 cities 365* X Higher of (a) or (b) above * 366, wherever applicable. The top 30 cities shall mean top 30 cities based on Association of Mutual Funds in India (AMFI) data on AUM by Geography Consolidated Data for Mutual Fund Industry as at the end of the previous financial year. 10.1.3 The additional TER on account of inflows from beyond top 30 cities so charged shall be clawed back in case the same is redeemed within a period of 1 year from the date of investment. Accordingly, Annexure A1 mention ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ffecting such change. Provided that any decrease in TER in a mutual fund scheme due to various regulatory requirements, would not require issuance of any prior notice to the investors. 10.1.6 SEBI Circular No. SEBI/HO/IMD/DF2/CIR/P/2018/18 dated February 05, 2018 The above change in the base TER in comparison to previous base TER charged to the scheme shall be intimated to the Board of Directors of AMC along with the rationale recorded in writing. 10.1.7 The changes in TER shall also be placed before the Trustees on quarterly basis alongwith rationale for such changes. 10.1.8 Mutual funds/AMCs shall make complete disclosures in the half yearly report of Trustees to SEBI regarding the efforts undertaken by them to increase geographical penetration of mutual funds and the details of opening of new branches, especially at locations beyond top 30 cities. 10.1.9 Brokerage and transaction cost SEBI Circular No. CIR/IMD/DF/21/2012 dated September 13, 2012 SEBI Circular No. CIR/IMD/DF/24/2012 dated November 19, 2012. incurred for the purpose of execution of trade may be capitalized to the extent of 12bps and 5bps for cash market transactions and derivatives transa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ents for increasing awareness of Mutual Funds shall be limited to the amounts that are aggregated by Mutual Funds at industry level for the purpose of conducting investor education and awareness initiatives, in terms of clause F of SEBI circular dated September 13, 2012. iii. Prior approval of SEBI shall be required for issuance of any endorsement of Mutual Funds as a financial product, which features a celebrity for the purpose of increasing awareness of Mutual Funds 10.1.12 The following expenses cannot be charged to the schemes of Mutual Funds: (a) Penalties and fines for infraction of laws. (b) Interest on delayed payment to the unit holders. (c) Legal, marketing, publication and other general expenses not attributable to any scheme(s). (d) Fund Accounting Fees. (e) Expenses on investment management/general management. (f) Expenses on general administration, corporate advertising and infrastructure costs. (g) Depreciation on fixed assets and software development expenses. (h) Such other costs as may be prohibited by the Board. 10.1.13 The expenditure and/or fee payable by Mutual Funds to the Depositories may either be capitalized or included as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5 Service tax on brokerage and transaction cost SEBI Circular No. CIR/ IMD/ DF/ 24/2012 dated November 19, 2012 paid for execution of trade, if any, shall be within the limit prescribed under regulation 52 of the Regulations. 10.4 Empowering investors through transparency in payment of commission and load structure SEBI Circular No SEBI/IMD/CIR No. 4/ 168230/09 dated June 30, 2009 10.4.1 In order to empower investors in deciding the commission paid to distributors in accordance with the level of service received, it has been mandated that: (a) There shall be no entry load Waiver of load for direct applications - Vide SEBI Circular No. SEBI/IMD/CIR No.10/112153/07 dated December 31, 2007,SEBI mandated w.e.f January 4,2009 no entry load shall be charged for applications received directly by the AMC(s) through internet or submitted directly to the AMC(s) or Collection Center/Investor Service Centre and not routed through any distributor or agent or broker. This waiver was applicable to both additional purchases under the same folio and switch in to a scheme from other schemes also done directly by the investor. AMCs shall follow the provisions pertaining to info ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tember 13, 2012 . 10.4.3 The AMCs are required to bring the contents of these guidelines to the notice of their distributors and monitor compliance. 10.5 Transaction Charges SEBI Circular no. CIR/IMD/DF/13/2011 dated August 22, 2011 10.5.1 A transaction charge per subscription of ₹ 10,000/- and above be allowed to be paid to the distributors of the Mutual Fund products. However, there shall be no transaction charges on direct investments. The transaction charge shall be subject to the following: (a) For existing investors in a Mutual Fund, the distributor may be paid ₹ 100/- as transaction charge per subscription of ₹ 10,000/- and above. (b) As an incentive to attract new investors, the distributor may be paid ₹ 150/- as transaction charge for a first time investor in Mutual Funds. (c) The terms and conditions relating to transaction charge shall be part of the application form in bold print. (d) The transaction charge, if any, shall be deducted by the AMC from the subscription amount and paid to the distributor; and the balance shall be invested. (e) The statement of account shall clearly state that the net investment as gross ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... charging exit loads, no distinction among unit holders should be made based on the amount of subscription SEBI Circular No. SEBI / IMD / CIR No. 6 /172445/ 2009 dated August 7,2009 All Mutual Funds shall ensure compliance with this circular on or before August 24, 2009 . While complying with the same, Mutual Funds should ensure that any imposition or enhancement in the load shall be applicable on prospective investments only. SEBI Circular No - SEBI / IMD / CIR No. 7 /173650 / 2009 dated August 17, 2009 and SEBI circular No. SEBI/IMD/CIR No. 5/126096/08 dated May 23, 2008 (clause 16 of