INVESTMENT OBJECTIVES AND

VALUATION POLICIES

SAPNALI S. PAGI25-2010

43-INVESTMENT OBJECTIVE

Securities Money market instruments

Securitised Debt

Instruments

Privately Placed

Debentures

Real Estate Assets Gold

A Mutual fund may invest money collected under any of its schemes on

Money shall be invested only in transferable securities in the money market

Accordance with regulation 49E

RBI

Mutual fund shall

not borrow

except to meet

temporary liquidity

needs

•More than 20 per cent of the net asset of the scheme •not exceed a period of six months

44-INVESTMENT ,BORROWING ,RESTRICTIONS ETC

Investment under regulation 43 shall be subject to the investment restriction specified in the seventh schedule

aggregate securities

worth Rs. 10 crores or

more, shall be in only

through

dematerialised Form

Shall not advance any loan

lend and borrow securities in accordance

gold exchange traded fund scheme

invested funds accordance with its investment objective

Invest pending

deployment of

funds in short-

term deposits of

scheduled

commercial banks

45-CARRY FORWARD TRANSACTIONS, DERIVATIVES TRANSACTIONS AND SHORT SELLING TRANSACTIONS

Shall not in any manner be used in carry forward transactions

Enter into derivative transaction on a recognised stock exchange

Enter into short selling transactions on a recognized stockExchange

Framework specified by the Board

Enter into underwriting agreement

SEBI(underwriters)

rule

SEBI (underwriters )regulation

1993

46-UNDERWRITING OF SECURITIES

Underwriting obligation will be deemed as if investments are made in such securities

Capital adequacy norms for the purpose of underwriting shall be the net asset of the scheme

Mutual fund Shall not any time

exceed total net asset of the scheme

Compute and carry out valuation of its investment portfolio

Publish with valuation norms specified in eighth schedule

47-METHOD OF VALUATION OF INVESTMENT

NAV = NET ASSET OF THE SCHEME NO OF UNITS OUTSTANDING

48-COMPUTATION OF NET ASSET VALUE

• NAV = NET ASSET OF THE SCHEME NO OF UNITS OUTSTANDING

published at least in two daily newspapers at intervals of not exceeding one week

Provided NAV is of closed ended scheme

Other than equity linked saving scheme

Calculated on daily basis

At least two newspapers -circulation in India

49-Pricing of units

Price at which the units subscribed or sold shall be made available to the investors

Open-ended scheme, shall at least once a week publish the sale and repurchase price of units

Ensure repurchase price is not lower than 93 % of NAV & sale price is not higher than 107 % of NAV

Shall not be lower then 95% of the NAV

DIFFERENCE SHALL NOT EXCEED 7% ON SALE PRICE

CHAPTER VI A

49A-REAL ESTATE MUTUAL FUND SCHEMES

i) located within India in a city

ii) on which construction is complete and which is usable

(iii) which is evidenced by valid title documents

(iv) which is legally transferable

(v) which is not subject matter of any litigation

49 A Definitions

(a) “real estate asset” means an identifiable immovable property-

But does not include

I. a project under construction

II. vacant land

III. deserted property

IV. land specified for agricultural use

V. a property which is reserved or attached by any Government

(b) “real estate valuer”

Qualified valuer of real estate

assets who has been accredited

by a credit rating agency

registered with the board.

49B. Applicability

• (1) Provisions apply to real estate mutual fund schemes.

(2) All other provisions of the regulation and guidelines used there under shall apply • To real estate mutual fund schemes• And trustees •And asset management companies in relation to such schemes

49C .Additional eligibility criteria

carrying on business in real estate for over 5 years

Certificate of registration granted to applicant proposing to launch only real estate mutual fund schemes if he

A real estate mutual fund scheme of a mutual fund registered

shall not invest in the securities unless it has key personnel having adequate professional experience in financial services.

An existing mutual fund may launch a real estate mutual fund scheme if

•It has an adequate number of key personnel •And directors having adequate experience in real estate

2) The units issued shall not confer any right to unit holders to use the real estate assets held by the scheme

3) The title deeds shall be kept in safe custody with custodian

4) scheme shall not undertake lending or housing finance activities.

(1) shall be close-ended And units be listed on a recognized stock exchange

49D. Other conditions for real estate mutual fund schemes

(5) All financial transactions of a real estate mutual fund scheme shall be routed through banking channels

49E. Permissible investments

Of the net assets of the scheme directly in real estate assets.

of the net assets of the scheme (I) real estate assets(ii) mortgage backed securities(iii) equity shares or debentures of companies engaged in dealing in real estate assets

in other securities

At least 35%

Atleast 75%

balance

No mutual fund shall, under all its real estate mutual fund schemes invest

net assets in a single city .Unless disclosed in the offer document,.

net assets of any of its schemes in the equity shares or debentures of any unlisted company.

