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TITLE OF DISSERTATION : MUTUAL FUNDS AND THEIR INVESTMENT OPTIONS

ACKNOWLEDGMENT

I would like to thank the people who have put in lot of their labor will certainly not be enough to express my gratitude since this dissertation would not have accomplished the way it has, without the help, co-ordination, guidance and support of the numerous people. Honestly admitting, I was not capable enough to handle and maintain all these data etc. had I not received help from all these quarters.

My first thought goes to my pro ect guide, ! who always remained a great source of inspiration and courage for me.

Irrespective of numerous efforts, there are likely to be many mistakes which might have creped in the work for which I alone should be held accountable.

SYNOPSIS

Concept : " mutual fund is a pool of money, collected from investors, and is invested according to certain investment options. " mutual fund is a trust that pools the savings of a number of investors who share a common financial goal. " mutual fund is created when investors put their money together. It is therefore a pool of the investor#s funds. $he money thus collected is then invested in capital market instruments such as shares ,debentures and other securities. $he income earned through these investments and the capital appreciation reali%ed are shared by its unit holders in proportion to the number of units owned by them. $he most important characteristics of a fund is that the contributors and the beneficiaries of the fund are the same class of people, namely the investors. $he term mutual fund means the investors contribute to the pool , and also benefit from the pool . $here are no other claimants to the funds. $he pool of funds held mutually by investors is the mutual fund . Objective : $he basic purpose is to know about the Mutual &und Industry and to know the behaviour of the Indian Investors regarding different investment tools . Rationa e O! T"e p#oject : In Indian financial market, recent trends shows that the retail investor are more concern about the risk factors of the Indian 'conomy and most importantly returns on the money invested by them. (ow people are more interested towards (&)s of the Mutual &unds. *eing a student of management I shall try to find out what could be the ma or factors because of which people are choosing (&)s.

Scope:

$his pro ect will provide me the better platform to understand the History, +rowth and various other aspects of Mutual &und. It will also help me to understand the behavior of Indian investor regarding different investment tools.

Met"o$o o%&: ,rimary -ata. - ,ersonal interaction with the respondents. /econdary -ata. - Information through websites, books, fact sheets of various fund houses etc.

INTRODUCTION
" mutual fund is a pool of money, collected from investors, and is invested according to certain investment options. " mutual fund is a trust that pools the savings of a number of investors who share a common financial goal. " mutual fund is created when investors put their money together. It is therefore a pool of the investor#s funds. $he money thus collected is then invested in capital market instruments such as shares ,debentures and other securities. $he income earned through these investments and the capital appreciation reali%ed are shared by its unit holders in proportion to the number of units owned by them. $he most important characterstics of a fund is that the contributors and the beneficiaries of the fund are the same class of people, namely the investors. $he term mutual fund means the investors contribute to the pool , and also benefit from the pool . $here are no other claimants to the funds. $he pool of funds held mutually by investors is the mutual fund . " mutual funds business is to invest the funds thus collected according to the wishes of the investors who created the pool. 0sually , the investors appoint professional investment managers, to manage their funds. $he same ob ective is achieved when professional investment managers create a product and offer it for investment to the investor. $his product represents a share in the pool ,and pre states investment ob ectives. $hus 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. Investors in the mutual fund industry today have a choice of 12 mutual funds, offering nearly 344 products. $hough the categories of product offered can be classified under about a do%en generic heads, competition in the industry has led to innovative alterations to standard products. $he most important benefit of product choice is that it enables investors to choose options that suit their return requirements and risk appetite. Investors can combine the options to arrive at their own mutual fund portfolios that fit with their financial planning ob ectives.

Features that investors i!e in "utua #un$


If mutual funds are emerging as the favorite investment vehicle, it is because of the many advantages they have over other forms and avenues of investing, particularly for the investor who has limited resources available in terms of capital and ability to carry out detailed research and market monitoring. $he following are the ma or advantages offered by mutual funds to all investors. Port#o io $iversi#i%ation : Mutual &unds normally invest in a welldiversified portfolio or securities. 'ach investor in a fund is a part owner of all of the fund#s assets. $his enables him to hold a diversified investment portfolio even with a small amount of investment that would otherwise require big capital. Pro#essiona "ana&e"ent ' 'ven if an investor has a big amount of capital available to him, he lacks the professional attitude that is generally present in the experienced fund manager who, ensures a much better return than what an investor can manage on his own. &ew investors have the skills and resources of their own to succeed in today#s fast moving, global and sophisticated markets. Re$u%tion' $iversi#i%ation o# ris! : "n investor in a mutual fund acquires a diversified portfolio, no matter how small his investment. -iversification reduces the risk of loss, as compared to investing directly in one or two shares or debentures or other instruments. 5hen an investor invests directly, all the risk of potential loss is his own. " fund investor also reduces his risk in another way. 5hile investing in the pool of funds with other investors any loss on one or two securities is also shared with other investors. $his risk reduction is one of the most important benefits of a collective investment vehicle like the mutual fund.

Re$u%tion o# transa%tion %osts : 5hat is true of risk is also true of the transaction costs. " direct investor bears all the costs of investing such as brokerage or custody of securities. 5hen going through a fund, he has the benefit of economies of scale6 the funds pay lesser costs because of larger volumes, a benefit passed on to its investors. Li(ui$it) : )ften, investors hold shares or bonds they cannot directly, easily and quickly sell. Investment in a mutual fund, on the other hand, is more liquid. "n investor can liquidate the investment by selling the units to the fund if open-end, or selling them in the market if the fund is closed-end, and collect funds at the end of a period specified by the mutual fund or the stock market. Convenien%e an$ # e*i+i it) : Mutual fund management companies offer many investor services that a direct market investor cannot get. Investors can easily transfer their holdings from one scheme to the other, get updated market information ()t #o*e* "ave t"o#n* a* +e , 5hile the benefits of investing through mutual funds far outweigh the disadvantages, an investor and his advisor will do well to be aware of a few shortcomings of using the mutual funds as investment vehicles. No Contro over Costs : "n investor in a mutual fund has no control over the overall cost of investing. He pays investment management fees as long as he remains with the fund, albeit in return for the professional management and research. &ees are usually payable as a percentage of the value of his investments. 5hether the fund value is rising or declining. " mutual fund investor also pays fund distribution costs, which he would not incur in direct investing. However, this shortcoming only means that there is a cost to obtain the benefits of mutual fund services. However, this cost is often less than the cost of direct investing by the investors.

No Tai or,"a$e Port#o ios : Investors who invest on their own can build their own portfolios of shares, bonds and other securities. Investing through funds means he delegates this decision to the fund managers. $he very high-net-worth individuals or large corporate investors may find this to be a constraint in achieving their ob ectives. However. Most mutual funds help investors overcome this constraint by offering families of schemes-a large number of different schemes 7 within the same fund. "n investor can choose from different investment plans and construct a portfolio of his choice. Poo# Reac": 8ack of deeper distribution networks and channels is hurting the growth of the industry. $his is an area of concern for the M& industry, which has not been able to penetrate deeper into the country and has been limited to few metros. (an-* *ti Do.inate: $he biggest hindrance to the growth of the

mutual fund industry lies in its inability to attract the savings of the public, which constitutes the ma or source of investment in the other developed countries. " large pool of money in the savings in India is still with the state 7run and private banks. I.pact o! / oba Deve op.ent*: $hough the economic reforms

have brought India on the global investment map, this also exposes the Indian financial market, including the Indian mutual fund industry, to the volatility in the international market. &luctuations in the global markets and the financial systems will now be evident as the Indian markets get linked to the other foreign markets. Managing risk in such a scenario will be a key challenge for the Indian mutual fund industry.

FRE-UENTLY USED TERMS

Net Asset .a ue /NA.0


(et "sset 9alue is the market value of the assets of the scheme minus its liabilities. $he per unit ("9 is the net asset value of the scheme divided by the number of units outstanding on the 9aluation -ate.

Sa e Pri%e
It is the price you pay when you invest in a scheme. It is also called )ffer ,rice. It may include a sales load.

Re1ur%hase Pri%e
It is the price at which a close- ended scheme repurchases its units and it may include a back 7 end load. $his is also known as *id price.

Re$e"1tion Pri%e
It is the price at which open- ended schemes repurchase their units and close 7 ended schemes redeem their units on maturity. $heir prices are ("9 related.

Sa es Loa$
It is a charge collected by a scheme when it sells the units. It is also known as &ront 'nd 8oad. /chemes that do not charge a load are called (o 8oad schemes.

Re1ur%hase or 2a%! 3 En$ Loa$


It is a charge collected by a scheme when it buys back the units from the unit 7 holders.

INTERNATIONAL 4ISTORY OF MUTUAL FUNDS


5hen three *oston securities executives pooled their money together in :2;< to create the first mutual fund , they had no idea how popular mutual funds would become.$he idea of pooling money together for investing purposes started in 'urope in the mid :==s. $he first pooled fund in the 0./. was created in :=21 for the faculty and staff of Harvard 0niversity. )n March ;:st ,:2;< the first official mutual fund was born. It was called Massachusett Investors $rust. "fter one year, the Massachusetts Investors $rust grew >34444 in assets in :2;< to >12;,444 in assets ?with around ;44 shareholders @. In contrast, there are over :4,444 mutual funds in the 0./. today totaling around >A trillion ?with approximately =1 million individual investors @ according to the Investment Bompany Institute. $he stock market crash of :2;2 slowed the growth of mutual funds. In response to the stock market crash, Bongress passed the /ecurities "ct of :211 and the /ecurities 'xchange "ct of :21<. $hese laws require that a fund be registered with the /'B and provide prospective investors with a prospectus. $he /'B ?0./. /ecurities and 'xchange Bommission@ helped create the Investment Bompany "ct of :2<4 which provides the guidelines that all funds must comply with today. 5ith renewed confidence in the stock market, mutual funds began to blossom. *y the end of the :2C4s there were around ;A4 funds with ><= billion in assets. In :2AC, Dohn B. *ogle opened the first the first retail index fund called the E&irst Index Investment $rust F . It is now called the 9anguard 344 Index &und and in (ovember ;444 it became the largest mutual fund growth was Individual Getirement "ccount ?IG"@ provisions made in :2=:, allowing individuals ?including those already in corporate pension plans @ to contribute >;,444 a year. Mutual funds are now popular known for ease of use , liquidity and unique diversification capabilities.

4istor) o# the In$ian Mutua Fun$ In$ustr)


$he mutual fund industry in India started in:2C1 with the formation of 0nit $rust )f India, at the initiative of the government of India and Geserve *ank. $he history of mutual funds in India can be broadly divided into four distinct phases .

Fi#*t P"a*e :0 1234 5 1267


0nit $rust of India ?0$I@ was established on :2C1 by an "ct of ,arliament. It was set up by the Geserve *ank of India and functioned under the regulatory and administrative control of the Geserve *ank of India . In :2A= 0$I was de-linked from the G*I and the Industrial -evelopment *ank of India ?I-*I@ took over the regulatory and administrative control in place of G*I. $he first scheme launched by 0$I was 0nit /cheme :2C<. "t the end of :2== 0$I had Gs.CA44 crores of assets under management.

Secon$ P"a*e :0 1267 5 1228 9Ent#& o! P)b ic Secto# F)n$* :


:2=Amarked the entry of non-0$I, public sector mutual funds set by public sector banks and life Insurance corporation of India ? 8IB @ and +eneral Insurance Borporation of India ? +IB @ . /*I Mutual funds was the first non-0$I Mutual fund established in Dune :2=A followed by Ban bank Mutual &und ? -ec =A @ , ,un ab (ational *ank Mutual &und ? "ug =2 @, Indian *ank Mutual &und ? (ov =2 , *ank )f India ? Dun24@,*ank )f *aroda Mutual &und ? )ct2;@, 8IB established its Mutual &und in Dune :2=2 while +IB had set up its mutual fund in -ecember :224. "t the end of :221, the mutual fund industry had assets under management of Gs. <A,44<crores.

T"i#$ P"a*e 5 12280;<<8 9 Ent#& o! P#ivate Secto# F)n$* :


5ith the entry of private sector funds in :221, a new era started in the Indian mutual fund industry, giving the Indian investors a wider choice of fund families . "lso ,:221 was the year in which the first Mutual &und Gegulations came into being , under which all mutual funds , except 0$I were to be registered and governed. $he erstwhile Hothari ,ioneer

?now merged with &ranklin $empleton @ was the private sector mutual fund registered in Duly :221. $he :221 /'*I ? Mutual &und @ Gegulations were substituted by a more comprehensive and revised Mutual &und Gegulations in :22C. $he Industry now functions under the /'*I ?Mutual &und @ Gegulation :22C. $he number of mutual fund houses went on increasing ,with many foreign mutual funds setting up funds in India and also the industry has witnessed several mergers and acquisitions . "s at the end of Danuary ;441, there were 11 mutual funds with total assets of Gs.:,;:,=43 crores. $he 0nit $rust of India with Gs .<<,3<: crores of assets under management was way ahead of other mutual funds.