the standard observations) 10.8.2 Further, the parity among all classes of unit holders in terms of charging exit load shall be made applicable at the portfolio level. SEBI Circular No - SEBI / IMD / CIR No. 7 /173650 / 2009 dated August 17,2009 CHAPTER 11 DIVIDEND DISTRIBUTION PROCEDURE SEBI Circular No. SEBI/IMD/CIR No.1/64057/06 dated April 4, 2006. , For details on advertisement on dividend please refer to Chapter on Advertisements 11.1 Regulations Regulation 53(a) of the SEBI (Mutual Funds) Regulations, 1996 permit Mutual Funds to distribute returns ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on. 11.3 Non availability of Unit Premium Reserve for dividend distribution SEBI circular No. SEBI/IMD/CIR No 18 / 198647 /2010 dated March 15, 2010 11.3.1 Regulations Ninth and Eleventh Schedule of SEBI (Mutual Funds) Regulations, 1996 provide the accounting policies to be followed for determining distributable surplus and accounting the sale and repurchase of units in the books of the Mutual Fund. The format for Scheme Balance Sheet (including Abridged) provides for disclosure of Unit Premium Reserve. 11.3.2 Unit Premium Reserve, which is part of the sales price of units that is not attributable to realized gains, cannot be used to pay dividend. Therefore: 11.3.2.1 When units of an open-ended scheme are sold, and sale price is higher than face value of the unit, part of sale proceeds that represents unrealized gains shall be credited to a separate account (Unit Premium Reserve) and shall be treated at par with unit capital and the same shall not be utilized for the determination of distributable surplus. 11.3.2.2 When units of an open-ended scheme are sold, and sale price is less than face value of the unit, the difference between the sale price and face ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n one payout then the maturity of the securities shall be calculated on the basis of weighted average maturity of security. b. In case of securities with put and call options (daily or otherwise) the residual maturity of the securities shall not be greater than 91 days w.e.f May 01, 2009. c. In case the maturity of the security falls on a non-business day then settlement of securities will take place on the next business day. 12.2.2 The above requirements shall be disclosed in the SID and shall form part of the investment allocation pattern. Any deviation from these requirements shall be viewed as violation of investment restrictions. 12.3 Investments by close ended debt schemes: 12.3.1 Close ended debt schemes shall invest only in such securities which mature on or before the date of the maturity of the scheme SEBI Circular No IMD/CIR No 12/147132/08 dated December 11, 2008. 12.4 Prudential limits and disclosures on portfolio concentration risk in debt oriented mutual fund schemes SEBI Circular No. CIR/IMD/ DF/ 21/ 2012 dated September 13, 2012 and SEBI Circular No. CIR/IMD/DF/24/2012 dated November 19, 2012 SEBI/ HO/ IMD/ DF2/CIR/P/2016/35 dated Fe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ting mutual fund schemes shall comply with the revised investment restrictions at issuer level, sector level and group level within a period of one year from the date of issue of this circular (i.e. February 15, 2016). Existing close ended schemes shall not be required to sell their investments to comply with the restrictions. However, if existing close ended schemes sell their investments then their fresh investments shall be subject to the restrictions. 12.5 Stock Lending Scheme SEBI Circular No MFD/CIR/01/047/99 dated February 10, 1999. 12.5.1 The following guidelines are issued to facilitate lending of securities by Mutual Funds through intermediaries approved by the Board in accordance with the Stock Lending Borrowing Scheme. Regulation 44(4) of the SEBI (Mutual Funds) Regulations, 1996. 12.5.2 Disclosure Requirements 12.5.2.1 The following information shall be disclosed in the SID to enable the investors and unit holders to take an informed decision: a. Intention to lend securities belonging to a particular Mutual Fund scheme in accordance with the guidelines on securities lending and borrowing scheme issued by SEBI from time to time. SEBI Circu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pplicable. Clauses 10 and 11, Seventh Schedule of SEBI (Mutual Funds), Regulations, 1996. 12.8 Investment limits for Government guaranteed debt securities SEBI Circular No. SEBI/IMD/CIR No.8/18944/03 dated October 6, 2003. 12.8.1 Prudential investment norms as per Regulations stipulating limits for investments in debt securities Clauses 1 and 1A, Seventh Schedule of SEBI (Mutual Funds), Regulations, 1996. issued by a single issuer are applicable to all debt securities issued by public bodies or institutions such as electricity boards, municipal corporations, state transport corporations etc. guaranteed by either State / Central Government. Government securities issued by Central and/or State Government or on its behalf, by the RBI are however exempt from these limits. 12.9 Investment Restrictions for Securitised Debt SEBI Circular No. SEBI/IMD/CIR No.6/63715/06 dated March 29, 2006. 12.9.1 For investments made in Securitised Debt (mortgage backed securities and asset backed securities), restrictions as per Clause 1 of Seventh Schedule Clause I of Schedule VII of SEBI (Mutual Fund), Regulations, 1996 shall not apply at the originator level. 12 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r the investment especially comparisons with interest rates offered by other scheduled commercial banks. SEBI Circular No. SEBI/IMD/CIR No.9/20306/03 dated November 12, 2003. 12.10.1.10 Except for clause (12.10.1.7) the above guidelines shall not apply to term deposits placed as margins for trading in cash and derivatives market SEBI Circular No. SEBI/IMD/Cir No.7/129592/08 dated June 23, 2008.. However, duration of such term deposits shall be disclosed in the Half Yearly Portfolio SEBI Circular No. SEBI/IMD/Cir No.7/129592/08 dated June 23, 2008 . 