Mutual fund is a trust that pools the savings of a number of investors who share a common financial goal. This pool of money is invested in accordance with a stated objective. The joint ownership of the fund is thus “Mutual”, i.e. the fund belongs to all investors. The money thus collected is then invested in capital market instruments such as shares, debentures and other securities. The income earned through these investments and the capital appreciations realized are shared by its unit holders in proportion the number of units owned by them. Thus a Mutual Fund is the most suitable investment for the common man as it offers an opportunity to invest in a diversified, professionally managed basket of securities at a relatively low cost. A Mutual Fund is an investment tool that allows small investors access to a well-diversified portfolio of equities, bonds and other securities. Each shareholder participates in the gain or loss of the fund. Units are issued and can be redeemed as needed. The fund’s Net Asset value (NAV) is determined each day. Investments in securities are spread across a wide cross-section of industries and sectors and thus the risk is reduced. Diversification reduces the risk because all stocks may not move in the same direction in the same proportion at the same time. Mutual fund issues units to the investors in accordance with quantum of money invested by them. Investors of mutual funds are known as unit holders.

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. NAV (For a particular day) = Market Value of the scheme / Number of unit-holders Where, Numerator= Market value of investment+receivables+other Accrued Income +Other AssetsAccrued Expenses-Other Payables-Other Liabilities.

A mutual fund is set up in the form of a trust, which has sponsor, trustees, Asset Management Company (AMC) and custodian. The trust is established by a sponsor or more than one sponsor

who is like promoter of a company. The trustees of the mutual fund hold its property for the benefit of the unit holders. Asset management company (AMC) approved by SEBI managers the fund by making investments in various schemes of the in its custody. The trustees are vested with the general power of superintendence and direction over AMC. They monitor the performance and compliance of SEBI regulations by the mutual fund. SEBI regulations require that at least two thirds of the directors of trustee company or board of trustees must be independent i.e., they should not be associated with the sponsors. Also, 50% of the directors of AMC must be independent. All mutual funds are required to be registered with SEBI before they launch any scheme. The performance of a particular scheme of a mutual fund is denoted by net value (NAV).

a) Portfolio Diversification b) Professional management c) Reduction / Diversification of Risk d) Liquidity e) Flexibility & Convenience f) Reduction in Transaction cost g) Safety of regulated environment h) Choice of schemes i) Transparency

a) No control over Cost in the Hands of an Investor b) No tailor-made Portfolios c) Managing a Portfolio Funds d) Difficulty in selecting a Suitable Fund Scheme


In the beginning:
Historians are uncertain of the origins of investment funds; some cite 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 Adrian van Ketwich whose investment trust created in 1774 may have given the king the idea. Van Ketwich probably theorized that diversification would increase the appeal of investments to smaller investors with minimal capital. The name of van Ketwich's fund, EENDRAGT MAAKT MAGT, translates to "unity creates strength". The next wave of near-mutual funds included an investment trust launched in Switzerland in 1849, followed by similar vehicles which is followed by many kind of companies created in Scotland in the 1880s. The idea of pooling resources and spreading risk using closed-end investments soon took root in Great Britain and France, making its way to the United States in the 1890s. The Boston Personal Property Trust, formed in 1893, was the first closed-end fund in the U.S. The creation of the Alexander Fund in Philadelphia, Pennsylvania, in 1907 was an important step in the evolution toward what we know as the modern mutual fund. The Alexander Fund featured semi-annual issues and allowed investors to make withdrawals on demand.

The Arrival of the Modern Fund:
The creation of the Massachusetts Investors' Trust in Boston, Massachusetts, heralded the arrival of the modern mutual fund in 1924. The fund went public in 1928, eventually spawning the mutual fund firm known today as MFS Investment Management. State Street Investors' Trust was the custodian of the Massachusetts Investors' Trust. Later, State Street Investors started its own fund in 1924 with Richard Paine, Richard Saltonstall and Paul Cabot at the helm. Saltonstall was also affiliated with Scudder, Stevens and Clark, an outfit that would launch the first noload fund in 1928. A momentous year in the history of the mutual fund, 1928 also saw the launch of the Wellington Fund, which was the first mutual fund to include stocks and bonds, as opposed to direct merchant bank style of investments in business and trade.

