SEOJK on Procedures for Resolving Net Asset Value Calculation Errors in Mutual Funds

To:

1. Investment Managers;
2. Mutual Fund Securities Selling Agents;
3. Custodian Banks;
4. Indonesia Mutual Fund Management Association; and
5. Indonesia Custodian Bank Association;
   At their respective locations.

COPY

CIRCULAR LETTER OF THE FINANCIAL SERVICES AUTHORITY NUMBER 1/SEOJK.04/2015

REGARDING

PROCEDURES FOR RESOLVING NET ASSET VALUE CALCULATION ERRORS IN MUTUAL FUNDS

The calculation of the Net Asset Value of Mutual Funds as referred to in Regulation Number IV.A.3, Appendix of the Decision of the Chairman of the Capital Market Supervisory Board Number: KEP-13/PM/2002 dated 14 August 2002 concerning Guidelines for the Management of Mutual Funds in the Form of a Corporation, Regulation Number IV.B.1, Appendix of the Decision of the Chairman of the Capital Market Supervisory Board and Financial Institutions Number: KEP-552/BL/2010 dated 30 December 2010 concerning Guidelines for the Management of Mutual Funds in the Form of Collective Investment Contracts, and Regulation Number IV.C.2, Appendix of the Decision of the Chairman of the Capital Market Supervisory Board and Financial Institutions Number: KEP-367/BL/2012 dated 9 July 2012 concerning Fair Market Value of Securities in Mutual Fund Portfolios, in its implementation, may result in calculation errors that cause the Net Asset Value per share or Mutual Fund Investment Units, which serve as the basis for purchase or resale of shares or Mutual Fund Investment Units, to be inconsistent with the actual Net Asset Value per share or Mutual Fund Investment Units.

In light of this matter, it is necessary to regulate provisions regarding the procedures for resolving Net Asset Value per share or Mutual Fund Investment Unit calculation errors in a Circular Letter of the Financial Services Authority as follows:

I. PROVISIONS

I. GENERAL PROVISIONS

In this Circular Letter of the Financial Services Authority, the following terms are defined:

1. Investment Manager is a Party whose business activities involve managing a Securities Portfolio for clients or managing a collective investment portfolio for a group of clients, except for insurance companies, pension funds, and banks that conduct their own business activities based on applicable laws and regulations.

2. Custodian Bank is a Commercial Bank that has received approval from the Financial Services Authority as a Custodian Bank.

3. Investment Unit is a unit of measurement indicating the interest portion of each Party in a collective investment portfolio.

4. Net Asset Value is the fair market value of a Security and other assets of the Mutual Fund minus all its liabilities.

II. NET ASSET VALUE CALCULATION ERRORS IN MUTUAL FUNDS

1. Investment Managers and Custodian Banks are required to have policies and standard operating procedures to detect, prevent, and correct Net Asset Value calculation errors in Mutual Funds.

2. In the event that an Investment Manager becomes aware of a Net Asset Value calculation error in a Mutual Fund, the Investment Manager is required to immediately notify the Custodian Bank of the calculation error, with a copy to the Financial Services Authority, no later than 24:00 WIB on the day the calculation error is discovered.

3. In the event that a Custodian Bank becomes aware of a Net Asset Value calculation error in a Mutual Fund, the Custodian Bank is required to immediately submit a report of the Net Asset Value calculation error to the Financial Services Authority, with a copy to the Investment Manager, no later than 24:00 WIB on the next business day after the Custodian Bank becomes aware of the calculation error.

4. The report of the Net Asset Value calculation error as referred to in item 3 must be made in accordance with the Format of the Net Asset Value Calculation Error Report as contained in the Appendix, which is an integral part of this Circular Letter of the Financial Services Authority.

5. Copies of the notification of the Net Asset Value calculation error as referred to in item 2 and the Net Asset Value calculation error report as referred to in item 3 must be submitted via email to the Financial Services Authority at the address pelaporanrd@ojk.go.id.

III. REVISION OF NET ASSET VALUE PER SHARE OR INVESTMENT UNIT OF MUTUAL FUNDS

1. A Custodian Bank that becomes aware of a Net Asset Value per share or Mutual Fund Investment Unit calculation error is required to:
   a. revise the calculation of the Net Asset Value per share or Mutual Fund Investment Unit; and b. submit the revision of the Net Asset Value per share or Mutual Fund Investment Unit in the Mutual Fund report in accordance with the format and procedures contained in the Appendix of Regulation Number X.D.1, Appendix of the Decision of the Chairman of the Capital Market Supervisory Board Number: KEP-06/PM/2004 dated 9 February 2004 concerning Mutual Fund Reports, no later than 24:00 WIB on the next business day after the calculation error is discovered, with a copy to the Investment Manager.