12.11 Reconciliation Procedure for Investment in Government Securities SEBI Circular No. MFD/CIR/19/22474/2002 dated November 20, 2002. 12.11.1 According to the RBI guidelines RBI Circular No. P.D.O.SGL.CIRR/1945/2002-2003 dated November 1, 2002. issued to all SGL account holders, to make transactions in government securities transparent, a monthly reconciliation system has been introduced between RBI and Mutual Funds maintaining SGL/CSGL accounts with respect to Government Securities on an ongoing basis. 12.11.2 Mutual Funds shall reconcile the balances reported in the monthly statements furnished by RBI ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urities, including details of counterparties, amount involved and percentage of NAV shall be disclosed to investors in the half yearly portfolio statements and to SEBI in the half yearly trustee report. 12.12.1.8 To enable the investors in the mutual fund schemes to take an informed decision, the concerned Scheme Information Document shall disclose the following: a. The intention to participate in repo transactions in corporate debt securities in accordance with directions issued by RBI and SEBI from time to time; b. The exposure limit for the scheme; and c. The risk factors associated with repo transactions in corporate bonds 12.13 Overseas Investment SEBI Circular No. SEBI/IMD/CIR No.7/104753/07 dated September 26, 2007 SEBI Circular No. SEBI/IMD/CIR No.2/122577/08 dated April 8, 2008. 12.13.1 Applicable limits: 12.13.1.1 Aggregate ceiling for overseas investments is US $ 7 billion SEBI Circular No. SEBI/IMD/CIR No.2/122577/08 dated April 8, 2008. and within this overall limit, Mutual Funds can make overseas investments subject to a maximum of US $ 300 million per Mutual Fund. 12.13.1.2 Aggregate ceiling for investment by Mutual Funds in over ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Board of the AMC and Trustees may prescribe detailed parameters for making such investments which may include identification of countries, country rating, country limits etc. They shall satisfy themselves that the AMC has experienced key personnel, research facilities and infrastructure for making such investments. Other specialized agencies and service providers associated with such investments e.g. custodian, bank, advisors etc. shall also have adequate expertise and infrastructure facilities. Their past track record of performance and regulatory compliance record, if they are registered with foreign regulators, should also be considered. Necessary agreements may be entered into with them as required. 12.13.3.3 Mandatory Disclosure Requirements for Mutual Fund schemes proposing overseas investments: a. Intention to invest in foreign securities and/or ETF(s) shall be disclosed in the SID. The attendant risk factors and returns ensuing from such investments shall be explained clearly in the SID. Mutual Funds shall also disclose as to how such investments will help in the furtherance of the investment objectives of the scheme(s). Such disclosures shall be in a language compr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fer their comments on the compliance of these guidelines in the Half Yearly Reports filed with the Board. 12.13.3.8 Prudential Investment Norms: a. Investment restrictions specified in Schedule Seven of the Mutual Funds Regulations are applicable to overseas investments stipulated under paragraph 12.13.2.1- 12.13.2.10 b. However, Clause 4 of the Seventh Schedule of the Mutual Funds Regulations that restricts investments in Mutual Fund units up to 5% of net assets and prohibits charging of fees, shall not be applicable to investments in Mutual Funds in foreign countries made in accordance with these Guidelines. c. Management fees and other expenses charged by the Mutual Funds in foreign countries along with the management fee and recurring expenses charged to the domestic Mutual Fund scheme shall not exceed the total limits on expenses as prescribed under Regulation 52(6) of the Mutual Funds Regulations. Where the scheme is investing only a part of the net assets in overseas Mutual Funds, the same principle shall be applicable for that part of investment. Details of calculation for charging such expenses shall be reported to the Board of the AMC and the Trustees and sh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... investment decision which will indicate data, facts and opinion leading to that decision. While broad parameters for investments can be prescribed by the Board of Directors of the AMC, the basis for taking individual scrip wise investment decision in equity and debt securities shall be recorded. A detailed research report analyzing various factors for each investment decision taken for the first time shall be maintained and the reasons for subsequent purchase and sales in the same scrip shall also be recorded. The contents of the research reports may be decided by the AMC(s) and the Trustees. 12.17.2 The Board of the AMC shall develop a mechanism to verify that due diligence is being exercised while making investment decisions especially in cases of investment in unlisted and privately placed securities, unrated debt securities, NPAs, transactions where associates are involved and instances where the performance of the scheme(s) is poor. 12.17.3 AMC(s) shall report compliance with these requirements in their periodical reports to the Trustees and the Trustees shall report the same to the Board in the Half Yearly Trustee Reports For Half Yearly Trustee Report please refer t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7/109 dated September 27, 2017 To reduce interest rate risk in a debt portfolio, mutual funds may hedge the portfolio or part of the portfolio (including one or more securities) on weighted average modified duration basis by using Interest Rate Futures (IRFs).The maximum extent of short position that may be taken in IRFs to hedge interest rate risk of the portfolio or part of the portfolio, is