Regulation and Expansion:
By 1929, there were 19 open-end mutual funds competing with nearly 700 closed-end funds. With the stock market crash of 1929, the dynamic began to change as highly-leveraged closed-end funds were wiped out and small open-end funds managed to survive. Government regulators also began to take notice of the fledgling mutual fund industry. The creation of the Securities and Exchange Commission (SEC), the passage of the Securities Act of 1933 and the enactment of the Securities Exchange Act of 1934 put in place safeguards to protect investors: mutual funds were required to register with the SEC and to provide disclosure in the form of a prospectus. The Investment Company Act of 1940 put in place

additional regulations that required more disclosures and sought to minimize grievance of investor of different categories conflicts of interest. The mutual fund industry continued to expand. At the beginning of the 1950s, the number of open-end funds topped 100. In 1954, the financial markets overcame their 1929 peak, and the mutual fund industry began to grow in earnest, adding some 50 new funds over the course of the decade. The 1960s saw the rise of aggressive growth funds, with more than 100 new funds established and billions of dollars in new asset inflows. Hundreds of new funds were launched throughout the 1960s until the bear market of 1969 cooled the public appetite for mutual funds. Money flowed out of mutual funds as quickly as investors could redeem their shares, but the industry's growth later resumed. Massachusetts Investors Trust (now MFS Investment Management) was founded on March 21, 1924, and, after one year, 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 slowed the growth of mutual funds. In response to the stock market crash, Congress passed the Security Act of 1933 and the Securities Exchange Act of 1934. These laws require that a fund be registered with the SEC.

The mutual fund industry in India started in 1963 with the formation of Unit Trust of India, at the initiative of the Government of India and Reserve Bank of India. Though the growth was slow, but it accelerated from the year 1987 when Non-UTI players entered into the Industry. In the past decade, Indian mutual fund industry had seen a dramatic improvement, both qualities wise as well as quantity wise. In March 1987, the Asset Under Management (AUM) was Rs.4564 crores. The private sector entry to the fund family raised the AUM to Rs. 47000 crores in March 1993 and till April 30, 2010; it has reached the height of Rs. 7, 19,133 crores.

The Mutual Fund Industry is obviously growing at a tremendous space with the mutual fund industry can be broadly put into four phases according to the development of the sector. Each phase is briefly described as under.

Phase I. 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 and 1984, Children's Gift Growth Fund and India Fund (India's first offshore fund) in 1986, Master share (India’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. Amount Mobilized (In Rs. crores) 11,057 1,964 13,021 Assets Under Management (In Rs. crores) 38,247 8,757 47,004 Mobilization as % of Gross Domestic Savings 5.2% 0.9% 6.1%

1992-93 UTI Public Sector Total

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 investorservicing 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 Programs 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-organized 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 mobilizations of funds from investors and assets under management which is supported by the following data: ASSETS UNDER MANAGEMENT (RS. CRORES) AS ON 31-March-99 UTI 53,32 0 PUBLIC SECTOR 8,292 PRIVATE SECTOR 6,860 TOTAL 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 38 funds as at the end of April 2010. This is a continuing phase of growth of the industry through consolidation and entry of new international and private sector players.

In India, the following are involved in mutual fund operations: the sponsor, the mutual fund, the trustees, the asset management company, the custodian, and the registrars and transfer agents.

Fund Sponsor:
The sponsor of a mutual fund is like the promoter of a company. The sponsor may be a bank, a financial institution, or a financial service company. It may be Indian or foreign. The sponsor is responsible for setting up and establishing the mutual fund. The sponsor is the settler of the mutual fund trust. The sponsor delegates the trustee functions to the trustees.

Mutual fund :
The mutual funds constituted as a trust under the Indian trust act, 1881, and registered with SEBI.

A trust is a notional entity that cannot contract in its own name. so, the trust enters into contracts in the name of the trustees. Appointment by the sponsor, the trustees can be either individuals or a corporate body. Typically it is the latter. The trustees appoint the asset management company (AMC), secure necessary approval, periodically monitor how the AMC functions, and hold the properties of the various schemes in trust for the benefits of investors.

Asset Management Company:
It also referred to as the investment manager, is a separate company appointed by the trustees to run the mutual fund. The AMC should have a certificate from SEBI to act as portfolio manager under SEBI rules and regulations, 1993.

The custodian handles the investment back office operations of a mutual fund. It looks after the receipt and delivery of securities, collection of income, distribution of dividends, and segregation of assets between schemes. The sponsor of a mutual fund cannot act as its custodian.

Registrars and Transfer Agents:

The registrars and transfer agents handle investor related services such as issuing units, redeeming units, sending fact sheets and annual reports, and so on. Some funds handle such functions in house, while others outsource it to be SEBI approved registrars and transfer agents like Karvy and CAMS. The legal structure and organization of mutual funds as laid down by SEBI guidelines is as follows.

