Project report on

“MUTUAL FUNDS & ITS IMPACT ON INVESTORS”

At

HYDERABAD SECURITIES & ENTERPRISES LIMITED

Submitted in practical fulfillment of the requirement for the award of the

degree of

MASTER OF BUSINESS ADMINISTRATION

By

Dr.K.Ramgoal

……….

(year)

Under the guidance of

………

(……….)

Department Of Master Of Business Administration

 CHAPTER-1

INTRODUCTION

UNDERSTANDING MUTUAL FUND

Introduction:
Mutual fund is a trust that pools money from a group of investors
(sharing common financial goals) and invest the money thus collected
into asset classes that match the stated investment objectives of the
scheme. Since the stated investment objectives of a mutual fund scheme
generally form the basis for an investor's decision to contribute money to
the pool, a mutual fund can not deviate from its stated objectives at any
point of time.

Every Mutual Fund is managed by a fund manager, who using his

investment management skills and necessary research works ensures
much better return than what an investor can manage on his own. The
capital appreciation and other incomes earned from these investments are
passed on to the investors (also known as unit holders) in proportion of
the number of units they own.
 When an investor subscribes for the units of a mutual
fund, he becomes part owner of the assets of the fund in the same
proportion as his contribution amount put up with the corpus (the total
amount of the fund). Mutual Fund investor is also known as a mutual
fund shareholder or a unit holder. Any change in the value of the
investments made into capital market instruments (such as shares,
debentures etc) is reflected in the Net Asset Value (NAV) of the scheme.
NAV is defined as the market value of the Mutual Fund scheme's assets
net of its liabilities. NAV of a scheme is calculated by dividing the market
value of scheme's assets by the total number of units issued to the
investors.

For example:
A. If the market value of the assets of a fund is Rs. 100,000
B. The total number of units issued to the investors is equal to
10,000.
 C. Then the NAV of this scheme = (A)/(B), i.e. 100,000/10,000 or
10.00
D. Now if an investor 'X' owns 5 units of this scheme
E. Then his total contribution to the fund is Rs. 50 (i.e. Number of
units held multiplied by the NAV of the scheme)

Definition:

An open-ended fund operated by an investment company which

raises money from shareholders and invests in a group of assets, in
accordance with a stated set of objectives. mutual funds raise money by
selling shares of the fund to the public, much like any other type of
company can sell stock in itself to the public.

Mutual funds then take the money they receive from the sale of
their shares (along with any money made from previous investments) and
use it to purchase various investment vehicles, such as stocks, bonds and
money market instruments. In return for the money they give to the fund
when purchasing shares, shareholders receive an equity position in the
fund and, in effect, in each of its underlying securities.

For most mutual funds, shareholders are free to sell their shares at
any time, although the price of a share in a mutual fund will fluctuate
daily, depending upon the performance of the securities held by the fund.
Benefits of mutual funds include diversification and professional money
management. Mutual funds offer choice, liquidity, and convenience, but
charge fees and often require a minimum investment. A closed-end fund
is often incorrectly referred to as a mutual fund, but is actually an
investment trust.

There are many types of mutual funds, including aggressive

growth fund, asset allocation fund, balanced fund, blend fund, bond fund,
capital appreciation fund, clone fund, closed fund, crossover fund, equity
fund, fund of funds, global fund, growth fund, growth and income fund,
hedge fund, income fund, index fund, international fund, money market
fund, municipal bond fund, prime rate fund, regional fund, sector fund,
specialty fund, stock fund, and tax-free bond fund.

Mutual Fund Industry in India

The Evolution

The formation of Unit Trust of India marked the evolution of the

Indian mutual fund industry in the year 1963. The primary objective at
that time was to attract the small investors and it was made possible
through the collective efforts of the Government of India and the Reserve
Bank of India. The history of mutual fund industry in India can be better
understood divided into following phases:

Phase 1. Establishment and Growth of Unit Trust of India - 1964-87

Unit Trust of India enjoyed complete monopoly when it was

established in the year 1963 by an act of Parliament. UTI was set up by
the Reserve Bank of India and it continued to operate under the
regulatory control of the RBI until the two were de-linked in 1978 and
the entire control was transferred in the hands of Industrial Development
Bank of India (IDBI). UTI launched its first scheme in 1964, named as
Unit Scheme 1964 (US-64), which attracted the largest number of
investors in any single investment scheme over the years.

UTI launched more innovative schemes in 1970s and 80s to suit

the needs of different investors. It launched ULIP in 1971, six more
schemes between 1981-84, Children's Gift Growth Fund and India Fund
(India's first offshore fund) in 1986, Mastershare (Inida's first equity
diversified scheme) in 1987 and Monthly Income Schemes (offering
assured returns) during 1990s. By the end of 1987, UTI's assets under
management grew ten times to Rs 6700 crores.

Phase II. Entry of Public Sector Funds - 1987-1993

The Indian mutual fund industry witnessed a number of public

sector players entering the market in the year 1987. In November 1987,
SBI Mutual Fund from the State Bank of India became the first non-UTI
mutual fund in India.

SBI Mutual Fund was later followed by Canbank Mutual Fund,

LIC Mutual Fund, Indian Bank Mutual Fund, Bank of India Mutual
Fund, GIC Mutual Fund and PNB Mutual Fund. By 1993, the assets
under management of the industry increased seven times to Rs. 47,004
crores. However, UTI remained to be the leader with about 80% market
share.

Mobilisation as % of
Amount Assets Under
1992-93 gross Domestic
Mobilised Management
Savings
UTI 11,057 38,247 5.2%
Public Sector 1,964 8,757 0.9%
Total 13,021 47,004 6.1%

Phase III. Emergence of Private Sector Funds - 1993-96

The permission given to private sector funds including foreign fund

management companies (most of them entering through joint ventures
with Indian promoters) to enter the mutual fund industry in 1993,
provided a wide range of choice to investors and more competition in
the industry. Private funds introduced innovative products, investment
techniques and investor-servicing technology. By 1994-95, about 11
private sector funds had launched their schemes.

Phase IV. Growth and SEBI Regulation - 1996-2004

The mutual fund industry witnessed robust growth and stricter

regulation from the SEBI after the year 1996. The mobilization of funds
and the number of players operating in the industry reached new heights
as investors started showing more interest in mutual funds.

Investors' interests were safeguarded by SEBI and the

Government offered tax benefits to the investors in order to encourage
them. SEBI (Mutual Funds) Regulations, 1996 was introduced by SEBI
that set uniform standards for all mutual funds in India. The Union
Budget in 1999 exempted all dividend incomes in the hands of investors
from income tax. Various Investor Awareness Programmes were launched
during this phase, both by SEBI and AMFI, with an objective to educate
investors and make them informed about the mutual fund industry.

In February 2003, the UTI Act was repealed and UTI was stripped
of its Special legal status as a trust formed by an Act of Parliament. The
primary objective behind this was to bring all mutual fund players on the
same level. UTI was re-organised into two parts:

1. The Specified Undertaking,

2. The UTI Mutual Fund

Presently Unit Trust of India operates under the name of UTI

Mutual Fund and its past schemes (like US-64, Assured Return Schemes)
are being gradually wound up. However, UTI Mutual Fund is still the
largest player in the industry. In 1999, there was a significant growth in
mobilization of funds from investors and assets under management which
is supported by the following data:

GROSS FUND MOBILISATION (RS. CRORES)

PUBLIC PRIVATE
FROM TO UTI TOTAL
SECTOR SECTOR
01-April-98 31-March-99 11,679 1,732 7,966 21,377
01-April-99 31-March-00 13,536 4,039 42,173 59,748
01-April-00 31-March-01 12,413 6,192 74,352 92,957
01-April-01 31-March-02 4,643 13,613 1,46,267 1,64,523
01-April-02 31-Jan-03 5,505 22,923 2,20,551 2,48,979
01-Feb.-03 31-March-03 * 7,259* 58,435 65,694
01-April-03 31-March-04 - 68,558 5,21,632 5,90,190
01-April-04 31-March-05 - 1,03,246 7,36,416 8,39,662
01-April-05 31-March-06 - 1,83,446 9,14,712 10,98,158

ASSETS UNDER MANAGEMENT (RS. CRORES)

 AS ON UTI PUBLIC SECTOR PRIVATE SECTOR TOTAL
31-March-99 53,320 8,292 6,860 68,472

Phase V. Growth and Consolidation - 2004 Onwards

The industry has also witnessed several mergers and acquisitions

recently, examples of which are acquisition of schemes of Alliance
Mutual Fund by Birla Sun Life, Sun F&C Mutual Fund and PNB Mutual
Fund by Principal Mutual Fund. Simultaneously, more international
mutual fund players have entered India like Fidelity, Franklin Templeton
Mutual Fund etc. There were 29 funds as at the end of March 2006. This
is a continuing phase of growth of the industry through consolidation and
entry of new international and private sector players.

Benefits & risk:

Mutual funds have traditionally been the go-to investment choice

for people who would like a better and relatively safer return on their
money. For one, mutual funds can offer diversification, something that
cannot be expected in some types of investments.

However, they do carry some amount of risk. If you’re thinking of

investing in mutual funds, here are some risks and benefits to consider:

Benefits of investing in mutual funds

Mutual fund investments are diversified, meaning, the holdings

are spread out across multiple types of businesses and industries. This
helps minimize losses should one or two business or industry sectors fail.

Mutual funds are also relatively affordable, allowing small

amounts of investments to be pooled. In case of an emergency, it’s easy
for investors to cash in their shares – inclusive of charges and fees, of
course.

Mutual funds are also managed by professionals (often referred to

as money managers) who are experienced at researching and selecting the
best investments to make the fund grow.

Some risks:
 When investing in mutual funds, know that all control is
relinquished to the fund managers. That means only the fund managers
will decide on the type of investments that are included in a portfolio.

There are also costs associated with these funds, such as annual
fees and sales charges. These costs will be charged even if the fund
performs badly. Interest payment or dividends can also rise and fall,
depending on how the market behaves.

ADVANTAGES OF MUTUAL FUND

S.
Advantage Particulars
No.
Mutual Funds invest in a well-diversified portfolio
Portfolio of securities which enables investor to hold a
1.
Diversification diversified investment portfolio (whether the
amount of investment is big or small).
Fund manager undergoes through various research
Professional works and has better investment management skills
2.
Management which ensure higher returns to the investor than
what he can manage on his own.
Investors acquire a diversified portfolio of securities
even with a small investment in a Mutual Fund. The
3. Less Risk
risk in a diversified portfolio is lesser than investing
in merely 2 or 3 securities.
Low Due to the economies of scale (benefits of larger
4. Transaction volumes), mutual funds pay lesser transaction costs.
Costs These benefits are passed on to the investors.
5. Liquidity An investor may not be able to sell some of the
 shares held by him very easily and quickly, whereas
units of a mutual fund are far more liquid.
>Mutual funds provide investors with various
schemes with different investment objectives.
Choice of Investors have the option of investing in a scheme
6.
Schemes having a correlation between its investment
objectives and their own financial goals. These
schemes further have different plans/options
Funds provide investors with updated information
pertaining to the markets and the schemes. All
7. Transparency
material facts are disclosed to investors as required
by the regulator.
Investors also benefit from the convenience and
flexibility offered by Mutual Funds. Investors can
switch their holdings from a debt scheme to an
8. Flexibility equity scheme and vice-versa. Option of systematic
(at regular intervals) investment and withdrawal is
also offered to the investors in most open-end
schemes.
Mutual Fund industry is part of a well-regulated
investment environment where the interests of the
9. Safety investors are protected by the regulator. All funds
are registered with SEBI and complete transparency
is forced.
DISADVANTAGES OF MUTUAL FUND

S.
Disadvantage Particulars
No.
1. Costs Investor has to pay investment management fees and
Control Not fund distribution costs as a percentage of the value of
in the Hands his investments (as long as he holds the units),
 of an
irrespective of the performance of the fund.
Investor
The portfolio of securities in which a fund invests is a
No decision taken by the fund manager. Investors have
2. Customized no right to interfere in the decision making process of
Portfolios a fund manager, which some investors find as a
constraint in achieving their financial objectives.
Difficulty in Many investors find it difficult to select one option
Selecting a from the plethora of funds/schemes/plans available.
3. Suitable For this, they may have to take advice from financial
Fund planners in order to invest in the right fund to achieve
Scheme their objectives.