as per the formula given below: (Portfolio Modified Duration * Market Value of the Portfolio) (Futures Modified Duration * Futures Price / PAR) b. In case the IRF used for hedging the interest rate risk has different underlying security(s) than the existing position being hedged, it would result in imperfect hedging. c. Imperfect hedging using IRFs may be considered to be exempted from the gross exposure, upto maximum of 20% of the net assets of the scheme, subject to the following: i. Exposure to IRFs is created only for hedging the interest rate risk based on the weighted average modified duration of the bond portfolio or part of the portfolio. ii. Mutual Funds are permitted to resort to imperfect hedging, without it being considered under the gross exposure limits, if a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of exit load. The risks associated with imperfect hedging shall be disclosed and explained by suitable numerical examples in the offer documents and also needs to be communicated to the investors through public notice or any other form of correspondence. ii. In case of new schemes, the risks associated with imperfect hedging shall be disclosed and explained by suitable numerical examples in the offer documents 12.18.2 Definition of Exposure in case of Derivative Positions 12.18.2.1 Each position taken in derivatives shall have an associated exposure as defined under. Exposure is the maximum possible loss that may occur on a position. However, certain derivative positions may theoretically have unlimited possible loss. Exposure in derivative positions shall be computed as follows: Position Exposure Long Future Futures Price * Lot Size * Number of Contracts Short Future Futures Price * Lot Size * Number of Contracts Option bought Option Premium Paid * Lot Size * Number of Contracts. 12.18.2.2 The provisions ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tted to buy credit protection only to hedge their credit risk on corporate bonds they hold. They shall not be allowed to sell protection and hence not permitted to enter into short positions in the CDS contracts. However, they shall be permitted to exit their bought CDS positions, subject to para (d) below. b. Mutual funds can participate as users in CDS for the eligible securities as reference obligations, constituting from within the portfolio of only Fixed Maturity Plans (FMP) schemes having tenor exceeding one year. c. Mutual funds shall buy CDS only from a market maker approved by the RBI and enter into Master Agreement with the counterparty as stipulated under RBI Guidelines. Exposure to a single counterparty in CDS transactions shall not exceed 10% of the net assets of the scheme. d. The cumulative gross exposure through credit default swap in corporate bonds along with equity, debt and derivative positions shall not exceed 100% of the net assets of the scheme. e. The total exposure related to premium paid for all derivative positions, including CDS, shall not exceed 20% of the net assets of the scheme. f. Before undertaking CDS transactions, mutual funds shal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ded further that such person is not registered with SEBI as Foreign Institutional Investor or Sub-account. Explanation- For the purposes of this clause: (1) the term Person shall carry the same meaning under Section 2(31) of the Income Tax Act, 1961 (2) the phrase resident in India shall carry the same meaning as in the Income Tax Act, 1961 (3) resident in a country, other than India, shall mean resident as per the direct tax laws of that country. 13.2.2 MF shall ensure that only QFIs who comply with para 13.2.1 are allowed to invest under these routes. 13.2.3 MF shall ensure that QFIs meet the KYC requirements as per the FATF standards, Prevention of Money Laundering Act, 2002 (PMLA) rules and regulations made thereunder, and SEBI circulars issued in this regard before accepting subscriptions from QFIs. 13.2.4 The aggregate investments by QFIs under both the routes shall be subject to a total overall ceiling of US $10 billion for equity schemes. 13.2.5 In addition to the above, the aggregate investments by QFIs under both the routes for debt schemes which invest in infrastructure ( Infrastructure as defined under the extant ECB guidelines issued by R ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Investments/ transfer/ withdrawals and switches are not available to the QFIs. QFIs can only subscribe or redeem. 13.2.12 MF/ DP shall ensure that units/ UCRs held by QFIs are free from all encumbrances i.e. pledge or lien cannot be created for such units. 13.2.13 MF shall comply with all the requirements as per the PMLA, FATF standards and SEBI circulars issued in this regard on an ongoing basis. 13.2.14 MF shall ensure that all the investor related documents/ records of the QFIs are available with them. 13.2.15 MF shall ensure compliance with laws (rules and regulations) of the jurisdictions where the QFIs are based and also ensure that the interest of existing unit holders of the MF schemes are not adversely affected due to the issuance of UCRs/ demat units to the QFIs. 13.2.16 In case of any penalty, pending litigations or proceedings, findings of Inspections or investigations for which action may have been taken or is in the process of being taken by an overseas regulator against MF/ AMC, it shall bring such information to the attention of SEBI and unitholders of the concerned scheme. 