Indian Mutual Fund Industry
Thirteen out of 37 fund houses witnesses a growth in average AUM in January, 2010, with Reliance Mutual Fund continuing the largest fund house by asset at Rs. 1.17 trillion. HDFC was at the second spot at Rs. 948 billion, followed by ICICI Prudential Mutual Fund at Rs. 784 billion. UTI Mutual Fund and Birla Sun Life Mutual Fund followed with an average AUM of Rs. 745 billion and Rs. 626 billion, respectively. The share of top 5 MF’s in the industry’s asset was at 56% while that of top 10 funds’ asset was close to 80% in January 2010. As per AMFI data, UTI Mutual Fund had the highest number of investor folios at 10 million as of December 2009. The total number of investor folios for the mutual fund industry stood at 48 million as of December 2009. The average AUM data analyzed for equity oriented schemes showed that Reliance Growth Fund held the highest corpus of around Rs. 70 billion, followed by HDFC top 200 fund, Reliance diversified Power Sector fund, HDFC equity fund and SBI magnum Tax Gain Scheme1993 with an average AUM Rs. 61billion, Rs.58 billion, Rs. 55 billion, Rs. 54 billion, respectively.

Latest Average Asset Under Management for all Mutual Fund houses & AAUM
No. of Schem es* As on AIG Global Investment Group Mutual Fund Axis Mutual Fund 31 58 May 31, 2010 May 31, 2010 14 May 31, 2010 45 May 31, 2010 219 May 31, 2010 73,828. 03 Apr 30, 2010 69,508.6 9 4319.346 724.17 Apr 30, 2010 595.35 128.819 2,263.15 Apr 30, 2010 1,930.53 332.628 4,759.53 Apr 30, 2010 4,362.69 396.845 4,715.89 Apr 30, 2010 3,477.98 1237.912 44 May 31, 2010 Corpus 1,030.86 As on Apr 30, 2010 Corpus 1,093.24 Net inc/dec in corpus -62.378 Asset Under Management (Amount in Rs. Crore)

Ranking according to the

Mutual Fund Name

Baroda Pioneer Mutual Fund

Benchmark Mutual Fund

Bharti AXA Mutual Fund Birla Sun Life Mutual Fund (Rank 4)

Canara Robeco Mutual Fund


May 31, 2010

10,661.9 5

Apr 30, 2010

10,050.8 4


Deutsche Some facts

Mutual Fund

for the growth of 31, mutual fund industry in India: 6 2010 1




Apr 30,



a) 100% growth in the last 6 years.
DSP Blackrock Mutual Fund

b) Numbers of foreign AMC’s are in 21,884.9 toApr 30, Indian markets -63.814 the queue enter the 21,948.7 like Fidelity 96 May Investments, US based, with over US$1trillion assets under management worldwide. 31, 5 2010 6 mutual funds sector is required. c) Our saving rate is over 23%, highest in the world. Only channelizing these savings in 2010

40 May 261.09 Apr 30, 216.16 44.932 Edelweiss d) We have approximately 37 mutual funds which are much less than US having more than 31, 2010 Mutual Fund is a big scope for expansion. 800. There 2010

e) 'B' and 'C' class cities are growing rapidly. Today most of the mutual funds are
30 May 198.23 Apr 30, concentrating on the 'A' class cities. Soon they will find scope 205.46 in the growing -7.237 cities.

Escorts Mutual

31, 2010 f) Fund Mutual fund can penetrate rural like the Indian insurance industry with simple and 2010 limited products. Fidelity Mutual Fund

g) SEBI allowing the MF's to launch commodity mutual funds. 7,684.70 61 May 7,457.84 Apr 30, h) Emphasis on better corporate governance. 31, 2010 i) Trying to curb the late trading practices. 2010 j) Introduction of Financial Planners who can provide need based advice.
472 May 7,537.44 Apr 30, 6,902.15


Fortis Mutual Fund


31, 2010 The Indian mutual funds business is expected to grow significantly in the coming years due to a

high degree of transparency and 2010 disclosure standards comparable to anywhere in the world, though there are many challenges that need to be addressed to increase net mobilization of funds
Franklin 173 May 35,774.7 Apr 30, 34,107.0 1667.789

in this sector, as said by Mr. A.P. Kurian, Chairman of the 2010 Association of0 Mutual Funds of India. Templeton 31, 9
Mutual Fund 2010 Indian Mutual fund industry exhibited 200% growth in the last 10 yrs from Rs.470 billion to

Rs1400 billion in terms of assets under management. The Mutual Funds industry is expected to
HDFC Mutual Fund

jump sharply from its present share of 6% of GDP to 40% in the next 10yrs provided the country’s growth rate is consistently above 6%. The growing investor preference for mutual
(Rank 2) funds has resulted in the assets under management of mutual funds growing 8-folds in last 5 yrs. 2010 31, .31 2010 9




