Securities and Exchange Board of India
CHIEF GENERAL MANAGER
MUTUAL FUNDS DEPARTMENT
SEBI/MFD/CIR No. 2/6855/2003
April 4, 2003
All Mutual Funds Registered with SEBI
Unit Trust of India
Association of Mutual Funds in India (AMFI)
Dear Sirs,
Guidelines for Investments in Foreign Securities by Mutual Funds
Please refer to SEBI circulars MFD/CIR/17/419/02 dated March 30, 2002 and MFD/CIR/18/21826/2002 dated November 7, 2002 pertaining to investment by mutual funds in foreign securities.
Government has now decided to allow mutual funds to invest in equity of listed overseas companies. Subsequently, RBI has also written to SEBI in this regard.
In the light of the above, the mutual funds can now make investments in equity of listed overseas companies which have a shareholding of at least 10% in an Indian company listed on a recognised stock exchange in India (as on January 31 of the year of investment). The overall cap for the entire mutual funds industry to invest in ADRs/GDRs issued by Indian companies and foreign equity and debt securities, would be US $1 billion.
Accordingly, it has been decided to permit each mutual fund to invest up to 10% of their net assets as on January 31, 2003 for investment in foreign securities. However, the limit of a minimum of US$ 5 million and a maximum of US$ 50 million for each mutual fund irrespective of the size of the assets as specified in SEBI circular MFD/CIR/18/21826/2002 dated November 7, 2002 remains unchanged.
Apart from applicability of SEBI (Mutual Funds) Regulations, 1996 and guidelines issued from time to time, the specific guidelines as prescribed in SEBI circular MFD/CIR/17/419/02 dated March 30, 2002 pertaining to 1. Due Diligence 2. Disclosure Requirements 3.Investment by Existing schemes 4. Reporting to Trustees 5. Review of performance, and 6. Reporting to SEBI, shall also be applicable for investment in equity of listed overseas companies.
The mutual funds which have already received approvals from Exchange Control Department of RBI may approach them once again for enhancement of the limits for making investment in foreign securities. Other mutual funds who have not applied to SEBI so far and desire to invest in foreign securities may forward their applications to SEBI in line with the aforesaid SEBI circular dated March 30, 2002.
These guidelines are being issued in accordance with the provisions of Regulation 77 of SEBI (Mutual Funds) Regulations, 1996.
Yours faithfully,
P.K.NAGPAL