13.2.17 MF shall be responsible for the deduction of applicable tax at sou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onvertible) directly to the single rupee pool bank account of the DP maintained with a designated AD category - I bank. b. DP in turn shall forward the purchase order to the concerned MF and remits the money to the MF s scheme account on the same day as the receipt of funds from QFIs. In case of receipt of money after business hours, DP shall remit the funds to MF scheme account by next business day. c. If for any reasons, the DP is not able to remit the money to the MF scheme account within the stipulated timeframe as mentioned in para-b, the DP shall immediately return the money to the designated overseas bank account of the QFIs. d. MF shall process the order and credit units into the demat account of the QFIs. e. If for any reasons the units are not allotted, MF / DP shall ensure that the money is remitted back to the QFI s designated overseas bank account within 3 working days from the date of receipt of subscription of money in the single rupee pool bank account of the DP maintained with a designated AD category I bank. Redemption f. QFIs can redeem, either through Delivery Instruction (physical/ electronic) or any another mode prescribed by the Depositori ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... atures are not retained post-merger may also be made available on request with adequate disclaimer. 13.3.8.3 This Circular shall be applicable with effect from May 01, 2018. 13.4 Other conditions for Indirect route (Unit Confirmation Receipts) 13.4.1 There shall be four parties involved - QFIs, UCR issuer (based overseas), SEBI registered Custodian (based in India) and MF. 13.4.2 QFIs can subscribe / redeem only through the UCR Issuer. 13.4.3 MF shall appoint one or more UCR issuing agent overseas and one SEBI registered custodian in India. 13.4.4 UCR issuer appointed by MF shall act as agent of the MF. 13.4.5 MF can appoint entities fulfilling the following conditions as UCR issuer: a. The entity is able to demonstrate that it has proven track record, expertise and technology in the business of issuance of global depository receipts/global custody agency b. The entity is registered with an overseas securities market/ banking regulator. 13.4.6 MF shall seek no objection from SEBI before appointing any UCR issuer and furnish the details and information sought by SEBI about the UCR issuer. SEBI reserves the right to seek additional information / clarif ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the QFIs. d. In case of dividend payout, the MF shall transfer the dividend amounts to the MF overseas bank account for making payment to the designated overseas bank account of the QFIs. In case MF receives money in India from UCR issuer. e. UCR issuer shall forward the purchase order to MF and Custodian, and remit the funds into MF scheme account (in rupee terms). Upon receipt of funds; the MF shall issue units to the custodian and custodian shall in turn confirm to the UCR Issuer to issue UCR to the QFIs. f. In case of redemption, UCR issuer shall confirm receipt of redemption request to the MF Custodian. Upon receipt of instruction, MF shall process and remit redemption proceeds to the UCR issuer which in turn shall remit redemption proceeds to the designated bank account of the QFIs. g. In case of dividend payout, the MF shall remit the dividend amount proceeds to the UCR issuer which in turn shall remit the dividend amount to the designated bank account of the QFIs. 13.5 The investment by the QFIs in MF equity and debt schemes under this scheme shall also be subject to the relevant and extant FEMA regulations and guidelines issued by the Reserve Bank of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l period of the information being published in the advertisement, the same should be disclosed in a footnote 14.3.2 When a scheme has been in existence for more than 1 year but less than 3 years or 5 years, the same shall be mentioned as a footnote in the performance advertisement of the Mutual Fund scheme 14.3.3 Where the scheme has been in existence for less than one year, past performance shall not be provided SEBI Circular No.Cir/IMD/DF/13/2011 dated August 22, 2011 . 14.3.4 In case of Money Market schemes or cash and liquid schemes SEBI Circular No.Cir/IMD/DF/6/2012 dated February 28, 2012 , wherein investors have very short investment horizon, the performance can be advertised by simple annualisation of yields if a performance figure is available for at least 7 days, 15 days and 30 days provided it does not reflect an unrealistic or misleading picture of the performance or future performance of the scheme. 14.3.5 For the sake of standardization, a similar return in INR and by way of CAGR must be shown for the following apart from the scheme benchmarks: Scheme Type Benchmark Equity Scheme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rcular No. IMD/CIR No. 14/1510/2009 dated January 19, 2009 14.4.1 Mutual Funds shall not offer any indicative portfolio and indicative yield. No communication regarding the same in any manner whatsoever shall be issued by any Mutual Fund or distributors of its products. The compliance of the same shall be monitored by the AMC and Trustees and reported in their respective reports to SEBI. 14.4.2 Indicative portfolio or yield in close ended debt oriented mutual fund schemes SEBI Circular No. CIR/IMD/DF/12/2011 dated August 01,2011 Mutual Funds (MFs) / AMCs may make following additional disclosures in the SID/SAI and KIM without indicating the portfolio or yield, directly or indirectly: 14.4.2.1 MFs/AMCs shall disclose their credit evaluation policy for the investments in debt securities. 14.4.2.2 MFs/AMCs shall also disclose the list of sectors they would not be investing. 14.4.2.3 MFs shall disclose the type of instruments which the schemes propose to invest viz. CPs, CDs, Treasury bills etc 14.4.2.4 MFs shall disclose the floors and ceilings within a range of 5% of the intended allocation (in %) against each sub asset class/credit rating. For example, i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 000 SEBI/HO/IMD/DF2/CIR/P/2016/37 dated February 25, 2016 15.2.1 The unclaimed redemption and dividend amounts, that were earlier allowed to be deployed only in call money market or money market instruments, shall also be allowed to be invested in a separate plan of Liquid scheme / Money Market Mutual Fund scheme floated by Mutual Funds specifically for deployment of the unclaimed amounts. 