Total issued capital of any unlisted company.

net assets in the real estate assets of any single real estate project(“single real estate project” means a project by a builder in a single location within a city)

Transfer real estate assets amongst its schemes.

Invest in any real estate asset which was owned by the sponsor or the asset management company

more than 30% of

more than 25% of

more than 15% of

more than 15% of

Period of 5 years

49F. Valuation of real estates assets and declaration of net asset value

valued at cost price on the date of acquisition and

At fair price on every 19 day from the day of its purchase

AMC , directors, trustees and real estate valuer •Ensure valuation done in good faith &Accounts of the scheme prepared in accordance with accounting principles

Calculation and declared At the close of each business day on the basis of• The most current valuation of the real estate assets held by the scheme

49G. Duties of asset management company of real estate mutual fund scheme

Appoint suitable number of qualified key personnel

• Ensure cost of maintenance and insurance within reasonable limits

Appoint advisors to advise it on acquisitions

Due care in appointing real estate valuers

Real estate assets held are insured against impair, damage or

destruction

Due diligence in maintenance of the assets of a real estate

mutual fund scheme

Ensure no valuer continues with valuation of particular asset for

more than 2 years

No valuer values the same asset for a period of at least 3 years

thereafter

Record in writing, the details of its decision making process in buying or selling real estate

assets

ensure that investment of funds of the realestate mutual fund scheme is not made contrary to provisions

49H- Usage of real estate assets of a real estate mutual fund scheme

1

The asset management company may let out or lease

out the real estate assets

ease or letting does notextend beyond the period of maturity

of the scheme

diligently collect the rents or other income in a timely manner

Where real estate assets are let out or leased out

2

at market price orotherwise on commercial terms:

not more than 25% of the total rental income of the scheme shall bederived from assets so let out.

Let out to the sponsor or AMC

3

49 I. Duties of trustees

Monitor due diligence of AMC in

managing the investments

Review the market price of units &recommend

proportionate buy back of units from unit holders

Lay down the broad procedure to be followed

by the AMC while transacting in real estate

assets

obtain approval from the recognized stock

exchange(s) where units are proposed to be listed

Ensure that all financial transactions of scheme

made only through banking channels

Ensure that only Permissible

investments are made by AMC

Effectively monitor performance and

functioning

Necessary expertise, internal control systems and risk

management

The trustees shall lay down the broad procedure while

transacting

include a confirmation on compliance with sub

regulation (9) in their half yearly reports

Shall obtain In principle approval

from the recognized stock exchange

(1) The offer documents of real estate mutual fund schemes shall contain disclosures which are adequate for investors to make informed investment decisions

The portfolio disclosures and financial disclosure specified by board

Advertisments shall confirm guidelines specified by board

(49J) Disclosures in offer document and other disclosures

49K.TRANSACTIONS BY EMPLOYEES ETC.

Disclosure of transactions to the compliance officer with in one month

Compliance officer shall make report and suggest recommendation if any

The persons covered in sub-regulation (1) may obtain the views of the trustees before

entering into the transaction in real estate assets,

48 Amendments

in regulation 48, sub-regulation (2) and the proviso shall be substituted withthe following, namely -"(2) The Net Asset Value of the scheme shall be calculated on daily basis andpublished in at least two daily newspapers having circulation all over India.".

43 amendments

in regulation 43, in sub-regulation (1) – (a) in clause (f), for the full stop, the figure and word “ ; or” shall be substituted;

(b) after clause (f), the following new clause shall be inserted, namely:- “(g) infrastructure debt instrument and assets as specified in clause (1) of regulation 49L.”

44 Amendments

• in regulation 44, sub-regulation (3) shall be substituted with the following, namely:-

• “(3) Save as otherwise expressly provided under these regulations, the mutual fund shall not advance any loans for any purpose

47 amendments

• for regulation 47, the following shall be substituted, namely:– “Valuation of investments

• 47. Every mutual fund shall ensure that the asset management company computes and carries out valuation of investments made by its scheme(s) in accordance with the investment valuation norms specified in Eighth Schedule, and publishes the same.”;

Eighth schedule

• in the Eighth Schedule, • (a) in the reference title, the word and number, “regulation 47”

shall be substituted with the word and numbers “regulations 25(19), 47”;

• (b) the words and symbol “Mutual fund shall value its investments according to the following valuation norms:” appearing under the heading “Investment Valuation Norms”, shall be omitted;

• (c) after the heading “Investment Valuation Norms”, the following sub-headings and clauses shall be inserted, namely:−