Consolidation of Schemes - SEBI - SEBI/MFD/CIR No. 05 / 12031 /03

CHIEF GENERAL MANAGER MUTUAL FUNDS DEPARTMENT SEBI/MFD/CIR No. 05 / 12031 /03 June 23, 2003 All Mutual Funds registered with SEBI Association of Mutual Funds in India (AMFI) Dear Sirs, Consolidation of Schemes We have been receiving proposals from mutual funds for merger or consolidation of schemes. For the information of all mutual funds, it is clarified that such consolidations shall be viewed as changes in fundamental attributes of the related schemes and the mutual funds shall comply with the requirements laid down in the SEBI (Mutual Funds) Regulations, 1996, for the purpose. Further, with a view to ensure that all important disclosures are made to the investors of the concerned schemes and their interests are protected in such cases, the mutual funds shall take the following steps: Approval by Boards of AMCs and Trustees The proposal and modalities of the merger or consolidation of schemes shall be approved by the Boards of the AMC and Trustees after their ensuring that the interests of the unitholders of all concerned schemes have been protected. Disclosures After approval by the Boards of AMCs and Trustees, the mutual funds shall file such proposals with SEBI, alongwith the draft offer document and requisite fees in case a new scheme emerges after merger or consolidation and the draft letter to the unitholders, in line with the procedural requirements prescribed vide SEBI Circular No. MFD/CIR No. 22/2311/03 dated January 30, 2003. The letter to the unitholders, giving them option to exit at prevailing NAV without exit load, shall disclose all relevant information enabling them to take well informed decisions, including information on the following aspects: (i) information on the investment objective, asset allocation and the main features of the new consolidated scheme (ii) basis of allocation of new units by way of a numerical illustration (iii) percentage of total NPAs and percentage of total illiquid assets to net assets of the individual schemes as well as in the consolidated scheme (iv) the tax impact of the consolidation of schemes on the unitholders (v) any other disclosures as specified by trustees (vi) any other disclosures as directed by SEBI Maintenance of Records The AMCs shall maintain records of dispatch of the letters to the unitholders giving them the option to exit at prevailing NAVs without exit loads and the responses received from them. A report in this regard giving information on total number of unitholders in the schemes and their net assets, number of unitholders who opted to exit and net assets held by them, and number of unitholders and net assets in the consolidated scheme, shall be filed with SEBI. These clarifications and guidelines are issued in accordance with the provisions of Regulation 77 of SEBI (Mutual Funds) Regulations, 1996. Yours faithfully, P.K. Nagpal