15.2.2 AMCs shall not be permitted to charge any exit load in this plan and TER (Total Expense Ratio) of such plan shall be capped at 50 bps. 15.2.3 Further, for the Unclaimed redemption and dividend amounts deployed by Mutual Funds in Call Money Market or Money Market instruments, the investment management and advisory fee charged by the AMC for managing unclaimed amounts shall not exceed 50 basis points. 15.2.4 Investors who claim the unclaimed amounts during a period of three years from the due date shall be paid initial unclaimed amount along-with the income earned on its deployment. Investors, who claim these amounts after 3 years, shall be paid initial unclaimed amount along-with the income earned on its deployment till the end of the third year. After the third year, the in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he date of receipt of the request from the unitholders. 15.3.2 Consolidated Account Statement SEBI Circular No. Cir/IMD/DF/16/2011 dated September 08, 2011 15.3.2.1 As per regulation Regulation 36(4) of SEBI (Mutual Funds) Regulations, 1996 , AMCs shall issue consolidated account statement for each calendar month to the investors in whose folios transaction(s) has/have taken place during that month. 15.3.2.2 Pursuant to the Interim Budget announcement in 2014 to create one record for all financial assets of every individual, it has been further decided that AMCs/ RTAs shall share the requisite information with the Depositories on monthly basis to enable generation of CAS SEBI Circular No CIR/MRD/ DP/ 31/2014 dated November 12, 2014 . 15.3.2.3 The depositories and the Asset Management Companies (AMCs)/ MF-RTAs shall put in place systems to facilitate generation and dispatch of single Consolidated Account Statements (CAS) for investors having MF investments and holding demat accounts. AMCs/ RTAs shall share the requisite information with the Depositories on monthly basis to enable generation of CAS. 15.3.2.4 Consolidation of account statement shall be done ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... all utilize the shared data only for the purpose of providing CAS and shall not share the same with their Depository participants. Where Depositories are required to share such information with unregulated entities like third party printers, the depositories shall enter into necessary data confidentiality agreements with them. 15.3.2.10 The CAS shall be implemented from the month of March 2015 with respect to the transactions carried out during the month of February 2015. 15.3.2.11 If an investor does not wish to receive CAS, an option shall be given to the investor to indicate negative consent. Depositories shall accordingly inform investors in their statements from the month of January 2015 about the facility of CAS and give them information on how to opt out of the facility if they do not wish to avail it. 15.3.2.12 Where such an option is exercised, the concerned depository shall inform the AMC/MF-RTA accordingly and the data with respect to the said investor shall not be shared by the AMC/MF-RTA with the depository. 15.3.2.13 If there is any transaction in any of the demat accounts of the investor or in any of his mutual fund folios, then CAS shall be sent to that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... half-yearly CAS shall be issued to all MF investors, excluding those investors who do not have any holdings in MF schemes and where no commission against their investment has been paid to distributors, during the concerned half-year period. d. Further, an indicative format Please refer to section on Formats for requisite formats providing guidance on the key components which shall be reflected in half-yearly CAS may be referred. 15.3.3 Systematic Investment Plan (SIP) or Systematic Transfer Plan (STP) or Systematic Withdrawal Plan (SWP) SEBI Circular No. IMD/CIR/12/80083/2006 dated November 20, 2006 a. Mutual Funds may dispatch the Statement of Accounts to the unit holders under SIP or STP or SWP, once every quarter ending March, June, September and December within 10 working days of the end of the respective quarter. The first Statement of Accounts shall however be issued within 10 working days of the initial transaction. b. Mutual funds shall also provide Statement of Accounts to unit holders within 5 working days, without any charges, if specific requests are received from the investors. Further, if so mandated, a soft copy of the Statement of Accounts sha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al mode of payment through Applications Supported by Blocked Amount (hereinafter referred to as ASBA ) in Mutual Funds SEBI Circular No. SEBI/IMD/CIR No 18 / 198647 /2010 dated March 15, 2010 15.7.1 ASBA facility which investors have been enjoying for subscription to public issue of equity capital of companies has been extended to the investors subscribing to New Fund Offers (NFOs) of mutual fund schemes. It shall co-exist with the current process, wherein cheques/ demand drafts are used as a mode of payment. 15.7.2 The banks which are in SEBI s list shall extend the same facility in case of NFOs of mutual fund schemes to all eligible investors in Mutual Fund units. 15.7.3 Mutual Funds shall ensure that adequate arrangements are made by Registrar and Transfer Agents for the implementation of ASBA. Mutual Funds/AMCs shall make all relevant disclosures in this regard in the SAI. 15.7.4 SEBI circulars SEBI Circular No. SEBI/CFD/DIL/DIP/31/2008/30/7 dated July 30, 2008, SEBI/CFD/DIL/2008/25/09dated September 25, 2008, SEBI/CFD/DIL/MB/IS/5/2009/05/08 dated August 5, 2009 and SEBI/CFD/DIL/ASBA/1/2009/30/12 dated December 30, 2009 and CIR/CFD/DIL/7/2010 dated July 13, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... i. AMCs shall make appropriate disclosures in the scheme related documents about IAF and ensure that no mis-selling is done on the pretext of instant availability of funds to the investors. ii. Appropriate disclosures shall be made to the investors mentioning the scenarios under which IAF may be suspended and that IAF request would be processed as a normal redemption request in such circumstances. e. Approvals and Controls i. MFs/ AMCs shall offer IAF only after obtaining approvals from the AMC Board and the Trustees and keep in place adequate safeguards in the system to implement this facility. ii. IAF shall also be considered while carrying out stress testing of the schemes. 