Development of mutual funds in India:

Potential of Indian Mutual Funds Industry

The Indian mutual funds industry has been experiencing a rapid

growth due to infrastructural development, personal financial assets
getting augmented and increased foreign participation. The risk appetite
of the middle class investors has been increasing, income has been going
up, investors being made aware of the potential of the mutual fund
industry – all these have been making India a preferred Mutual Fund
investment destination when compared to other investment vehicles like
Fixed Deposits (FDs) and postal savings. The diversified portfolio is
another reason for the investors to get allured by the Mutual Fund
Investment India.
Growth of Indian MF Industry:

1. The Indian mutual funds retail market, which at present is growing at a

CAGR of around 30%, is estimated to reach US$ 300 Billion by 2015

2. Income and growth MF schemes made up for the bulk Assets under
Management (AUM) in India..

3. Private sector Asset Management Companies (AMCs) account for

majority of mutual fund sales in India (around 84% on March 31, 2008).
 The growth path of Mutual Fund Investment India is attributed to the

high saving pattern in India. This is a healthy status of the MF industry

in India when compared to Japan, France and China. The Mutual fund

sector in India though has huge potential, yet the limited participation

of the rural sector will always act as a deterrent factor.

The other hurdles in this regard are lack of awareness, inferior

distribution channel and limited banking services in the rural regions.

The best instrument of investing money nowadays is the mutual fund.

Investing in a stock market has become risky these days due to the

high volatility in the market.

Regulatory framework:

SEBI, the regulatory authority for the Indian Mutual fund industry
has consistently introduced several regulatory measures and amendments
in order to protect the interests of small investors. The Securities
Exchange Board of India (Mutual Funds) Regulations, 1996, is the
principal regulation for the Mutual fund industry in India. This was
amended several times with the latest amendment being issued in 2006.

The key provisions of the ‘SEBI Regulations, 1996’ include:

 All the schemes to be launched by the AMC needs to be approved

by the Board of Trustees and copies of offer documents of such
schemes are to be filed with SEBI.
 The offer documents shall contain adequate disclosures to enable
the investors to make informed decisions.
 The listing of close-ended schemes is mandatory and they should
be listed on a recognized stock exchange within six months from
the closure of subscription. However, the listing is not mandatory
in case (i) the scheme provides for monthly income or caters to
senior citizens, women, and children and physically handicapped;
(ii) if the scheme discloses details of repurchase in the offer
document; or (iii) if the scheme opens for repurchase within six
months of closure of subscription.
  Units of a close-ended scheme can be opened for sale or
redemption at a predetermined fixed interval if the minimum and
maximum amount of sale, redemption and periodicity is disclosed
in the offer document.
 Units of a close-ended scheme can be converted into an open-
ended scheme with the consent of a majority of the unit-holders
and disclosure is made in the offer document about the option and
period of conversion.
 Units of close-ended scheme may be rolled over by passing a
resolution by a majority of the shareholders.
 No scheme other than unit-linked scheme can be opened for
subscription for more than 45 days. Further, the minimum
subscription and the extent of over-subscription that is intended to
be retained should be specified in the offer document. In the case
of over-subscription, all applicants applying up to 5,000 units
must be given full allotment subject to over subscription.
 The AMC is required to refund the application money if minimum
subscription is not received, and also the excess over subscription
within six weeks of closure of subscription.
 A close-ended scheme shall be wound up on redemption date,
unless it is rolled over, or if 75% of the unit-holders of a scheme
pass a resolution for winding up of the scheme; if the trustees on
the happening of any event require the scheme to be wound up; or
if SEBI, so directs in the interest of investors.

Some of the provisions in the “SEBI Regulations, 1996” were

amended in the guidelines issued in 2001-02. Highlights of “SEBI
Guidelines (2001-02)” relating to mutual funds are as follows:

 Initial offer period to be reduced to a maximum of 30 days from

45 days.
 To invest in mortgage backed securities of investment grade given
by credit rating agency.
 To identify and make provision for the non-performing assets
(NPAs) according to criteria for classification of NPAs and
treatment of income accrued on NPAs.
 All the schemes shall be launched within six months from the date
of letter containing observations from SEBI on the scheme offer
document.
 To disclose large unit-holdings in the scheme, which are over 25%
of the NAV.

In addition, the SEBI took various measures and issued guidelines to

facilitate operations of mutual funds. As part of these measures, mutual
funds were allowed to invest in foreign debt securities in the countries
with full convertible currencies and with highest foreign currency credit
rating by accredited credit rating agencies. They were also allowed to
invest in government securities where the countries are AAA rated.

Moreover, guidelines were issued for valuation of unlisted equity

shares in order to bring about uniformity in the calculation of NAVs of
mutual fund schemes. In order to allow mutual funds to invest in both
gold and gold related instruments, the SEBI amended its regulation in
2006.

The amended regulation, “Securities and Exchange Board of India

(Mutual Funds) (Amendment) Regulation, 2006” permits introduction of
Gold Exchange Traded Fund (GETF) Schemes by mutual fund. The new
mutual fund scheme can invest primarily in gold and gold related
instruments, subject to certain investment restrictions.

Current scenario of mutual fund industry in India:

The Indian Mutual fund industry has witnessed considerable

growth since its inception in 1963. The assets under management (AUM)
have surged to Rs 4,173 bn in Mar-09 from just Rs 250 mn in Mar-65. In
a span of 10 years (from 1999 to 2009), the industry has registered a
CAGR of 22.3%, albeit encompassing some shortfalls in AUM due to
business cycles.

The impressive growth in the Indian Mutual fund industry in

recent years can largely be attributed to various factors such as rising
household savings, comprehensive regulatory framework, favourable tax
policies, introduction of several new products, investor education
campaign and role of distributors.

In the last few years, household’s income levels have grown

significantly, leading to commensurate increase in household’s savings.
Household financial savings (at current prices) registered growth rate of
around 17.4% on an average during the period FY04-FY08 as against
11.8% on an average during the period FY99-FY03. The considerable
rise in household’s financial savings, point towards the huge market
potential of the Mutual fund industry in India.

Besides, SEBI has introduced various regulatory measures in

order to protect the interest of small investors that augurs well for the
long term growth of the industry. The tax benefits allowed on mutual
fund schemes (for example investment made in Equity Linked Saving
Scheme (ELSS) is qualified for tax deductions under section 80C of the
Income Tax Act) also have helped mutual funds to evolve as the preferred
form of investment among the salaried income earners.
 Besides, the Indian Mutual fund industry that started with
traditional products like equity fund, debt fund and balanced fund has
significantly expanded its product portfolio. Today, the industry has
introduced an array of products such as liquid/money market funds,
sector-specific funds, index funds, gilt funds, capital protection oriented
schemes, special category funds, insurance linked funds, exchange traded
funds, etc.

It also has introduced Gold ETF fund in 2007 with an aim to

allow mutual funds to invest in gold or gold related instruments. Further,
the industry has launched special schemes to invest in foreign securities.
The wide variety of schemes offered by the Indian Mutual fund industry
provides multiple options of investment to common man.

With a strong growth in the AUM of domestic Mutual fund

industry, the ratio of AUM to GDP increased gradually from 4.7% in
2001 to 8.5% in 2009. The share of mutual funds in households’ financial
savings also witnessed a substantial increase to 7.7% in 2008 as against
1.3% in 2001.
 AuM of the asset management industry grew from 470 billion
INR in 1993 to 1396 billion INR in 2004 and to 8252 billion INR in
2014. While the AuM has grown from approximately 470 billion INR as
on 31 March 1993 to approximately 8,250 billion INR as on 31 March
2014 (reflecting a CAGR of 14.6% over the last 21 years), the Sensex has
grown from approximately 2280.52 as on 31 March 1993 to 22,386.27 as
on 31 March 2014 (reflecting a CAGR of approximately 11.5%).

The investor-wise pattern of asset-holding as well as investors

accounts reveals that individual investors account for almost 96.75% of
total investors account and contribute Rs 1552.8 bn which is 37.0% of the
total net assets as on March 31, 2009. The comparatively lower share of
net assets of individual investors in total net assets is mainly because of
lower penetration of mutual fund as an investment instrument among
working population (age group 18-59 years).

A majority of investors in the age group 18-59 years are not

aware of mutual funds or of investing in mutual funds through Systematic
Investment Plan (SIP). However, take up of mutual fund as an investment
opportunity by individual investors, particularly in Tier 2 and Tier 3
towns, is expected to increase in the near future.

Corporate/institutions sector on the other hand, though account

for only 1.2% of the total number of investors’ accounts in Mutual funds
industry, contribute as much as 56.3% to the total net assets of the
industry as on March 31, 2009. Despite a rise in net FII inflows in the
domestic mutual funds, FIIs constitute a very small percentage of
investors’ accounts (0.0003%) and contribute Rs 49.83 bn to the total net
assets (1% of total net assets of the Indian Mutual fund industry as on
March 31, 2009).
 The net resource mobilisation of domestic mutual funds which
registered strong growth in FY2000 due to the tax incentives announced
in the Union Budget for FY2000, witnessed a sharp decline in FY01. The
decline in resource mobilisation in FY01 was primarily due to the bearish
trend in the domestic stock markets and problems in UTI. The resource
mobilisation continued to remain at low level upto FY05.

In FY05 resource mobilisation by mutual funds declined by

almost 95.3% on account of redemption pressures on income, gilt and
equity-linked saving schemes subsequent to shift of resources in favour
of small saving schemes that offered attractive tax adjusted rates of
return. Mutual funds mobilised huge amount of resources under
liquid/money market schemes & growth/equity oriented schemes, while
resource mobilisation under debt schemes experienced sharp fall due to
change in interest rate scenario.

While, the resource mobilisation by mutual funds witnessed

strong growth during FY06-FY07 and in the period Apr-Aug 07 due to
buoyant capital market conditions, the eruption of sub-prime mortgage
crisis during Sep-07 and consequent volatility witnessed in the domestic
stock markets led to decline in resource mobilisation. The net resource
mobilisation of mutual funds turned negative as there was a net outflow
of Rs 282.97 bn during FY09 as against a net inflow of Rs 1,538.01 bn
during FY08.

The uncertain conditions in stock markets coupled with

redemption pressures from banks and corpoates amidst tight liquidity
conditions resulted in significant outflows during the months of Jun-08
(Rs 392.3 bn), Sep-08 (Rs 456.5 bn) and Oct-08 (458 bn). This led the
RBI to announce various liquidity augmentation measures to provide
liquidity support to mutual funds through banks.

