TaxTMI 
TaxTMI 
Securities and Exchange Board of India (Mutual Funds) (Amendment) Regulations, 2008.
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....d" means a fund established in the form of a trust to raise monies through the sale of units to the public or a section of the public under one or more schemes for investing in securities including money market instruments or gold or gold related instruments or real estate assets; (b) after clause (s), the following clause shall be inserted, namely:- "(sa) "real estate mutual fund scheme" means a mutual fund scheme that invests directly or indirectly in real estate assets or other permissible assets in accordance with these regulations;" (ii) in regulation 7, clause (g) shall be substituted with the following namely:- "(g) appointment of custodian in order to keep custody of the securities or gold and gold related instrument or other assets of the mutual fund held in terms of these regulations, and provide such other custodial services as may be authorised by the trustees;" (iii) in regulation 26, in sub-regulation (1), after the existing proviso, the following proviso shall be inserted, namely:- "Provided further that in case of a real estate mutual fund scheme, the title deed of real estate assets held by it may be kept in the custody of a custodian registered with th....
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....ot subject matter of any litigation; but does not include- I. a project under construction; or II. vacant land; or III. deserted property; or IV. land specified for agricultural use; or V. a property which is reserved or attached by any Government or other authority or pursuant to orders of a court of law or the acquisition of which is otherwise prohibited under any law for the time being in force; (b) "real estate valuer" means a qualified valuer of real estate assets who has been accredited by a credit rating agency registered with the Board. Applicability 49B. (1) The provisions of this Chapter shall apply to real estate mutual fund schemes. (2) Unless the context otherwise requires, all other provisions of these regulations and the guidelines and circulars issues thereunder shall apply to real estate mutual fund schemes, and trustees and asset management companies in relation to such schemes, except where specific provisions are made in relation thereto under this Chapter. Additional eligibility criteria 49C (1) A Certificate of registration may be granted under regulation 9 to an applicant proposing to launch only real estate mutual fund schemes if he;- (....
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....nless otherwise disclosed in the offer document, no mutual fund shall, under all its real estate mutual fund schemes, invest more than thirty per cent. of its net assets in a single city. (4) No mutual fund shall, under all its real estate mutual fund schemes, invest more than fifteen per cent. of its net assets in the real estate assets of any single real estate project. Explanation: For the purposes of this regulation, "single real estate project" means a project by a builder in a single location within a city. (5) No mutual fund shall, under all its real estate mutual fund schemes, invest more than twenty five per cent. of the total issued capital of any unlisted company. (6) No mutual fund shall invest more than fifteen per cent of the net assets of any of its real estate mutual fund schemes in the equity shares or debentures of any unlisted company. (7) No real estate mutual fund scheme shall invest in - (a) any unlisted security of the sponsor or its associate or group company ; (b) any listed security issued by way of preferential allotment by the sponsor or its associate or group company; (c) any listed security of the sponsor or its associate or group company, i....
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....tions in cash or unaccounted transactions. (6) The asset management company shall exercise due diligence in maintenance of the assets of a real estate mutual fund scheme and shall ensure that there is no avoidable deterioration in their value. (7) The asset management company shall ensure that the real estate assets held by a real estate mutual fund scheme are adequately insured against impair, damage or destruction. (8) The asset management company shall ensure that the cost of maintenance and insurance of real estate assets is within reasonable limits and that no funds of the scheme are utilized towards development of such assets. (9) The asset management company shall ensure that a real estate valuer certifies compliance with sub-regulation (8) on an annual basis. (10) The asset management company shall ensure that no real estate valuer continues with valuation of particular real estate asset for more than two years and that no such valuer values the same asset for a period of at least three years thereafter. (11) The asset management company shall record in writing, the details of its decision making process in buying or selling real estate assets together with the justif....
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....tems and submit such reports to trustees, as may be necessary for them to effectively monitor the performance and functioning of the real estate mutual fund schemes. (10) The trustees shall include a confirmation on compliance with sub regulation (9) in their half yearly reports made to the Board. Disclosures in offer document and other disclosures 49J. (1) The offer documents of real estate mutual fund schemes shall contain disclosures which are adequate for investors to make informed investment decisions and such further disclosures as may be specified by the Board. (2) The portfolio disclosures and financial results in respect of a real estate mutual fund scheme shall contain such further disclosures as are specified by the Board. (3) Advertisements in respect of real estate mutual fund schemes shall conform to such guidelines as may be specified by the Board. Transactions by employees etc. 49K. (1) All transactions done by the trustees or the employees or directors of the asset management company or the trustee company in real estate assets shall be disclosed by them to the compliance officer within one month of the transaction. (2) The compliance officer shall make a....