2. In the event that a daily Net Asset Value calculation error in a Mutual Fund as referred to in item 1 occurs for more than 1 (one) day, the Custodian Bank is required to:
   a. calculate the accumulated revision of the daily Net Asset Value, which is the accumulation of the difference between the incorrect Net Asset Value per share or Mutual Fund Investment Unit and the revised Net Asset Value per share or Mutual Fund Investment Unit; and b. submit a report of the accumulated revision of the daily Net Asset Value to the Financial Services Authority, with a copy to the Investment Manager, in accordance with the Format of the Net Asset Value Calculation Error Report as referred to in the Appendix, which is an integral part of this Circular Letter of the Financial Services Authority, no later than 24:00 WIB on the next business day after the calculation error is discovered.

IV. CALCULATION AND RESOLUTION OF COMPENSATION PAYMENT

1. In the event that a Net Asset Value per share or Mutual Fund Investment Unit calculation error is discovered, the Custodian Bank is required to calculate the compensation value per share or Mutual Fund Investment Unit.

2. The Custodian Bank is required to notify the calculation error of the Net Asset Value per share or Mutual Fund Investment Unit, along with the compensation value, to all shareholders or Mutual Fund Investment Unit holders who conducted transactions at the time the Net Asset Value per share or Mutual Fund Investment Unit calculation error occurred and suffered losses.

3. In the event that a Mutual Fund and/or shareholders or Mutual Fund Investment Unit holders suffer losses due to a Net Asset Value per share or Mutual Fund Investment Unit calculation error, compensation must be paid to the affected parties.

4. The compensation funds as referred to in item 3 are borne by and become the obligation of the party that caused the Net Asset Value per share or Mutual Fund Investment Unit calculation error and must be paid through the Custodian Bank no later than 7 (seven) business days after the Net Asset Value per share or Mutual Fund Investment Unit calculation error is discovered.

5. Investment Managers and/or Custodian Banks are prohibited from charging Mutual Funds and shareholders or Mutual Fund Investment Unit holders with all costs arising related to the payment of compensation due to Net Asset Value per share or Mutual Fund Investment Unit calculation errors.

6. The Custodian Bank is required to submit a report on the calculation and resolution of compensation payment due to Net Asset Value per share or Mutual Fund Investment Unit calculation errors to the Financial Services Authority, with a copy to the Investment Manager, no later than 2 (two) business days after the compensation payment to the Mutual Fund and shareholders or Mutual Fund Investment Unit holders is completed.

7. The report on the calculation and resolution of compensation payment must be made in accordance with the Format of the Report on Calculation and Resolution of Compensation Payment as contained in the Appendix, which is an integral part of this Circular Letter of the Financial Services Authority.

8. The report on the calculation and resolution of compensation payment must be submitted via email to the Financial Services Authority at the address pelaporanrd@ojk.go.id.

V. CLOSING

The provisions in this Circular Letter of the Financial Services Authority shall take effect on the date of determination.

To ensure that everyone is aware of this, the publication of this Circular Letter of the Financial Services Authority is ordered by placing it in the State Gazette of the Republic of Indonesia.

Determined in Jakarta
On 21 January 2015

EXECUTIVE HEAD
OF THE CAPITAL MARKET SUPERVISOR,

Signed,
NURHAIDA

STATE GAZETTE OF THE REPUBLIC OF INDONESIA YEAR 2015 NUMBER 10 DATE 3 FEBRUARY 2015

Copy matches the original
Director of Legal Affairs I
Legal Department,
Signed,
Sudarmaji

APPENDIX

CIRCULAR LETTER OF THE FINANCIAL SERVICES AUTHORITY NUMBER 1/SEOJK.04/2015

REGARDING PROCEDURES FOR RESOLVING NET ASSET VALUE CALCULATION ERRORS IN MUTUAL FUNDS

I. NET ASSET VALUE CALCULATION ERROR REPORT

1. Name of Mutual Fund :
2. Name of Investment Manager :
3. Name of Custodian Bank :
4. Description of Net Asset Value
   Calculation Error :
5. Magnitude of Error in
   Percentage Against Net Asset
   Value Per Share Or Investment
   Unit After Revision :
6. Cause And Time Of Occurrence
   Of Net Asset Value Calculation
   Error :
7. Party That Made The Net Asset
   Value Calculation Error :
8. Shareholders Or Mutual Fund
   Investment Unit Holders Who
   Conducted Sale Or Repurchase
   Of Shares Or Investment Units
   At The Time The Error Occurred :
9. Steps Taken And/Or To Be Taken
   To Improve Internal Control :

INSTRUCTIONS FOR FILLING OUT THE NET ASSET VALUE CALCULATION ERROR REPORT FOR MUTUAL FUNDS

The Net Asset Value Calculation Error Report for Mutual Funds is reported by the Custodian Bank and filled out with detailed information regarding the Net Asset Value calculation error of the Mutual Fund.

The Custodian Bank fills in rows number 1 to number 9 with detailed information as referred to in the Net Asset Value Calculation Error Report Table.