15.8.2 Use of e-wallet for investment in MFs 15.8.2.1 With an objective to promote digitalization, MFs/AMCs can accept investment by an investor through e-wallets (Prepaid Payment Instruments (PPIs)) subject to the following: a. MFs/ AMCs shall ensure that extant regulations such as cut-off timings, time stamping, etc., are complied with for investment in MFs using e-wallets. b. MFs/ AMCs shall enter into an agreement / arrangement with issuers of PPIs for facilitating payment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... same is also available at our website www.sebi.gov.in under the Mutual Funds section. 15.11.2 AMCs are advised to circulate copies of the brochure among their distributors and agents (including brokers, banks, post offices) and the investors. 15.11.3 AMCs may publish the same as small booklets. In such a case, while the booklets must bear SEBI name and logo, AMC may give their name as publisher. This may also be displayed prominently on their web sites 15.11.4 AMFI may consider including the brochure as a part of study material for their training programmes for investors and for their certification programme conducted for agents and distributors. 15.11.5 Board may be kept informed about the steps taken by the AMCs in this regard from time to time. 15.12 Financial Inclusion: 15.12.1 In context of Mutual Funds, financial inclusion implies that the concept of Mutual Fund products is understood by all and are accessible to anyone who wishes to make an investment in them. Also, investors should be capable of figuring out which Mutual Fund scheme is appropriate for their financial objectives. Towards this, it has been decided that: a. Mutual Funds shall mandator ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... due diligence process of distributors. SEBI Circular No. Cir/IMD/DF/7/2012 dated February 28, 2012 16.4.1.2 The due diligence process shall be initially applicable for distributors satisfying one or more of the following criteria: a. Multiple point presence (More than 20 locations) b. AUM raised over ₹ 100 Crore across industry in the non-institutional category but including high net worth individuals (HNIs) c. Commission received of over ₹ 1 Crore p.a. across industry d. Commission received of over ₹ 50 Lakh from a single Mutual Fund 16.4.1.3 At the time of empaneling distributors and during the period i.e. review process, Mutual Funds/AMCs shall undertake a due diligence process to satisfy fit and proper criteria that incorporate, amongst others, the following factors: a. Business model, experience and proficiency in the business. b. Record of regulatory / statutory levies, fines and penalties, legal suits, customer compensations made; causes for these and resultant corrective actions taken. c. Review of associates and subsidiaries on above factors. d. Organizational controls to ensure that the following processes are delinked ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onship management process, servicing standards, enquiry / grievance handling mechanism. f. Internal/ external audit processes, their comments / observations as it relates to MF distribution business. g. Findings of ongoing review from sample survey of investors. 16.4.1.6 Mutual Funds/AMCs may implement additional measures as deemed appropriate to help achieve greater investor protection. 16.5 Code of Conduct: 16.5.1 Mutual Funds are required to monitor the activities of their distributors, agents, brokers to ensure that they do not indulge in any malpractice or unethical practice while selling or marketing Mutual Funds units. Any non compliance with the Mutual Funds Regulations and Guidelines pertaining to Mutual Funds especially guidelines on advertisements and/ or sales literature and/or Code of Conduct shall be reported in the periodic meetings of the Board of the AMC and the Trustee(s) and shall also be reported to the Board by the AMC(s) in their CTR(s) and by the Trustees in their Half Yearly Reports. 16.5.2 AMFI has prescribed a Code of Conduct for Mutual Fund intermediaries enclosed herewith as Annexure 1 Refer Annexure and Reports for details on Cod ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... NISM from time to time. 16.7.3 The Certification Regulations require the persons referred to in paragraph 16.7.1 above to comply with the requirements for CPE as specified by NISM within the validity period of the certificate obtained by passing the certification examination. However, to facilitate the transition process from AMFI to NISM, it has been decided that a person holding a valid AMFI certification whose validity expires between June 01, 2010 and December 31, 2010, would be required to comply with the CPE requirements as laid down by NISM under the relevant clauses of the Certification Regulations, by December 31, 2010. 16.7.4 An associated person holding a valid AMFI/NISM certification whose validity expires anytime after December 31, 2010, would be required to comply with the CPE requirements as laid down by NISM under the relevant clauses of the Certification Regulations, prior to the expiry of the validity of the certification. 16.7.5 The requirement of obtaining registration from AMFI after obtaining certification, as per the Circular dated November 28, 2002, would continue. 