With the easing of overall liquidity conditions, net resource

mobilisation by mutual funds again turned positive between the period
Dec-08 to Feb-09. Further, with liquidity conditions remaining
comfortable and stock markets registering strong gains, the net resource
mobilisation by mutual funds grew considerably during the first quarter
of FY10.
 The data reveals that the increase in revenue and profitability of
the Mutual fund industry has not been commensurate with the AUM
growth in past few years. The increased expenditure on marketing,
distribution and administration exerted upward pressure on the operating
expenses, thereby impacting AMC’s margins. The operating expenses as
a percentage of AUM rose from 41 basis points in FY04 to 113 basis
points in FY08.

Impact of the Global Financial Crisis

Deepening of the global financial crisis during September 2008,

which resulted in liquidity crunch world-over, had dampening impact of
the Indian Mutual fund industry. With the drying up of credit inflows
from banks and external commercial borrowings route, mutual funds
witnessed redemption pressure from corporates.

Although the mutual funds promised immediate redemption, their

assets were relatively illiquid. Besides, mutual funds faced problems such
as maturity mismatches between assets & liabilities of mutual funds, shift
from mutual funds to bank deposits in view of the comparatively higher
interest rates being offered by banks and freezing up of money markets
due to lack of buyers for assets like certificates of deposits of private
sector banks.

During Apr-Sep 08, net mobilisation of funds by mutual funds

declined sharply by 97.7% to Rs 24.8 bn due to uncertain conditions
prevailing in the domestic stock markets. The redemption pressures
witnessed by mutual funds led to net outflows under both the
income/debt-oriented schemes and growth/equity-oriented schemes.
Further, the AUM of Mutual fund industry contracted by 20.7% from Rs
5,445.4 bn as on August 31, 2008 to Rs 4,319.0 bn as on October 31,
2008. During the same period, liquid and debt schemes which contribute
more than 65% to the total AUM witnessed a decline of 19% in AUM.

In an endeavour to ease liquidity pressures in the system and restore

stability in the domestic financial markets, the RBI announced a slew of
measures. The key measures announced by the RBI include:

 The RBI decided to conduct a special 14 day repo at 9% per

annum for a notified amount of Rs 200 bn from October 14, 2008
with a view to enable banks to meet the liquidity requirements of
mutual funds.
 Scheduled Commercial Banks (SCBs) and All India term lending
and refinancing institutions were allowed to lend against and buy
back CDs held by mutual funds for a period of 15 days.
 As a temporary measure, banks were allowed to avail of
additional liquidity support exclusively for the purpose of meeting
the liquidity requirements of mutual funds to the extent of up to
0.5% of their net demand and time liabilities (NDTL).
Accordingly on November 1, 2008, it was decided to extend this
facility and allow banks to avail liquidity support under the LAF
through relaxation in the maintenance of SLR to the extent of up
to 1.5% of their NDTL. This relaxation in SLR was provided for
the purpose of meeting the funding requirements of NBFCs and
mutual funds.
 The borrowing limit prescribed in Regulation 44(2) of SEBI
(Mutual Fund) Regulations, 1996 was enhanced from 20% of net
asset of the scheme to 40% of net asset of the scheme to those
mutual funds who approached SEBI. This enhanced borrowing
limit was made available for a period of six months and could be
utilised for the purpose of redemptions/ repurchase of units.
 In order to moderate the exit from close ended debt schemes and
in the interest of those investors who choose to remain till
maturity and with a view to ensure that the value of debt securities
reflects the current market scenario in calculation of NAV, the
discretion given to mutual funds to mark up/ mark down the
benchmark yields for debt instruments of more than 182 days
maturity was enhanced from 150 basis points to 650 basis points.

The significant reduction in CRR & SLR, net injection of Rs 9,279 bn

through the repo window during Oct-08, the repurchase of MSS bonds
worth Rs 200 bn along with the earlier mentioned liquidity augmentation
measures helped to ease liquidity pressures for domestic mutual funds.
The data reveals that about 18 mutual funds borrowed from banks.
Further, the increase of borrowing limits enabled the mutual funds to
meet redemption pressures without engaging in a large scale sale of assets
which could have caused systemic instability. As on November 10, 2008,
15 mutual funds had been extended the enhanced borrowing limit as per
their requests made to SEBI.

However, with some recovery in the Indian financial markets as well

as improvement in the liquidity conditions, the RBI in it’s Q2 FY10
review of monetary policy withdrew some liquidity boosting measures
that were introduced as a part of monetary stimulus in FY09. The special
term repo facility for SCBs, for funding to NBFCs, mutual funds, and
housing finance companies was terminated.

Future of Mutual Funds in India:

The Future of Mutual Funds in India suggests that the industry

has got huge scopes of development in the times to come.

The Future of Mutual Funds In India is quite bright. Mutual Funds

are one of the most popular forms of investments as these funds are
diversification, professional management, and liquidity. In the year 2004,
the mutual fund industry in India was worth Rs 1,50,537 crores. The
mutual fund industry is expected to grow at a rate of 13.4% over the next
10 years.

Mutual funds assets under management (MF AUM) – growth:

 In March 2000, the MF AUM was Rs. 93717 crores and the
percentage growth was 26 %.
 In March 2001, the MF AUM was Rs. 83131 crores and the
percentage growth was 13 %.
 In March 2002, the MF AUM was Rs. 94017 crores and the
percentage growth was 12 %.
 In March 2003, the MF AUM was Rs. 75306 crores and the
percentage growth was 25 %.
 In March 2004, the MF AUM was Rs. 137626 crores and the
percentage growth was 45 %.
 In September 2004, the MF AUM was Rs. 151141 crores and the
percentage growth was 9 % in 6 months time.
 In December 2004, the MF AUM was Rs. 149300 crores and the
percentage growth was 1 % in 2 months time.

Future of mutual funds in India-facts on growth:

 Important aspects related to the future of mutual funds in India
are:

1. The growth rate was 100% in 6 previous years.

2. The saving rate in India is 23%.
3. There is a huge scope in the future expansion of
the mutual funds industry.
4. A number of foreign-based assets management
companies are venturing into Indian markets.
5. The Securities Exchange Board of India has
allowed the introduction of commodity mutual funds.
6. The emphasis is being given on the effective
corporate governance of mutual funds.
7. The Mutual Funds in India has the scope of
penetrating into the rural and semi urban areas.
8. Financial planners are introduced into the market,
which would provide the people with better financial planning.

Registration of mutual funds:

Application for registration

1. An application for registration of a mutual fund shall be made

to the Board in Form A by the sponsor.

Application fee to accompany the application

2. Every application for registration under regulation 1 shall be

accompanied by non-refundable application fee as specified in the
Second Schedule.

Application to conform to the requirements

3. An application, which is not complete in all respects shall be

liable to be rejected. Provided that, before rejecting any such application,
the applicant shall be given an opportunity to complete the Board may
specify such formalities within such time as.

Furnishing information

4. The Board may require the sponsor to furnish such further

information or clarification as may be required by it.

Eligibility criteria
 5. For the purpose of grant of a certificate of registration, the
applicant has to fulfill the following, namely: -

(a) The sponsor should have a sound track record and general
reputation of fairness and integrity in all his business transactions;

Explanation: For the purposes of this clause "sound track record"

shall mean the sponsor should, -

i. Be carrying on business in financial services for a

period of not less than five years; and

ii. The net worth is positive in all the immediately

preceding five years; and
iii. The net worth in the immediately preceding year is
more than the capital contribution of the sponsor in the asset
management company; and
iv. The sponsor has profits after providing for
depreciation, interest and tax in three out of the immediately
preceding five years, including the fifth year.

(a) The applicant is a fit and proper person

(b) In the case of an existing mutual fund, such fund is in the form
of a trust and the Board has approved the trust deed;

(c) The sponsor has contributed or contributes at least 40% to the

net worth of the asset management company; Provided that any person
who holds 40% or more of the net worth of an asset management
company shall be deemed to be a sponsor and will be required to fulfill
the eligibility criteria specified in these regulations;

(d) The sponsor or any of its directors or the principal officer to be

employed by the mutual fund should not have been guilty of fraud or has
not been convicted of an offense involving moral turpitude or has not
been found guilty of any economic offence.

(e) Appointment of trustees to act as trustees for the mutual fund

in accordance with the provisions of the regulations;

(f) Appointment of asset Management Company to manage the

mutual fund and operate the scheme of such funds in accordance with the
provisions of these regulations;
 (g) Appointment of a custodian in order to keep custody of the
securities and carry out the custodian activities as may be authorized by
the trustees.

Consideration of application

6. The Board may on receipt of all information decide the

application.

Grant of Certificate of Registration

7. The Board may register the mutual fund and grant a certificate
in Form B on the applicant paying the registration fee as specified in
Second Schedule.

Terms and conditions of registration

8. The registration granted to a mutual fund under regulation 7,

shall be subject to the following terms and conditions: -

(a) The trustees, the sponsor, the asset management company and
the custodian shall comply with the provisions of these regulations;

(b) The mutual fund shall forthwith inform the Board, if any
information or particulars previously submitted to the Board was
misleading or false in any material respect

(c) The mutual fund shall forthwith inform the Board, of any
material change in the information or particulars previously furnished,
which have a bearing on the registration granted by it;

(d) Payment of fees as specified in the regulations and the Second

Schedule.

Rejection of application

9. Where the sponsor does not satisfy the eligibility criteria

mentioned in regulation 5, the Board may reject the application and
inform the applicant of the same.

Payment of service fee

 10. A mutual fund shall pay before the 15th April each year a
service fee as specified in the Second Schedule for every financial year
from the year following the year of registration.

Provided that the Board may, on being satisfied with the reasons
for the delay permit the mutual fund to pay the service fee at any time
before the expiry of two months from the commencement of the financial
year to which such fee relates.

Failure to pay service fee

11. The Board may not permit a mutual fund that has not paid
service fee to launch any scheme.

Investments in mutual funds:

Mutual Funds over the years have gained immensely in their

popularity. Apart from the many advantages that investing in mutual
funds provide like diversification, professional management, the ease of
investment process has proved to be a major enabling factor. However,
with the introduction of innovative products, the world of mutual funds
nowadays has a lot to offer to its investors. With the introduction of
diverse options, investors needs to choose a mutual fund that meets his
risk acceptance and his risk capacity levels and has similar investment
objectives as the investor.

With the plethora of schemes available in the Indian markets, an

investors needs to evaluate and consider various factors before making

an investment decision. Since not everyone has the time or inclination

to invest and do the analysis himself, the job is best left to a

professional. Since Indian economy is no more a closed market, and

has started integrating with the world markets, external factors which

are complex in nature affect us too. Factors such as an increase in

short-term US interest rates, the hike in crude prices, or any major

happening in.
 Asian market have a deep impact on the Indian stock market.
Although it is not possible for an individual investor to understand Indian
companies and investing in such an environment, the process can become
fairly time consuming. Mutual funds (whose fund managers are paid to
understand these issues and whose Asset Management Company invests
in research) provide an option of investing without getting lost in the
complexities.

Most importantly, mutual funds provide risk diversification:

diversification of a portfolio is amongst the primary tenets of portfolio
structuring, and a necessary one to reduce the level of risk assumed by
the portfolio holder. Most of us are not necessarily well qualified to apply
the theories of portfolio structuring to our holdings and hence would be
better off leaving that to a professional. Mutual funds represent one such
option.

Lastly, Evaluate past performance, look for stability and although past

performance is no guarantee of future performance, it is a useful way

to assess how well or badly a fund has performed in comparison to its

stated objectives and peer group. A good way to do this would be to

identify the five best performing funds (within your selected

investment objectives) over various periods, say 3 months, 6 months,

one year, two years and three years. Shortlist funds that appear in the

top 5 in each of these time horizons as they would have thus

demonstrated their ability to be not only good but also, consistent

performers.