Apr 30,



Number of foreign AMC's are in May the queue to enter theApr 30,markets like US based Fidelity Indian 88 5,851.11 6,005.03 -153.926 HSBC Mutual over US$1trillion assets under management worldwide. Our saving rate is over Investments, with 31, 2010
Fundhighest in the world. Only channeling these savings in mutual funds sector is required. 23%, 2010 ICICI Prudential Mutual Fund (Rank 3) 317 May 31, 2010 87,709. 81 Apr 30, 2010 83,035.5 1 4674.3

IDFC Mutual Fund


May 31, 2010

26,614.7 7

Apr 30, 2010

25,177.2 8


There is a big scope for expansion as we have 37 mutual funds which is much less than US
ING Mutual having more than 800. Fund 90 92 May 31, 2010 May 31, 8,950.43 Apr 30, 2010 8,568.80 381.625 1,645.42 Apr 30, 2010 1,652.84 -7.423

JM Financial Mutual Fund

31 May 3,784.98 Apr investors in the -329.768 Mutual funds are an ideal vehicle for investment by retail 30, 4,114.75 stock market for JPMorgan several reasons. 31, 2010 Mutual Fund 2010 a) It pools investments of small investors together increasingly thereby the participation in the stock market. b) Mutual funds being119 institutional investors, can invest 30, market analysis 6914.032 not generally Kotak May 40,657.5 Apr in 33,743.4 available or accessible to individual investors, providing therefore informed decisions to Mahindra 31, 2 2010 9 small investors. Mutual Fund can diversify the 2010 c) Mutual fund portfolio in better way as compared with individual investors due to the expertise and availability of funds. L&T Mutual 61 May 5,170.69 Apr 30, 4,125.69 1045.009 2010 Mutual funds in India, because of 31, small size and slower growth in the recent past, have their Fund tended to play only a limited role 2010 stock market. share of mutual funds in total turnover of in the the stock market (BSE+NSE), which was 4.9% in January 2000, declined to 3.6% by January 2003. LIC Mutual Fund 37 62 May 31, 2010 May 31, 2010 11 May 31, 2010 22 May 31, 2010 85 May 31, 2010 11 May 31, 101.72 Apr 30, 2010 101.34 0.381 7,647.76 Apr 30, 2010 7,470.15 177.605 823.38 Apr 30, 2010 496.26 327.119 2,253.67 Apr 30, 2010 2,305.89 -52.226 236.50 Apr 30, 2010 245.06 -8.562 38,962.8 2 Apr 30, 2010 40,507.2 1 -1544.388

Mirae Asset Mutual Fund Morgan Stanley Mutual Fund Peerless Mutual Fund


Quantum Mutual Fund

Reliance Mutual Fund (Rank 1) Religare


May 31, 2010

118,973 .14

Apr 30, 2010

111,819. 33



May 2010


Apr 30,



Mutual Fund

The mutual fund industry has a trade association called Association of Mutual Funds in India
44 May 765.23 Apr 30, 804.57 -39.335 (AMFI) modeled on the lines of a Self Regulating Organization (SRO) with a view to 'promoting Sahara Mutual Fund 31, 2010 and protecting the interest of mutual funds and their unit-holders, increasing public awareness of 2010 mutual funds, and serving the investor’s interest by defining and maintaining high ethical and

professional standards in the mutual funds industry'. AMFI plays an important role in
116 May 36,235.7 Apr 30, 39,826.3 -3590.585 SBI Mutual disciplining members and assist the31, regulatory authority in2010 protecting investors' interest. 6 5 Fund AMFI works through a number 2010 of committees, some of which are standing committees to

address areas where there is a need for constant vigil and improvements and other which are 11 May 323.71 Apr 30, 222.28 101.433 Shinsei Mutual ad-hoc committees constituted to address specific issues. 2010 committees consist of industry These 31,

professionals from among the member mutual funds. AMFI has now decided to become a self2010 regulatory organization since it has worked very effectively as an industry body.
Sundaram BNP Fund 143 May 31, 2010 13,976.1 1 Apr 30, 2010 14,361.1 8 Paribas Mutual -385.076

The Association of Mutual Funds of India works with 30 registered AMCs of the country. It has
168 22,673.4 Apr 30, 22,051.2 622.154 certain defined objectives which May juxtaposes the guidelines of its Board of Directors. The Tata Mutual Fund

objectives are as follows:

31, 2010




47 May 3,056.16 Apr 30, 2,347.23 708.928 Taurus Mutual fund association of India maintains high professional and ethical standards in  This mutual 31, 2010 Fund all areas of operation of the industry. 2010

 It also UTI Mutual recommends and promotes the top class business practices and code of conduct 203 May 78,617. Apr 30, 79,456.7 -839.544
Fund which is followed by members and related people engaged in the activities of mutual 31, 15 2010 0 (Rank 5) 2010 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 does 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 program of training and certification for all intermediaries and other engaged in the mutual fund industry.  AMFI undertakes all India awareness program for investors in order 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 information on Mutual Fund Industry and undertakes studies and research either directly or in association with other bodies.