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....s can be sold or leased separately, the real estate mutual fund scheme shall account for the portions separately. Initial Recognition 4. A real estate mutual fund scheme shall recognise a real estate asset if : (a) it is probable that the future economic benefits that are associated with the real estate asset will flow to the real estate mutual fund scheme; and (b) the cost of the asset can be measured reliably. 5. A real estate mutual fund scheme shall evaluate all its real estate asset costs including those incurred initially to acquire a real estate asset and those incurred subsequently to add to, replace part of, or service a real estate asset, at the time they are incurred: Provided that a real estate mutual fund scheme shall not recognise in the carrying amount of a real estate asset the costs of the day-to-day servicing of such an asset and such costs shall be recognised in the revenue account as incurred. 6. A real estate mutual fund scheme may acquire parts of real estate assets through replacement. For example, the interior walls may be replacements of original walls. Under the recognition principle, an real estate mutual fund scheme shall recognise in the carry....
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.... the transaction changes as a result of the exchange, and (c) the difference in (a) or (b) is significant relative to the fair value of the assets exchanged. For the purpose of determining whether an exchange transaction has commercial substance, the real estate mutual fund scheme-specific value of the portion of the real estate mutual fund scheme's operations affected by the transaction should reflect post-tax cash flows. The result of these analyses may be clear without an real estate mutual fund scheme having to perform detailed calculations. 12. The fair value of an asset for which comparable market transactions do not exist is reliably measurable if (a) the variability in the range of reasonable fair value estimates is not significant for that asset or (b) the probabilities of the various estimates within the range can be reasonably assessed and used in estimating fair value. If the real estate mutual fund scheme is able to determine reliably the fair value of either the asset received or the asset given up, then the fair value of the asset given up is used to measure cost unless the fair value of the asset received is more clearly evident. Subsequent Measurement 13. Af....
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....market assessments of the uncertainty in the amount and timing of the cash flows. vi. In some cases, the various sources listed in the previous paragraph may suggest different conclusions about the fair value of a real estate asset. The reasons for those differences shall be considered, in order to arrive at the most reliable estimate of fair value within a range of reasonable fair value estimates. vii. (a)Where the fair value of the asset is not reliably determinable on a continuing basis, a real estate mutual fund scheme shall measure that real estate asset at cost as per Accounting Standard (AS) 10, Accounting for Fixed Assets. The residual value of the real estate asset shall be assumed to be zero. The real estate mutual fund scheme shall apply AS 10 until disposal of the investment asset. (b) The fair value of the asset will be considered to not reliably determinable on a continuing basis if the variability in the range of reasonable fair value estimates is large , and the probabilities of the various outcomes difficult to assess, such that the usefulness of a single estimate of fair value is negated. This may be due to infrequent comparable market transactions and alter....
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....for rental income on real estate asset, Accounting Standard (AS) 19, Leases, shall be followed. Such income shall be accrued on a daily basis, till the currency of the lease agreements. 17. Where the rental income receivable by a real estate mutual fund scheme in respect of real estate asset, has accrued but has not been received for the period specified by the Board. Further, provision shall be made by debiting to the revenue account the income so accrued in the manner as may be specified by the Board. Derecognition of Real Estate Asset 18. A real estate mutual fund scheme shall derecognise a real estate asset on disposal or when the asset is permanently withdrawn from use and no future economic benefits are expected from its disposal. 19. In determining the date of disposal for real estate asset by way of sale, a real estate mutual fund scheme shall apply the criteria in Accounting Standard (AS) 9, Revenue Recognition, for recognising revenue from the sale of goods and considers the related guidance in the Appendix to AS 9. 20. Gains or losses arising from the disposal or retirement of real estate asset shall be determined as the difference between the net disposal proceeds....