An investor can choose the fund on various criteria according to his

investment objective, to name a few:
 Thorough analysis of fund performance of schemes over the last
few years managed by the fund house and its consistent return in
the volatile market.
 The fund house should be professional, with efficient
management and administration.
  The corpus the fund is holding in its scheme over the period of
time.
 Proper adequacies of disclosures have to seen and also make a
note of any hidden charges carried by them.
 The price at which you can enter/exit (i.e. entry load / exit load)
the scheme and its impact on overall return.

HOWTOINVEST INMUTUALFUNDS:

Step One: Identify your investment needs.

Your financial goals will vary, based on your age, lifestyle, financial
independence, family commitments, level of income and expenses
among many other factors. Therefore, the first step is to assess your
needs. Begin by asking yourself these questions:

1. What are my investment objectives and needs?

Probable Answers: I need regular income or need to buy a home
or finance a wedding or educate my children or a combination of all these
needs.

2.How much risk am I willing to take?

Probable Answers: I can only take a minimum amount of risk or I

am willing to accept the fact that my investment value may fluctuate or
that there may be a short-term loss in order to achieve a long term
potential gain.

3.What are my cash flow requirements?

Probable Answers: I need a regular cash flow or I need a lump sum

amount to meet a specific need after a certain period or I don’t require
a current cash flow but I want to build my assets for the future.

By going through such an exercise, you will know what you want out
of your investment and can set the foundation for a sound Mutual
Fund Investment strategy.

Step Two - Choose the right Mutual Fund.

Once you have a clear strategy in mind, you now have to choose
which Mutual Fund and scheme you want to invest in. The offer
document of the scheme tells you its objectives and provides
supplementary details like the track record of other schemes managed by
the same Fund
 Manager. Some factors to evaluate before choosing a particular
Mutual Fund are:

 The track record of performance over the last few years in relation
to the appropriate yardstick and similar funds in the same.
 How well the Mutual Fund is organized to provide efficient,
prompt and personalized service.
 Degree of transparency as reflected in frequency and quality of
their communications.

Step three: - Select the ideal mix of Schemes.

Investing in just one Mutual Fund scheme may not meet all your
investment needs. You may consider investing in a combination of
schemes to achieve your specific goals.

Step Four:-Invest regularly

For most of us, the approach that works best is to invest a fixed
amount at specific intervals, say every month. By investing a fixed
sum each month, you get fewer units when the price is high and more
units when the price is low, thus bringing down your average cost per
unit. This is called rupee cost averaging and do investors all over the
world follow a disciplined investment strategy. With many open-ended
schemes offering systematic investment plans, this regular investing
habit is made easy for you.

Step five:- Keep your taxes in mind

As per the current tax laws, Dividend/Income Distribution made by

mutual funds is exempt from Income Tax in the hands of investor.
However, in case of debt schemes Dividend/ Income Distribution is
subject to Dividend Distribution Tax. Further, there are other benefits
available for investment in Mutual Funds under the provisions of the
prevailing tax laws. You may therefore consult your tax advisor or
Chartered Accountant for specific advice to achieve maximum tax
efficiency by investing in mutual funds.

Step Six:- Start early

It is desirable to start investing early and stick to a regular investment

plan. If you start now, you will make more than if you wait and invest
 later. The power of compounding lets you earn income on income and
your money multiplies at a compounded rate of return.

Step Seven:- The final step

All you need to do now is to get in touch with a Mutual Fund or your
advisor and start investing. Reap the rewards in the years to come.
Mutual Funds are suitable for every kind of investor whether starting a
career or retiring, conservative or risk taking, growth oriented or
income seeking.

YOUR RIGHTS AS A MUTUAL FUND UNITHOLDER:

As a unit holder in a Mutual Fund scheme coming under the SEBI

(Mutual Funds) Regulations, you are entitled to:

1. Receive unit certificates or statements of accounts confirming your

title within 30 days from the date of closure of the subscription under

open-ended schemes or within 6 weeks from the date your request for a

unit certificate is received by the Mutual Fund.

2. Receive information about the investment policies, investment

objectives, financial position and general affairs of the scheme.
3. Receive dividend within 30 days of their declaration and receive the
redemption or repurchase proceeds within 10 working days from the date
of redemption or repurchase.
4.Vote in accordance with the Regulations to: a. changes the Asset
Management Company; b.wind up the schemes.
5. Receive communication from the Trustees about change in the
fundamental attributes of any scheme or any other changes, which would
modify the scheme and affect the interest of the unit holders and to have
option to exit at prevailing Net Asset Value without any exit load in such
cases.
6. Inspect the documents of the Mutual Funds specified in the scheme’s
offer document.

In addition to your rights, you can expect the following from Mutual
Funds:

To publish their NAV, in accordance with the regulations: daily, in

case of open-ended schemes and once a week, in case of close ended
schemes.
 To disclose your schemes’ entire portfolio twice a year, unaudited
financial results half yearly and audited annual accounts once a year.

In addition many mutual funds send out newsletters periodically.

To adhere to a Code of Ethics, which requires that investment, decisions
are taken in the best interest of the unit holders.
 Frequently Used Terms

Net Asset Value (NAV

Net Asset Value is the market value of the assets of the scheme
minus its liabilities. The per unit NAV is the net asset value of the scheme
divided by the number of units outstanding on the Valuation Date.

Sale Price

Is the price you pay when you invest in a scheme? Also called
Offer Price. It may include a sales load.

Repurchase Price

Is the price at which a close-ended scheme repurchases its units

and it may include a back-end load. This is also called Bid Price.

Redemption Price

Is the price at which open-ended schemes repurchase their units

and close-ended schemes redeem their units on maturity. Such prices are
NAV related.

Sales Load

Is a charge collected by a scheme when it sells the units. Also

called, ‘Front-end’ load. Schemes that do not charge a load are
called ‘No Load’ schemes.

Repurchase or ‘Back-end’ Load

Is a charge collected by a scheme when it buys back the units

from the unit holders?

CHAPTER-2

LITERATURE OVERVIEW

MUTUAL FUNDS
Introduction:
 A mutual fund is a professionally managed type of collective
investment scheme that pools money from many investors and invests
typically in investment securities (stocks, bonds, short-term money
market instruments, other mutual funds, other securities, and/or
commodities such as precious metals).

The mutual fund will have a fund manager that trades (buys and
sells) the fund's investments in accordance with the fund's investment
objective. In the U.S., a fund registered with the Securities and
Exchange Commission (SEC) under both SEC and Internal Revenue
Service (IRS) rules must distribute nearly all of its net income and net
realized gains from the sale of securities (if any) to its investors at least
annually.

Most funds are overseen by a board of directors or trustees (if the

U.S. fund is organized as a trust as they commonly are) which is
charged with ensuring the fund is managed appropriately by its
investment adviser and other service organizations and vendors, all in
the best interests of the fund's investors.

Since 1940 in the U.S., with the passage of the Investment

Company Act of 1940 (the '40 Act) and the Investment Advisers Act of
1940, there have been three basic types of registered investment
companies: open-end funds (or mutual funds), unit investment trusts
(UITs); and closed-end funds. Other types of funds that have gained in
popularity are exchange traded funds (ETFs) and hedge funds,
discussed below.

Similar types of funds also operate in Canada, however, in the rest

of the world, mutual fund is used as a generic term for various types of
collective investment vehicles, such as unit trusts, open-ended
investment companies (OEICs), unitized insurance funds, undertakings
for collective investments in transferable securities (UCITS,
pronounced "YOU-sits") and SICAVs (pronounced "SEE-cavs").

History

Massachusetts Investors Trust (now MFS Investment Management)

was founded on March 21, 1924, and, after one year, it had 200
shareholders and $392,000 in assets. The entire industry, which
included a few closed-end funds, represented less than $10 million in
1924.

The stock market crash of 1929 hindered the growth of mutual

funds. In response to the stock market crash, Congress passed the
Securities Act of 1933 and the Securities Exchange Act of 1934. These
laws require that a fund be registered with the U.S. Securities and
Exchange Commission (SEC) and provide prospective investors with a
prospectus that contains required disclosures about the fund, the
securities themselves, and fund manager.

The Investment Company Act of 1940 sets forth the guidelines

with which all SEC-registered funds must comply.

With renewed confidence in the stock market, mutual funds began

to blossom. By the end of the 1960s, there were approximately 270
funds with $48 billion in assets. The first retail index fund, First Index
Investment Trust, was formed in 1976 and headed by John Bogle, who
conceptualized many of the key tenets of the industry in his 1951
senior thesis at Princeton University. It is now called the Vanguard 500
Index Fund and is one of the world's largest mutual funds, with more
than $100 billion in assets.

A key factor in mutual-fund growth was the 1975 change in the

Internal Revenue Code allowing individuals to open individual
retirement accounts (IRAs). Even people already enrolled in corporate
pension plans could contribute a limited amount (at the time, up to
$2,000 a year). Mutual funds are now popular in employer-sponsored
"defined-contribution" retirement plans such as (401(k)s) and 403(b)s
as well as IRAs including Roth IRAs.

As of October 2007, there are 8,015 mutual funds that belong to the
Investment Company Institute (ICI), a national trade association of
investment companies in the United States, with combined assets of
$12.356 trillion. In early 2008, the worldwide value of all mutual funds
totaled more than $26 trillion.

Usage, investment objectives

Since the Investment Company Act of 1940, a mutual fund is one

of three basic types of investment companies available in the United
States.

Mutual funds may invest in many kinds of securities (subject to its

investment objective as set forth in the fund's prospectus, which is the
legal document under SEC laws which offers the funds for sale and
contains a wealth of information about the fund). The most common
securities purchased are "cash" or money market instruments, stocks,
bonds, other mutual fund shares and more exotic instruments such as
derivatives like forwards, futures, options and swaps.
 Some funds' investment objectives (and or its name) define the type
of investments in which the fund invests. For example, the fund's
objective might state "...the fund will seek capital appreciation by
investing primarily in listed equity securities (stocks) of U.S.
companies with any market capitalization range." This would be
"stock" fund or a "domestic/US stock" fund since it stated U.S.
companies.

A fund may invest primarily in the shares of a particular industry or

market sector, such as technology, utilities or financial services. These
are known as specialty or sector funds. Bond funds can vary according
to risk (e.g., high-yield junk bonds or investment-grade corporate
bonds), type of issuers (e.g., government agencies, corporations, or
municipalities), or maturity of the bonds (short- or long-term).

Both stock and bond funds can invest in primarily U.S. securities
(domestic funds), both U.S. and foreign securities (global funds), or
primarily foreign securities (international funds). Since fund names in
the past may not have provided a prospective investor a good
indication of the type of fund it was, the SEC issued a rule under the
'40 Act which aims to better align fund names with the primary types
of investments in which the fund invests, commonly called the "name
rule".

Thus, under this rule, a fund must invest under normal

circumstances in at least 80% of the securities referenced in its name.
For example, the "ABC New Jersey Tax Free Bond Fund" would
generally have to invest, under normal circumstances, at least 80% of
its assets in tax-exempt bonds issued by the state of New Jersey and its
political subdivisions. Some fund names are not associated with
specific securities so the name rule has less relevance in those
situations.

For example, the "ABC Freedom Fund" is such that its name does
not imply a specific investment style or objective. Lastly, an index fund
strives to match the performance of a particular market index, such as
the S&P 500 Index. In such a fund, the fund would invest in securities
and likely specific derivates such as S&P 500 stock index futures in
order to most closely match the performance of that index.

