PRESENTATION REPORT

1. Outline submission date: September 22st , 2011 2. Class: K47E + K47B (Group Unit 5) 3. Group Members 1. V H Phc H u 2. Tr ng Th Nh i 3. Tr n Hong Anh 4. Hu nh Th Thu H ng 5. u Th H o 6. Phng Qu Hi u 7. H Th Di u Linh 8. Phan Thu Th o 9. Hu nh Th V nh 10. Nguy n Thanh Tu n 4. Content a. Topic: Mutual Fund . b. Division of tasks: (group task) No 1 Member Thu Th o + Qu Hi u Th V nh Nh i Th H o Hong Anh presentation Preparing for part 2 of the presentation Preparing for part 3 of the presentation Preparing for part 4 of the presentation presentation Preparing for part 6 of the presentation Job Preparing for part 1 of the Effects/results Done Done Done Done Done Done Student no.: 727 Student no.: 696 Student no.: 701 Student no.: 721 Student no.: 726 Student no.: 733 Student no.: 748 Student no.: 809 Student no.: 847 Student no.: 338 (Leader)

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Di u Linh - Phc H u Preparing for part 5 of the Thu H ng Thanh Tu n

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Hong Anh Th H o Thu Th o Th V nh Thanh Tu n Th V nh Qu Hi u Phc H u

Preparing for Power Point slides Preparing for game show Preparing for the way to present Preparing gift for audiences Preparing for projector and loudspeaker Completing the outline and sending to teacher

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c. Comprehension questions (main ideas + some detailed questions): 1. What is mutual fund? 2. What are advantages and disadvantages of mutual fund? 3. How many types of mutual fund? 4. What is the cost of mutual fund? 5. How to invest in mutual fund effectively? d. References: 1. Mutual Fund Basics Tutorial, Investopedia http://www.investopedia.com/university/mutualfunds/ 2. Mutual Funds for dummies, Eric Tyson http://books.google.com/books?id=wY7aylyw3F0C&printsec=frontcover&so urce=gbs_atb#v=onepage&q&f=false 3. A brief history of the mutual fund, Investopedia http://www.investopedia.com/articles/mutualfund/05/MFhistory.asp#axzz1Y XejKhGp 4. Close-ended vs open-ended mutual funds (MFs) http://www.scribd.com/doc/59297040/Close-Ended-vs-Open-Ended-MutualFunds 5. Qu u t k v ng 2011 http://sanvangthegioi.net/news/detail/2505/

PRESENTATION CONTENTS
I. Introduction about mutual fund (Thu Th o_809 + Qu Hi u_733) 1. Definition 2. Brief history of mutual fund in the world 3. Mutual funds in Viet Nam 4. Three ways to make money from mutual fund y Dividends on stocks and interest on bonds y Capital gains distribution y Increased share value Vocabulary No Vocabulary Type English meaning of investment firm formed for holding securities of 1 Investment trust other firms, and for obtaining its capital from public issues of shares that are trade on stock exchange 2 3 IRA Unit holder Individual retirement account An investor in a unit trust fund A profit that is made from the 4 5 Capital gains NAV sale of property or an investment Net asset value calculated according to how 6 Pro rata much of something has been used, the amount of work done, etc Phn chia l i t c theo t l Ti kho n h u tr c nhn C ng c a cng ty ut Qu ut y thc Vietnamese meaning

L i nhu n thu ut Gi tr ti s n th c

c t vi c

bn cc kho n ti s n hay

Detailed Expansion 1. Definition y A mutual fund (MF) is just the connecting bridge or a financial intermediary that allows a group of investors to pool their money together with a predetermined investment objective. The mutual fund will have a fund manager who is responsible for investing the gathered money into specific securities (stocks or bonds). When you invest in a mutual fund, you are buying units or portions of the mutual fund and thus on investing becomes a shareholder or unit holder of the fund.  Mutual funds are like baskets of investments because one single mutual fund can invest in dozens or hundreds of stocks and/or bonds, referred to as "holdings".  Each investor is charged a percentage of his or her investment to help cover all the costs of running the mutual fund, including having a professional fund manager, and researching, buying, and selling stocks. The fees are spread out over all the investors, so the cost to each individual investor is less than it would have been if he or she had purchased the stocks directly. 2. Brief history of mutual fund in the world y Some cite about the closed-end investment companies launched in the Netherlands in 1822 by King William I as the first mutual funds, while others point to a Dutch merchant named Adriaan van Ketwich whose investment trust created in 1774 may have given as the king of the idea. y The next wave of near-mutual funds included an investment trust launched in Switzerland in 1849, followed by similar vehicles created in Scotland in the 1880s. y In 1924, Americas first mutual fund Massachusetts Investors' Trust in Boston was founded. This mutual fund known today as MFS Investment Management. y In 1971, William Fouse and John McQuown of Wells Fargo Bank established the first index fund, a concept that John Bogle would use as a foundation on which to build The Vanguard Group, a mutual fund powerhouse renowned for