Fo)#t" P"a*e 5 *ince Feb#)a#& ;<<8


In &ebruary ;441, following the repeal of the 0nit $rust of India "ct :2C1 0$I was bifurcated into two separate entities . )ne is the specified 0ndertaking of the 0nit $rust of India with assets under management of Gs ;2,=13 crores as at the end o f Danuary ;441, representing broadly , the assets of 0/ C< scheme, assured return and certain other schemes. $he specified 0ndertaking of 0nit $rust )f India, functioning under an administrators and under the rules framed by +overnment of India and does not come under the purview of the Mutual &und Gegulations. $he second is the 0$I Mutual &und 8td , sponsored by /*I, *)*, and 8IB. It is registered with /'*I and functions under the Mutual &und Gegulations . 5ith the bifurcation of the erstwhile 0$I which had in March ;444 more than Gs.AC,444 crores of assets under management and with the setting up of a 0$I Mutual &und , conforming to the /'*I Mutual &und Gegulations, and with recent mergers taking place among different private sector funds , the mutual fund industry has entered its current phase of consolidation and growth . "s at the end of /eptember , ;44< there were ;2 funds , which manage assets of Gs . :3::4= crores under <;:schemes

REGULATORY STRUCTURE OF MUTUAL FUNDS IN INDIA


$he structure of mutual fund in India is governed by the /'*I Gegulations , :22C. $hese regulations make it mandatory for mutual funds to have a three-tier structure /,)(/'G 7$G0/$''-"//'$ M"("+'M'($ B)M,"(I ? "MB @. $he sponsor is the promoters of the mutual fund and appoint the "MB for managing the investment portfolio. $he "MB is the business face of the mutual fund . as its manages all the affairs of the mutual fund . $he mutual fund and the "MB have to be registered with /'*I.

M)t)a F)n$* can be *t#)ct)#e$ in t"e !o o+in% +a&* :


Bompany form . in which investors hold shares of the mutual fund . In this structure management of the fund in the hands of an elected board , which in turn appoints investment managers to manage the fund . $rust from , in which the investors are held by the trust, on behalf of the investors . $he appoints investment managers and monitors their functioning in the interest of the investors. $he company form of organi%ation is very popular in the 0nited /tates . In India mutual funds are organi%ed as trusts . $he trust is created by the sponsors who is actually the entity interested in creating the mutual fund business. $he trust is either managed by a *oard of trustees or by a trustee company, formed for this purpose. $he investors# funds are held by the trust. $hough the trust is the mutual fund, the "MB is its operational face. $he "MB is the first functionary to be appointed ,and is involved in the appointment of all the other functionaries. $he "MB structures the mutual fund products, markets them and mobili%es the funds and services the investors. It seeks the services of the functionaries in carrying

out these functions. "ll the functionaries are required to the trustees, who lay down the ground rules and monitor them working.

REGULATORY FRAMEWORK
Re%) ato#& j)#i*$iction o! SE(I :
/'*I is the apex regulatory of capital markets. /'*I has enacted the /'*I ?mutual fund@ Gegulations,:22C,which provides the scope of the regulation of the mutual fund in India. "ll Mutual funds are required to be mandatorily registered with /'*I. $he structure and formation of mutual funds, appointment of key functionaries, operation of the mutual funds, accounting and disclosure norms, rights and obligations of functionaries and investors, investment restrictions ,compliance and penalties are all defined under the /'*I regulations. Mutual funds have to send half yearly compliance reports to /'*I, and provide all information about their operations.

Re%) ato#& j)#i*$iction o! R(I :


G*I is the monetary authority of the country and is also the regulatory of the banking system. 'arlier bank sponsored mutual funds were under the dual regulatory control of G*I and /'*I. $hese provisions are no longer in vogue. /'*I is the regulator of all mutual funds. $he present position is that the G*I is involved with the mutual fund industry, only to the limited extent of being the regulator of the sponsors of bank sponsored mutual funds.

Ro e o! Mini*t#& o! Finance in M)t)a F)n$ :


$he &inance Ministry is the supervisor of both the G*I and /'*I. $he Ministry )f &inance is also the appellate authority under /'*I Gegulations. "ggrieved parties can make appeals to the Ministry of &inance on the /'*I rulings relating to the mutual fund.

Ro e o! Co.panie* Act in M)t)a F)n$ :


$he "MB and the $rustee Bompany may be structured as limited companies, which may come under the regulatory purview of the Bompany 8aw *oard ?B8*@.$he provisions of the Bompanies "ct,:23C is applicable to these company forms of organi%ations. $he Bompany 8aw *oard is the apex regulatory authority for companies. "ny grievance against the "MB or the trustee company can be addressed to the Bompany 8aw *oard for redressal.

Ro e o! Stoc- E=c"an%e* :
If a mutual fund is listed its schemes on stock exchanges, such listings are sub ect to the listing regulation of stock exchanges. Mutual funds have to sign the listing agreement and abide by its provisions, which primarily deal with periodic notifications and disclosure of information that may impact the trading of listed units.

LEGAL STRUCTURE
Mutual funds have a unique structure not shared with other entities such as companies or the firms . It is important for employees and agents to be aware of the special nature of this structure ,because it determines the rights and the responsibilities of the fund#s constitutes vi%. sponsor, trustees, custodian, transfer agents and of course the fund and the "MB.$he legal structure also drives the inter relationship between these constituents. 8ike other countries, India has a legal framework within which mutual funds must be constituted along one unique structure as unit trust. " mutual fund in India is allowed to issue open ended and a close ended under a common legal structure. $herefore, a mutual fund may have a several different scheme under it at any point of time.

T"e F)n$ Spon*o#


E/ponsorF is defined by the /'*I regulations as any person who acting alone or in combination with another body corporate, establishes a mutual fund. $he sponsor of a fund is akin to the promoter of the company as he gets the fund registered with the /'*I. $he sponsor will form a trust and appoint the *oard )f $rustees. $he sponsor will also generally appoint the "MB as the fund managers. $he sponsor, either directly or acting through the trustees will also appoint a Bustodian to hold the fund assets. "ll these appointments are made in accordance with the guidelines of the /'*I. "s per the existing /'*I regulations, for a person to qualify as the sponsor, he must contribute at least <4J of the net worth of the "MB and posses a sound financial track record over a period of five years prior to the registration.

M)t)a F)n$* A* T#)*t*


" mutual fund is constituted in the form of a ,ublic $rust created under the Indian $rusts "ct ,:==;. $he fund sponsor acts as the settlers of the trust, contributing to its initial capital and appoints a $rustee to hold the assets of the $rust for the benefit of the unit holders, who are the beneficiaries of the trust .$he fund then invites investors to contribute their money in the common pool, by subscribing to EunitsF issued by various schemes established by the trust, units being the evidence of their beneficial interest in the fund.

T#)*tee*
$he trust 7 the mutual fund may be managed by a board of $rustees- a body of the individuals, or a trust company- a corporate body. Most of the funds in India are managed by the *oard of $rustees. 5hile the *oard is governed by the provisions of the Indian $rust act, where the $rustee is a corporate body ,it would also be required to comply the provisions of the Bompanies "ct, :23C, the *oard as an independent body, act as the protector of the interest of the unit holders. $he $rustees do not directly manage the portfolio of the securities. &or this specialist function, they appoint "MB. $hey ensure that the fund is managed by the "MB as per the defined ob ective and in accordance with the trust deed and the regulations of the /'*I. $he trust is created through a document called the $rust -eed that is executed by the fund sponsor in the favour of the trustees. $he $rust -eed is required to be stamped as registered under the provisions of the Indian Gegistration "ct and registered with /'*I. Blauses in the $rust -eed ,inter alia, deal with the establishment of the $rust, the appointment of the trustees, their powers and duties and the obligations of the trustees towards the unit holders and the "MB. $hese clauses also specify activities that the fund K "MB cannot undertake. $he third schedule of the /'*I ?M&@ Gegulations, :22C specifies the contents of the $rust -eed.

ASSET MANA/EMENT COMPAN>


It* Appoint.ent an$ F)nction* :
$he role of the "MB is to act as the Investment Manager of the $rust. $he sponsors, or the trustees, if so authori%ed by the trust deed appoint the "MB. $he "MB so appointed is required to be approved by the /'*I. )nce approved, the "MB functions under the supervision of its own directors and also under the direction of the trustees and the /'*I. $he trustees are empowered to terminate the appointment of the "MB by ma ority and appoint a new one with the prior approval of the /'*I and the unit holders. $he "MB would, in the name of the trust, float and then manage the different investment schemes as per the regulations of the /'*I and as per Investment Management "greement it signs with the trustees. Bhapter I9 of /'*I ?M&@ Gegulations, :22C describes the issues relevant to appointment, eligibility criteria and the restrictions on the business activities and obligations of the "MB. $he "MB of a mutual fund must have a net worth of at least Gs.:4 crores at all the time. -irectors of the "MB ,both independent and non independent should have adequate professional experience in the financial services and should be individuals of high moral standing, a condition also applicable to other key personnel of the "MB. $he "MB cannot act as a trustee of any other mutual fund. *esides its role as advisory services and consulting , provided these activities are run independently of one another rand the "MB#s resources?such as personnel, system,etc @ are properly segregated by activity. $he "MB must always act in the interest of the unit holders and report to the trustees with respect to its activities.

CLASSIFICATION OF MUTUAL FUND SC4EMES


"ny mutual fund has an ob ective of earning ob ective income for the investors and K or getting increased value of their investments. $o achieve these ob ectives mutual funds adopt different strategies and accordingly offer different schemes of investments. )n these bases the simplest way to categori%e schemes would be to group these into two broad classifications. )perational Blassification ,ortfolio Blassification. )perational Blassification highlights the two main types of schemes, i.e. open ended and close ended which are offered by the mutual funds. ,ortfolio classification pro ects the combination of investment instruments and investment avenues available to mutual funds to manage their funds. "ny portfolio scheme can be either open ended or close ended.

Ope#ationa C a**i!ication
a@ Open en$e$ *c"e.e* : "s the name implies the si%e of the scheme ?fund@ is open i.e. not specified or pre determined. 'ntry to the fund is always open to the investor who can subscribe at any time. /uch fund stands ready to buy or sell its securities at any time. It implies that the capitali%ation of the fund is constantly changing as investors sell or buy their shares . &urther the shares or units are normally not traded on the stock exchange but are repurchased by the fund at announced rates. )pen ended schemes have comparatively better liquidity despite the fact that these are not listed. $he reason is that investor can at any time approach mutual funds for sale of such units. (o intermediaries are required.Morever, the reali%able amount is certain since repurchase is at a price based on declared net asset value ?("9@. (o minute to minute fluctuations in rate haunts the investors. $he portfolio mix of such schemes has to be investments, which are actively traded in the market. )therwise, it will not be possible to

calculate ("9.$his is the reason that generally open 7 ended schemes are equity based. Moreover , desiring frequently traded securities, open 7ended schemes are hardly have in their portfolio shares of comparatively new and smaller companies since these are not generally not traded. In such funds, option to reinvest its dividend is also available. /ince there is always a possibility of withdrawals, the management of such funds becomes more tedious as managers have to work from crisis to crisis. Brisis may be on two fronts ,one is that unexpected withdrawals require funds to maintain a high level of cash available every time implying thereby idle cash. &und managers have to face question like Ewhat to sellF . He could very well have to sell his most liquid assets. /econd, by virtue of this situation such funds may fail to grab favorable opportunities. &urther to match quick cash payments, funds cannot have matching reali%ation from their portfolio due to intricacies of the stock market . $hus, success of the open ended schemes to a great extent depends on the efficiency of the capital market. b@ C o*e en$e$ *c"e.e* : /uch schemes have a definite period after which their sharesK units are redeemed. 0nlike open ended , these funds have fixed capitali%ation , i.e. corpus normally does not change throughout its life period. Blose ended funds units# trade among the investors in the secondary market since these are to be quoted on the stock exchanges. $heir price is determined on the basis of demand and supply in the market. $heir liquidity depends on the to efficiency and understanding of the engaged brokers. $heir price is free

deviate ("9, i.e., there is very possibility that the market price may be above or below its ("9 . If one takes into account the issue expenses , conceptually close ended funds units cannot be trade at a premium or over ("9 because of a package of investments, i.e., cannot exceed the sum of the prices of the investments constituting the package . 5hatever premium exists that may exist only on account of speculative activities. In India as per /'*I ?M&@ Gegulations every mutual fund is free to launch any or both types of schemes.

