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SEBI/MFD/CIR No. 6 / 12357 /03

June 26, 2003

All Mutual Funds registered with SEBI

Association of Mutual Funds in India (AMFI)

Dear Sirs,

Advertisements by Mutual Funds

As you are aware, SEBI had earlier issued a set of guidelines on the captioned subject vide
Circular No. MFD/CIR/4/51/2000 dated June 05, 2000.

With an objective to improve the standard of disclosures in advertisements, effective

implementation of regulatory intent and to remove difficulties in the application of
Regulations, the following guidelines are being issued after consultation with AMFI, in
accordance with Regulation 77 of the SEBI (Mutual Funds) Regulations, 1996.

1. Advertisements through Hoardings / Posters

It is essential for the investors to read the offer documents and risk factors before investing
in mutual funds schemes to take well informed investment decisions. Considering that the
investors get very little time to read the advertisements through hoardings / posters, etc.
while passing by, it is clarified that such advertisements may carry only the following
statement apart from copy of advertisement: “Mutual Fund investments are subject to market
risks, read the offer document carefully before investing”.
The above statement shall be displayed in black letters of at least 8 inches height or
covering 10% of the display area, on white background. The compliance officers shall ensure
that the statement appearing in such advertisements are in legible font.

2. Advertisements through Audio-Visual Media

Likewise, in advertisements through audio-visual media like television, a statement “Mutual

Fund investments are subject to market risks, read the offer document carefully before
investing” shall be displayed on the screen for at least 2 seconds, in a clearly legible font-
size covering at least 80% of the total screen space and accompanied by a voice-over
reiteration. The remaining 20% space can be used for the name of the mutual fund or logo or
name of scheme, etc.

Advertisements through audio media like radio, cassettes, CDs etc. shall also read the above
statement in a way that is easily understandable to the listeners.

3. Promotional Activities, Sales Literature

Section II of aforesaid SEBI Guidelines issued on June 5, 2000 prescribes standards for
various forms of communications by the mutual funds. It is clarified that the same standards
shall be followed in case of activities organized to promote mutual funds/schemes/asset
management companies.

The above guidelines are also applicable for sales literature. With a view to broaden the
definition of sales literature as specified in the Guidelines, it is clarified that it shall also
include fund fact sheets, research reports, newsletters, performance reports or summaries,
telemarketing scripts, seminar texts, press releases and reprints or excerpts of any other
advertisements or published article, etc.

4. Performance Advertisements

(i) Disclosure of Benchmarks in Advertisements: The earlier guidelines (Section III,

Clause 3.7) prescribe the type of benchmark indices that can be used in performance
advertisements of mutual funds schemes. Subsequently, the disclosure of benchmarks in
the offer documents and comparison of returns with benchmarks while publishing half-
yearly results were made mandatory. Henceforth, all performance advertisements
disclosing return statistics shall also mention the returns on the benchmark indices,
during the same time periods.

(ii) Performance of Money Market Schemes: Referring to Clause 3.4 (Section III) of
the guidelines, considering that the investors in cash/liquid/money market schemes have
very short investment horizon, the mutual funds while advertising simple annualized
returns of such schemes based on a period of 30 days can also advertise simple
annualized returns based on 15 day period.

(iii) Impact of Distribution Taxes: While advertising returns by assuming reinvestment

of dividends, if distribution taxes are excluded while calculating the returns, this fact may
also be disclosed.

(iv) Pay-out of Dividend: While advertising pay-out of dividends, it shall be disclosed

that after the payment of the dividend, the NAV will fall to the extent of the payout and
distribution taxes (if applicable), in the main body of advertisement.

5. Ranking advertisements

Clause 3.7 d (1) of the aforesaid Guidelines, shall be substituted as follows:

“Any ranking set forth in an advertisement or sales literature must be current to the most
recent quarter ended or such periodicity / frequency of ranking as may be applicable, in the
case of advertising prior to the submission for publication or in the case of sales literature
prior to use”.

All mutual funds shall comply with the requirements pertaining to advertisements in letter
and spirit.

Yours faithfully,