Securities and Exchange Board of India (SEBI)

As far as mutual funds are concerned, SEBI formulates policies and regulates the mutual funds to protect the interest of the investors. SEBI notified regulations for the mutual funds in 1993. Thereafter, mutual funds sponsored by private sector entities were allowed to enter the capital market. The regulations were fully revised in 1996 and have been amended thereafter from time to time. SEBI has also issued guidelines to the mutual funds from time to time to protect the interests of investors.

 Every mutual fund must be registered with SEBI and registration is granted only where

SEBI is satisfied with the background of the fund.
 SEBI (Mutual Funds) Regulations, 1996 lays down the provisions for the appointment

of the trustees and their obligations. The Regulations have also laid down the provisions for the approval of the AMC and the custodian.
 Every new scheme launched by a mutual fund needs to be filed with SEBI and SEBI

reviews the document in regard to the disclosures contained in such documents.
 SEBI has also laid down advertisement code to be followed by a mutual fund in

making any publicity regarding a scheme and its performance.
 SEBI has the authority to inspect the books of accounts, records and documents of a

mutual fund, its trustees, AMC and custodian where it deems it necessary. SEBI also has the authority to initiate penal actions against an erring MF.

Various investment options in Mutual Funds offer

To cater to different investment needs, Mutual Funds offer various investment options. Some of

the important investment options include: 1. Growth Option: Dividend is not paid-out under a Growth Option and the investor realizes only the capital appreciation on the investment (by an increase in NAV). 2. Dividend Payout Option: Dividends are paid-out to investors under the Dividend Payout Option. However, the NAV of the mutual fund scheme falls to the extent of the dividend payout. 3. Dividend Re-investment Option: Here the dividend accrued on mutual funds is automatically re-invested in purchasing additional units in open-ended funds. In most cases mutual funds offer the investor an option of collecting dividends or re-investing the same. 4. Retirement Pension Option: Some schemes are linked with retirement pension. Individuals participate in these options for themselves, and corporate participate for their employees. 5. Insurance Option: Certain Mutual Funds offer schemes that provide insurance cover to investors as an added benefit.

1. Systematic Investment Plan (SIP): under this a fixed sum is invested each month on a fixed date of a month. Payment is made through post dated cheques or direct/auto debit

facilities. The investor gets fewer units when the NAV is high and more units when the NAV is low. This is called as the benefit of Rupee Cost Averaging (RCA) 2. Systematic Transfer Plan (STP): under this an investor invest in debt oriented fund and give instructions to transfer a fixed sum, at a fixed interval, to an equity scheme of the same mutual fund. 3. Systematic Withdrawal Plan (SWP): if someone wishes to withdraw from a mutual fund then he can withdraw a fixed amount each month.

The Reliance group - one of India's largest business houses with revenues of Rs. 990 billion ($22.6 billion) that is equal to 3.5 percent of the country's gross domestic product was split into two.

The group - which claims to contribute nearly 10 per cent of the country's indirect tax revenues and over six percent of India's exports - was divided between Mukesh Ambani and his younger brother Anil on June 18, 2005.

The group's activities span exploration, production, refining and marketing of oil and natural gas, petrochemicals, textiles, financial services, insurance, power and telecom. The family also has interests in advertising agency and life sciences. Reliance Mutual Fund (RMF) is one of India’s leading Mutual Funds, with Average Assets under Management (AAUM) of Rs. 1, 18,973 Crores and an investor count of over 74 Lakh folios. (AAUM and investor count as of May 2010). Reliance Mutual Fund, a part of the Reliance - Anil Dhirubhai Ambani Group, is one of the fastest growing mutual funds in the country. RMF offers investors a well-rounded portfolio of products to meet varying investor requirements and has presence in 159 cities across the country. Reliance Mutual Fund constantly endeavors to launch innovative products and customer service initiatives to increase value to investors. "Reliance Mutual Fund schemes are managed by Reliance Capital Asset Management Limited., a subsidiary of Reliance Capital Limited, which holds 93.37% of the paid-up capital of RCAM, the balance paid up capital being held by minority shareholders." Reliance Capital Ltd. is one of India’s leading and fastest growing private sector financial services companies, and ranks among the top 3 private sector financial services and banking companies, in terms of net worth. Reliance Capital Ltd. has interests in asset management, life and general insurance, private equity and proprietary investments, stock broking and other