Po#t!o io C a**i!ication o! F)n$* :


&ollowing are the portfolio classification of funds, which may be offered. $his classification may be on the basis of ?a@ Geturn ?b@ Investment ,attern ?c@ /peciali%ed sector of investment ?d@ 8everage ?e@ )thers

a: Ret)#n (a*e$ C a**i!ication


$o meet the diversified needs of the investors, the mutual fund schemes are made to en oy a good return. Geturns expected are in form of regular dividends or capital appreciation or a combination of these two . i. Inco.e F)n$* : &or investors who are more curious for returns, income funds are floated. $heir ob ective is to maximi%e current income. /uch funds distribute periodically the income earned by them. $hese funds can further be spitted up into categories . those that stress constant income at relatively low risk and those that attempt to achieve maximum income possible,even with the use of leverage. )bviously , the higher the expected returns, the higher the potential risk of the investment. ii. /#o+t" F)n$* : /uch funds aim to achieve increase in the value of the underlying investments through capital appreciation. /uch funds invest in growth oriented securities which can appreciate through the expansion production facilities in long run. "n investor who selects such funds should be able to assume a higher than normal degree of risk. iii. Con*e#vative F)n$* : $he fund with a philosophy of Eall things to allF issue offer document announcing ob ectives as ?i@ $o provide a reasonable rate of return, ?ii@ $o protect the value of investment ?iii@ $o achieve capital appreciation consistent with the fulfillment of the first two ob ectives. /uch funds which offer a blend of immediate average return and reasonable capital appreciation are known as Emiddle of the road Efunds. /uch funds divide their portfolio in common stocks and bonds in a way to achieve the desired ob ectives.

/uch funds have been most popular and appeal to the investors who want both growth and income.

b: Inve*t.ent (a*e$ C a**i!ication:


Mutual funds may also be classified on the basis of securities in which they invest. *asically ,it is renaming the subcategories of return based classification. i. E?)it& F)n$ : /uch funds, as the name implies, invest most of their investible shares in equity shares of companies and undertake the risk associated with the investment in equity shares. /uch funds are clearly expected to outdo other funds in rising market, because these have almost all their capital in equity. 'quity funds again can be of different categories varying from those that invest exclusively in high quality Lblue chip# companies to those that invest solely in the new, unestablished companies. $he strength of these funds is the expected capital appreciation. (aturally they have a higher degree of risk. ii. (on$ F)n$* : /uch funds have their portfolio consisted of bonds, debentures,etc. this type of fund is expected to be very secure with a steady income and little or no chance of capital appreciation. )bviously risk is low in such funds. In this category we may come across the funds called L8iquid &unds# which speciali%e in investing short term money market instruments. $he emphasis is on liquidity and is associated with lower risks and low returns. iii. (a ance$ F)n$ : $he funds which have in their portfolio a reasonable mix of equity and bonds are known as balanced funds. /uch funds will put more emphasis on equity share investments when the outlook is bright and will tend to switch to debentures when the future is expected to be poor for shares.

c: Specia i@e$ Secto# (a*e$ F)n$* :


$here are number of funds that invest in a specified sector of economy. 5hile such funds do have the disadvantage of low diversification by putting all their all eggs in one basket, the policy of speciali%ing has the advantage of developing in the fund managers an intensive knowledge of the specific sector in which they are investing.

TYPES OF MUTUAL FUNDS


"ll mutual fund would be either close ended or open ended and either load or no load. $hese classifications are general. &or example all open 7 end funds operate the same way6or in case of a load a deduction is made from investor#s subscription or redemption and only the net amount used to determine his number of shares purchased or sold. &unds are generally distinguished from each other by their investment ob ectives and types of securities they invest in. $he ma or types of funds available .-

Mone& Ma#-et F)n$*


)ften considered to be at the lowest ring in the order of risk level. Money Market &unds invest insecurities of short term nature which generally means securities of less than one year maturity.$he typical short term interest bearing instruments these funds invest in $reasury *ills issued by governments, Bertificate of -eposits issued by banks and Bommercial ,aper issued by companies.$he ma or strengths of money market funds are the liquidity and safety of principal that the investors can normally expect from short term investments.

/i t F)n$*
+ilts are the governments securities with medium to long term maturities typically of over one year ?under one year instruments being money market securities @. In India, we have now seen the emergence of government securities or gilt funds that invest in government paper called dated securities. /ince the issuer is the government ,these funds have little risk of default and hence offer better protection of principal. However , investors have to recogni%e the potential changes in values of debt securities held by the funds that are caused by changes in the market price of debt securities held by the funds that are caused by changes in the market price of debt securities quoted on the stock exchanges.

Debt F)n$* 9Inco.e F)n$*:


$hese funds invest in debt instruments issued not only by the governments, but also by private companies, banks and financial institutions and other entities such as infrastructure companies. *y investing in debt these funds target low risk and stable income for the investor as their key ob ectives. -ebt funds are largely considered as income funds as they do not target capital appreciation, look for high current income and therefore distribute a substantial part of their surplus to investors . $he income funds fall largely in the category of debt funds as they invest primarily in fixed income generating debt instruments

Dive#*i!ie$ Debt F)n$


" debt fund that invests in all available types of debt securities, issued by entities across all industries and sectors is properly diversified debt fund. 5hile debt fund offer high income and less risk as compared to equity funds, investors need to recogni%e that debt securities are sub ect to risk of default by the issuer on payment of interest or principal. " diversified debt fund has the benefit of risk reduction through diversification and sharing of any default related losses by a large number of investors. Hence the diversified debt fund is less risky than the sect oral funds.

Foc)*e$ Debt F)n$


/ome debt funds have a narrower focus, with less diversification in its investment .'xamples include sector ,speciali%ed and off shore debt funds. $hese are much similar to the equity funds that these are less income oriented oriented and less riskier

Hi%" >ie $ Debt F)n$*


0sually debt funds control the borrower default risk by investing in securities issued by the borrowers who are rated by the credit rating agencies and are considered to be of Einvestment gradeF. $here are however, high yield debt funds that seek to obtain higher interest returns by investing in the debt instruments that are considered Ebelow investment gradeF. $hese funds are

exposed to greater risks.

A**)#e$ Ret)#n F)n$* 5 An In$ian Va#iant


&undamentally ,mutual funds hold assets in trust for investors. "ll returns and risks are for account of the investors. $he role of the fund manager is to provide the professional management service and to ensure the highest possible return consistent with the investment ob ective of the fund. $he fund manager or the trustees do not give any guarantee of any minimum return to the investor. However in India, historically the 0$I offered assured return to the investor. If there is any shortfall it will be borne by the sponsor. 5hile "ssured Geturn funds may certainly be considered to be the lowest risk type within the debt fund category, they are not entirely risk free, as the investors normally lock in their funds for the term of scheme or at least a specific period of time. -uring this period, changes in the financial market may result in the investor loosing their money .

Fi=e$ Te#. P an Se#ie*


" mutual fund would normally be either open ended or close ended . However in India, mutual funds have evolved an innovative middle option between the two, in response to the investor needs. &ixed $erm ,lan /eries are essentially close ended in nature . In that the mutual fund "MB issues a fixed number of units for each series only for once and closes the issue after an initial offering period like a close end scheme offering. However a close ended scheme would normally make a one time initial offering of units , for a fixed duration generally exceeding a year. Investors have to hold the units until the end of the stated duration or sell them on a stock exchange if listed. &ixed $erm ,lans are close end but usually for shorter term less than a year . )f course like any close end fund each plan series can be wounded earlier under certain regulatory conditions.

E?)it& F)n$*
"s investors move from debt funds category to equity funds , they face increased risk level . However there are a large variety of equity funds and all of them are not equally risk prone. Investor and their advisors need to sort out and select the right equity fund that risk appetite. 'quity funds invest a ma or portion of their corpus in equity shares issued by the companies, acquired directly in initial public offerings or through the secondary market . 'quity funds would be exposed to the equity price fluctuations risk at the market level , at the industry or the sector level and the company specific level .'quity &unds ("9 fluctuates with all these price movement. $hese price movements are caused by all kinds of external factors, political and social as well economic. $he issuers of equity shares offer no guaranteed repayments in case of debt instruments. Hence ,equity funds are generally considered at the higher end of the risk spectrum among all funds available in the market. )n the other hand, unlike debt instruments that offer fixed amounts of repayments , equities can appreciate in value in line with the issuers# earning potential and so offer the greatest potential for growth in capital. 'quity funds adopt different investment strategies resulting in different levels of risk. Hence they are generally separated into different types in terms of their investment styles. /ome of these equity funds are as under .

/#o+t" F)n$*
+rowth funds invest in companies whose earnings are expected to rise at an average. $hese companies may be operating in sectors like technology considered having a growth potential, but not entirely unproven and speculative. $he primary ob ective of growth fund is capital appreciation over a span of 1 to 3 years. +rowth funds are therefore les volatile than funds that target aggressive growth.

Specia t& F)n$*


$hese funds have a narrower portfolio orientation and invest only in companies that meet pre determined criteria. /ome funds may build portfolio that will exclude $obacco companies. 5ithin the specialty funds category some funds may be broad based in terms of investments in the portfolio. However most specialty funds tend to be concentrated funds, since diversification is limited to one type of investment. Blearly concentrated specialty fund tend to be more volatile than the diversified funds.

Dive#*i!ie$ E?)it& F)n$*


" fund that seeks to invest only in equities for a very small portion in liquid money market securities but is not focused on any one or few sectors or shares may be termed as diversified equity funds. 5hile exposed to all equity risks, diversified equity funds seek to reduce the sector or stock specific risks through diversifications. $hey have mainly market risk exposure. /uch general purpose but diversified funds are clearly at the lower risk level than growth funds.

E?)it& Lin-e$ Savin%* Sc"e.e


In India the investors have been given tax concessions to encourage them to invest in equity markets through these special schemes. Investments in these schemes entitles the investors to claim an income tax rebate, but usually has a lock in period before the end of which funds cannot be withdrawn. $hese funds are sub ect to the general /'*I investment guidelines for all equity funds and would be in the -iversified 'quity &und category. However as there are no specific restrictions on which sectors these funds ought to invest in ,investors should clearly look for where the "MB proposes to invest and accordingly udge the level of risk involved.

E?)it& In$e= F)n$*


"n index fund tracks the performance of a specific stock market index. $he ob ective is to match the performance of the stock market by tracking an index that represents the overall market. $he fund invests in shares that constitutes the index in the same proportion as the index. /ince they generally invests in a diversified market index portfolio these funds take only the overall market risks while reducing the sector and the stock specific risks through diversifications.

Va )e F)n$*
$he growth funds that we reviewed above holds shares of the companies with good or improving profit prospects and aim primarily at capital appreciation. $hese concentrate on future growth prospects may be willing to pay high priceK earnings multiples for companies considered to have good potential. In contrast to the growth investing other funds follow 9alue Investing "pproach. 9alue funds try to seek out fundamentally sound companies whose shares are currently under priced in the market. 9alue funds will add only those shares to their portfolios that are selling at low price earning ratios ,low market to book value ratios and are undervalued by other yardsticks. 9alue funds have the equity market price fluctuation risks, but stand often at a lower end of the risk spectrum in comparison with the growth funds. 9alue stocks may be from a large number of sectors and therefore diversified.

E?)it& Inco.e F)n$*


0sually income funds are in the debt funds category, as they target fixed income investments . However there are equity funds that can be designed to give the investors a high level of current income along with some steady capital appreciation, investing mainly in shares of companies with high dividend yields.

"s an example an equity income fund would invest largely in powerK utility companies shares of established companies that pay higher dividend and whose price do not fluctuate as much as the other shares. $hese equity funds should therefore be less volatile and less risky than nearly all other equity funds.

H&b#i$ F)n$*
5e have seen that in terms of the nature of financial securities held, there are three ma or mutual fund types .money market , debt and equity. Many mutual fund mix these different types of securities in their portfolios. $hus, most funds equity or debt always have some money market securities in their portfolios as these securities offer the much needed liquidity. However money market holdings will constitute a lower proportion in the overall portfolios. $hese are the funds that seek to hold a relatively balanced holdings of debt or equity in their portfolios. /uch funds are termed as Ehybrid fundsF as they have a dual equityK bond focus.

