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TMI BlogReview of norms regarding investment in debt instruments with special features, and the valuation of perpetual bonds.X X X X Extracts X X X X X X X X Extracts X X X X ..... (AMFI) Sir / Madam, Subject: Review of norms regarding investment in debt instruments with special features, and the valuation of perpetual bonds. A. Review of Norms of Investment in Instruments having Special Features 1. Mutual Funds invest in certain debt instruments with special features viz. subordination to equity (absorbs losses before equity capital) and /or convertible to equity upon t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a. more than 10% of its NAV of the debt portfolio of the scheme in such instruments; and b. more than 5% of its NAV of the debt portfolio of the scheme in such instruments issued by a single issuer. The above investment limit for a mutual fund scheme shall be within the overall limit for debt instruments issued by a single issuer, as specified at clause 1 of the Seventh Schedule of SEBI (Mutua ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... portfolio in the existing schemes shall be subject to compliance with Regulation 18(15A) of SEBI (Mutual Funds) Regulations, 1996. 5. If the said instrument is to be written off or converted to equity pursuant to any proposal, the date of said proposal may be treated as the trigger date. However, if the said instruments are written off or converted to equity without proposal, the date of write o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ger date onwards. C. Valuation of Perpetual Bonds 8. As regards the valuation of bonds with call and/or put options, it is clarified that the bonds shall be valued in line with the SEBI circular No. MRD/CIR/8/92/2000 dated September 18, 2000 irrespective of the nature of issuer. Further, the maturity of all perpetual bonds shall be treated as 100 years from the date of issuance of the bond for t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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