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....ule; (v) Brief statement of the Board of Trustees on the following aspects, namely:- (a) Liabilities and responsibilities of the Trustees and the Settlor; (b) Investment objective of each scheme; (c) Basis and policy of investment underlying the scheme; (d) If the scheme permits investment partly or wholly in shares, bonds, debentures, real estate asset and other scrips or securities whose value can fluctuate, a statement on the following lines: "The price and redemption value of the units, and income from them, can go up as well as down with the fluctuations in the market value of its underlying investments in securities or fair value in underlying real estate asset, as the case may be;" (e) Comments of the Trustees on the performance of the scheme, with full justification. (v) Statement giving relevant perspective historical 'per unit' statistics in accordance with paragraph 6 of this Schedule; (vi) Statement on the following lines: "On written request, present and prospective unitholder/investors can obtain copy of the trust deed, the annual report at a price and the text of the relevant scheme." 2. Accounting Policies (a) For investments in securities- Follo....
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....rage cost" method shall be followed. vi. Transactions for purchase or sale of investments shall be recognised as of the trade date and not as of the settlement date, so that the effect of all investments traded during a financial year are recorded and reflected in the financial statements for that year. Where investment transactions take place outside the stock market, for example, acquisitions through private placement or purchases or sales through private treaty, the transaction shall be recorded, in the event of a purchase, as of the date on which the scheme obtains in enforceable obligation to pay the price or, in the event of a sale, when the scheme obtains an enforceable right to collect the proceeds of sale or an enforceable obligation to deliver the instruments sold. vii. Bonus shares to which the scheme becomes entitled shall be recognised only when the original shares on which the bonus entitlement accrues are traded on the stock exchange on an ex-bonus basis. Similarly, rights entitlements shall be recognised only when the original shares on which the right entitlement accrues are traded on the stock exchange on an ex-rights basis. viii. Where income receivable on inv....
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....aining outstanding. xii. The cost of investments acquired or purchased shall, inter alia, include brokerage, stamp charges and any charge customarily included in the broker's bought note. In respect of privately placed debt instruments any front-end discount offered shall be reduced from the cost of the investment. xiii. Underwriting commission shall be recognised as revenue only when there is no devolvement on the scheme. Where there is devolvement on the scheme, the full underwriting commission received and not merely the portion applicable to the devolvement shall be reduced from the cost of the investment. (b) For investments in real estate assets- Following accounting policies shall be followed by real estate mutual fund schemes for the preparation of accounts: i. The accounting policies given in paragraph 2(a) in respect of investment in securities; ii. The accounting policies given in Part B of the Ninth Schedule in respect of real estate assets; and iii. In a real estate mutual fund scheme which provides to the unit holders the option for an early redemption or repurchase their own units the par value of the unit shall be debited to Capital Account and the differen....
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....estments falling under each major industry group (which constitutes not less than 5% of the total investment in the major classification) shall be disclosed together with the percentage thereof in relation to the total investment within the classification; (c) a full list of investments of the scheme shall be made available for inspection with the Asset Management Company; (d) the basis on which management fees have been paid to the Asset Management Company and the computation thereof; (e) if brokerage, custodial fees or any other payment for services are paid to or payable to any entity in which the Asset Management Company or its major shareholders have a substantial interest (being not less than 10% of the equity capital), the amounts debited to the revenue account or amounts treated as cost of investments in respect of such services shall be separately disclosed together with details of the interest of the Asset Management Company or its major shareholders; (f) aggregate value of purchases and sales of investments during the year and expressed as a percentage of average weekly net asset value; (g) where the non-traded investments which have been valued "in good faith"....
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....e approved valuers having recent experience in the category of the real estate asset being valued. (d) the existence and amounts of restrictions on the realisability of real estate asset or the remittance of income and proceeds of disposal. (e) When the lower valuation obtained from the two approved valuers is adjusted significantly for the purpose of the balance sheet, for example to avoid double-counting of assets or liabilities that are recognised as separate assets or liabilities, the real estate mutual fund scheme should disclose the reconciliation between the so selected lower valuation and the adjusted valuation shown in the balance sheet. (f) In case where a real estate mutual fund scheme measures a real estate asset using the cost model [as mentioned in paragraph (vii) of Explanation in Part B of the Ninth Schedule], the reconciliation required as per item (a) this paragraph shall disclose amounts relating to that real estate asset separately from the amounts relating to other real estate assets. In addition, an real estate mutual fund scheme shall disclose: 1. a description of the real estate asset; 2.an explanation of why fair value cannot be determined reliabl....