low-cost index funds. y Despite the 2003 mutual fund scandals and the global financial crisis of 20082009, the story of the mutual fund is far from over. In fact, the industry is still growing. In the U.S. alone there are more than 10,000 mutual funds, and if one accounts for all share classes of similar funds, fund holdings are measured in the trillions of dollars. 3. Mutual funds in Viet Nam y The appearance of mutual funds in Vietnam under the name: Qu funds operating in Vietnam with total capital raised $ 700 million. y After the financial crisis in 1997, there were only two investment funds that were Vietnam Enterprise Investment Fund (VIEL) of Dragon Capital Management and the Vietnam Frontier Fund (VFF) of Finasa Group. However, with the capital scope of 50 million, VFF eventually went out of Vietnam after 10 years of operation. Only when there are signs of positive growth in the stock market, VFF returns to more modest scale - 15 million, in 2005. y Along with these positive changes and strong stock market, from mid 2006, Vietnam's financial system recorded the boom of investment funds and fund management companies such as Mekong Capital, VinaCapital, IDG, VietFund, PXP Asset Management, y Activities of mutual fund in Vietnam are in the inception period and begin the process of looking for disbursement opportunities. Approximately 5 to 7 years will be the time for both investors and recipients of investment focus on the goal of improving competitiveness. Otherwise things will be difficult to ensure long-term benefits for the parties. 4. Three ways to make money from mutual fund y Dividends on stocks and interest on bonds: whenever an investment inside the mutual fund declares a dividend or pays interest, you receive a pro rata share of that dividend or interest. y Capital gains distribution: you also receive your share of any net profits from u t in the early 1990s. In the first half of the 90th decade, there were eight mutual

the sale of investments. These profits are called distributions of capital gains. y Increased share value: as the value (NAV) of the investments that are held by the fund increases or, in a closed-end fund, as the share price increases. The amount of dividends, interest or capital gain distributions you get from a mutual fund depends on the kinds of investments the fund owns.  Funds invested in high-rated corporate bonds may pay you dividends of 5% 10%, based on the income from the bonds.  A fund investing in small growth companies may have little or no income from dividends. Your profit from this fund would be due to any appreciation in the stocks owned by the fund.  A balanced fund made up of stocks and bonds may pay you a combination of dividends and appreciation. II. Advantages and disadvantages of Mutual Fund (Th V nh _847) 1. Advantages y Professional management y Diversification y Economies of scale y Liquidity y Simplicity 2. Disadvantages y y y y Drawback of professional management Costs Dilution Taxes

Vocabulary No 1 2 3 Vocabulary Expertise Infallible Mitigate English meaning Special knowledge or skill in a particular job Never wrong or making mistakes Make something less harmful and serious Vietnamese meaning S thnh th o Khng th sai l m Lm gi m nh

Tax-deferred

Pay tax on later

Thu n p sau

Detailed Expansion 1. Advantages y Professional management: Investors purchase funds because they do not have the time or the expertise to manage their own portfolios y Diversification: to invest in a large number of assets so that a loss in any particular investment is minimized by gains in others y Economies of scale: a mutual fund buys and sells large amounts of securities at a time, its transaction costs are lower than what an individual would pay for securities transactions y Liquidity: a mutual fund allows you to request that your shares be converted into cash at any time y Simplicity: buying a mutual fund is easy 2. Disadvantages y Drawback of professional management: Management is by no means infallible, and, even if the fund loses money, the manager still gets paid y Costs: every dollar spend on fees is a dollar that has no opportunity to grow over time y Dilution: is also the result of a successful fund getting too big. When money pours into funds that have had strong success, the manager often has trouble finding a good investment for all the new money y Taxes: when a fund manager sells a security, a capital-gains tax is triggered. Taxes can be mitigated by investing in tax-sensitive funds or by holding nontax sensitive mutual fund in a tax-deferred account, such as a 401(k) or IRA. III. Types of mutual fund (Nh i_696 + Th H o_726) 1. On the basis of portfolio 1.1. Stock funds (Equity funds) 1.2. Bond funds (Fixed-income funds)