financial services. Reliance Capital Ltd is a part of the Reliance - Anil Dhirubhai Ambani Group, and is ranked among the 20 most valuable private companies in India. The Reliance Anil Dhirubhai Ambani Group is one of India's top 2 business houses, and has a market capitalization of over Rs.2,25,000 crore (US$ 53 billion), net worth in excess of Rs.58,000 crore (US$ 14 billion), cash flows of Rs. 12,000 crore (US$ 3 billion) and net profit of Rs.8,000 crore (US$ 2 billion) Reliance Mutual Fund (RMF) has been established as a trust under the Indian Trusts Act, 1882 with Reliance Capital Limited (RCL), as the Settler/Sponsor and Reliance Capital Trustee Co. Limited (RCTCL), as the Trustee. RMF has been registered with the Securities & Exchange Board of India (SEBI) vide registration number MF/022/95/1 dated June 30, 1995. The name of Reliance Capital Mutual Fund has been changed to Reliance Mutual Fund effective 11th March 2004 vide SEBI's letter no. IMD/PSP/4958/2004 date 11th March 2004. Reliance Mutual Fund was formed to launch various schemes under which units are issued to the Public with a view to contribute to the capital market and to provide investors the opportunities to make investments in diversified securities. Reliance Mutual Fund schemes are managed by Reliance Capital Asset Management Limited., a subsidiary of Reliance Capital Limited, which holds 93.37% of the paid-up capital of RCAM, the balance paid up capital being held by minority shareholders.Reliance Mutual Fund(RMF) has been sponsored by Reliance Capital Ltd(RCL).The promoter of RCL is AAA Enterprises Private Limited.Reliance Capital Limited is a Non Banking Finance Company. Reliance Capital Limited is one of the India’s leading and fastest growing financial services companies, and ranks among the top three private sector financial services and banking companies, in terms of net worth.

Reliance Capital Asset Management Ltd.
Reliance Capital Asset Management Ltd. (RCAM) is an unlisted Public Limited Company incorporated under the Companies Act, 1956 on February 24, 1995. RCAM has been appointed as the Asset Management Company of Reliance Mutual Fund by The Trustee vides Investment Management Agreement (IMA) dated May 12, 1995 and executed between Reliance Capital Trustee Co. Limited and Reliance Capital Asset Management Ltd. and amended on August 12, 1997 and January 20, 2004 in line with SEBI (Mutual Funds) Regulations, 1996).

Vision Statement
“To be a globally respected wealth creator, with an emphasis on customer care and a culture of good corporate governance”.

Mission Statement
“To create and nurture a world-class, high performance environment aimed at delighting their customers”.

The Management Team
Board of directors:

Mr. Soumen Ghosh Mr. Manu Chadha

Mr. Kanu Doshi Mr. Sushil Tripathi

Management Team:
Ceo: Head Equity Investments : Head Fixed Income :

Mr. Sundeep Sikka Mohanty

Mr. Sunil B. Singhania

Mr. Amitabh

Fund Managers:

Mr. Ashwani Kumar Mr. Shiv Chanani Debt: Mr. Amit Tripathi Commodity: Mr. Hiren Chandaria

Mr. Shailesh Raj Bhan Mr. Omprakash S. Kuckian

Mr. Krishan Daga Mr. Govind Agrawal

Ms. Anju Chhajer

Mr. Prashant Pimple

Head Of Department :Infrastructure & Admin. Finance & Accounts Human resource Development Information Technology R&T operations & Investor Relations Operations & Settlement Legal,Secretarial & Compliance HEAD-Sales & Distribution, Product Management,Customer Service Mr. Himanshu Vyapak Mr. Pradeep Andrade Mr. Milind Gandhi Mr. Rajesh Derhgawen Mr. Vinay Nigudkar Mr. Bhalchandra Joshi Ms. Geeta Chandran Mr. Muneesh Sud

Deutsche Bank, AG

A Custody Agreement has been entered with Deutsche Bank in accordance with SEBI Regulations. The Custodian is approved by SEBI under registration no. IN/CUS/003 to act as Custodian for the Fund. Deutsche Bank AG, the Custodian shall, inter alia:  Provide post-trading and custodial services to the Mutual Fund.  Keep Securities and other instruments belonging to the Scheme in safe custody.  Ensure smooth inflow/outflow of securities and such other instruments as and when necessary, in the best interests of the unit holders.  Ensure that the benefits due to the holdings of the Mutual Fund are recovered and Be responsible for loss of or damage to the securities due to negligence on its part on the part of its approved agents.

