Framework for Corporate Debt Market Development Fund (CDMDF)

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....Debt (GSCD) as notified by Ministry of Finance vide notification no. G.S.R. 559(E) dated July 26, 2023, which includes the Framework for Corporate Debt Market Development Fund. 3. In addition to the abovementioned scheme as mentioned at para 2 above, CDMDF shall comply with following: 3.1. The fund shall deal only in following securities during normal times: * Low duration Government Securities * Treasury bills * Tri-party Repo on G-sec * Guaranteed corporate bond repo with maturity not exceeding 7 days. 3.2. The fees and expenses of the Fund shall be as follows: * During Normal times: (0.15% + tax) of the Portfolio Value charged on daily pro-rata basis. * During Market stress: (0.20% + tax) of the Portfolio Value charged on daily pro-rata basis. * "Portfolio Value" means the aggregate amount of portfolio of investments including cash balance without netting off of leverage undertaken by the Fund. Clarification: i. The taxes as mentioned above shall include all kinds of taxes. ii. Transaction costs on securities such as brokerage, clearing charges etc. shall be charged within the limit of fees and expenses. iii. Financing charges pertaining to borrowings mad....

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....sebi.gov.in   Annexure A Approach to purchase pricing: 1. While it may not be possible to pre-empt the events and scenarios prevailing at the point of time when purchase of securities is being undertaken by CDMDF, the investment policy may provide for following indicative factors for determining purchase price of corporate debt securities: a. Valuation policies prescribed for Mutual Funds (based on the principles of fair valuation). b. Previous day's valuation of securities by valuation agencies before the date of Purchase. c. Average 10 days valuation prior to start of market dislocation. d. Mark-up in yield over previous day may be limited to arrive at floor price. For eg: it may be 25/50/75 bps over AAA/AA/Below AA securities respectively. e. Consideration of Spread over benchmark/ spread over sovereign yields. f. Qualitative factors that may have bearing on arriving at fair price. 2. The investment policy shall be duly approved & reviewed periodically by the Board of Trustee, Investment Committee & Governance Committee. CDMDF shall adhere to investment framework laid down in the investment policy & the fund documents. 3. However, in case the Investment ....

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....10% by MF schemes selling debt securities to the Fund (i.e., equivalent to the units outstanding of the selling MF schemes issued to them against sale of securities to CDMDF) Class A3 units 2nd Contribution of specified debt oriented MF Schemes and AMCs Class A1 and A2 units 3rd Government Guarantee NA C. The following process shall be followed: 1. All profits/losses/income/gains/expenses to be apportioned to A1 and A2 unit class in ratio of their AUM during the normal times. 2. A3 units to be allotted at the same NAV as that of A1 & A2 at the time of opening of market dislocation. 3. All profits/losses/income/gains/expenses (including cost of leverage) to be apportioned to all the 3 class of units during the market dislocation and subsequently till A3 units exits (i.e A1/A2/A3), except that the NAV of A1 and A2 should not drop below their opening NAV (opening NAV at the time of market dislocation). Since A1 and A2 units are to be protected at their opening NAV to that extent the excess/unabsorbed loss/expense would be debited to only A3 unit class. This would mean the NAV of A3 units could drop below the NAV of A1&A2 4. Any subsequent profits/gains/income w....

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....1,003 Scenario -4 Realised loss NAV of the unit NAV of the corpus -1 -1 10.02 1,002 10.02 1,002 Scenario -5 Opening NAV of the Corpus 1.002 1,002 Number of opening units 100 Opening NAV of the unit 10.02 100 10.02 Additional Capital 2,006 -2 2,004 2,002 Investment in Government Securities and T-Bills MTM Gain is proportionately allocated to all the unit holders (except A3 doesn't exist as of now) Investment in Government Securities and T-Bills MTM loss is proportionately allocated to all the unit holders (except A3 doesn't exist as of now) System System driven calculation System driven calculation 2,006 Investment in Government Securities and T-Bills System driven calculation Gain is proportionately allocated to all the unit holders (except A3 doesn't exist as of now) 2,004 204 2,004 200 200 NAV at the which the units to be allotted 10.02 10.02 10.02 Total corpus (NAV) 1,002 1,002 200 2,204 Part B Investment in Government Securities and T-Bills loss is proportionately allocated to all the unit holders (except A3 doesn't exist as of now) 2,000 Market Dislocation triggered A3 NAV assumed to be same A1 and A2 while allotting t....

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....02 Number of units 100 100 Loss to be absorbed by A1 and A2 1.82 1.82 3.64 NAV post the loss absorption 10.02 10.02 Unabsorbed loss entirely to A3 -16.36 -16.36 Corpus NAV of A3 units post absorbing the waterfall loss 184 A3 class unit NAV post absorbing the waterfall loss 9.22 Closing corpus( NAV) 1,002 1,002 184 2,188 Scenario -11 Cash loss which is same as the opening NAV Now A3 unit NAV drops below the NAV of A1 and A2. this is manual adjustment to be done in the system where there should be transfer of value between the unit class based on such workings 1,858 300 Significant cash loss (realised loss) -13.7 -13.7 -2.5 -30 with the loss getting apportioned to all the 3 unit classes, the NAV of A1 and A2 is falling below their opening NAV of 10.020 Manual working and intervention required NAV of the unit NAV of the corpus 9.88 9.88 9.09 988 988 181 2,158 Manual working and adjustment to be carried out Current NAV of units 10.02 10.02 Less: Protection to opening NAV 10.02 10.02 Surplus to absorb the w.off Number of units Loss to be absorbed by A1 and A2 - 100 100 Page 11 of 12 531 NAV post the loss absorption Unabsor....