Securities and Exchange Broad of India
Chief General Manager
Investment Management Department
SEBI/IMD/CIR No. 2/65348/06
April 21, 2006
All Mutual Funds Registered with SEBI
Association of Mutual Funds in India (AMFI)
Dear Sirs,
Re: Introduction of Gold Exchange Traded Funds in India.
As you are aware, SEBI vide circular dated January 24, 2006, issued gazette notification no. S.O. 38(E) dated January 12, 2006 pertaining to SEBI (Mutual Funds) (Amendment) Regulations, 2006 on the captioned matter.
Subsequently, SEBI had received some queries from mutual funds and custodians on certain operational aspects of GETF. The same has been examined and following guidelines are being issued:
1. Valuation
Since physical gold and other permitted instruments linked to gold are denominated in gold tonnage, it will be valued based on the market price of gold in the domestic market and will be marked to market on a daily basis. The market price of gold in the domestic market on any business day would be arrived at as under:
Domestic price of gold = (London Bullion Market Association AM fixing in US$/ounce X conversion factor for converting ounce into kg for 0.995 fineness X rate for US$ into INR) + custom duty for import of gold + sales tax/octroi and other levies applicable.
The Trustees reserve the right to change the source (centre) for determining the exchange rate. The AMC shall record in writing the reason for change in the source for determining the exchange rate.
2. Determination of Net Asset Value
NAV of units under the Scheme shall be calculated as shown below:
Market or Fair Value of Scheme’s investments + Current Assets Minus Current Liabilities and Provision
NAV (Rs.) = _
No of Units outstanding under Scheme on the Valuation Date
The NAV shall be calculated up to four decimals.
3. Recurring Expenses
For a GETF, the limits applicable to equity schemes as specified in regulation 52(6) shall be applicable.
4. Benchmark for GETF:
As there are no indices catering to the gold sector/securities linked to Gold, currently GETF shall be benchmarked against the price of Gold.
Please note that the necessary amendments to SEBI (Mutual Funds) Regulations, 1996 in this regard shall follow.
This circular is issued in exercise of powers conferred under Section 11 (1) of the Securities and Exchange Board of India Act, 1992, read with the provisions of regulation 77 of SEBI (Mutual Funds) Regulations, 1996, to protect the interests of investors in securities and to promote the development of, and to regulate the securities market.
Yours faithfully
(D. Chanda)