(a ance$ F)n$*
" balanced fund is the one that has a portfolio comprising debt instruments, convertible securities, preference and equity shares. $heir assets are generally held in more or less equal proportion between debt K money market securities and equities. *y investing in a mix of this nature, balanced funds seek to attain the ob ectives of the income, moderate capital appreciation and preservation of capital and are ideal for investors with a conservative and long term orientation.

/#o+t" an$ Inco.e F)n$*


0nlike income or growth focused funds ,these funds seek to strike a balance between capital appreciation and income for the investor. $heir portfolios are a mix between companies with good dividends paying records and those with potential for capital appreciation. $hese funds would be less risky than the pure growth funds though more risky than the income funds.

IN.ESTMENT PLANS
$he term investment plans generally refers to the services that the funds provide to investors offering different ways to invest or invest. $he different investment plans are an important considerations in the investment decisions because they determine the level of flexibility available to the investors. "lternate investment plans offered by the fund allow the investor freedom with respect to investing at one time or at regular intervals, making transfers to different schemes within the same fund family or receiving income at specified intervals or accumulating distributions . /ome of the investment plans offered are as follows.-

A)to.atic Reinve*t.ent P an* 9ARP:


In India, many funds offer two options under the same scheme the dividend option and the growth option. $he dividend option or the "utomatic Geinvestment ,lans ?"G,@ allows the investor to reinvest in additional units the amount of dividends or other distribution made by the fund ,instead of receiving them in cash. Geinvestment takes place at the ex-dividend ("9. $he "G, ensures that the investors reaps the benefit of compounding in his investments. /ome funds allow reinvestments into other schemes in the fund family.

A)to.atic Inve*t.ent P an* 9AIP:


$hese require the investor to invest a fixed sum periodically, there by letting the investor save in a disciplined and phased manner. $he mode of investment could be through debit to the investor#s salary or bank account. /uch plans are also known as the /ystematic Investment ,lans. *ut mutual funds do not offer this facility on all the schemes . $ypically they restrict it to their plain vanilla schemes like diversified equity funds, income funds and balanced funds. /I, works best in equity funds. It enforces saving discipline and helps you profit from market volatility- you buy more units when the market is down and fewer when the market is up.

S&*te.atic Ait"$#a+a P an 9SAP:


/uch plan allow the investor to make systematic withdrawal from his fund investment account on a periodic basis, thereby providing the same benefit as regular income. $he investor must withdraw a specific minimum amount with the facility to have withdrawal amounts sent to his residence by cheque or credited directly into his bank account. $he amount withdrawn is treated as redemption of units at the applicable ("9 as specified in the offer document. &or example, the withdrawal could be at ("9 on the first day of the month of payment. $he investor is usually required to maintain a minimum balance in his bank account under this plan. "gents and the investors should understand that the /5,#s are different from the Monthly Income ,lans, as the former allow investors to get back the principal amount invested while the latter only pay the income part on a regular basis.

S&*te.atic T#an*!e# P an* 9STP:


$hese plans allows the customer tom transfer on a periodic basis a specified amount from one scheme to the another within the same fund family- meaning two schemes by the same "MB and belonging to the same fund. " transfer will be treated as the redemption of the units from the scheme from which the transfer is made, and as investments in units of the scheme into which the transfer is made. /uch redemption or investment will be at the applicable ("9 for the respective schemes as specified in the offer document. It is necessary for the investor to maintain a minimum balance in the scheme from which the transfer is made .*oth 0$I and other private funds now generally offer these services to the investor in India. $he service allows the investor to maintain his investment actively to achieve his ob ectives. Many funds do not even change any transaction fees for this service.

Ot"e# Se#vice*
In addition to these plans as mentioned above, mutual funds may provide other services as under .

P"one T#an*action
Investors may redeem or purchase units by calling a fund representative, or registrars or investor service centers. $hey may also telephonically modify instructions regarding their

automatic investment plans, transfer plans and so on. In India , this mode of operating a fund account is still in its nascent stage.

C"e?)e A#itin%
/ome open end mutual funds allow the facility of cheque writing by providing the investors with a cheque book, treating his fund account as equivalent of a bank savings account for this purpose. $he fund must have G*I approval in order to offer this service, usually given to liquid schemes of short duration. G*I rules permit the investor to issue cheque against his fund balance, sub ect to maintaining a minimum balance and only to transfer funds in his own favors. G*I rule do not permit investors to issue cheque to third parties for other payments .&or investors with large amounts of short term surplus, invested in many schemes, this facility can be very important .

Pe#io$ic State.ent* an$ Ta= In!o#.ation


/ome mutual funds issue one time investments certificates to the investors, while others issue fund account statements. "ccount statements for each investor shows units purchased, redeemed or transferred between schemes, distributions, and reinvestments, and the investor current holdings in units and in amount. "ll mutual funds provide periodic statements to investors in the form of financial statements and performance reports . /'*I Gegulations require funds to send annual financial statements to unit-holders within six months of the close of the accounting year. However , the funds can choose to send more frequent statements to the investors for example quarterly. &unds also help investors with tax-related information at the end of the tax year . In India, if a fund has deducted tax at source from income distributed to the investors, it would also issue $-/ certificate . Many fund send much more information than that what the /'*I asks them to send . Most funds now sends quarterly statements and the market updates and newsletters to the investors, giving them the useful data to understand how their investments are performing /'*I has made it mandatory to disclose the portfolio of the investment . $he investors has the right to know where their money is put in . "ll these information helps the

investor to ascertain the right picture about the "MB and to decide whether or not continue his investments .

Loan* A%ain*t Unit*


/everal banks lend to investors loan against mutual funds units held by them . $he amount of the loan is usually a percentage of the value of the investor#s holding in the units . $he banks are usually inclined to sanction higher amounts holdings in liquid schemes . However , /'*I prohibits the mutual funds to give loans on themselves .

No.ination* an$ T#an*!e# (& Unit 5 "o $e#*


If an application for units is made in the name of a single holder , the unit holder may subsequently nominate a successor to get the units transferred in the name of the nominee upon the death of the original unit-holder . 5here an investor holds units of a closed-end scheme, he can transfer his units to another person, as he can do in the case of shares held . 0sually, closed-end funds are listed on the stock exchanges and so the same procedure as for share transfers are followed in case of the fund units as well .

E-UITY FUND
An open 5 en$e$ E?)it& Sc"e.e F)n$ !eat)#e* :
A"o *"o) $ inve*t ? $he scheme is suitable for investors seeking effective diversification by spreading the risks without compromising on the returns. Inve*t.ent Objective Inve*t.ent option Li?)i$it& NAV ca c) ation Re$e.ption p#ocee$* Ta= bene!it* A**et Un$e# Mana%e.ent NAV Mini.). app ication a.o)nt Loa$ St#)ct)#e $he ob ective is to provide investors long term capital appreciation. a@ +rowth b@ -ividend /ale and repurchase on all business days. "ll business days. 5ill be dispatched within 1 business days. Indexation benefits, no +ift $ax, no 5ealth tax. Gs. C3.=3crore +rowth ,lan . Gs. :=.:A -ividend ,lan . Gs. :2.:3 (ew investor . Gs. 3444 'xisting investor . Gs. 344 'ntry load .:.24J - less than Gs. 34 lakhs 4.34J - Gs. 34 lakhs and above upto Gs. : crore 4.;3J - Gs. : crore and above 'xit load . (I8

INDE5 FUND
An open 5 en$e$ In$e= Sc"e.e F)n$ !eat)#e*
A"o *"o) $ inve*t ? Inve*t.ent Objective $he scheme is suitable for investors seeking capital appreciation commensurate with that of the market. $he ob ective is to invest in the securities that comprise /M, B(N (ifty in the same ,roportion so as to attain results commensurate with the (ifty. Inve*t.ent option Li?)i$it& NAV ca c) ation Re$e.ption p#ocee$* Ta= bene!it* A**et Un$e# Mana%e.ent NAV Mini.). app ication a.o)nt Loa$ St#)ct)#e a@ +rowth b@ -ividend /ale and repurchase on all business days. "ll business days. 5ill be dispatched within 1 business days. Indexation benefits, no +ift $ax, no 5ealth tax. Gs. ::C.3A crore +rowth ,lan . Gs. :1.C:22 -ividend ,lan . Gs. :4.1<AC (ew investor . Gs. 3444 'xisting investor . Gs. 344 'ntry load . :J for subscription of Gs. :4 lakhs or 8ess (il for subscription of above Gs.:4 lakhs. 'xit load . (I8

2ALANCED FUND
An open 5 en$e$ (a ance$ Sc"e.e F)n$ !eat)#e*
A"o *"o) $ inve*t ? $he scheme is suitable for investors who seek long term growth and wish to avoid the risk if investing solely in equities. It provides a balanced exposure to both growth and income producing assets. Inve*t.ent Objective $he ob ective is to provide periodic returns and capital appreciation through a udicious mix of equity and debt instruments, while simultaneously aiming to minimi%e capital erosion. Li?)i$it& NAV ca c) ation Re$e.ption p#ocee$* Ta= bene!it* A**et Un$e# Mana%e.ent NAV Mini.). app ication a.o)nt Loa$ St#)ct)#e /ale and repurchase on all business days. "ll business days. 5ill be dispatched within 1 business days. Indexation benefits, no +ift $ax, no 5ealth tax. Gs. <<.=2 crore +rowth ,lan . Gs. :C.<A -ividend ,lan . Gs. :4.AC (ew investor . Gs. 3444 'xisting investor . Gs. 344 'ntry load . ;J 'xit load . (I8

TA5 SA.INGS FUND


An open 5 en$e$ E?)it& Lin-e$ Savin%* Sc"e.e F)n$ !eat)#e*
A"o *"o) $ inve*t ? $he scheme is suitable for investors seeking income tax rebate under section ==?;@ of I$" along with long term appreciation from investments in equities. Inve*t.ent Objective $he ob ective of the scheme is to build a high quality growth oriented portfolio to provide long term capital gains to the investors. $he scheme aims at providing returns through capital appreciation )ver the file of the scheme. Li?)i$it& NAV ca c) ation Re$e.ption p#ocee$* Ta= bene!it* A**et Un$e# Mana%e.ent NAV Specia !eat)#e Loc- 5 in pe#io$ Mini.). app ication a.o)nt Loa$ St#)ct)#e /ale and repurchase on all business days. "ll business days. 5ill be dispatched within 1 business days. $ax-rebate under section ==,indexation benefits, no +ift tax, no 5ealth tax. Gs. A<.CA crore Gs. 14.:< ,ersonal accident insurance 1 years Gs. 344 'ntry load . ;J 'xit load . (I8

TRUST 2ENEFIT SC4EME


An open 5 en$e$ Inco.e Sc"e.e F)n$ !eat)#e*
A"o *"o) $ inve*t ? $he scheme has been formulated exclusively to address the investment needs of the organi%ation, such as charitable and religious trusts and other non profit making bodies. Inve*t.ent Objective $he investment ob ective of the scheme is to build a high quality income oriented portfolio and provide returns and K or capital appreciation along with regular liquidity to a distinct class of investor with special needs. Li?)i$it& NAV ca c) ation Re$e.ption p#ocee$* Ta= bene!it* A**et Un$e# Mana%e.ent NAV /ale and repurchase on all business days. "ll business days. 5ill be dispatched within 1 business days. Indexation benefits, no +ift $ax, no 5ealth tax. Gs. ;4.AC crore -ebt ,lan +rowth . Gs. ::.C22A Ouarterly -ividend . Gs. :4.1A22 Iearly -ividend . Gs. :4.1=A1 "nnual -ividend . Gs. ::.A422 Mini.). app ication a.o)nt Loa$ St#)ct)#e (ew investor . Gs. 34444 'xisting investor . Gs. :4444 'ntry load .(I8 'xit load . aggregate redemption amount less than ?or equal to @ :4J of the amount invested 7 (il. "ggregate redemption amount greater than :4J of the amount invested. Ave#a%e Mat)#it& <.A years

