(1)

The trustees and the asset management company shall with the prior approval of the Board enter into an investment management agreement.

(2)

The investment management agreement shall contain such clauses as are mentioned in the Fourth Schedule and such other clauses as are necessary for the purpose of making investments.

(3)

The trustees shall have a right to obtain from the asset management company such information as is considered necessary by the trustees.

(4)

The trustees shall ensure before the launch of any scheme that the asset management company, has,-

(5)

The trustees shall ensure that an 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.

(6)

The trustees shall ensure that the asset management company has not given any undue or unfair advantage to any associates or dealt with any of the associates of the asset management company in any manner detrimental to interest of the unitholders.

(7)

The trustees shall ensure that the transactions entered into by the asset management company are in accordance with these regulations and the scheme.

(8)

The trustees shall ensure that the asset management company has been managing the mutual fund schemes independently of other activities and have taken adequate steps to ensure that the interest of investors of one scheme are not being compromised with those of any other scheme or of other activities of the asset management company.

(9)

The trustees shall ensure that all the activities of the asset management company are in accordance with the provisions of these regulations.

(10)

Where the trustees have reason to believe that the conduct of business of the mutual fund is not in accordance with these regulations and the scheme they shall forthwith take such remedial steps as are necessary by them and shall immediately inform the Board of the violation and the action taken by them.

(11)

[ Each trustee shall file the details of his transactions of dealing in securities with the Mutual Fund on a quarterly basis.] [Substituted by S.O. 1223(E), dated 8th December, 1999]

(12)

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 unitholders in accordance with these regulations and the provisions of trust deed.

(13)

The trustees shall take steps to ensure that the transactions of the mutual fund are in accordance with the provisions of the trust deed.

(14)

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 holders of the units of any scheme in accordance with these regulations and the trust deed.

(15)

The trustees shall obtain the consent of the unitholders-

(15A)

[ 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 unitholders, shall be carried out unless,-

(16)

The trustees 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 the Board, as and when required.

(17)

The trustees shall quarterly review all transactions carried out between the mutual funds, asset management company and its associates.

(18)

The trustees shall [quarterly] [Substituted by S.O. 32(E), dated 12.1.1998] review the networth of the asset management company and in case of any shortfall, ensure that the asset management company make up for the shortfall as per clause (f) of sub-regulation (1) of regulation 21.

(19)

The trustees 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.

(20)

The trustees shall ensure that there is no conflict of interest between the manner of deployment of its networth by the asset management company and the interest of the unit-holders.

(21)

The trustees shall periodically review the investor complaints received and the redressal of the same by the asset management company.

(22)

The trustees shall abide by the Code of Conduct as specified in the Fifth Schedule.

(23)

The trustees shall furnish to the Board on a half-yearly basis,-

(24)

[ 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.] [Inserted by S.O. 32(E), dated 12.1.1998]

(25)

[ Trustees shall exercise due diligence as under :

A. General Due Diligence :

(26)

Notwithstanding anything contained in sub-regulations (1) to (25), the trustees shall not be held liable for acts done in good faith if they have exercised adequate due diligence honestly.

(27)

The independent directors of the trustees or asset management company shall pay specific attention to the following, as may be applicable, namely:-