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....) custodian and registrar fees; (d) total income and expenditure expressed as a percentage of average net assets, calculated on a weekly basis. (v)(B) In respect of real estate asset, the following additional disclosures shall be made: (a) rental income from real estate asset; (b) direct operating expense (including repairs and maintenance) arising from real estate asset that generated rental income during the period; and (c) direct operating expenses (including repairs and maintenance) arising from real estate asset that did not generate rental income during the period. 5. Auditor's Report (i) All mutual funds shall be required to get their accounts audited in terms of a provision to that effect in their trust deeds. The Auditor's Report shall form a part of the Annual Report. It should accompany the Abridged Balance Sheet and Revenue Account. The auditor shall report to the Board of Trustees and not to the unitholders. (ii) The auditor shall state whether: (1) he has obtained all information and explanations which, to the best of his knowledge and belief, were necessary for the purpose of his audit, (2) the Balance Sheet and the Revenue Account are in agreement w....
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....ocation and project. Particulars shall include area, cost, fair value, basis of fair value, and legal disputes, etc. Accounting policy of valuation of investments shall be disclosed. III. DEPOSITS Distinguishing between : - Deposits with scheduled banks; - Deposits with Companies/Institutions; - Others. IV. OTHER CURRENT ASSETS Distinguishing between: - Balances with banks in current account; - Cash on hand; - Sundry Debtors; - Contracts for sale of investments in securities; - Outstanding and accrued income; - Advance, Deposits, etc.; - Bridge Finance; - Shares/debentures application money, pending allotment; - Others. V. FIXED ASSETS - Depreciated cost of the fixed assets as a whole or net block may be disclosed. ANNEXURE 1B [Refer para 3] Contents of schemewise balance sheet LIABILITIES SIDE OF THE BALANCE SHEET I. Liabilities side of the balance sheet be divided into the following groups : (i) Unit Capital; (ii) Reserves & Surplus; (iii) Loans; (iv) Current Liabilities and Provisions. II. Unit Capital: Distinguishing between: - Initial capital; - Unit capital (including number of units and face value per unit). III. Reserves....
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....ale/redemption of investments in securities (other than inter-scheme transfer/sale); Loss on sale of real estate investment properties (other than inter-scheme transfer/sale); - Loss on inter-scheme transfer/sale of investments; - Management fees; - Trusteeship fees; - Staff cost including salaries, allowances, contributions to provident fund, gratuity, etc.; - Office and administrative expenses; - Registration and local charges; - Commission to Agents; - Publicity expenses; - Audit fees; - Legal & Title Search Fee; - Insurance & security expenses; - Advisory fee in respect of real estate investment asset; - Other operating expenses; - Depreciation of fixed assets; - Custodian fees; - Registration fees; - Repairs and maintenance in case of real estate asset. Less: Amount recovered on sale of units on account of management expenses. Note: (i) Accounting policy in respect of recognition of revenue and income from investments (including dividend and interest in case of securities and rental income in case of real estate asset) shall be disclosed by way of a note. (ii) Unprovided depreciation and unrealised appreciation in value of investments in securities represe....
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.... 23, 2001 by the Securities and Exchange Board of India (Mutual Funds) (Amendment) Regulations, 2001 vide S.O. No.69 (E). (h) on May 29, 2001 by the Securities and Exchange Board of India (Investment Advice by Intermediaries) (Amendment) Regulations, 2001 vide S.O. No.476(E). (i) on July 23, 2001 by the Securities and Exchange Board of India (Mutual Funds) (Second Amendment) Regulations, 2001 vide S.O. No.698(E). (j) on February 20, 2002 by the Securities and Exchange Board of India (Mutual Funds) (Amendment) Regulations, 2002 vide S.O. No.219 (E). (k) on June 11, 2002 by the Securities and Exchange Board of India (Mutual Funds) (Second Amendment) Regulations, 2002 vide S.O. No.625 (E). (l) on July 30, 2002 by the Securities and Exchange Board of India (Mutual Funds) (Third Amendment) Regulations, 2002 vide S.O. No.809(E). (m) on September 9, 2002 by the Securities and Exchange Board of India (Mutual Funds) (Fourth Amendment) Regulations, 2002 vide S.O. No.956(E). (n) on September 27, 2002 by the Securities and Exchange Board of India (Procedure for Holding Enquiry by Enquiry Officer and Imposing Penalty) Regulations, 2002 vide S.O. No.1045(E). (o) on May 29, 2003 by the Se....