No. Row Name Explanation

1. Name of Mutual Fund : The Name of Mutual Fund row is filled
   with the name of the Mutual Fund that has a Net Asset Value calculation error.
2. Name of Investment Manager : The Name of Investment Manager row is
   filled with the name of the Investment
   Manager managing the Mutual Fund that has a Net Asset Value calculation error.
3. Name of Custodian Bank : The Name of Custodian Bank row is
   filled with the name of the Custodian
   Bank administering the Mutual Fund that has a Net Asset Value calculation error.
4. Description of Net Asset Value
   Calculation Error : The Description of Net Asset Value Calculation Error row is filled with a description of the Net Asset Value calculation error committed, whether undervalued or overvalued.
5. Magnitude of Error in
   Percentage Against Net Asset
   Value Per Share Or Investment
   Unit After Revision : The Magnitude of Error in Percentage Against Net Asset Value Per Share Or Investment Unit After Revision row is filled with the percentage value of the error against the Net Asset Value per share or Investment Unit after revision, accompanied by the calculation, including accumulated calculations in the event that an error occurs for more than 1 (one) day.
6. Cause And Time Of Occurrence
   Of Net Asset Value Calculation
   Error : The Cause And Time Of Occurrence Of
   Net Asset Value Calculation Error row is filled with the chronology of the event, cause, and time information such as day/date or time period when the Net Asset Value calculation error occurred.
7. Party That Made The Net Asset
   Value Calculation Error : The Party That Made The Net Asset Value Calculation Error row is filled with the name of the Investment Manager or Custodian Bank that committed the Net Asset Value calculation error.
8. Shareholders Or Mutual Fund
   Investment Unit Holders Who
   Conducted Sale Or Repurchase
   Of Shares Or Investment Units
   At The Time The Error Occurred : The Shareholders Or Mutual Fund Investment Unit Holders Who Conducted Sale Or Repurchase Of Shares Or Investment Units At The Time The Error Occurred row is filled with the existence or non-existence of parties, the number of parties, and the magnitude of the transaction value.
9. Steps Taken And/Or To Be Taken
   To Improve Internal Control :
   The Steps Taken And/Or To Be Taken To
   Improve Internal Control row is filled with internal control steps and prevention steps taken by the Investment Manager or Custodian Bank so that similar incidents do not recur in the future.

II. REPORT ON CALCULATION AND RESOLUTION OF COMPENSATION PAYMENT

1. Number of Shareholders Or Mutual Fund
   Investment Unit Holders Affected By
   The Net Asset Value Per Share Or
   Investment Unit Calculation Error :
2. Calculation of Total Compensation
   And Value To Be Paid To The
   Mutual Fund And/Or Each
   Shareholder Or Mutual Fund
   Investment Unit Holder :
3. Date Of Realization Of Compensation
   Payment To The Mutual Fund
   And/Or Each Shareholder Or
   Mutual Fund Investment Unit Holder :

INSTRUCTIONS FOR FILLING OUT THE REPORT ON CALCULATION AND RESOLUTION OF COMPENSATION PAYMENT

The Report on Calculation and Resolution of Compensation Payment is reported by the Custodian Bank and filled out with detailed information regarding the calculation and resolution of compensation payment.

The Custodian Bank fills in rows number 1 to number 3 with detailed information as referred to in the Report on Calculation and Resolution of Compensation Payment Table.

No. Row Name Explanation

1. Number of Shareholders Or
   Mutual Fund Investment Unit
   Holders Affected By The Net
   Asset Value Per Share Or
   Investment Unit Calculation
   Error : The Number of Shareholders Or Mutual
   Fund Investment Unit Holders Affected
   By The Net Asset Value Per Share Or
   Investment Unit Calculation Error row is filled with the number of parties affected by the calculation error referred to.
2. Calculation of Total
   Compensation And Value
   To Be Paid To The Mutual
   Fund And/Or Each
   Shareholder Or Mutual Fund
   Investment Unit Holder : The Calculation of Total Compensation And Value To Be Paid To The Mutual Fund And/Or Each Shareholder Or Mutual Fund Investment Unit Holder row is filled with the detailed calculation of the compensation value and total compensation to be paid to the Mutual Fund and/or each shareholder or Mutual Fund Investment Unit holder, in the event that there are losses due to Net Asset Value calculation errors suffered by the Mutual Fund and/or each shareholder or Mutual Fund Investment Unit holder.
3. Date Of Realization Of
   Compensation Payment To
   The Mutual Fund And/Or
   Each Shareholder Or
   Mutual Fund Investment Unit
   Holder : The Date Of Realization Of Compensation Payment To The Mutual Fund And/Or Each Shareholder Or Mutual Fund Investment Unit Holder row is filled with the date and time of the compensation payment to the Mutual Fund and/or each shareholder or Mutual Fund Investment Unit holder.

Determined in
On 21 January 2015

EXECUTIVE HEAD
OF THE CAPITAL MARKET SUPERVISOR,

Signed,
NURHAIDA

Copy matches the original
Director of Legal Affairs I
Legal Department,
Signed,
Sudarmaji