Most mutual funds' investment portfolios are continually monitored

by one or more employees within the sponsoring investment adviser or
management company, typically called a portfolio manager and their
assistants, who invest the funds assets in accordance with its
investment objective and trade securities in relation to any net inflows
or outflows of investor capital (if applicable), as well as the ongoing
performance of investments appropriate for the fund. A mutual fund is
advised by the investment adviser under an advisory contract which
generally is subject to renewal annually.

Mutual funds are subject to a special set of regulatory, accounting,

and tax rules. In the U.S., unlike most other types of business entities,
they are not taxed on their income as long as they distribute 90% of it
to their shareholders and the funds meet certain diversification
requirements in the Internal Revenue Code.

Also, the type of income they earn is often unchanged as it passes

through to the shareholders. Mutual fund distributions of tax-free
municipal bond income are tax-free to the shareholder. Taxable
distributions can be either ordinary income or capital gains, depending
on how the fund earned those distributions. Net losses are not
distributed or passed through to fund investors

Net asset value

The net asset value, or NAV, is the current market value of a fund's
holdings, minus the fund's liabilities, that is usually expressed as a per-
share amount. For most funds, the NAV is determined daily, after the
close of trading on some specified financial exchange, but some funds
update their NAV multiple times during the trading day. The public
offering price, or POP, is the NAV plus a sales charge.

Open-end funds sell shares at the POP and redeem shares at the
NAV, and so process orders only after the NAV is determined. Closed-
end funds (the shares of which are traded by investors) may trade at a
higher or lower price than their NAV; this is known as a premium or
discount, respectively. If a fund is divided into multiple classes of
shares, each class will typically have its own NAV, reflecting
differences in fees and expenses paid by the different classes.

Some mutual funds own securities, which are not regularly traded
on any formal exchange. These may be shares in very small or
bankrupt companies; they may be derivatives; or they may be private
investments in unregistered financial instruments (such as stock in a
non-public company). In the absence of a public market for these
securities, it is the responsibility of the fund manager to form an
estimate of their value when computing the NAV. How much of a
fund's assets may be invested in such securities is stated in the fund's
prospectus.
 The price per share, or NAV (net asset value), is calculated by
dividing the fund's assets minus liabilities by the number of shares
outstanding. This is usually calculated at the end of every trading day.

Average annual return

US mutual funds use SEC form N-1A to report the average annual
compounded rates of return for 1-year, 5-year and 10-year periods as
the "average annual total return" for each fund. The following formula
is used:

P(1+T)n = ERV

Where:

P = a hypothetical initial payment of $1,000.

T = average annual total return.

n = number of years.

ERV = ending redeemable value of a hypothetical $1,000 payment

made at the beginning of the 1-, 5-, or 10-year periods at the end of the
1-, 5-, or 10-year periods (or fractional portion).

Turnover

Turnover is a measure of the fund's securities transactions, usually

calculated over a year's time, and usually expressed as a percentage of
net asset value.

This value is usually calculated as the value of all transactions

(buying, selling) divided by 2 divided by the fund's total holdings; i.e.,
the fund counts one security sold and another one bought as one
"turnover". Thus turnover measures the replacement of holdings.

In Canada, under NI 81-106 (required disclosure for investment

funds) turnover ratio is calculated based on the lesser of purchases or
sales divided by the average size of the portfolio (including cash).

Expenses and expense ratios

Mutual funds bear expenses similar to other companies. The fee

structure of a mutual fund can be divided into two or three main
components: management fee, non-management expense, and 12b-
1/non-12b-1 fees. All expenses are expressed as a percentage of the
average daily net assets of the fund.

Management fees

The management fee for the fund is usually synonymous with the
contractual investment advisory fee charged for the management of a
fund's investments. However, as many fund companies include
administrative fees in the advisory fee component, when attempting to
compare the total management expenses of different funds, it is helpful
to define management fee as equal to the contractual advisory fee plus
the contractual administrator fee. This "levels the playing field" when
comparing management fee components across multiple funds.

Contractual advisory fees may be structured as "flat-rate" fees, i.e.,

a single fee charged to the fund, regardless of the asset size of the fund.
However, many funds have contractual fees, which include breakpoints
so that as the value of a fund's assets increases, the advisory fee paid
decreases. Another way in which the advisory fees remain competitive
is by structuring the fee so that it is based on the value of all of the
assets of a group or a complex of funds rather than those of a single
fund.

Non-management expenses

Apart from the management fee, there are certain non-management

expenses which most funds must pay. Some of the more significant (in
terms of amount) non-management expenses are: transfer agent
expenses (this is usually the person you get on the other end of the
phone line when you want to buy/sell shares of a fund), custodian
expense (the fund's assets are kept in custody by a bank which charges
a custody fee), legal/audit expense, fund accounting expense,
registration expense (the SEC charges a registration fee when funds
file registration statements with it), board of directors/trustees expense
(the members of the board who oversee the fund are usually paid a fee
for their time spent at meetings), and printing and postage expense
(incurred when printing and delivering shareholder reports).

12b-1/Non-12b-1 service fees

In the United States, 12b-1 service fees/shareholder servicing fees

are contractual fees which a fund may charge to cover the marketing
expenses of the fund. Non-12b-1 service fees are
marketing/shareholder-servicing fees which do not fall under SEC rule
12b-1. While funds do not have to charge the full contractual 12b-1
fee, they often do. When investing in a front-end load or no-load fund,
the 12b-1 fees for the fund are usually .250% (or 25 basis points).

The 12b-1 fees for back-end and level-load share classes are
usually between 50 and 75 basis points but may be as much as 100
basis points. While funds are often marketed as "no-load" funds, this
does not mean they do not charge a distribution expense through a
different mechanism. It is expected that a fund listed on an online
brokerage site will be paying for the "shelf-space" in a different
manner even if not directly through a 12b-1 fee.

Investor fees and expenses

Fees and expenses borne by the investor vary based on the

arrangement made with the investor's broker. Sales loads (or contingent
deferred sales loads (CDSL)) are included in the fund's total expense
ratio (TER) because they pass through the statement of operations for
the fund.

Additionally, funds may charge early redemption fees to discourage

investors from swapping money into and out of the fund quickly,
which may force the fund to make bad trades to obtain the necessary
liquidity. For example, Fidelity Diversified International Fund
(FDIVX) charges a 10 percent fee on money removed from the fund in
less than 30 days.

Brokerage commissions

An additional expense, which does not pass through the fund's

income statement (statement of operations) and cannot be controlled
by the investor is brokerage commissions. Brokerages commissions are
incorporated into the price of securities bought and sold and, thus, are a
component of the gain or loss on investments. They are a true, real cost
of investing though.

The amount of commissions incurred by the fund and are reported

usually 4 months after the fund's fiscal year end in the "statement of
additional information" which is legally part of the prospectus, but is
usually available only upon request or by going to the SEC's or fund's
website. Brokerage commissions, usually charged when securities are
bought and again when sold, are directly related to portfolio turnover
which is a measure of trading volume/velocity (portfolio turnover
refers to the number of times the fund's assets are bought and sold over
the course of a year).
 Usually, higher rate of portfolio turnover (trading) generates higher
brokerage commissions. The advisors of mutual fund companies are
required to achieve "best execution" through brokerage arrangements
so that the commissions charged to the fund will not be excessive as
well as also attaining the best possible price upon buying or selling.

Types of mutual funds

Open-end fund, forms of organization, other funds

The term mutual fund is the common name for what is classified as
an open-end investment company by the SEC. Being open-ended
means that, at the end of every day, the fund continually issues new
shares to investors buying into the fund and must stand ready to buy
back shares from investors redeeming their shares at the then current
net asset value per share.

Mutual funds must be structured as corporations or trusts, such as

business trusts, and the SEC as an investment company will classify
any corporation or trust if it issues securities and primarily invests in
non-government securities. The SEC as an open-end investment
company will classify an investment company if they do not issue
undivided interests in specified securities (the defining characteristic of
unit investment trusts or UITs) and if they issue redeemable securities.

Registered investment companies that are not UITs or open-end

investment companies are closed-end funds. Closed-end funds are like
open end except they are more like a company, which sells its shares a
single time to the public under an initial public offering or "IPO".

Subsequently, the fund's shares trade with buyers and sellers of

shares in the secondary market at a market-determined price (which is
likely not equal to net asset value) such as on the New York or
American Stock Exchange. Except for some special transactions, the
fund cannot continue to grow in size by attracting more investor capital
like an open-end fund may.

Exchange-traded funds

A relatively recent innovation, the exchange-traded fund or ETF, is

often structured as an open-end investment company. ETFs combine
characteristics of both mutual funds and closed-end funds. ETFs are
traded throughout the day on a stock exchange, just like closed-end
funds, but at prices generally approximating the ETF's net asset value.
Most ETFs are index funds and track stock market indexes.
 Shares are issued or redeemed by institutional investors in large
blocks (typically of 50,000). Most investors buy and sell shares
through brokers in market transactions. Because the institutional
investors normally purchase and redeem in in kind transactions, ETFs
are more efficient than traditional mutual funds (which are
continuously issuing and redeeming securities and, to effect such
transactions, continually buying and selling securities and maintaining
liquidity positions) and therefore tend to have lower expenses.

Exchange-traded funds are also valuable for foreign investors who

are often able to buy and sell securities traded on a stock market, but
who, for regulatory reasons, are limited in their ability to participate in
traditional U.S. mutual funds.

Equity funds

Equity funds, which consist mainly of stock investments, are the

most common type of mutual fund. Equity funds hold 50 percent of all
amounts invested in mutual funds in the United States. Often equity
funds focus investments on particular strategies and certain types of
issuers.

Market Cap(italization)

Fund managers and other investment professionals have varying

definitions of mid-cap, and large-cap ranges. The following ranges are
used by Russell Indexes:

 Russell Microcap Index – micro-cap ($54.8 – 539.5 million)

 Russell 2000 Index – small-cap ($182.6 million – 1.8 billion)
 Russell Midcap Index – mid-cap ($1.8 – 13.7 billion)
 Russell 1000 Index – large-cap ($1.8 – 386.9 billion)

Growth vs. value

Another distinction is made between growth funds, which invest in

stocks of companies that have the potential for large capital gains, and
value funds, which concentrate on stocks that are undervalued. Value
stocks have historically produced higher returns; however, financial
theory states this is compensation for their greater risk.

Growth funds tend not to pay regular dividends. Income funds tend
to be more conservative investments, with a focus on stocks that pay
dividends. A balanced fund may use a combination of strategies,
typically including some level of investment in bonds, to stay more
conservative when it comes to risk, yet aim for some growth.
 Index funds versus active management

An index fund maintains investments in companies that are part of

major stock (or bond) indexes, such as the S&P 500, while an actively
managed fund attempts to outperform a relevant index through
superior stock-picking techniques. The assets of an index fund are
managed to closely approximate the performance of a particular
published index.

Since the composition of an index changes infrequently, an index

fund manager makes fewer trades, on average, than does an active fund
manager. For this reason, index funds generally have lower trading
expenses than actively managed funds, and typically incur fewer short-
term capital gains, which must be passed on to shareholders.

Additionally, index funds do not incur expenses to pay for selection

of individual stocks (proprietary selection techniques, research, etc.)
and deciding when to buy, hold or sell individual holdings. Instead, a
fairly simple computer model can identify whatever changes are
needed to bring the fund back into agreement with its target index.

