CHIEF GENERAL MANAGER
MUTUAL FUNDS DEPARTMENT
MFD/CIR No. 22 / 2311 /03
January 30, 2003
All Mutual Funds registered with SEBI Unit Trust of India – I
Associatio of Mutual Funds in India
Dear Sirs,
Conversion of Close-ended Schemes to Open-ended Schemes
According to Regulation 33(3) of SEBI (Mutual Funds) Regulations 1996, the units of a close ended scheme may be converted to open ended scheme, if the offer document of such scheme discloses the option and the period of such conversion or the unitholders are provided with an option to redeem their units in full.
As you are aware, SEBI has been insisting on complying with certain disclosure requirements in case of conversion of close ended schemes to open ended schemes so that the investors may take well informed decisions. Though the requirements for conversion from close ended to open ended have been clearly enumerated in the aforementioned regulation, the entire procedure would entail time to comply. It has come to our notice that often mutual funds approach SEBI very late and consequently are left with very little time to comply with the requirements. Therefore, the following requirements are being clarified once again in the interests of investors of the mutual funds:
A draft of the communication to unitholders shall be submitted to SEBI which shall include the following:
(i) the latest portfolio of the scheme in the format prescribed for half yearly disclosures as per SEBI Circular MFD/CIR/9/120/2000 dated November 24, 2000,
(ii) the details of financial performance of the scheme since inception in the manner prescribed under the Standard Offer Document along with comparison with appropriate benchmarks,
(iii) the addendum to the offer document detailing the modifications (if any) made to the scheme.
1. Since the scheme would re-open for fresh subscriptions, the disclosures contained in the offer document of the scheme shall be revised and updated. A copy of the draft offer document shall be filed with SEBI in line with the requirement under Regulation 28(1) along with the filing fees prescribed under Regulation 28(2). The instructions prescribed for filing of offer documents under SEBI Circulars IIMARP/MF/CIR/06/793/98 dated March 31, 1998, F/CIR/12/109/2000 dated February 22, 2000 and MFD/CIR/06/275/2001 dated July 09, 2001 shall also be followed.
SEBI would communicate its observations, if any, within the time period prescribed under Regulation 29(3). The letter to unitholders and offer document 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.
1. Further, it is advised that the unitholders shall be given a time period of at least 30 days for the purpose of exercising the exit option. The unitholders who opt to redeem their holdings in part or full, shall be allowed to exit at the NAV applicable for the day on which such request is received, during the prescribed period.
These guidelines and clarifications are issued in accordance with the provisions of Regulation 77 of SEBI (Mutual Funds) 1996.
Yours faithfully,
P.K. NAGPAL
