Mutual Funds

WHAT IS A MUTUAL FUND?

A Mutual Fund is a trust that pools the savings of a number of investors who share a common investment objective in turn buy assets.

Mutual Fund Operation

TYPES OF MUTUAL FUNDS

Type of Mutual Fund Schemes Structure Open Ended Funds Close Ended Funds Interval Funds Investment Objective Special Schemes

Growth Funds Income Funds Balanced Funds Money Market Funds

Industry Specific Schemes Index Schemes Sectoral Schemes

LEGAL STRUCTURE
FUND SPONSPOR/SETTLOR KOTAK MAHINDRA FINANCE LTD.

TRUST KOTAK MAHINDRA MUTUAL FUND

TRUSTEE KOTAK MAHINDRA TRUSTEE CO. LTD. UNIT HOLDERS

INVESTMENT MANAGER & ADVISOR KOTAK MAHINDRA ASSET MANAGEMENT CO. LTD.
Contd

LEGAL STRUCTURE
INVESTMENT MANAGER & ADVISOR KOTAK MAHINDRA ASSET MANAGEMENT CO. LTD.

APPOINTS CUSTODIANS REGISTRARS BANKS DISTRIBUTORS

Working of a Mutual Fund

INVESTORS Passed back to INVESTORS GET A BLEND OF LIQUIDITY RETURNS & SAFETY
MUTUAL FUND LARGE CORPORATE SPECIALISTS MANAGE

Pool their money with

RETURNS

FUND MANAGEMENT

Generate PORTFOLIO YIELDS HIGH RETURN TO MFs SECURITIES

Invest in INVEST IN BALANCED PORTFOLIO

MUTUAL FUNDS
OPEN ENDED OPEN FOR ALL THE YEAR MIN SUBS AMT 50CR NO DURATION REFUNDED IF MIN SUBS NOT ACHIEVED REPURCHASED ANY TIME REDEEMED AT NAV & LOAD FACTOR RANGES (4% TO 6%) AS REPURCHSED SO NOT LISTED AT STOCK EX TRADED AS PERMITTED LOT DIVID MAY /MAY NOT SWITCHOVER ALLOWED CLOSE ENDED OPEN FOR FIXED PERIOD MIN SUBS AMT 20CR DURATION (5TO7 YEARS) REFUNDED IF MIN AMT NOT ACHIEVED MAY BE REPURCHASED (AFTER 2 TO 3 YRS) REDEMPTION SPECIFIED & DONE AT NAV - SERVICE CHARGE LISTED AT STOCK EX DIVID MAY/MAY NOT BE SWITCHOVER ALLOWED

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.

Frequently Used Terms

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.

BENEFITS OF MUTUAL FUNDS

Professional Management & Analysis Diversification & Divisibility Across Companies & Sectors Liquidity Entry & Exit at NAV Transparency Regular disclosures Convenient Administration (Record Keeping) Low Costs of operations (Lower transaction cost) Choice of schemes. Well Regulated. (By SEBI)

Mutual Funds in India

MF only showed up in sixties More active mobilization of household savings First MF 1964 (UTI) During 1964-1987 UTI 5 open ended MF The period 1986-1993 can be termed as the period as the period of Public Sector Mutual Funds (PMFs) First Private sector MF was launched in 1993 Kothari Pioneer

Mutual Funds in India

 Growth of MF 1999 Year of funds MF taxation benefit

MF Marketing Schemes
About the Fund Fund Administration Fund Objective Professional Member About the Scheme Target Group

Computation and Relevance of NAV

Net Asset Value (NAV) represents a fund's per share market value. This is the price at which investors buy ("bid price") fund shares from a fund company and sell them ("redemption price") to a fund company. It is derived by dividing the total value of all the cash and securities in a fund's portfolio, less any liabilities, by the number of shares outstanding. An NAV computation is undertaken once at the end of each trading day based on the closing market prices of the portfolio's securities For example, if a fund has assets of $50 million and liabilities of $10 million, it would have a NAV of $40 million.

Computation and Relevance of NAV

NAV of MF = (Total market value of all MF holding All MF Liabilities) / (No. of MF units or shares)

Name of the scheme XYZ, Size of the scheme Rs.50,00,00,000, face value of units Rs.10, no. of units 5,00,00,000 Market value of shares Rs.75,00,00,000 = Market value of investments/No. of units = 75,00,00,000 / 5,00,00,000 = Rs.15

Offshore Mutual Funds

A mutual fund that is based in an offshore jurisdiction, which is generally considered to be outside the United States. The term is often used, perhaps incorrectly, to describe a fund that is not in a high-tax country. Always be careful when investing your money in offshore accounts that have sponsors that are not well known and/or are located outside of established financial centers such as London or Hong Kong.

Money Market Mutual Funds

Money market funds are mutual funds that invest in short term debt obligations of corporations and governments thus called money market mutual funds (MMMFs). They are NOT the same thing as money market accounts at financial institutions.

Money Market Mutual Funds

Money market funds are mutual funds that invest in short term debt obligations of corporations and governments thus called money market mutual funds (MMMFs). They are NOT the same thing as money market accounts at financial institutions.

Money Market Mutual Funds

Advantages Ability to transfer money into and out of stock, bond, and other mutual funds once you ve established a MMMF, you can invest in other funds within the same family without filling out an application Have an excellent track record You can earn tax-exempt interest at the federal and state level by investing in tax-free MMMFs Disadvantage Inflation risk don t let your funds sit idle (unless you re using them for an emergency fund). Learn what you can do with them then put them where you can earn a higher interest.

Regulations 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  AMFI therefore thought it appropriate to produce a booklet in the form of an investor s concise guide that will explain in simple language the concept and working of Mutual Funds.

Techniques of investment analysis

The study of how an investment is likely to perform and how suitable it is for a given investor. Investment analysis is key to any sound portfolio-management strategy. Investors not comfortable doing their own investment analysis can seek professional advice from a financial advisor. An analysis of past investment decisions. An investment analysis is a look back at previous investment decisions and the thought process of making the investment decision. Key factors should include entry price, expected time horizon, and reasons for making the decision at the time.

Credit Rating
An assessment of the credit worthiness of individuals and corporations. It is based upon the history of borrowing and repayment, as well as the availability of assets and extent of liabilities. Credit is important since individuals and corporations with poor credit will have difficulty finding financing, and will most likely have to pay more due to the risk of default. Rating is an opinion regarding the timely repayment of principal and interest thereon; It is expressed by assigning symbols, which have definite meaning.