1.3. Money market funds 2. On the basis of structure 2.1. Open-ended funds 2.2. Close-ended funds

Vocabulary No 1 Vocabulary Volatile Redeem (v) English meaning Unstable, or varying frequently between extreme highs and lows To buy back debt securities on or before their maturity date A kind of share including those 3 Ordinary shares traded privately as well as shares that trade on the various public stock exchanges Initial public offering 4 IPO The first sale of stock by a formerly PUBLIC company t pht hnh tin u C phi u th ng Vietnamese meaning Khng n Chu c l i nh

Redemption (n)

Detailed Expansion 1. On the basis of portfolio 1.1. Stock funds y Also called equity funds that invest in equities more commonly known as stocks. y This is the most volatile with their value sometimes rising and falling sharply over a short period, but historically stocks have performed better over the long term than other types of investments. Thats because stocks are traded on the expectation that a companys future results will include expanded market share, greater revenues and higher profits. 1.2. Bond funds

y Also known as fixed-income funds, invest in corporate and government debt with the purpose of providing income through dividend payments. y Bond funds are often included in a portfolio to boost an investors total return, by providing steady income when stock funds lose value 1.3. Money market funds y This type has relatively low risks, compared to other mutual funds and most other investments. By law, they are limited to investing only in specific highquality, short-term investments issued by the U.S. government, U.S. corporations, and state and local governments. y Try to keep their net asset value (NAV) - which represents the value of one share in a fund - at a constant $1 per share. But the NAV may fall below $1 if the fund's investments perform poorly y Historically the returns for money market funds have been lower than for either bond or stock funds, leaving them vulnerable to rising inflation. In other words, if a money market fund paid a guaranteed rate of 3%, but over the investment period inflation rose by 4%, the value of the investors money would have been eroded by that 1%. 2. On the basis of structure 2.1. Open-ended funds y In open ended MFs, the fund house continuously buys and sells units from investors. New units are created and issued if there is demand, and old units are eliminated if there is redemption pressure. y There is no fixed date on which the units would be permanently redeemed or terminated. y If you want to invest in an open ended fund, you buy units from the fund house. Similarly, when you redeem your units, the fund house directly pays you the value of the units 2.1.1. Advantages y Larger participation: there is no limit on the number of units that can be issued new units can easily be created and issued. Therefore, a large number of

investors can participate in a mutual fund scheme that is performing well. y More choices: since open-ended mutual funds are more prevalent compared to close-ended MFs, there are many mutual fund schemes to choose from in case you want to invest in an open ended mutual fund. y No issue expenses: open ended schemes do not have any such issue expenses. Thus, more of your money is actually invested. 2.1.2. Disadvantages y Large cash positions and impact on returns: most open ended MFs keep a large balance of cash to meet any redemption pressure because at any time, investor can surrender the units and redeem them. Therefore, since this cash is not invested in equities, and is kept either as cash or is invested in very liquid money market funds, it earns very low returns. 2.2. Close-ended funds y A closed-end fund is a publicly traded investment company that raises a fixed amount of capital through an initial public offering (IPO). y At the time of an IPO, you can buy the units from the fund house. These units are issued with a fixed tenure or duration, for example, 5 years. New units are not issued on an ongoing basis, and existing units are not eliminated before the term of the fund ends. At the time of the closure of the scheme (and at some other pre-defined intervals, like once every six months), you can redeem the units with the fund house. y But if you want to buy or sell the units of a close ended scheme during the lifetime of the units, you have to do that on a stock exchange. The units of such schemes are listed on the stock exchanges just like ordinary shares, and can be bought and sold through a broker. 2.2.1. Advantages
y No redemption pressure, better returns: the units you buy from a close-end fund will change hands from one investor to another there is no impact on the funds with the fund manager. Therefore, there is no redemption pressure on the fund manager, and thus, there is no need to constantly keep unnecessary cash. This means better utilization of funds, resulting in better returns

2.2.2. Disadvantages
y Lack of broad participation: since the number of units of close-ended schemes is constant, there is naturally a cap on the number of investors that can participate in such schemes. y Lack of choice: since most of the mutual schemes in the market are open-ended, you would have very little choice if you want to invest in a close-ended scheme.

y Issue expenses: in case of close ended schemes, the fund house can charge up to 6%
of the amount collected through the IPO as issuing expense. And this amount is charged in one go, at the very beginning of the investment. Closed-end Funds vs. Open-end Funds Type Closed-end Open-end How Shares are Bought Stock Exchange Directly through fund Sales Price Market price Net asset value Shares Outstanding Fixed Varies