CAS4 MANAGEMENT FUND 6 LI-UID OPTION


An open 5 en$e$ Li?)i$ Sc"e.e F)n$ !eat)#e*
A"o *"o) $ inve*t ? $he scheme is a suitable investment for an investor seeking very high liquidity and negligible principal risk while aiming for a good return. Inve*t.ent Objective $he ob ective of the scheme is to provide investors with a high level of income from short term investments. $he scheme will focus on preserving the investor#s capital and liquidity. Investments will be made in money market and in investment grade debt instruments. Inve*t.ent option* Li?)i$it& NAV ca c) ation Re$e.ption p#ocee$* A**et Un$e# Mana%e.ent Ave#a%e Mat)#it& ("9 a@ +rowth b@ -ividend ?-ailyK 5eekly KMonthly@ /ale and repurchase on all business days. 1C3 days a year 5ill be dispatched within : business days. Gs. :=32.;:crore :;= days +rowth ,lan K -ividend ,lan +rowth ,lan -ividend ,lan Gs. :;.3333 -aily . Gs.:4.4442 5eekly Gs.:4.:;4A Monthly Gs. :4.41;1 "pplication (ew investor 'xisting Investor Gs. :4444 Gs.:444 'ntry 8oad (I8 'xit 8oad (I8 +rowth ,lan K -ividend ,lan +rowth ,lan -ividend ,lan Gs. :4.<=2C -aily . Gs.:4.44:1 5eekly Gs.:4.44:1 Monthly Gs. :4.41<A (ew investor 'xisting Investor Gs. : crore Gs. : lakhs 'ntry 8oad (I8 'xit 8oad (I8

Minimum "mount 8oad /tructure

CAS4 MANAGEMENT FUND MONEY AT CALL


An open 5 en$e$ Li?)i$ Sc"e.e F)n$ !eat)#e*
A"o *"o) $ inve*t ? $he scheme is a suitable investment for an investor seeking very high liquidity and negligible principal risk while aiming for a good return. Inve*t.ent Objective $he ob ective of the scheme is to provide investors with a high level of income from short term investments. $he scheme will focus on preserving the investor#s capital and liquidity. Investments will be made in money market and in investment grade debt instruments. Inve*t.ent option* Li?)i$it& NAV ca c) ation Re$e.ption p#ocee$* A**et Un$e# Mana%e.ent Ave#a%e Mat)#it& a@ +rowth b@ -ividend ?-aily@ /ale and repurchase on all business days. 1C3 days a year 5ill be dispatched within : business days. Gs. <.A4crore =C days +rowth ,lan K -ividend ,lan +rowth ,lan -ividend ,lan Gs. :;.;<=4 -aily . Gs.:4.444 "pplication (ew investor 'xisting Investor Gs.: lakh Gs. : lakh +rowth ,lan K -ividend ,lan +rowth ,lan -ividend ,lan Gs. :4.44;= -aily . Gs.:4.444 (ew investor 'xisting Investor Gs. : crore Gs. :4 lakhs

("9

Minimum "mount

C4ILD 2ENEFIT FUND


An open 5 en$e$ E?)it& Sc"e.e F)n$ !eat)#e*
A"o *"o) $ inve*t ? $he scheme is suitable for investors seeking long term growth and accumulation of capital for the beneficiary. Inve*t.ent Objective $he ob ective of the scheme is to generate regular returns along with capital appreciation with the aim of giving lump sum capital growth to the beneficiary at the end of the chosen target period. Inve*t.ent option Li?)i$it& NAV ca c) ation Re$e.ption p#ocee$* Ta= bene!it* A**et Un$e# Mana%e.ent NAV Specia Feat)#e Mini.). app ication a.o)nt Loa$ St#)ct)#e Bareer builder plan ?one time investment @ &uture guard plan ?recurring annual investment@ /ale and repurchase on all business days. "ll business days. 5ill be dispatched within 1 business days. Indexation benefits, no +ift $ax, no 5ealth tax. Gs. 1.A< crore Bareer builder plan . Gs. ;C.=A &uture guard plan . Gs. ;C.34 8ife insurance facility ?for future guard investors@ (ew investor . Gs. 3444 'xisting investor . Gs. 344 'ntry load .:.2J 'xit load . as applicable ?max1J , min 4J@

MONT4LY INCOME PLAN


An open 5 en$e$ !)n$
Monthly Income is not assured and is sub ect to the availability of distributable surplus.

F)n$ !eat)#e*
A"o *"o) $ inve*t ? "n open ended income scheme having periodical distributions with no assured monthly returns. MI, attempts to provide income on a monthly basis and is therefore particularly suited for investors seeking regular source of income . Inve*t.ent Objective $he ob ective is to generate regular income through investments in debt securities to enable periodical income distribution and also to generate long term capital appreciation by investing a potion in equity related instruments. Inve*t.ent option Li?)i$it& NAV ca c) ation Re$e.ption p#ocee$* Ta= bene!it* A**et Un$e# Mana%e.ent NAV -ividend ,lan,+rowth "ccumulation ,lan "nd "uto earnings /ale and repurchase on all business days. "ll business days. 5ill be dispatched within 1 business days. Indexation benefits, no +ift $ax, no 5ealth tax. Gs. 3<4.<A crore +rowth plan . Gs. :;.=:3; -ividend ,lan ?monthly @. Gs.:4.211C -ividend ,lan ?quarterly@ .Gs. ::.443: Mini.). app ication a.o)nt -ividend plan K "uto earning payout (ew investor . Gs. :4444 'xisting investor . Gs. 344 +rowth accumulation plan (ew investor . Gs. 3444

'xisting investor . Gs. 344 Loa$ St#)ct)#e 'ntry load . (I8 'xit load . for investment of Gs. 3 crore and above (I8 &or investment of over Gs. :4 lakhs and upto Gs. 3 Brore 7 4.;3J ?if redeemed on or before 14 days &rom the date of allotment @ &or investment of Gs. :4 lakhs or below- 4.3J ?if Gedeemed on or before :=4 days from the date of "llotment @. Ave#a%e Mat)#it& ;.< years

MONT4LY INCOME PLAN 3 MIP PLUS


An open 5 en$e$ !)n$
Monthly Income is not assured and is sub ect to the availability of distributable surplus.

F)n$ !eat)#e*
A"o *"o) $ inve*t ? "n open ended income scheme having periodical distributions with no assured monthly returns. MI, attempts to provide income on a monthly basis and is therefore particularly suited for investors seeking regular source of income . Inve*t.ent Objective $he ob ective is to generate regular income through investments in debt securities to enable periodical income distribution and also to generate long term capital appreciation by investing a potion in equity related instruments. Inve*t.ent option Li?)i$it& NAV ca c) ation Re$e.ption p#ocee$* Ta= bene!it* A**et Un$e# Mana%e.ent NAV -ividend ,lan,+rowth "ccumulation ,lan "nd "uto earnings /ale and repurchase on all business days. "ll business days. 5ill be dispatched within 1 business days. Indexation benefits, no +ift $ax, no 5ealth tax. Gs. :=<.C2 crore +rowth plan . Gs. :4.;4C= -ividend ,lan ?monthly @. Gs.:4.:12= -ividend ,lan ?quarterly@ .Gs. :4.:1A; Mini.). app ication a.o)nt -ividend plan K "uto earning payout (ew investor . Gs. :4444 'xisting investor . Gs. 344 +rowth accumulation plan (ew investor . Gs. 3444

'xisting investor . Gs. 344 Loa$ St#)ct)#e 'ntry load . (I8 'xit load . for investment of Gs. 3 crore and above (I8 &or investment of over Gs. :4 lakhs and upto Gs. 3 Brore 7 4.;3J ?if redeemed on or before 14 days &rom the date of allotment @ &or investment of Gs. :4 lakhs or below- 4.3J ?if Gedeemed on or before :=4 days from the date of "llotment @. Ave#a%e Mat)#it& :.= years

GROWT4 FUND
An open 5 en$e$ E?)it& Sc"e.e F)n$ !eat)#e*
A"o *"o) $ inve*t ? Inve*t.ent Objective Inve*t.ent option Li?)i$it& NAV ca c) ation Re$e.ption p#ocee$* Ta= bene!it* A**et Un$e# Mana%e.ent NAV Mini.). app ication a.o)nt Loa$ St#)ct)#e $he scheme is suitable for investors willing to accept the risks that come with investing in equities. $he ob ective is to provide investors long term capital appreciation. a@ +rowth b@ -ividend /ale and repurchase on all business days. "ll business days. 5ill be dispatched within 1 business days. $ax free dividends in the hands of investors. Indexation benefits, no +ift $ax, no 5ealth tax. Gs. =<.14 crore +rowth ,lan . Gs. ;4.C1 -ividend ,lan . Gs. :1.23 (ew investor . Gs. 3444 'xisting investor . Gs. 344 'ntry load .:.24J - less than Gs. 34 lakhs 4.34J - Gs. 34 lakhs and above upto Gs. : crore 4.;3J - Gs. : crore and above 'xit load . (I8

Ro e o# Distri+ution Channe s
Mutual funds devise investment plans for the institutional and the individual investors . /ome funds target and contact the institutional investors directly, without using any external distribution channels . &or example 0$I and some private funds have some schemes targeted at provident funds, which are contacted directly by their own sales officers . )ther funds work through distribution for institutional clients as well as the individual clients . *ut, it is important to note that mutual funds are primarily vehicles for the larger collective investments, working on the principle of pooling the funds of a large number of the investors . $hat is why a ma ority of schemes are targeted at the individual investors . " substantial portion of the investments in the mutual funds take place at the retail level . Getail distribution channels are therefore a critical element in the distribution of the mutual funds,

T&pe* o! Di*t#ib)tion C"anne * In$ivi$)a A%ent*


0se of agents has been the most widely prevalent practice for distribution of funds over the years . *y definition, an agent acts on the behalf of a principal 7 in this case , the mutual fund . "n agent is essentially a broker between the fund and the investor . In India, we also have unique system whereby a broker has a number of sub 7 brokers working under him . $he vast sub broker network ensures a larger geographic coverage than otherwise . In India, any person who signs an agreement with a fund on non 7 udicial stamp paper can act as its agent . &rom (ov . :, ;44: /'*I has made it mandatory for newly recruited distributors to pass "ssociation )f Mutual &unds ?"M&I @ certification test and has recommended the test for existing distributors. "s financial markets, investment options and the variety of mutual funds get more sophisticated, distributors need more and more information , knowledge and skills. $hat is why the distributors in India will find that many mutual funds now prescribe minimum qualifications that a person must possess to

be its agent. $hese qualifications may be in terms of education, experience or even registration on an exchange. &or example , 0$I requires its agent to pass at least the matriculation exams and also to provide two references.

Di*t#ib)tion Co.panie*
"vailing of the services of established distribution companies is a practice accepted by mutual funds internationally. $his practice evolved with a view to circumvent the huge administrative mechanism require to support a large agents force .Instead of having to deal with several agents , a fund can interact with a distribution company which has several employees or sub -brokers under it . " distribution company usually manages distribution for several funds simultaneously and receives commission for its services. Many private funds have preferred to adopt this practice because of its sophisticated nature and because they benefit from the specialist knowledge and established client contacts of these marketing firms. In India there are about :4 ma or distribution companies in addition to few :44 smaller ones.

(an-* An$ N(FC*


In developed countries , banks are an important marketing vehicles for the mutual funds , given that the banks themselves have a large depositorKclient base of their own .we can see up the opening of this new channel in India as well ./everal banks ,particularly the private and the foreign banks are involved in the fund distribution companies on a commission basis ./ome (*&Bs are also providing such services .

Di#ect Ma#-etin%
-irect marketing means that the mutual funds sell their own product without the use of any intermediaries . 0sually , this takes the form of sales officers and employees of the "MB who approach the investor and accept their contribution directly. However in India, independent agents may really be treated as the direct marketing channel, in the sense that they do not form a well- knit , independent and organi%ed single entity and act more like fund employees. )ther channels like distribution companies or banks or even stock brokers are clearly distinct and independent intermediaries

The I"1ortan%e O# A%%ountin& Kno7 e$&e


$he balance sheet of a mutual fund is different from the normal balance sheet of a bank or a company. "ll of the fund#s assets belong to the investors and are held in the fiduciary capacity for them. Mutual fund employees need to be aware of the special requirements concerning accounting for the fund#s assets, liabilities and transactions with investors and the outsiders like banks, securities custodians and registrars. $his knowledge will help them better understand their responsibilities and their place in the organi%ation, by getting an overview of the functioning of the fund. 'ven the mutual fund agents need to understand the accounting for the

fund#s transaction with investors and how the fund accounts for its assets and liabilities ,as the knowledge is essential for them to perform their basic role in explaining the mutual fund performance to the investor. &or example, unless the agent knows how the ("9 is computed, he cannot use even simple measures such as ("9 change to assess the fund performance. He also should understand the impact of dividends paid out by the fund or entryKexit loads paid by the investor on the calculation of the ("9 and therefore the fund performance. $he mutual funds in India are required to follow the accounting policies as laid down by the /'*I?Mutual &und@ Gegulations :22C and the amendments in :22=.