Certain empirical evidence seems to illustrate that mutual funds do

not beat the market and actively managed mutual funds under-perform
other broad-based portfolios with similar characteristics. One study
found that nearly 1,500 U.S. mutual funds under-performed the market
in approximately half of the years between 1962 and 1992.

An analysis of the equity funds returns of the 15 biggest asset

management companies worldwide from 2004 to 2009 showed that
about 80% of the funds have returned below their respective
benchmarks. Moreover, funds that performed well in the past are not
able to beat the market again in the future (shown by Jensen, 1968;
Grinblatt and Sheridan Titman, 1989)..

Bond funds

Bond funds account for 18% of mutual fund assets. Types of bond
funds include term funds, which have a fixed set of time (short-,
medium-, or long-term) before they mature. Municipal bond funds
generally have lower returns, but have tax advantages and lower risk.
High-yield bond funds invest in corporate bonds, including high-yield
or junk bonds. With the potential for high yield, these bonds also come
with greater risk.

Money market funds

Money market funds hold 26% of mutual fund assets in the United
States. Money market funds generally entail the least risk, as well as
lower rates of return. Unlike certificates of deposit (CDs), open-end
money fund shares are generally liquid and redeemable at "any time"
(that is, normal business hours during which redemption requests are
taken - generally not after 4 PM ET).

Money funds in the US are required to advise investors that a

money fund is not a bank deposit, not insured and may lose value.
Most money fund strive to maintain an NAV of $1.00 per share though
that is not guaranteed; if a fund "breaks the buck", its shares could be
redeemed for less than $1.00 per share. While this is rare, it has
happened in the U.S., due in part to the mortgage crisis affecting
related securities.

Funds of funds

Funds of funds (FOF) are mutual funds, which invest in other

mutual funds (i.e., they are funds composed of other funds). The funds
at the underlying level are often funds which an investor can invest in
individually, though they may be 'institutional' class shares that may
not be within reach of an individual shareholder).

A fund of funds will typically charge a much lower management

fee than that of a fund investing in direct securities because it is
considered a fee charged for asset allocation services which is
presumably less demanding than active direct securities research and
management.

The fees charged at the underlying fund level are a real cost or drag
on performance but do not pass through the FOF's income statement
(statement of operations), but are usually disclosed in the fund's annual
report, prospectus, or statement of additional information. FOF's will
often have a higher overall/combined expense ratio than that of a
regular fund. The FOF should be evaluated on the combination of the
fund-level expenses and underlying fund expenses, as these both
reduce the return to the investor.

Most FOF’s invest in affiliated funds (i.e., mutual funds managed

by the same advisor), although some invest in unaffiliated funds (those
managed by other advisors) or both. The cost associated with investing
in an unaffiliated underlying fund may be higher than investing in an
affiliated underlying because of the investment management research
involved in investing in fund advised by a different advisor.

Recently, FOF’s have been classified into those that are actively
managed (in which the investment advisor reallocates frequently
among the underlying funds in order to adjust to changing market
conditions) and those that are passively managed (the investment
advisor allocates assets on the basis of on an allocation model which is
rebalanced on a regular basis).

The design of FOF’s is structured in such a way as to provide a

ready mix of mutual funds for investors who are unable to or unwilling
to determine their own asset allocation model. Fund companies such as
TIAA-CREF, American Century Investments, Vanguard, and Fidelity
have also entered this market to provide investors with these options
and take the "guess work" out of selecting funds. The allocation mixes
usually vary by the time the investor would like to retire: 2020, 2030,
2050, etc. The more distant the target retirement date, the more
aggressive the asset mix.

Hedge funds

Hedge funds in the United States are pooled investment funds with
loose, if any, SEC regulation, unlike mutual funds. Some hedge fund
managers are required to register with SEC as investment advisers
under the Investment Advisers Act of 1940. The Act does not require
an adviser to follow or avoid any particular investment strategies, nor
does it require or prohibit specific investments.

Hedge funds typically charge a management fee of 1% or more,

plus a “performance fee” of 20% of the hedge fund's profit. There may
be a "lock-up" period, during which an investor cannot cash in shares.
A variation of the hedge strategy is the 130-30 fund for individual
investors.

Mutual funds vs. other investments

Mutual funds offer several advantages over investing in individual

stocks. For example, the transaction costs are divided among all the
mutual fund shareholders, which allows for cost-effective
diversification.

Investors may also benefit by having a third party (professional

fund managers) apply expertise and dedicate time to manage and
research investment options, although there is dispute over whether
professional fund managers can, on average, outperform simple index
funds that mimic public indexes.

Yet, the Wall Street Journal reported that separately managed

accounts (SMA or SMAs) performed better than mutual funds in 22 of
25 categories from 2006 to 2008. This included beating mutual funds
performance in 2008, a tough year in which the global stock market
lost US$21 trillion in value. In the story, Morning star, Inc said SMAs
outperformed mutual funds in 25 of 36 stock and bond market
categories.

Whether actively managed or passively indexed, mutual funds are

not immune to risks. They share the same risks associated with the
investments made. If the fund invests primarily in stocks, it is usually
subject to the same ups and downs and risks as the stock market.

Share classes

Mutual funds may offer different types of shares, known as classes.

For a given fund, each class will invest in the same portfolio of
securities and will have the same investment objectives and policies.
But each class will have different shareholder services and/or
distribution arrangements with different fees and expenses. As a result,
each class will likely have different performance results.

As an example, a fund may have three classes of shares that are sold
to the general public – Class A, Class B, and Class C – and a class that
is sold only to institutional investors – Class I.

 Class A shares often have a front-end sales load (a type of fee

that investors pay when they purchase fund shares).
 Class B shares often have no front-end sales load, instead having
a contingent deferred sales load, or CDSL (a type of fee paid
when fund shares are sold, and that typically decreases to zero
over time) and a 12b-1 fee. Class B shares also may convert
automatically to a class of shares with a lower 12b-1 fee
(usually Class A) if held long enough.
 Class C shares might have a 12b-1 fee and a front-end sales load
or CDSL, but these would be lower than a Class A’s front-end
sales load or a Class B’s CDSL. Class C shares usually do not
convert to another class.
 Class I would be sold only to institutional investors and might
have different fees and expenses. These generally have very
high minimum investment requirements. In some cases, by
aggregating regular investments made by many individuals, a
retirement plan (such as a 401(k) plan) may qualify to purchase
 "institutional" shares (and gain the benefit of their typically
lower expense ratios) even though no members of the plan
would qualify individually.

Load and expenses

A front-end load or sales charge is a commission paid to a broker

by a mutual fund when shares are purchased, taken as a percentage of
funds invested. The value of the investment is reduced by the amount
of the load. Some funds have a deferred sales charge or back-end load.

In this type of fund an investor pays no sales charge when

purchasing shares, but will pay a commission out of the proceeds when
shares are redeemed depending on how long they are held. Another
derivative structure is a level-load fund, in which no sales charge is
paid when buying the fund, but a back-end load may be charged if the
shares purchased are sold within a year.

Load funds are sold through financial intermediaries such as

brokers, financial planners, and other types of registered
representatives who charge a commission for their services. Shares of
front-end load funds are frequently eligible for breakpoints (i.e., a
reduction in the commission paid) based on a number of variables.

These include other accounts in the same fund family held by the
investor or various family members, or committing to buy more of the
fund within a set period of time in return for a lower commission
"today".

It is possible to buy many mutual funds without paying a sales

charge. These are called no-load funds. In addition to being available
from the fund company itself, no-load funds may be sold by some
discount brokers for a flat transaction fee or even no fee at all.

(This does not necessarily mean that the broker is not compensated
for the transaction; in such cases, the fund may pay brokers'
commissions out of "distribution and marketing" expenses rather than a
specific sales charge. The buyer is therefore paying the fee indirectly
through the fund's expenses deducted from profits.)

No-load funds include both index funds and actively managed

funds. The largest mutual fund families selling no-load index funds are
Vanguard and Fidelity, though there are a number of smaller mutual
fund families with no-load funds as well. Expense ratios in some no-
load index funds are less than 0.2% per year versus the typical actively
managed fund's expense ratio of about 1.5% per year.
 Load funds usually have even higher expense ratios when the load
is considered. The expense ratio is the anticipated annual cost to the
investor of holding shares of the fund. For example, on a $100,000
investment, an expense ratio of 0.2% means $200 of annual expense,
while a 1.5% expense ratio would result in $1,500 of annual expense.
These expenses are before any sales commissions paid to purchase the
mutual fund.

Many fee-only financial advisors strongly suggest no-load funds

such as index funds. If the advisor is not of the fee-only type but is
instead compensated by commissions, the advisor may have a conflict
of interest in selling high-commission load funds.

CHAPTER-3

ANALYSIS OF MUTUAL FUNDS

Association of Mutual Funds in India (AMFI) is the umbrella body of

all the Mutual Funds registered with SEBI. It is a non-profit
organization committed to develop the Indian Mutual Fund Industry
on professional, healthy and ethical lines and to enhance and maintain
standards in all areas with a view to protecting and promoting the
interests of Mutual Funds and their unit holders. Mutual Fund both
 conceptually and operationally is different from other savings
instruments. Mutual Funds invest in instruments of capital markets,
which have different risk-return profile. It is very necessary that the
investors understand properly the conceptual framework of Mutual
Fund and its operational features.

Association of Mutual Funds in India (AMFI):

With the increase in mutual fund players in India, a need for

mutual fund association in India was generated to function as a non-profit
organisation. Association of Mutual Funds in India (AMFI) was
incorporated on 22nd August, 1995.

AMFI is an apex body of all Asset Management Companies

(AMC) which has been registered with SEBI. Till date all the AMCs are
that have launched mutual fund schemes are its members. It functions
under the supervision and guidelines of its Board of Directors.

Association of Mutual Funds India has brought down the Indian

Mutual Fund Industry to a professional and healthy market with ethical
lines enhancing and maintaining standards. It follows the principle of
both protecting and promoting the interests of mutual funds as well as
their unit holders.

The objectives of Association of Mutual Funds in India

The Association of Mutual Funds of India works with 30 registered

AMCs of the country. It has certain defined objectives which

juxtaposes the guidelines of its Board of Directors. The objectives are

as follows:

 This mutual fund association of India maintains high professional

and ethical standards in all areas of operation of the industry.
 It also recommends and promotes the top class business practices
and code of conduct which is followed by members and related
people engaged in the activities of mutual fund and asset
management. The agencies who are by any means connected or
involved in the field of capital markets and financial services also
involved in this code of conduct of the association.
 AMFI interacts with SEBI and works according to SEBIs
guidelines in the mutual fund industry.
  Association of Mutual Fund of India do represent the Government
of India, the Reserve Bank of India and other related bodies on
matters relating to the Mutual Fund Industry.
 It develops a team of well qualified and trained Agent distributors.
It implements a programme of training and certification for all
intermediaries and other engaged in the mutual fund industry.
 AMFI undertakes all India awarness programme for investors
inorder to promote proper understanding of the concept and
working of mutual funds.
 At last but not the least association of mutual fund of India also
disseminate informations on Mutual Fund Industry and
undertakes studies and research either directly or in association
with other bodies.

The sponsorers of Association of Mutual Funds in India

Bank Sponsored
 SBI Fund Management Ltd.
 BOB Asset Management Co. Ltd.
 Canbank Investment Management Services Ltd.
 UTI Asset Management Company Pvt. Ltd.

Institutions
 GIC Asset Management Co. Ltd.
 Jeevan Bima Sahayog Asset Management Co. Ltd.