M/s. Karvy Computershare Pvt. Limited M/s. Karvy Computershare Pvt. Limited (KCL) is a Registrar and Transfer Agent registered with SEBI under registration no. INR000000221. Reliance Capital Asset Management Ltd. and the Trustee have satisfied themselves, after undertaking appropriate due diligence measures, that they can provide the services required and have adequate facilities, including systems facilities and back up, to do so. The Trustee has also laid down broad parameters for supervision of the Registrar. As Registrar to the Schemes, KCL will accept and process investor's applications, handle communications with investors, perform data entry services, dispatch Account Statements and also perform such other functions as agreed, on an ongoing basis. The Registrar is responsible for carrying out diligently the functions of a Registrar and Transfer Agent and will be paid fees as set out in the agreement entered into with it and as per any modification made thereof from time to time.

Reliance Capital Trustee Co. Limited Reliance Capital Trustee Co. Limited (RCTC), a company incorporated under the Companies Act, 1956, has been appointed as the Trustee to the Fund vide the Trust Deed dated April 25, 1995 executed between the Sponsor and the Trustee.


CRISIL Fund House Level 1

“CRISIL Fund House Level 1” rating denotes that RCAM has been judged by CRISIL Limited (Rating Agency) to possess HIGHEST LEVEL OF PROCESS QUALITY AND RISK MANAGEMENT CAPABILITY IN FUND MANAGEMENT PRACTICES. The other levels of rating are Level, Level2, Level 3, Level 4, and Level 5 denoting High, Average, Below Average and Poor ‘level of process quality and risk management capability in Fund Management Practices’, respectively.

CNBC TV18 - CRISIL Mutual Fund of the Year Award for 2009:
Reliance Mutual Fund has won the ‘CNBC TV18 - CRISIL Mutual Fund of the Year’ Award in the Category – Mutual Fund House of the Year (Awarded by CRISIL Fund Services, CRISIL Limited). In total 37 fund houses were considered as the award universe. Fund Houses winning at least one award for their schemes in the category level awards for 2009 were eligible to be in contention for the award. The award is based on consistency of fund house’s performance across various scheme categories in the four quarterly CRISIL Composite Performance Rankings (CPRs) released during the calendar year 2009.

Asia Manager for the year 2009:
Reliance Capital Asset Management Limited has been awarded “Asset Manager for the year 2009” i.e. from July 2008 to July 2009 at Asia Risk Awards 2009 by Incisive Media Publishing Limited. The participation was open for all the Asset Managers across Asia Pacific. Twelve Asset Managers participated for the award exercise. The Asia Risk Annual Award is renowned for recognizing and rewarding institutions for the best risk management practices adopted by them.

The Mutual Fund has launched so many Schemes till date; some of them are as follow:
S.No. 1. Name of the Scheme Reliance Growth Fund Inception Year September 1995

2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15. 16. 17. 18. 19. 20. 21. 22. 23. 24. 25. 26. 27. 28. 29.

Reliance Vision Fund Reliance Income Fund Reliance Liquid Fund Reliance Medium Term Fund Reliance Short Term Fund Reliance Fixed Term Scheme Reliance Banking Fund Reliance Gilt Securities Fund Reliance Monthly Income Plan Reliance Diversified Power Sector Fund Reliance Pharma Fund Reliance Floating Rate Fund Reliance Media & Entertainment Fund Reliance NRI Income Fund Reliance NRI Equity Fund Reliance Equity Opportunities Fund Reliance Index Fund Reliance Fixed Maturity Fund – Series I Reliance Fixed Maturity Fund – Series II Reliance Regular Savings Fund Reliance Liquidity Fund Reliance Tax Saver (ELSS) Fund Reliance Fixed Tenor Fund Reliance Equity Fund Reliance Fixed Horizon Fund Reliance Fixed Horizon Fund I Reliance Fixed Horizon Fund II Reliance Long Term Equity Fund

September 1995 December 1997 March 1998 August 2000 December 2002 March 2003 May 2003 July 2003 December 2003 March 2004 May 2004 August 2004 September 2004 October 2004 October 2004 February 2005 February 2005 March 2005 April 2005 May 2005 June 2005 July 2005 November 2005 February 2006 April 2006 August 2006 November 2006 November 2006

30. 31. 32. 33. 34. 35. 36. 37. 38. 39. 40. 41. 42. 43. 44. 45. 46. 47. 48. 49.