NET ASSET .ALUE /NA.0


" mutual fund is a common investment vehicle where the assets of the fund belong directly to the investors. Investors# subscription are accounted for by the fund not as the liabilities or deposits but as the 0nit Bapital. )n the other hand, the investments made on the behalf of the investors are reflected on the assets side and are the main constituents of the balance sheet, there are ,however, liabilities of a strictly short- term nature that may be the part of the balance sheet. $he fund#s (et "ssets are therefore defined as the assets minus the liabilities. "s there are many investors in the fund. It is common practice for the mutual funds to compute the share of each of the investor on the basis of the value of the (et "ssets ,er /hareK0nit, commonly known as the (et "ssets 9alue ?("9@. $he following are the regulatory requirements and accounting definitions as laid down by the /'*I. ("9P(et "ssets )f $he /chemeK(umber )f the 0nits )utstanding ,i.e. Market value of the investmentsQ GeceivablesQ )ther "ccrued Income Q)ther "ssets 7"ccrued 'xpenses- )ther ,ayables 7)ther 8iabilities (o. of units outstanding as at the ("9 date. &or the purpose of the ("9 calculation, the day on which ("9 is calculated by a fund is known as the valuation date. ("9 of all schemes must be calculated and published at least weekly for closed end schemes and daily for open end schemes. ("9#s for a day must also be posted on "M&I website by = ,.M. on that day.

" fund#s ("9 is affected by four sets of factors ,urchase and sale of investment securities 9aluation of al investment securities held

)ther assets and liabilities and, 0nits sold or redeemed E other assetsF include income due to the fund but not received as on the valuation date ? for ex. ,dividend announced by he company yet to be received@. E other liabilitiesF have to include expenses payable by the fund , for ex. Bustodian fees or even the management fees payable to "MB. $hese income and expense items have to be EaccruedF and included in the computation of the ("9. Ma or expenses such as management fees should be accrued on a day to day basis, while others need not to be so accrued, if non-accrual does not affect ("9 by more than :J.

FEES AND E5PENSES


"n "MB may incur many expenses specifically for given schemes, and other common expenses. In any case, all expenses should be clearly identified and allocated to the individual schemes. $he "MB may charge the scheme with investment management and advisory fees that are fully disclosed in the offer document sub ect to the following limits. R :.;3J of the first Gs. :44 crores of weekly average net assets outstanding in the accounting year, and R of :J of weekly average net assets in excess of Gs. :44 Brores. &or no load schemes, the "MB may charge an additional

management fee upto : J of weekly average net assets outstanding in the accounting year. In addition to fees mentioned above, the "MB may charge the scheme with the following expenses . Initial expenses of launching schemes 6 and Gecurring expenses including.

i.

Marketing and selling expenses including agent#s commission

ii. iii. iv. v. vi. vii. i. ii. iii. iv. v.

*rokerage &ees and expenses of trustees "udit fees Bustodian fees 5inding up cost )ther cost as approved by /'*I ,enalties and fines Interest on delayed payments to the unitholders +eneral expences not related to any schemes -epreciation on fixed assets "ny cost prohibited by /'*I

However the following expenses cannot be charged to the schemes.

$he total expense charged by the "MB to a scheme, excluding issue or redemption expenses but including investment management and advisory fees, are sub ect to the following limits. )n the first Gs. :44 crore of average weekly net assets 7 ;.3 J )n the next Gs 144 Brores of average weekly net assets 7 ;.;3J )n the next Gs 144 Brores of average weekly net assets 7 ;.4 J )n the balance of average weekly net assets 7 :.A3J

Dis% osures An$ Re1ortin& Re(uire"ents


"udited "nnual /tatement )f "ccounts M&K"MB shall prepare, for each financial year, annual reports and annual statement of accounts for all the schemes M& shall have the annual statement of accounts audited by an auditor who is independent of the auditor of the "MB 5ithin months of the closure of the relevant accounting year the

fund shall.

i.

,ublish through advertisement, scheme wise annual report or an abridged summary of the report,

ii. iii.

Mail the summary to the unit holders and &orward to /'*I ,a copy of the annual report and other information including details of investments and deposits held by the fund.

A%%ountin& Po i%ies8 Investment are required to be marked to market using market prices. "ny unreali%ed appreciation cannot be distributed , and provision must be made for the same. In determining the gain or loss of investment, the average cost method must be followed to determine the cost of purchase. 'xample . a fund acquires :44 shares in the company " for Gs. 3444 on "pril :. it buys another :34 shares in the same company on "ril :3 for Gs.A444. It sells 34 shares for Gs.1344 on "pril 14. the gain on sale is Gs. ::44 calculated as . "verage cost of holding per share in the company

"P ?3444QA4444@K?:44Q:34@P<= $otal holding cost of shares sold P<=S34P;<44 +ain on saleP 1344-;<44P::44 Investments owned by mutual funds are marked to market.

$herefore, the value of the investments appreciates or depreciates based on the market fluctuations, which is reflected in the balance /heet. However, this change in value constitutes unreali%ed gainKloss . when any investments are actually sold, the proportion of the unreali%ed gainKloss that pertains to such investments, becomes reali%ed gainKloss. $herefore, at any given point of time, the ("9 includes reali%ed and unreali%ed gainKloss on investments. 5hile /'*I

prohibits the distribution of the unreali%ed appreciation on the investments, reali%ed gain is available for the distribution. 'quali%ation . "n open end scheme sells and repurchase units on the basis of ("9./'*I therefore prescribes the use of equali%ation account, to ensure that creationKredemption of units does not change the percentage of income distributed. $his involves the following steps.

- Co.p)tation o! $i*t#ib)tab e #e*e#ve*: income Qreali%ed gain on investments 7expenses- unreali%ed losses

?unreali%ed gains are excluded@. ,ractically, many funds make the ad ustments for unreali%ed losses in computation of equali%ation only at the time of dividend distribution. $his is to avoid variation in per unit equali%ation balance on a day to day basis. - $he following percentage is then computed . distributable Geserves K0nits )utstanding $he above percentage is multiplied with the number of new units sold,and the equali%ation account is credited by this amount. $he same percentage is multiplied with the number of units repurchased , and the equali%ation account is debited by this amount if the units are repurchased above par, if the units are repurchased below par, the equali%ation account is credited. $he net balance in the equali%ation account is transferred to the profit and loss account. It is only an ad ustment to the distributable surplus and does not effect the net income for the period.

TA5ATION
Investors often view the tax angle as an important consideration while deciding on the appropriate investments. $his section examines the area of mutual fund taxation with respect to the taxation of income ?dividends and capital gains@ in the hands of the fund itself and the income when received in the hands when received in the hands investors. Ta*ation in the han$s o# the #un$s 5hen we talk about a mutual fund for taxation purpose , we mean the legally constituted trust that holds the investors# money. It is this trust that earns and receives income from the investments it makes on the behalf of the investors. Most countries do not impose any tax on this entity- the trust- because this income that it earns is meant for the investors. $he trust is considered to be only a pass through entry. It would amount to double taxation if the trust first pays the tax and then the investor is also required to pay the tax. +enerally, the trust is exempted from the tax and it the investor who pays tax on his share of income. "fter the :222K;444 budget of finance minister Mr.Iashwant /inha , the investors are totally exempted from paying any tax on the dividend income they receive from the mutual funds, while certain types of schemes pay some taxes. $his section deals with what the fund or the trust pays by the way of tax.

Ta* 1rovisions
+enerally, income earned by any mutual fund registered with /'*I is exempt from tax. However, income distributed to unit-holders by a closed-end or

debt fund is liable to a dividend distribution tax of :4J plus a surcharge of ;J,i.e., a tax of :4.;J. this tax is also applicable to distributions made by open-end equity funds ? i.e., funds with more than 34J of their portfolio in equity@ on or after "pril :, ;44;.

T"e i.pact on t"e F)n$ an$ t"e Inve*to#


It should be noted that although this tax is payable by the fund on its distributions and out of its income, the investors pays indirectly since the fund#s ("9, and therefore the value of his investment will come down by the amount of tax paid by the fund. &or example, if a closed end fund declares a dividend distribution of Gs.:44, Gs.:4.;4 ?:4.;4J@ will be the tax in the hands of the funds. 5hile the investor will get Gs.:44, the fund will have Gs.:4.;4 less to invest. $he fund L current cash flow will diminish by Gs. :4.;4 paid as a tax , and its impact will be reflected in the lower value of the fund#s ("9 and hence investor#s investment on a compounded basis in future periods. "lso , the tax bears no relationship to the investor#s tax bracket and is payable by the fund even if the investor#s income does not exceed the taxable limit prescribed by the Income $ax "ct In fact, since the tax is on distributions, it makes income schemes less attractive in comparison to the growth schemes, because the ob ective of the income schemes is to pay regular dividends. $he fund cannot avoid the tax even if the investor chooses to reinvest the distribution back into he fund. &or example, the fund will still pay Gs.:4.;4 tax on the announced distribution , even if the investor chooses to reinvest his dividends in the concerned schemes.

Ta*ation in the han$s o# the investor


Ta= #ebate avai ab e to in$ivi$)a inve*to# on *)b*c#iption* to M)t)a F)n$* In accordance with the section 88 of the Income Tax Act, Investments up to Gs.:4,444 in an '8// qualifies for tax rebate of ;4J.

In case of EinfrastructureF mutual fund units, investments up to Gs.=4,444 is eligible for ;4J tax rebate . However, total investment eligible for tax rebate under section == is not allowed to exceed Gs. C4,444 ?Gs.=4,444 in case of investment qualifying under Linfrastructure#. 'xample ?/ec ==@. "n investor invests Gs.=4,444 in a /'*I approved mutual fund ?not being an infrastructure fund@. $he tax rebate that he is entitled to is Gs.;,444?;4J of :4,444@. $herefore , if his tax liability on income from all sources is Gs.:,44,444 he is liable to pay a tax of Gs.2=,444 net of rebate under section ==@

Divi$en$s re%eive$ #ro" Mutua Fun$s


&rom the accounting year :222K;444, income distributed by a fund is exempt in the hands of the investors.

Capita

%ain* on *a e o! Unit*

However ,if the investors sells his units and earns EBapital +ainsF , the investor is sub ect to the Bapital +ains $ax as under. If units are held for not more :; months , they will be treated as short term capital assets, otherwise as long term capital assets. ?$his period is 1C months for assets other than shares and listed securities@. $ax law definition of capital gains P sale consideration- ?Bost of "cquisition Q Bost of improvements Q cost of transfer@ If the units were held for over one year, the investors gets the benefit of EindexationF, which means his purchase price is marked up by an inflation index , so his capital gains amount is less than otherwise. ,urchase price of a long term capital assets after indexation is computed as,Bost of acquisition or improvementP actual cost of acquisition or improvement Scost inflation index for year of transferKcost inflation index for year of acquisition or improvement or for :2=:, whichever is later.

Mutua Fun$ Per#or"an%e


The Investor Pers1e%tive
$he investor would actually be interested in tracking the value of his investments , whether he invests directly in the market or indirectly through the mutual funds. He would have to make intelligent decisions on whether he gets an acceptable return on his investments in the funds selected by him, or if he needs to switch to the another fund. He therefore, needs to understand the basis of appropriate performance measurement for the funds , and acquire the basic knowledge of the different measures of evaluating the performance of a fund. )nly then would he be in a position to udge correctly whether his fund is performing well or not.

The A$visor9s Pers1e%tive


If you are an intermediary recommending a mutual fund to a potential investor, he would expect you to give him proper advice on which funds have a good performance track record. If you want to be an effective investment advisor, then you too have to know how to measure and evaluate the performance of the different funds available to the investor. $he need to compare the performance of the different funds requires the advisor to have the knowledge of the correct and appropriate measures of evaluating the fund performance.

Di##erent Per#or"an%e Measures


Gemember that there are many ways to evaluate the performance of the fund. )ne must find the most suitable measure, depending upon the type of the fund one is looking at , the stated investment ob ective of the fund and even depending on the current financial market condition. 8et us discuss few common measures . Bhange in ("9- $he most common measure

,urpose . If

an investor wants to compute the Geturn )n Investment

between two dates, he can simply use the ,er 0nit (et "ssets 9alue at the beginning and the end periods and calculate the change in the value of the ("9 between the two dates in absolute and percentage terms. &ormula . for ("9 change in absolute terms. ?("9 at the end of the period@ 7?("9 at the beginning of the period@ &or ("9 change in percentage terms. ?"bsolute changes in ("9 K("9 at the beginning@S:44. If period covered is less Kmore than one year. for annuali%ed ("9 Bhange ?absolute change in ("9K("9 at the beginning@Kmonths coveredTS:;US:44 'xample . $hus ,if a fund Ls ("9 was Gs.;4 at the beginning of the year and Gs.;; at the end of the year , the absolute change was Gs.; and the percentage change was Q:4J ?;;-;4K;4S:44@. (ow, let us assume that an investor purchases a unit in an open-end fund at Gs.;4 and its ("9 after :C months is Gs.;;, the annuali%ed return is A.3J?VW;;;4TK;4UK:CS:;@S:44. /uitability. ("9 change is most commonly used by the investors to evaluate fund performance, and so is also most commonly published by the mutual fund managers. $he advantage of this measure is that it is easily understood and applies to virtually any type of fund. Interpretation . 5hether the return in terms of ("9 growth is sufficient or not should be interpreted in light of the investment ob ective of the fund, current market conditions and alternative investment returns. $hus, a long term growth fund or infrastructure fund will give low returns in its initial years. "ll equity funds may give lower returns when the market is in bearish phase.

