Reliance Capital Trustee Co. Limited

Regd. Office : “Reliance House”, Near Mardia Plaza, Off C G Road, Ahmedabad 380006.

Corporate Office : One Indiabulls Centre, Tower 1, Jupiter Mills Compound , 841, Senapati Bapat Marg, Elphinstone Road, Mumbai - 400 013. Boardline No.: 022 3099 4600.

Reliance Capital Trustee Co. Limited (RCTC), a company incorporated under the Companies Act, 1956, has been appointed as the Trustee to the Fund vide the Trust Deed dated April 25, 1995 executed between the Sponsor and the Trustee.

In accordance with Securities and Exchange Board of India (Mutual Funds) Regulations, 1996 and the Trust Deed constituting the Mutual Fund, the Trustees are required to fulfill several duties and
obligations, including the following :

• The Trustee and the Asset Management Company shall with the prior approval of Securities and Exchange Board of India (SEBI) enter into an Investment Management Agreement (IMA).
• The Investment Management Agreement shall contain such clauses as are mentioned in the Fourth Schedule of the SEBI (MFs) Regulations, 1996 and other such clauses as are necessary for the purpose of making investments.
• The Trustees shall have a right to obtain from the Asset Management Company such information as is considered necessary by the Trustees.
• The Trustee shall ensure before the launch of any scheme that the Asset Management Company possesses/has done the following :
  • Systems in place for its back office, dealing room and accounting;
  • Appointed all key personnel including fund manager(s) for the Scheme(s) and submitted their which shall contain the educational qualifications, past experience in the securities market to SEBI, within 15 days of their appointment;
  • Appointed Auditors to audit its accounts;
  • Appointed a Compliance Officer to comply with regulatory requirement and to redress investor grievances;
  • Appointed Registrars and laid down parameters for their supervision;
  • Prepared a compliance manual and designed internal control mechanisms including internal audit systems; and
  • Specified norms for empanelment of brokers and marketing agents.
• The Trustee shall ensure that the Asset Management Company has been diligent in empanelling the brokers, in monitoring securities transactions with brokers and avoiding undue concentration of business with any broker.
• The Trustee shall ensure that the Asset Management Company has not given any undue or unfair advantage to any associate or dealt with any of the associates of the Asset Management Company in any manner detrimental to interest of unitholders.
• The Trustee shall ensure that the transactions entered into by the Asset Management Company are in accordance with the SEBI (Mutual Funds) Regulations, 1996 and the Scheme.
• The Trustee shall ensure that the Asset Management Company has been managing the Mutual Fund Scheme independent of other activities and have taken adequate steps to ensure that the interest of investors of one Scheme are not compromised with those of any other scheme or of other activities of the Asset Management Company.
• The Trustee shall ensure that all the activities of the Asset Management Company are in accordance with the provisions of SEBI (Mutual Funds) Regulations, 1996.
• Where the Trustees have reason to believe that the conduct of the business of the Mutual Fund is not in accordance with the Regulations and the Scheme, they shall forthwith take such remedial steps as deemed necessary by them and shall immediately inform SEBI of the violation and the action taken by them.
• Each Trustee shall file the details of his transactions in securities (above Rs.1 Lac per transaction) with the Mutual Fund on a quarterly basis.
• The Trustees shall be accountable for and be the Custodian of the funds and property of the respective Schemes and shall hold the same in trust for the benefit of the unit holders in accordance with the SEBI (Mutual Funds) Regulations, 1996 and the provisions of the Trust Deed.
• The Trustees shall take steps to ensure that the transactions of the Mutual Fund are in accordance with the provisions of the Trust Deed.
• The Trustees shall be responsible for the calculation of any income due to be paid to the Mutual Fund and also of any income received in the Mutual Fund for the unitholders of any Scheme in accordance with the SEBI (Mutual Funds) Regulations, 1996 and the Trust Deed.
• The Trustees shall obtain the consent of the unit holders of the Scheme :
  • Whenever required to do so by SEBI in the interest of the unitholders;
  • Whenever required to do so, on the requisition made by three-fourths of the unitholders of any Scheme under the Mutual Fund;
  • When the majority of the Trustees decide to wind up the Scheme or prematurely redeem the Units;
• The Trustees shall ensure that no change in the fundamental attributes of any Scheme or the Trust or fees and expenses payable or any other change which would modify the Scheme and affects the interest of unit holders, shall be carried out unless :-
  • A written communication about the proposed change 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; and
  • The unitholders are given an option to exit at the prevailing net asset value without any exit load.
• The Trustee shall call for the details of transactions in securities by the key personnel of the Asset Management Company in his own name or on behalf of the Asset Management Company and shall report to SEBI, as and when required.
• The Trustee shall quarterly review all transactions carried out between the Mutual Fund, Asset Management Company and its associates.
• The Trustee shall quarterly review the net worth of the Asset Management Company and shall ensure that the same is in accordance with the clause (f) of sub-regulation (1) of regulation 21 of SEBI (Mutual Funds) Regulations, 1996.
• The Trustee shall periodically review all service contracts such as custody arrangements, transfer agency of the securities and satisfy itself that such contracts are executed in the interest of the unitholders.
• The Trustee shall ensure that there is no conflict of interest between the manner of deployment of the net worth by the Asset Management Company and the interest of the unit holders.
• The Trustee shall periodically review the investor complaints received and the redressal of the same by the Asset Management Company.
• The Trustee shall abide by the Code of Conduct as specified in the Fifth Schedule of the SEBI (Mutual Funds) Regulations, 1996.
• The Trustee shall furnish to SEBI on a half-yearly basis the following :
  • A report on the activities of the Mutual Fund;
  • A certificate stating that the Trustees have satisfied themselves that there have been no instances of self-dealing or front-running by any of the Trustees and by the directors and key personnel of the Asset Management Company; and
  • A certificate to the effect that the Asset Management Company has been managing the Scheme independently of any other activities and in case any activities of the nature referred to in regulation 24(2) of the SEBI (Mutual Funds) Regulations, 1996 have been undertaken by the Asset Management Company, adequate steps to ensure that the interest of the unitholders are protected, have been taken.
• The independent Trustees referred to in sub-regulation (5) of Regulation 16 shall give their comments on the report received from the Asset Management Company regarding the investments by the Mutual Fund in the securities of group companies of the Sponsor.
   