Reliance Fixed Horizon Fund III Reliance Interval Fund Reliance Money Manager Fund Reliance Equity Advantage Fund Reliance Fixed Horizon Fund IV Reliance Fixed Horizon Fund V Reliance Gold Exchange Traded Fund Reliance Equity Linked Saving Fund - Series I Reliance Fixed Horizon Fund VI Reliance Natural Resources Fund Reliance Fixed Horizon Fund VII Reliance Fixed Horizon Fund VIII Reliance Fixed Horizon Fund IX Reliance Banking Exchange Traded Fund Reliance Fixed Horizon Fund X Reliance Fixed Horizon Fund XI Reliance Fixed Horizon Fund XII Reliance Infrastructure Fund Reliance small. Cap. Reliance index fund –NIFTY PLAN

March 2007 March 2007 March 2007 June 2007 August 2007 September 2007 October 2007 December 2007 December 2007 January 2008 January 2008 March 2008 March 2008 May 2008 August 2008 October 2008 November 2008 June 2009 September 2010 September 2010

No. of schemes No. of schemes including options Equity Schemes Debt Schemes

49 185 17 32

Short term debt Schemes Equity & Debt Money Market Gilt Fund

15 02 00 06

Systematic Investment Plan (SIP)

Periodic investments are referred to as a SIP.

That means that, every month, you commit to investing, say, Rs 1,000 in your fund. At the end of a year, you would have invested Rs 12,000 in your fund. Let's say the NAV on the day you invest in the first month is Rs 20; you will get 50 units. The next month, the NAV is Rs 25. You will get 40 units. The following month, the NAV is Rs 18. You will get 55.56 units.

So, after three months, you would have 145.56 units. On an average, you would have paid around Rs 21 per unit. This is because, when the NAV is high, you get fewer units per Rs 1,000. When the NAV falls, you get more units per Rs 1,000.

SIP – The best way for investment
Case Study: • • • • Market hit a high of 5450 in Mar 2000. Market crashed to lows of 2600. It took almost 4.5 years for the market to scale back the level of 5400 in Sep 2004. Let’s see how the SIP investors fared in that scenario.

Investor 1 – Panic Investors

These investors had started their SIP of Rs. 2000 in Mar 2000 peak. With the decline in the market they panicked & stopped their SIP in a span of 13 months

SIP Start Date SIP End Date No. of installments

Mar-00 Mar-01 13

Scheme Name Reliance Growth HDFC Equity Fund ICICI Technology Fund Birla New Millennium

Investment 26,000 26,000 26,000 26,000

Value in Mar 01 18,846 20,870 14,944 14,596

Returns -46.1% -33.9% -67.3% -69.0%

These investors actually made a loss on their SIPs by stopping it in the downturn… Investor 2 – Smart Investors

These investors had started their SIP of Rs. 2000 in Mar 2000 peak. They continued their SIP and kept on investing in the SIPs.

SIP Start Date No. of installments

Mar-00 55

Scheme Name Reliance Growth HDFC Equity Fund ICICI Technology Fund Birla New Millennium

Investment 1,10,000 1,10,000 1,10,000 1,10,000

Value in Sep 04 3,25,736 2,53,337 1,74,300 1,64,224

Returns 50.5% 38.1% 20.5% 17.8%

These investors have made phenomenal returns even though market has delivered no return (From 5400 level in Mar 00 to 5400 level in Sep 04)

Investor 3 – New Investor

These investors started their SIP of Rs. 2000 in Mar 2001, 1 year after the fall in the market

SIP Start Date No. of installments

Mar-01 43

Scheme Name Reliance Growth HDFC Equity Fund ICICI Technology Fund Birla New Millennium

Investment 86,000 86,000 86,000 86,000

Value in Sep 04 2,48,528 1,90,341 1,50,844 1,43,954

Returns 66.8% 48.3% 33.2% 30.3%

Investors who have started SIP in lean period have made fantastic returns

• • • •

Investments of Rs.10000/- becomes Rs.276947/- even after several falls in the NAV during the period of 13 Years. And finally, with the current correction, its NAV has fallen by 50% 3 times over the period of past 14 years. Even after the current fall, the fund is still delivering a CAGR of 29% widely beating the index which has given 8.3% returns. The Absolute returns from the fund even after the current fall are staggering 3529.72%. Equity investments through Mutual Funds deliver 15-20% of returns over Long term. Bull and bear market cycles are nature of Equity markets and are going to continue in future also.

• Financial advisors know very less about benefits of MF and its business. They have a perception that there is no potential earning in MF business.

• • •

Investors of younger age invest generally in equity funds whereas older age investors invest in debt funds. Investing through MF is best way for capital appreciation within protection in comparison to investing directly in equity market and other investment avenues. Some schemes of each AMC perform well which have a good Fund Manager and well designed Portfolio.