8imitation . However, this measures does not always give the correct picture , in case where the fund has distributed to the investors a significant amount of dividend in the interim period. If , in the above example ,year end ("9 was Gs.;; after declaration and payment of dividend of Ge.:, the ("9 change of :4J gives an incomplete picture. $herefore, it is suitable for evaluating growth funds and accumulation plans of debt and equity fund, but should be avoided for income funds and funds with withdrawal plans. $otal Geturn ,urpose. $his measure corrects the shortcomings of the ("9 Bhange measure, by taking into account of the dividends distributed by the fund between the two ("9 dates, and adding them to the ("9 change to arrive at the total return. &ormula. W?distributionsQ change in ("9@K("9 at the beginning of the periodTS:44 'xample . let us assume that an investor purchased : unit of an open-end scheme at Gs.;4. $he fund has an interim dividend distribution of Gs.< per unit. (ow let us that the ("9 of the fund at the year end was Gs.;;. $hus, total return at the end of the year for the investor was 14J WV<Q?;;;4@UK;4TS:44. /uitability. total return is the measure suitable for all types of funds.

,erformance of different types of funds can be compared on the basis of $otal Geturn. $hus, during a given period ,one can find out whether a debt fund has given better returns than the equity fund. It is also more accurate than simple ("9 change, because it takes into account distribution during the period. 5hile using $otal Geturn, performance must be interpreted in the light of market conditions and investment ob ectives of the fund.

8imitation. although more accurate than ("9 change, simple $otal Geturn as calculated here is still inadequate as a performance measure, because it ignores the fact that distributed dividends also get reinvested if received during the year. $he investor#s total return should take account of reinvestment of interim dividends. Geturn )n Investment ,urpose. the short coming of the simple total return is overcome by the total return with reinvestment of the dividends in the funds itself at the ("9 on the date of the distribution. $he appropriate measure of the growth of an investor#s mutual fund holdings is therefore, the return on investment . &ormula . V?units heldQ dividendKex-dividend ("9@Send ("9U-begin ("9Kbegin ("9S:44 'xample . let us assume that an investor purchased :-unit of an open end equity fund at Gs.;4. $he fund has an interim dividend distribution of Gs.< per unit, when the ("9 was Gs.;:. $he distribution of Gs.< was reinvested in the fund at Gs.;: per unit ,giving the investor the 4.:2 unit ?<K;:@in the fund, making his total holding :.:2?original : unitQ4.:2 through reinvestment@. (ow let s assume that the ("9 of the fund at the year-end was Gs.;;. $he value of the investor#s holding at the year end is Gs.;C.:=?;;S:.:2@, giving the investors a total return with reinvestment of distribution 14.2J ?W;C.:=-;4TK;4@. /uitability . $otal return with distributions reinvested at ("9 is a

measure accepted by mutual fund tracking agencies such as Bresedence in Mumbai and 9alue Gesearch in (ew -elhi. It is appropriate for

measuring performance of accumulation plans, monthlyK quarterly income schemes that distribute interim dividends.

$he 'xpense Gatio ,urpose . the expense ratio is an indicator of the fund#s efficiency and cost- effectiveness . &ormula . it is defined as the ratio of the total expenses to average net assets of the fund. 'xample . in any offer document ,one will find the past and estimated expense figures and ratios as disclosed by the fund . )ne will find that from any annual report of a fund, one will be able to compute the expense ratios and compare it with the figures in the offer document. /uitability. /'*I Gegulations regulate this aspect for funds in India. It is important to know that the brokerage commissions on the fund#s transactions are not included in the fund expenses figure while computing this ratio. $he expense ratio is most important in case of the *ond or the -ebt funds, since these funds# performance can be "dversely effected if a larger proportion of its income is spent on the 'xpenses. 8imitation . though an important yardsticks, fluctuation in the ratios across periods require that an average over 1 to 3 years be used to udge a fund#s performance. "lso, the expense ratio must be evaluated in the light of fund si%e, average account si%e and the portfolio composition. $he Income Gatio &ormula . a fund#s income ratio is defined as its net investment income dividend by its net assets for this period. ,urposeK/uitability . this ratio is a useful measure for evaluating income-oriented fund, particularly debt funds. It is not recommended for funds that concentrate primarily on capital appreciation.

8imitation . the income ratio cannot be considered in isolation 6it should be used only to supplement the analysis based on the expense ratio and total return.

Tra%!in& Mutua Fun$ Per#or"an%e Having identified appropriate measures and benchmarks for the mutual funds available in the market, the challenge is to track fund performance on a regular basis. $his is indeed the key towards maximi%ing wealth through mutual fund investing. ,roper tracking allows the investor to make informed and timely decisions regarding his fund portfolio 7whether to acquire attractive funds, dispose off poor performers or switch between fundsKplans. $o be able to track fund performance, the first step is to find the relevant information on ("9, expenses cash flow, appropriate indices and so on. $he following are the sources of information in India. M)t)a F)n$*B Ann)a an$ Pe#io$ic Repo#t*: $hese include data on the fund#s financial performance, so indicators such as incomeKexpense ratios and $otal Geturn can be computed on the basis of this data. $he annual report includes a listing of the fund#s portfolios expenses holdings ,unreali%ed at market value, statement at of revenue year-end, and and appreciationKdepreciation

changes in the net assets. )n the basis of the annual report, the investors can develop a perspective on the quality of the fund Ls assets and portfolio concentration and risk profile, besides computing returns. He can also assess the quality of the fund management company by reviewing all their scheme#s performance. $he profit and loss account part of the annual report will also give details of transaction costs such as brokerage paid, custodianKregistrar fees and stamp duties.

M)t)a F)n$*B Aeb*ite* . 5ith the increasing spread of the internet as a medium, all mutual funds have their own websites. /'*I even requires funds to disclose certain types of the information on these sites- for example, the ,ortfolio Bomposition. /imilarly, "M&I itself has a websites , which displays all of its members funds# ("9 information. Financia pape#*: -aily newspapers such as the 'conomic $imes provide daily ("9 figures for the open end schemes and share prices of the closed end listed schemes. *esides, weekly supplements of the economic newspapers give more analytical information on the fund performance. &or example, *usiness /tandard- the /mart Investor gives total returns over 1month, : year and 1 year periods, besides the fund si%e and rankings with the other funds separately for 'quity, *alanced, -ebt, Money Market, /hort $erm -ebt and $ax ,lanning &unds. /imilarly, 'conomic $imes weekly supplement gives additional data on open end schemes such as 8oads and -ividends besides the ("9 and other information, and performance data on closed end scheme. F)n$ T#ac-in% A%encie*: In India, agencies such as Bredence and 9alue Gesearch are a source of information for mutual fund performance data and evaluation. $his data is available only on request and payment. Ne+ * ette#* : Many stockbrokers ,mutual fund agent and banks and non-ranking firms catering to retail investors publish their own newsletters, sometimes free or else for their subscribes, giving fund performance data and recommendations. P#o*pect)*: /'*I Gegulations for mutual fund require the fund sponsors to disclose performance data relating to scheme being managed by the concerned "MB ,such as the beginning and end of the year.

Eva uatin& Fun$ Per#or"an%e


I.po#tance o! (enc".a#-in% in Eva )atin% F)n$ Pe#!o#.ance $he measures mentioned above are obsolete, i.e., none of the measure should be used to evaluate the fund performance in isolation. " fund#s performance can only be udged in relation to the investor#s expectations. However, it is important for the investor to define his expectations in relation to the certain EguidepostsF on what is possible to achieve, or moderate his expectations with realistic investments alternatives available to him in the financial market. $hese guideposts or the indicators of performance can be thought of as benchmarks against which a fund#s performance ought to be udged. &or example, an investor#s expectations of returns from equity fund should be udged against how the overall stock market performed , in the other words by how much the stock market index itself moved up or down, and whether the fund gave a return that was better or worse than the index movement. In this example, we can use a market index like /M, B(N (ifty or */' /'(/'N as Ebenchmarks to evaluate the investor#s mutual fund performance. $he advisor need to select the right benchmark to evaluate a fund#s performance ,so that he can compare the measured performance figures against the selected benchmark. Historically, in India ,investors# only option to evaluate the performance of the units were 0$I schemes or the bank fixed deposit interest rates. 0$I itself to tended to EbenchmarkF its returns against what interest rates were available on bank deposits of 1K3 year maturity. $hus, for a long period, 0/ C< scheme dividends were compared on bank interest rates and investors would be happy if the -ividend Iield on 0/ C< units was greater than comparable deposits interest rate. However, with increasing investment options in the market, bank interest rates should not be used to correct benchmarks of mutual fund performance. udge a mutual fund#s performance in all cases. 8et us therefore look at how to choose the

2asis o# %hoosin& an A11ro1riate Per#or"an%e 2en%h"ar!


$he appropriate benchmark for any fund as to be selected by reference to. i. $he asset class it invests in. $hus, an equity fund has to be udged by an appropriate benchmark from the equity markets, a debt fund performance against a debt market bench mark and so on6 and ii. $he fund#s stated investment ob ective. &or example, if a fund invests in long term growth stocks, its performance ought to be evaluated against a benchmark that captures a growth stocks# performance. $here are in fact three types of benchmarks that can be used to evaluate a fund#s performance relative to the market as whole, relative to other mutual funds, comparable financial products or investments options open to the investor.

(enc".a#-in% #e ative to t"e .a#-et :


E(uit) Fun$s Index &unds- a *ase Index. If an investor were to choose an 'quity &und, now being offered in India, he can expect to get the same return on his investments as the return on the equity index used by the fund as its benchmark, called the *ase Index. $he fund would invest in the index stocks, and expects ("9 changes to mirror the changes in the index itself. $he fund and therefore the investor would not expect to beat the benchmark, but merely earn the same return as the index. T#ac-in% E##o#: In order to obtain the same returns as the index, an index fund invests in all of the stocks included in the index calculation, in the same proportion as the stocks# weight age in the index. $he tracking error arises from the practical difficulties faced by

the fund manager in trying to always buy or sell stocks to remain in line with the weight age that the stock en oys in the index. CActiveD E?)it& F)n$*: "n index fund is passively managed, to track a given index. However, most of the other equity fundsK schemes are actively managed by the fund managers. If an investor holds such an actively managed equity fund, the fund manager would not specify in advance the benchmark to evaluate his expected performance as in case of an index fund. However, the investor still needs to know whether the fund performance is good or bad. $o evaluate the performance of the equity scheme, therefore, we still need to select an appropriate benchmark and compare its return to the returns on the benchmark 6 usually this means using the appropriate market index. $he appropriate index to be used to evaluate a broad based equity fund should be decided on the basis of the si%e and the composition of the fund#s portfolio. If the fund in question has a large portfolio, a broader market index like */' :44 or ;44 or (/' :44 may have to be used as the rather than /M, B(N (I&$I or */' 14. "n actively managed fund expects to be able to beat the index, in other words give higher returns than the index itself. /omewhat like the Index &unds, the choice of benchmarks in case of /ector &unds is easier. Blearly, for example, an investor in Infotech or ,harma sector funds can only expect the same return as the relative sectoral indices. In such cases, he should expect the same or higher returns than the Infotech or ,harma sector index if such index exists. In other words, the choice of the correct equity index as a benchmark also depends upon the investment ob ective of the fund. $he performance of a small cap fund has to be compared with the small cap index. " +rowth &und investing in new growth sectors but is diversified in many sectors can only be udged against the appropriate growth index if available. If not, the returns can only be compared to either a broad based index or a combined set of sectoral indices.

