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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:−