The Trustees shall exercise due diligence as under:

General Due Diligence :

 
• The Trustees shall be discerning in the appointment of the directors on the Board of the Asset Management Company.
• The Trustees shall review the desirability or continuance of the Asset Management Company if substantial irregularities are observed in any of the Schemes and shall not allow the Asset Management Company to float new Schemes.
• The Trustee shall ensure that the trust property is properly protected, held and administered by proper persons and by a proper number of such persons.
• The Trustee shall ensure that all the service providers are holding appropriate registrations from SEBI or concerned regulatory authority.
• The Trustees shall arrange for test checks of service contracts.
• The Trustees shall immediately report to SEBI of any special developments in the Mutual Fund.

Specific Due Diligence
The Trustees shall :

 

• Obtain internal audit reports at regular intervals from independent auditors appointed by the Trustees.
• Obtain compliance certificates at regular intervals from the Asset Management Company.
• Hold meetings of the Trustees once in two calendar months and atleast six such meetings shall be held in every year.
• Consider the reports of the independent auditor and compliance reports of Asset Management Company at the meetings of Trustees for appropriate action.
• Maintain records of the decisions of the Trustees at their meetings and of the minutes of the meetings.
• Prescribe and adhere to a code of ethics by the Trustees, Asset Management Company and its personnel.
• Communicate in writing to the Asset Management Company of the deficiencies and checking on the rectification of deficiencies.

 

The independent directors of the trustees shall pay specific attention to the following, as may be applicable, namely :
 
• The Investment Management Agreement and the compensation paid under the agreement.
• Service contracts with affiliates as to whether the Asset Management Company has charged higher fees than outside contractors for the same services.
• Selection of the Asset Management Company 's independent directors
• Securities transactions involving affiliates to the extent such transactions are permitted by Regulations.
• Selecting and nominating individuals to fill independent directors vacancies.
• Code of ethics must be designed to prevent fraudulent, deceptive or manipulative practices by insiders in connection with personal securities transactions.
• The reasonableness of fees paid to Sponsors, Asset Management Company and others for services provided.
• Principal underwriting contracts and renewals
• Any service contract with the associates of the Asset Management Company.

The Trust Deed shall not be amended without obtaining the prior approval of SEBI, and the unitholders approval would be obtained where it affects the interest of unitholders.Under the Trust Deed, duties and obligations also include the following :

• Seeking approval by postal ballot
  or
• Approval of the Unit-holders present and voting at a meeting to be specifically convened by the Trustee for the purpose. For this purpose, the Trustees shall give 21 days notice to the Unit Holders and the Trustees may lay down guidelines for the actual conduct and accomplishment of the voting at the meeting and announcement of the results.

Under the Trust Deed, duties and obligations also include the following :

• In carrying out its responsibility, the Trustee and it's directors shall maintain arms length relationship with other companies, or institutions or financial intermediaries or any body corporate with which they may be associated.
• The Directors of the Trustee shall not participate in any decision making process/resolutions of it's board meetings for any investment in which they may be interested.
• All the Trustees shall furnish to the Board of Trustees or Trustee Company particulars of interest which he may have in any other company, or institution or financial intermediary or any corporate by virtue of his position as Director, partner or with which he may be associated in any other capacity.
• The Trustee shall not acquire or allow the AMC to acquire any asset out of the Trust Fund and/or Unit Capital, which involves the assumption of unlimited liability or results in encumbrance of Trust Fund and/or Unit Capital in any way.
• The Trustee shall not make or guarantee loans or take up any activity in contravention of SEBI Regulations except with the prior approval of SEBI nor shall it allow the AMC to do so.
  However, as and when there is an addition / modification / deletion in the duties and responsibilities of the Trustee, due to a change in the SEBI Regulations, such addition / modification / deletion shall be applicable here, accordingly.
• The Trustee shall not be held liable for acts done in good faith if they have exercised adequate due diligence honestly.
• The Trustees shall meet at least once in two calendar months and atleast six such meetings shall be held in every year to review the information / reports submitted by the AMC in accordance with the Regulations. As per Regulations prevailing during the year ended March 31, 2003, five meetings of the Board of Directors of the Trustee Company were held.
• The Trustees have also appointed the statutory auditors to verify the books of accounts and to ascertain the true and fair representation of the state of affairs as on a particular day and to ascertain profit/ loss of the Mutual Fund, as at the end of the financial year.
• The Board of Trustees has constituted an Audit Committee, chaired by an independent Trustee. The Committee meets before launch of a new scheme and also periodically to discuss the internal control systems, the scope of audit of the internal auditors, as well as the observations made by them. It also reviews the half-yearly and annual financial accounts. Recommendations, if any, of the audit committee on any matter relating to financial management etc. are considered in the subsequent Board meeting of AMC and Trustees.