Private Sector
Indian: -
 Benchmark Asset Management Co. Pvt. Ltd.
 Cholamandalam Asset Management Co. Ltd.
 Credit Capital Asset Management Co. Ltd.
 Escorts Asset Management Ltd.
 JM Financial Mutual Fund
 Kotak Mahindra Asset Management Co. Ltd.
 Reliance Capital Asset Management Ltd.
 Sahara Asset Management Co. Pvt. Ltd
 Sundaram Asset Management Company Ltd.
 Tata Asset Management Private Ltd.

Predominantly India Joint Ventures:-

 Birla Sun Life Asset Management Co. Ltd.
 DSP Merrill Lynch Fund Managers Limited
 HDFC Asset Management Company Ltd.

Predominantly Foreign Joint Ventures:-

  ABN AMRO Asset Management (I) Ltd.
 Alliance Capital Asset Management (India) Pvt. Ltd.
 Deutsche Asset Management (India) Pvt. Ltd.
 Fidelity Fund Management Private Limited
 Franklin Templeton Asset Mgmt. (India) Pvt. Ltd.
 HSBC Asset Management (India) Private Ltd.
 ING Investment Management (India) Pvt. Ltd.
 Morgan Stanley Investment Management Pvt. Ltd.
 Principal Asset Management Co. Pvt. Ltd.
 Prudential ICICI Asset Management Co. Ltd.
 Standard Chartered Asset Mgmt Co. Pvt. Ltd.

Association of Mutual Funds in India Publications

AMFI publices mainly two types of bulletin. One is on the monthly basis
and the other is quarterly. These publications are of great support for the
investors to get intimation of the know-how of their parked money.

Mission:

The Association of Mutual Funds in India:

(AMFI) is dedicated to developing the Indian Mutual Fund Industry on

professional,
healthy and ethical lines and to enhance and maintain standards in all a
reas with a
view to protecting and promoting the interests of mutual funds and the
ir unit holders.
AMFI MEMBERSHIP
 Information Updated As On 22-Oct-2010
Name of the Mutual
Fortis Mutual Fund
Fund
Date of setup of
April 15, 2004
Mutual Fund
Name(s) of Sponsor ABN AMRO Asset Management (Asia) Limited
Name of Trustee
Fortis Trustee (India) Private Limited
Company
Mr. Marcus Martinus te Riele - Associate Director
- Board of Trustees
Mr. Pradip Nayak - Independent Director - Board
of Trustees
Name of Trustees
Mr. Shariq Contractor - Independent Director -
Board of Trustees
Prof. Gururajan Sethu - Independent Director -
Board of Trustees
Name of the Asset
Fortis Investment Management (India) Pvt. Ltd.
Management Co.
Date of Incorporation
November 4, 2003
of AMC
Mr. Nikhil Johri
Mr. Ninad Karpe
Name(s) of Director
Mr. Rajan Ray
Mr. Robert Stewart Edgar
Name of Head of
Ms. Viji Krishnan
Operations
Name of Head-Fixed
Mr. Alok Singh
Income
Name(s) of Fund Mr. Amit Nigam
Manager Mr. Chirag Doshi
Mr. Chirag Mehta
 Mr. Karthikraj Lakshmanan
Name of Compliance Ms. Hemanti Wadhwa - Head - Compliance, Legal,
Officer Risk Manager & Company Secretary
Name of Investor
Mr. Shridhar Iyer
Service Officer
Name(s) of
Mr. Nikhil Johri
Managing Director
5th Floor, French Bank Building, 62, Homji Street,
Address of AMC
Fort Mumbai 400001
Telephone Number 022-66560000
Fax Number 022-66560040
Website www.fortisinvestments.in
Email customercare@fortisinvestments.in
Name(s) of Auditors S. R. Batliboi & Co.
Name(s) of
Deutsche Bank A G
Custodian
Name(s) of Registrar
Computer Age Management Services (P) Ltd.
and Transfer Agent
 Information Updated As On 29-Jul-2010
Name of the Mutual Fund AEGON Mutual Fund
Date of setup of Mutual
September 25, 2008
Fund
Name(s) of Sponsor AEGON International B.V.
Name of Trustee Company AEGON Trustee Company Private Ltd.
Mr. Christophe Claude Ferrand - Director
Mr. Hari Mundra - Director
Name of Trustees
Mr. Madhukar R. Umarji - Director
Mr. Pradeep Mallick - Director
Name of the Asset AEGON Asset Management Company Pvt.
Management Co. Ltd.
Date of Incorporation of
February 13, 2008
AMC
Mr. Eric Rutten
Mr. K. Narasimha Murthy
Name(s) of Director
Mr. Vilas R. Gupte
Mr. Vimal Bhandari
45, Maker Chambers VI, Nariman Point
Address of AMC
Mumbai 400021
Telephone Number 022-66542614
Fax Number 022-66542617
Website N/A
Email aegonamc@aegonindia.com
Name(s) of Auditors M/s S V Ghatalia & Associates

Information Updated As On 14-Dec-2010

Name of the Mutual AIG Global Investment Group Mutual Fund
Fund
Date of setup of Mutual
February 9, 2007
Fund
Name(s) of Sponsor AIG Capital Corporation
Name of Trustee
AIG Trustee Company (India) Pvt. Ltd.
Company
Mr. Amal Ganguli - Trustee
Mr. N Rangachary - Trustee
Name of Trustees
Mr. Robert Conry - Trustee
Mr. Sunil Behari Mathur - Trustee
Name of the Asset AIG Global Asset Management Company
Management Co. (India) Pvt. Ltd.
Date of Incorporation of
October 30, 2006
AMC
Mr. Avinder Singh Bindra
Mr. Lochlan McNew
Name(s) of Director
Mr. Nanoo G Pamnani
Mr. Sunil Mehta
Name of Chief
Mr. Sunil Mehta
Executive Officer
Name of Sales Head Mr. Mahmood Basha
Mr. Huzaifa Husain
Name(s) of Fund
Mr. Ruchir Parekh
Manager
Mr. Vikrant Mehta
Name of Compliance
Officer & Company Ms. Sonal Barot
Secretary
Name of Investor
Ms. Usha Mallya
Service Officer
604, Peninsula Tower, 6th Floor, Peninsula
Address of AMC Corporate Park, G.K. Marg, Lower Parel
Mumbai 400013
Telephone Number 022-40930000
Fax Number 022-40930077
Website www.aiginvestments.co.in
Email investorcare@aig.com
Name(s) of Auditors S R Batliboi & Co.
Name(s) of Custodian CITIBANK N.A.
Name(s) of Registrar
Computer Age Management Services Pvt. Ltd.
and Transfer Agent
 Information Updated As On 01-Feb-2010
Name of the Mutual
Birla Sun Life Mutual Fund
Fund
Date of setup of December 23, 1994
Mutual Fund
Aditya Birla Nuvo Limited
Name(s) of Sponsor
Sun Life (India) AMC Investments Inc.
Name of Trustee
Birla Sun Life Trustee Company Private Limited
Company
Mr. B. N. Puranmalka - Director
Mr. Gur Charan Das - Director
Name of Trustees Mr. Prafull Anubhai - Director
Mr. Suresh Talwar - Director
Mr. V. Arunchalam - Director
Name of the Asset Birla Sun Life Asset Management Company
Management Co. Limited
Date of
Incorporation of September 5, 1994
AMC
Mr. Ajay Srinivasan
Mr. Ashok Goenka
Mr. Donald Stewart
Mr. Kumar Mangalam Birla
Mr. N. C. Singhal
Mr. N. N. Jambusaria
Name(s) of Director
Mr. S. S. Raman
Mr. Stephan Rajotte
Mr.Pankaj Razdan
Mr.R.C.Bhargava
Mr.Venkatesh Mysore
Prof. R.Vaidyanathan
Name of Chairman Mr. Kumar Mangalam Birla
Name of Chief
Mr. A. Balasubramanian
Executive Officer
Name of Compliance
Mr. Rajiv Joshi
Officer
Name of Investor
Mrs. Molly Kapoor
Service Officer
One India Bulls Centre ,Tower 1, 17th Flr, Jupiter
Address of AMC Mill Compound,841,S.B. Marg,Elphinstone Road
Mumbai 400 013
Telephone Number 43568000
Fax Number 43568110/ 8111
Website www.birlasunlife.com
Email connect@birlasunlife.com
 M/s. Haribhakti & Co. - For Asset Management
Name(s) of Auditors Company
S. R. Batliboi & Company - For Mutual Fund
Name(s) of
J P Morgan Chase Bank
Custodian
Name(s) of Registrar
Computer Age Management Services Pvt. Ltd
and Transfer Agent

Information Updated As On 25-Nov-2010

Name of the Mutual
Axis Mutual Fund
Fund
Date of setup of Mutual
September 4, 2009
Fund
Name(s) of Sponsor Axis Bank Limited
Name of Trustee
Axis Mutual Fund Trustee Limited
Company
Dr. T. C. Nair - Chairman
Mr. B. Gopalakrishnan - Trustee
Name of Trustees
Mr. Kamlesh Vikamsey - Trustee
Mr. Kedar Desai - Trustee
Name of the Asset
Axis Asset Management Company Ltd.
Management Co.
Date of Incorporation of
January 13, 2009
AMC
Mr. Pranesh Misra
Mr. Rajiv Anand, Managing Director & Chief
Executive Officer
Name(s) of Director Mr. T. S. Narayanasami
Mr. U. R. Bhat
Ms. Shikha Sharma
Ms. Sonu Bhasin
Name of Chief Executive Mr. Rajiv Anand, Managing Director & Chief
Officer Executive Officer
Name of Head of
Mr. Praveen Bhatt
Operations
Name of Head-Fixed
Mr. R. Sivakumar
Income
Name of Sales Head Mr. Karan Datta
Name of Chief
Mr. Chandresh Nigam
Investment Officer
Mr. Anurag Mittal
Mr. Chandresh Nigam, Fund Manager - Equity
Name(s) of Fund Mr. Ninad Deshpande, Fund Manager - Fixed
Manager Income
Mr. Pankaj Murarka
R. Sivakumar
Name of Compliance
Officer & Company Mr. Miten Chawda
Secretary
Name of Investor Service
Mr. Milind Vengurlekar
Officer
11th Floor, Nariman Bhavan, Vinay K. Shah
Address of AMC
Marg, Nariman Point, Mumbai 400021
Telephone Number 022-39403300
Fax Number 022-22040130
Website www.axismf.com
Email customerservice@axismf.com
M/s S R Batliboi & Co. (Mutual Fund) and
Name(s) of Auditors
M/s Haribhakti & Co. (AMC)
Name(s) of Custodian Deutsche Bank A. G.
Name(s) of Registrar and
Karvy Computershare Pvt. Ltd.
Transfer Agent

