CHIEF GENERAL MANAGER
INVESTMENT MANAGEMENT DEPARTMENT
September 26, 2005
All Mutual Funds Registered with SEBI
Association of Mutual Funds in India (AMFI)
Re: Investment in ADRs/GDRs/foreign securities by Mutual Funds
1.Please refer to SEBI Circulars MFD/CIR No.4/052/99 dated September 1, 1999, MFD/CIR No.5/062/99 dated September 30, 1999, MFD/CIR/17/419/02 dated March 30, 2002, MFD/CIR/18/21826/2002 dated November 7, 2002, SEBI/MFD/CIR No.02/6855/03 dated April 4, 2003 and SEBI/MFD/CIR No.07/5573/04 dated March 19, 2004 pertaining to investment by mutual funds in ADRs/GDRs/foreign securities.
2. It has now been decided that in mutual fund schemes, where disclosure pertaining to investment in ADRs/GDRs/foreign securities has not been made in the offer document, then in such cases prior to investment in ADRs/GDRs /foreign securities for the first time, the AMC shall ensure that a written communication about the proposed investment is sent to each unitholder and an advertisement is given in one English daily newspaper having nationwide circulation as well as in a newspaper published in the language of the region where the Head Office of the mutual fund is situated. The communication to unitholders shall also disclose the risk factors associated with such investments. However this provision will not be applicable to existing mutual fund schemes where relevant disclosure regarding investing in ADRs/GDRs/foreign securities has already been made.
3. All other conditions specified in the above mentioned circulars remain unchanged.
4. These guidelines are 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.