16.8 New cadre of distributors SEBI Circular No. CIR/IMD/DF/21/2012 dated Sept ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cially younger generation prefers online transactions. Therefore, it has been decided that all Mutual Funds should enhance the online investment facility and tap the internet savvy users to invest in Mutual Funds by providing an online investment facility on their websites. Mutual Funds also need to tap the burgeoning mobile-only internet users for direct distribution of Mutual Fund products. 16.10 Unique Identity Number 16.10.1 AMFI shall create a unique identity number of the employee/ relationship manager/ sales person of the distributor interacting with the investor for the sale of mutual fund products, in addition to the AMFI Registration Number (ARN) of the distributor. 16.10.2 The application form for mutual fund schemes shall have provision for disclosing the unique identity number of such sales personnel along with the ARN of distributor. CHAPTER 17 TRANSACTION IN MUTUAL FUNDS UNITS 17.1 Maintenance of documents SEBI Circular No - SEBI/IMD/CIR No.12 /186868 /2009 dated December 11,2009 17.1.1 As per the requirements specified by Board in respect of Anti Money Laundering (AML) Standards/Combating Financing of Terrorism (CFT) / Obligatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation of the investor related documents including account opening documents, PAN, KYC, PoA (if applicable), specimen signature by November 15, 2010. 17.1.5.3 The trustees shall submit a confirmation after they receive certification from an Independent auditor on completion of the said process latest by November 22, 2010. 17.2 Facilitating transactions in Mutual Fund schemes through the Stock Exchange infrastructure SEBI Circular No - SEBI /IMD / CIR No.11/183204/ 2009 dated November 13,2009 17.2.1 Stock Exchange terminals can be used for facilitating transactions in mutual fund schemes. The Stock Exchange mechanism would also extend the present convenience available to secondary market investors to mutual fund investors. 17.2.2 Units of mutual fund schemes may be permitted to be transacted through registered stock brokers of recognized stock exchanges and such stock brokers will be eligible to be considered as official points of acceptance SEBI Circular No. SEBI/IMD/CIR No.11/78450/06 dated October 11, 2006 . 17.2.3 The respective stock exchange would provide detailed operating guidelines to facilitate the same. 17.2.4 In this regard, Mutual Funds/AMC a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ository participants (DPs) to facilitate the same. 17.2.4.6 Option to hold units in demat form SEBI circular no. CIR/IMD/DF/9/2011, dated May 19, 2011 b. Mutual Funds/AMCs are advised to invariably provide an option to the investors to mention demat account details in the subscription form, in case they desire to hold units in demat form while subscribing to any scheme (open ended/close ended/Interval). c. Mutual Funds/AMCs shall ensure that above mentioned option is provided to the investors in all their schemes (existing and new). d. Mutual Funds/AMCs are advised to obtain ISIN for each option of the scheme and quote the respective ISIN along with the name of the scheme, in all Statement of Account/Common Account Statement (CAS) issued to the investors. 17.2.4.7 Know your client (KYC) a. Where investor desires to hold units in dematerialised form, the KYC performed by DP in terms of SEBI requirements SEBI Circular No - MRD/DoP/Dep/Cir-29/2004 dated August 24, 2004 would be considered compliance with applicable requirements specified in this regard SEBI Circular No - ISD/AML/CIR-1/2008 dated December 19, 2008 by Mutual Funds/AMCs. b. The Mutual ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... learing members and Depository participants as well. b. Stock exchanges and Depositories shall provide investor grievance handling mechanism to the extent they relate to disputes between their respective regulated entity and their client and shall also monitor the compliance of code of conduct specified SEBI Circulars MFD/CIR/20/23230/02 dated November 28, 2002 and SEBI/IMD/08/174648/2009 dated August 27, 2009 regarding empanelment and code of conduct for intermediaries of Mutual Funds. 17.2.4.12 The respective stock exchanges and Depositories would provide detailed operating guidelines to facilitate the above and ensure that timelines prescribed SEBI (Mutual Funds) Regulations, 1996 shall be adhered to with regard to allotment of units and receipt of redemption proceeds at the investor s level. 17.2.4.13 Transferability of Mutual Fund units SEBI Circular No - CIR/IMD/DF/10/2010 dated August 18, 2010 a. Regulations Regulation 37(1) of SEBI (Mutual Fund) Regulations, 1996 states that a unit unless otherwise restricted or prohibited under the scheme, shall be freely transferable by act of parties or by operation of law. The spirit and intention of this ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pplications online. For registration of mutual funds the SEBI Intermediary Portal shall include online application for registration, processing of application, grant of in-principle approval, grant of final registration etc. Link for SEBI Intermediary Portal is also available on SEBI website - www.sebi.gov.in. 18.1.2. SEBI Intermediary Portal for application of registration of Mutual Funds shall be made operational from June 01, 2017. Thereafter, all applications for registration of Mutual Fund shall be made through SEBI Intermediary Portal only. 18.1.3. The applicants will be separately required to submit relevant documents viz. declarations/ undertakings required as a part of application form prescribed in relevant regulations, in physical form only for records, without impacting the online processing of applications for registration. 18.1.4. In case of any queries and clarifications with regard to the SEBI Intermediary Portal, intermediaries may contact on 022-26449364 or may write at portalhelp@sebi.gov.in. 18.2 Clarification SEBI Circular No.Cir/IMD/DF/7/2012 dated February 28, 2012 to Regulation 24 Of SEBI (Mutual Funds) Regulations, 1996 18.2.1 The a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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