Information Updated As On 25-Aug-2010

Name of the Mutual
Baroda Pioneer Mutual Fund
Fund
Date of setup of Mutual
November 24, 1994
Fund
Pioneer Global Asset Management S.p.A. and
Name(s) of Sponsor
Bank of Baroda
Name of Trustee
N.A.
Company
Mr. A. D. M. Chavali - Associate Trustee
Mr. R. L. Baxi - Independent Trustee, Chairman
Name of Trustees of Board
Mr. Shrinivas Suvarna - Independent Trustee
Mr.V.H.Bhatia - Independent Trustee
Name of the Asset Baroda Pioneer Asset Management Company
Management Co. Limited
Date of Incorporation of
November 5, 1992
AMC
Dr. Anil K. Khandelwal
Dr. P. N. Khandwalla
Mr. Angus Stening
Mr. G. P. Gupta
Name(s) of Director Mr. M D Mallya
Mr. Rohit Arora
Mr. Shiv Dayal
Mrs. Minal Bhagat
Prof. B. B. Bhattacharya
Name of Chairman Dr. Anil K. Khandelwal
Name of Chief
Mr. Rajan Krishnan
Executive Officer
Name of Head-Fixed
Mr Alok Sahoo
Income
Name of Sales Head Mr Abhay Nagar
Name(s) of Chief
S. Sundararajan
Operating Officer
Name(s) of Fund Mr. Dipak Acharya (Equity)
Manager Mrs. Hetal Shah (Debt)
Name of Compliance
Ms Rashmi Podwal
Officer
501 TITANIUM, 5TH Floor, Western Express
Address of AMC
Highway, Goregaon(E) Mumbai 400 063
Telephone Number +91 22 30741000
Fax Number +91 22 30741001
Website www.barodapioneer.in
Email info@barodapioneer.in
M/s Borkar & Muzumdar Chartered
Name(s) of Auditors
Accountants
Name(s) of Custodian Citibank NA
Name(s) of Registrar
M/s Karvy Computershare Pvt. Ltd.
and Transfer Agent
 Information Updated As On 16-Nov-2009
Name of the Mutual
Benchmark Mutual Fund
Fund
Date of setup of
June 12, 2001
Mutual Fund
Name(s) of Sponsor Niche Financial Services Pvt. Ltd.
Name of Trustee
Benchmark Trustee Company Pvt. Ltd.
Company
Dr. A. C. Shah - Director
Dr. P.P. Shah - Director
Name of Trustees
Dr. S.A. Dave - Chairman
Mr. Shriraj Dhruv - Director
Name of the Asset
Benchmark Asset Management Company Pvt. Ltd.
Management Co.
Date of Incorporation
October 16, 2000
of AMC
Mr. D.S. Mehta - Chairman
Mr. S.J. Parekh
Name(s) of Director Mr. S.R. Halbe
Mr. T.N.V. Ayyar
Ms. Susan Thomas
Name of Sales Head Mr. Anil Desai
Name of Chief
Mr. Vishal Jain
Investment Officer
Name(s) of Fund Gauri Sekaria
Manager Payal Kaipunjal
Name of Compliance
Mr. Gautam H. Rathor
Officer
Name of Investor
Mr. Bibek Sengupta
Service Officer
405, Raheja Chambers, Free Press Journal Marg,
Address of AMC
213, Nariman Point Mumbai 400021
Telephone Number (91 22) 6651 2727
Fax Number (91 22) 2200 3412
Website www.benchmarkfunds.com
Email webmaster@benchmarkfunds.com
Deloitte Haskins & Sells (AMC)
Name(s) of Auditors
N.M. Raiji & Co. (Fund)
Name(s) of Custodian Citi Bank NA
Deutsche Bank
 The Bank of Nova Scotia
Name(s) of Registrar
Karvy Computershare Pvt. Ltd.
and Transfer Agent
 Information Updated As On 08-Nov-2010
Name of the Mutual Fund Bharti AXA Mutual Fund
Date of setup of Mutual
March 31, 2008
Fund
Name(s) of Sponsor AXA Investment Managers
Name of Trustee
Bharti AXA Trustee Services Private Limited
Company
Mr Raghu Palat - Trustee
Mr Robin Clark - Trustee
Name of Trustees
Mr S Venkatachalam - Trustee
Mr Sumant Chadha - Trustee
Name of the Asset Bharti AXA Investment Managers Private
Management Co. Limited
Date of Incorporation of
August 13, 2007
AMC
Mr Anil Harish
Mr Atul Sahasrabuddhe
Mr Bruno Guilloton
Mr Glenn Williams
Name(s) of Director
Mr James Young
Mr Manik Jhangiani
Mr Sanjay Gupta
Mr Sudhir Chand
Name of Chief Executive
Mr Sandeep Dasgupta
Officer
Name of Head of
Mr Shubro Sankha Das
Operations
Name of Head Equity Mr Prateek Agrawal
Name(s) of Chief
Investment Officer - Mr Prateek Agrawal
Equity
Name(s) of Chief
Mr Simon Dain
Operating Officer
Name(s) of Fund Manager Mr Ramesh Rachuri
Name of Compliance
Mr Manish Ghiya
Officer
Name of Investor Service
Mr Nanda Kishore Sethuraman
Officer
51, 5th Floor, Kalpataru Synergy, East Wing,
Address of AMC
Vakola, Santacruz East Mumbai 400055
Telephone Number 022-40479000
Fax Number 022-40479001
Website www.bhartiaxa-im.com
Email service@bhartiaxa-im.com
Name(s) of Auditors B S R & Co.
Name(s) of Custodian Citibank, N.A
Name(s) of Registrar and
Karvy Computershare Private Ltd
Transfer Agent

Chapter 4
Conclusion:

Mutual funds are funds that pool the money of several investors to

invest in equity or debt markets. Mutual Funds could be Equity funds,

Debt funds or balanced funds.

Fund are selected on quantitative parameters like volatility,

FAMA Model, risk adjusted returns, and rolling return coupled with a

qualitative analysis of fund performance and investment styles through

regular interactions / due diligence processes with fund managers.

Mutual funds are a method for investors to diversify risk and to

benefit from professional money management. The prospectus identifies

key information about the fund including its operating boundaries and its

costs. The fund manager operates within those boundaries and is a critical

to achieving strong results within those boundaries.

The mutual fund industry in India has prospered due to

transparency and disclosures. Most fund houses come out with a fund fact

sheet for each scheme every month. They provide information about the

investment particulars of the corpus (company and sector-wise), credit

ratings, market value of investments, NAVs, returns, repurchase and sale

price of the schemes.

A fund house normally comes out with various publications,

which contain the scheme’s objectives, fund manager’s commentary on

the portfolio, market outlook, etc. The aim is to help an investor take an

informed decision to invest, stay invested or redeem out of the fund. It is

upto the investor i.e. you, to make the best use of it.

Findings:

 62 percent of respondents invest in mutual funds

 Of those who do not invest in mutual funds, 12 percent are
interested in doing so
 Of those who do invest in mutual funds, nearly half (48 percent)
feel there are too many to choose from
 When asked their primary method of learning about mutual funds
1. 67 percent use online research
2. 13 percent follow analyst ratings and reports
3. 10 percent consult a financial advisor
 When asked what criteria they use to select mutual funds
1. 74 percent of respondents said they choose funds that meet
their investment objectives
2. 37 percent said they choose funds based on past
performance
3. 19 percent said they choose funds that provide the most
income
4. 10 percent said they choose funds that support their
interests, such as global awareness
 17 percent of respondents indicated they are very disciplined
when it comes to portfolio rebalancing and asset allocation
 28 percent of respondents wish they knew more about mutual
funds so they could make more educated choices
 12 percent of respondents prefer a professional chooses mutual
funds for them
  50 percent of respondents value the stability of fund management
 64 percent appreciate it when the style of a fund remains
consistent with the primary objective of the fund
 64 percent have mutual funds in accounts at other firms
 Of those who have mutual funds in accounts at other firms, 75
percent are not interested in consolidating them
1. When asked why, 59 percent said they are comfortable
with where they are and 30 percent said they don’t like
to have all their eggs in one basket
2. When asked the biggest disadvantage if mutual funds
3. 29 percent said complex fee structure
4. 20 percent said the cost to buy and sell them
5. 51 percent said they currently invest to generate
income
6. Of those who invest for income
 45 percent use the income to supplement retirement income
 44 percent use it to allow for a more comfortable lifestyle
 20 percent use the income to cover monthly bills
 13 percent use the income to pay down debt
Suggestions:

Suggestions for selecting best mutual funds;

1. Draw down your investment objective. There are various schemes

suitable for different needs. For example retirement plan, capital
growth etc. Also get clear about your time frame for investment
and returns. Equity funds are not advisable for short term because
of their long-term nature. You can consider money market and
floating rate funds for short-term gains. This equals asking - What
kind of mutual fund is right for me?

2. Once you have decided on a plan or a couple of them, collect as

much information as possible on them from different sources
offering them. Funds' prospectus and advisors may help you in
this.

3. Pick out companies consistently performing above average.

Mutual funds industry indices are helpful in comparing different
funds as well as different plans offered by them. Some of the
industry standard fund indices are Nasdaq 100, Russel 2000, S&P
fund index and DSI index with the latter rating the Socially
Responsible Funds only. Also best mutual funds draw good results
despite market volatility.
 4. Get a clear picture of fees & associated cost, taxes (for non-tax
free funds) for all your short listed funds and how they affect your
returns. Best mutual funds have lower cost out go.

5. Best mutual funds maximize returns and minimize risks. A

number called as Sharpe Ratio explains whether a fund is risk free
based on its expected returns compared against a risk free money
market fund.

6. Some funds have the advantage of low minimum initial

investments. You can start investing even with $250 a month. This
is advisable for building asset bases over a long period with small
regular investments.

Tips for investing in mutual funds:

1. NEVER invest in a mutual fund that charges a load:

These funds are for suckers. Whoever is trying to convince

you to buy them likely gets a kickback from the fund, which is why
they are trying to pressure you into investing in the fund.

2. NEVER take stock advice from someone trying to convince

you buy a mutual fund with a load:

This person clearly does not have your interests in mind. He

is most likely just trying to line his pockets with kickbacks.

3. Understand the fund's asset allocation:

Don't invest in a "mixed" fund (one that invests in both stocks

and bonds) if you only want to invest in stocks. If you want
international exposure, allocate some money towards international
mutual funds.

4. Keep fees to a minimum:

Obviously, you should avoid a load and 12 b-1 fees, but you
also don't want to be paying management fees either. A fund with an
expense ratio under 1% is particularly lovely in today's environment.
5. Don't invest in too many mutual funds:

A mutual fund gives you instant diversification. Most funds

invest in hundreds of stocks. The only reason to invest in multiple
mutual funds is if you want to target various types of stocks (such as
domestic and international).

6. Consider an index fund:

Most mutual funds under perform the market. You can

essentially buy the market with an index fund, which generally has
maintenance fees of .25% or less.

7. Keep track of the mutual fund's benchmark:

Most compare mutual funds to the performance of the S&P

500, but the S&P tracks the 500 largest US stocks. If, for example,
you choose to invest in foreign small caps, then you will need to use a
totally different benchmark.

8. Do not chase funds that have just had good performance:

The fund itself may have just gotten lucky or may just be
targeted to an asset group that did well in the past year (for example, a
health care fund when health care companies had a record year).

Also, funds that have had good performance might sometimes

get a huge influx of funds and not know how to invest all of these
extra funds effectively, thereby detracting from future performance.
9. If possible, invest in a smaller mutual fund:

Large, ten billion dollar funds have a difficult time investing

in stocks. Just 5% of a ten billion dollar fund can buy many US small
cap stocks.

If this fund found a $500 million company it thought was

great, it could only invest a small amount of its total assets in the
company without greatly affecting the price. I prefer to invest in
mutual funds that have $2 billion in assets or less, especially if the
fund is focused on small caps.

10. Never pay a load:

Consider an index fund.

Bibliography:

Websites:

 www.indiainfoline.com
 www.nseindia.com
 www.bseindia.com
 www.hseindia.org
 www.sebiindia.gov.in
 www.amfiindia.com

Books:

 Guide to Indian capital market - Sanjiv Agarwal

 Compendium on SEBI Capital Issues & Listings – Bharat
 Financial Management – Prasanna Chandra