Eva )atin% t"e F)n$ Mana%e# EA**et Mana%e.ent Co.pan& 5hile every fund is exposed to market risks, good funds should at least match ma or market indices, and be able to sustain bearish market phases better than other funds. +ood funds manager operate long term perspective, do not sacrifice investor value by excessive trading which generates a high level of transaction costs, and will turn out more consistent performance , which is more valuable than one-time high and otherwise volatile performance record. $he investor must evaluate the fund manager#s track record, how his schemes have performed over the years. $here is a difference between institution-managed funds that have a team of managers with successful records as against funds that are managed by the individuals only. $he team approach also helps by offsetting bad performance by one manager with good performance from the others in the team. In practice, however, single person managed funds are widely prevalent in the countries like the 0./. In India, many individuals operate as ,ortfolio Managers. However, currently, we have mainly institution sponsored funds, either banksponsored ,corporate owned or government K financial institution 7owned. $he reliability and track record of these sponsors has been an important factor in investor perceptions. In the final analysis, "sset Management Bompanies and their fund managers ought to be udged on consistency in the returns obtained, and performance record against competing or peer group managers running similar funds. 5hile transaction costs incurred are also an important factor, this information is not generally available in India.

CLASSIFICATION OF INVESTOR NEEDS


(eeds are generically classified into protection needs and investment needs. ,rotection needs refer to needs that have to be primarily taken care of to protect the living standards, current requirement and survival requirement of investors . (eeds for regular income . need for retirement income and need for insurance cover are protection needs . Investment needs are additional financial needs that can be served through saving and investments .$hese are needs for children#s professional growth .

WEALT4 CYCLE CLASSIFICATION OF IN.ESTORS


5ealth cycle based classification of investor#s financial needs ., refers to using a generali%ed approach to saving and investment as the classifications, than age or life stages . $he following table illustrates .

STA/E
"ccumulation stage

FINANCIAL NEEDS

INVESTMENT PREFERENCES

Investing for long term +rowth option and long identified financial goals term products . High risk appetite (ear term needs for funds 8iquid and medium term as per specified needs draw investment . ,reference for closer Higher requirements income and debt products. liquidity 8iquid and medium term investment ., for income needs ,

$ransition stage

Geaping stage

Inter generation transfer

low risk appetite 8ong term investment of 8ow liquidity inheritance

"bility to take risks and invest for the long term 5ealth preservation ,reference products. for low . risk

/udden wealth surge

Medium to long term

Asset A o%ation
"sset "llocation refers to the process of deciding the composition of a portfolio. In order to achieve the goals of a financial plan, investors should allocate their funds to equity, debt and other asset classes, according to the risk and return features of these classes. $his process is called asset allocation.

A**et A ocation St#ate%ie* Fo# Inve*to#*


*en amin +raham recommends the following allocations *asic Managed ,ortfolio 34J in diversified equity value funds ;3J in government securities fund *asic Indexed ,ortfolio /imple Managed portfolio Bomplex Managed ,ortfolio ;3J in high grade corporate bond fund 34J in stock market index fund 34J in bond market index fund =3J in balanced fund :3J in medium term bond fund ;4J in diversified equity fund ;4J in aggressive growth fund :4J in specialty fund 14J in long term bond funds Geadymade ,ortfolio ;4J in short term bond funds /ingle index fund with C4J in equity and <4J in debt

Mo$e Port#o ios that %an +e re%o""en$e$ #or investors a%%or$in& to their Li#e C)% e Sta&es
$he model portfolio that has been recommended by Dacobs for investors is as follows.

INVESTOR
Ioung unmarried professional

RECOMMENDED PORTFOLIO
34J in aggressive equity funds

MODEL

;3J in high yield bond funds, growth and income funds ;3J in conservative money market funds Ioung couple with ; incomes and ; :4J in money market funds children 14J in aggressive funds ;3J in high yield bond funds and long term growth funds )lder couple single income 13J in municipal bond funds 14J in short term municipal funds 13J in long term municipal funds ;3J in moderately aggressive equity Gecently retired couple :4J in emerging growth equity 13J in conservative equity funds for capital preservationK income ;3J in moderately aggressive equity for modest capital growth <4J in money market funds.

Ana )sis O# The -uestionnaire


$he questionnaires were sent to :44 people out of which only 3; responded. I have analysed my survey on the basis of these respondents feedback. )nce the questionnaire were filled up, the next work that comes up is the analysis of the data arrived. 5e find out that more *usiness Men were inclined towards investing their in the Burrent "Kc. 8adies are more inclined towards investing their funds in gold and other ewellery. )n the other hand, service class people and retired fellows prefer more either /avings andKor &ixed -eposits. ,eople with high income and who are young enough to take risks prefer shares and mutual funds. /imilarly, people are interested in knowing what are the returns of their investments. /imilar large number of people are equally interested in the safety of their funds. $here are the people who want easy liquidity of money and these are basically the business people who have to deal in the ready cash all the time. /urprisingly, while a large number ?1<@ of people are aware of the tax benefits, a very small number of them , only 3, are interested in it. 5hilst a large number of people are aware of mutual funds, comparatively a very less number invests into it.)n asking how do they get knowledge of Mutual &unds, a large number of them attributed it to ,rint Media. 'ven *anks today follow the role of investment advisors. 9ery few get any information from the 'lectronic Media or the GelativesK&riends. Hence "MBs must increase the awareness about their product through 'lectronic Media ?$.9.s, Bables, Gadios etc@ as well as and should not ust constrained itself to the print advertisement. $hose who do not read newspaperKmaga%ines due to any reasons may watch or listen to the advertisements. " large part of respondents said that their knowledge about M& does not allow them to invest into it while to another segment considered government bonds much better.

PRIORITY ON IN.ESTORS W4ILE IN.ESTING

10% 19% Safety Higher return 71% Liquidity

FRE-UENCY OF IN.ESTMENT

15%

33%

Regularly Once a while N ne f the!e

52%

O2:ECTI.E 2E4IND IN.ESTMENT

#% 29% "7% $nc %e &enerati n 'a( Sa)ing Other!

SOURCES OF AWARENESS

New!+a+er,-aga. ine 12% 17% 13% 10% #*% /riend!,0 lleague ! '1 2d)erti!e%ent! /act!heet! Other!

SPECIFIC APPRE4ENSIONS A2OUT IN.ESTING IN MUTUAL FUNDS

Lac3 f awarene!! 20% 50% 1*% Other! 12% Lac3 f tru!t $nc n)enience

TIME PERIOD FOR IN.ESTMENT

Le!! than 1 year 13% 19% 51% 17% - re than 5 year! 2 t 5 year! 1 t 2 year

PRIORITY OF IN.ESTORS TO IN.EST IN .ARIOUS FINANCIAL PRODUCTS

4an3 de+ !it! 1*% 20% 12% 50% -utual fund & )ern%ent 4 nd! 5quity %ar3et

OCCUPATION WISE DISTRI2UTION

13%

"%

Ser)ice 35% 4u!ine!! 6r fe!!i nal Retired 27% 7e+endent!

19%

AWARENESS OF MUTUAL FUNDS

29% NO 85S 71%

AWARENESS OF TA5 2ENEFITS

19%

85S NO
*1%

REASONS FOR NOT IN.ESTING IN MUTUAL FUNDS

1#%

12%

0 nfidence 9n wledge 4eter : nd! #*% Other!

2"%

Mar!etin& O# Mutua Fun$s


$he present marketing strategies of mutual funds can be divided into main headings . -irect Marketing /elling through intermediaries Doint Balls

Di#ect Ma#-etin%:
$his constitutes ;4 percent of the total sales of mutual funds. /ome of the important tools used in this type of selling are .

Pe#*ona Se in% :In this case the customer support officer of the fund at a
particular branch takes appointment from the potential prospect. )nce the appointment is fixed, the branch officer also called *usiness -evelopment "ssociate ?*-"@ in some funds then meets the prospect and gives him all details about the various schemes being offered by his fund. $he conversion rate in this mode of selling is in between 14J - <4J.

Te e.a#-etin% : In this case the emphasis is to inform the people about the
fund. $he names and phone numbers of the people are picked at random from telephone directory. /ometimes people belonging to a particular profession are also contacted through phone and are then informed about the fund. +enerally the conversion rate in this form of marketing is :3J - ;4J.

Di#ect Mai :$his is one of the most common method followed by all mutual
funds. "ddresses of people are picked at random from telephone directory. $he customer support officer ?B/)@ then mails the literature of the schemes offered by the fund. $he follow up starts after 1 7 < days of mailing the literature. $he B/) calls on the people to whom the literature was mailed. "nswers their queries and is generally successful in taking appointments with those people. It is then the ob of *-" to try his best to convert that prospect into a customer.

A$ve#ti*e.ent* in ne+*pape#* an$ .a%a@ine* : $he funds regularly


advertise in business newspapers and maga%ines besides in leading national dailies.

$he purpose to keep investors aware the schemes offered by the fund and their performance in recent past.

Hoa#$in%* an$ banne#*: In this case the hoardings and banners of the fund
are put at important locations of the city where the movement of the people is very high. +enerally such hoardings are put near 0$I offices in order to tap people who are at present investing in 0$I schemes. $he hoarding and banner generally contains information either about one particular scheme or brief information about all scheme of fund.

Se in% T"#o)%" Inte#.e$ia#ie* :


Intermediaries contribute towards =4J of the total sales of mutual funds. $hese are the peopleK distributors who are in direct touch with the investors. $hey perform an important role in attracting new customers. Most of these intermediaries are also involved in selling shares and other investment instruments. $hey do a commendable ob in convincing investors to invest in mutual funds. " lot depends on the after sale services offered by the intermediary to the customer. Bustomers prefer to work with those intermediaries who give them right information about the fund and keep them abreast with the latest changes taking place in the market especially if they have any bearing on the fund in which they have invested.

Re%) a# Meetin%* Ait" Di*t#ib)to#* :Most of the funds conduct


monthlyK bi monthly meetings with their distributors. $he ob ective is to hear their complaints regarding service aspects from funds side and other queries related to the market situation. /ometimes, special training programmes are also conducted for the new agentsK distributors. $raining involves giving details about the products of the fund, their present performance in the market, what the competitors are doing and what they can do to increase the sales of the fund.

Foint Ca * :
$his is generally done when the prospects seems to be a high net worth investor. $he *-" and the agent ?who is located close to the H(I#s residence or area of operation@ together visit the prospect and brief them about the fund. $he conversion rate is very high

in this situation ,generally around C4J. *oth the fund and the agent provide even after sale services in this particular case.

Meetin%* +it" HNIB* :$his is a special feature of all the funds . 5henever a
top official visits a particular branch office, he devotes at least one to two hours in meeting with the H(I#s of that particular area. $his generally develops a faith among the H(I#s towards the fund.

SUGGESTIONS
Inve*to#* point o! vie+
$he question all the customer, irrespective of the age group and financial status, think of is- "re Mutual &unds are a safe option! 5hat makes them safe! $he basis of mutual fund industry#s safety is the way the business is defined and regulations of law. /ince the mutual fund invests in the capital market instruments, so proper knowledge is essential. Hence the essential requirement is the well informed seller and equally informed buyer. 5ho understands and help them to understand the product ?here we can say the capital market and the money market instruments@ is the essential pre-conditions. *eing a prudent investors one should. i. "sk one#s agent to give details of different schemes and match the appropriate ones. ii. +o to the company or the fund house regarding any queries if one is not satisfied by the agents. iii. Investors should always keep an eye on the performance of the scheme and other good schemes as well which are available in the market for the closed comparison. iv. (ever invest blindly in the investments before going through the fact sheets, annual reports etc. of the company since ,according to the guidelines of the /'*I, the "MBs are bound to disclose all the relevant data that is necessary for the investment purpose by the investor.

Co"1anies 1oint o# vie7


&ollowing measures can be taken up by the company for getting higher investments in the mutual fund schemes. i. 'ducate the agents or the salesmen properly so that they can take up the queries of the customer effectively. ii. /et up separate customer care divisions where the customers can any time pose their query ,regarding the scheme or the current ("9 etc. $hese customer care units can work out in accordance with the requirements of the customer and facilitate him to choose the scheme that suits his financial requirements. iii. Bonduct seminars or programs on about mutual funds where each and every minute information about the product is outlined including the risk factor associated with the different classes of assets. iv. -eveloped ,design separate schemes for ruralKsemi urban areas and lower the minimum investment amount from Gs.344. v. vi. vii. Gecruit appropriate number of agents for ruralKurban and semi-urban areas. Make customer care services faster. Bhoose appropriate media ,newspaperKmaga%ines, $.9. commercials, etc. for marketing the product and educate the masses.

LIMITATIONS

$his pro ect is limited in scope as the survey is conducted with a shortage of time constraint and is also based on secondary data. $he answers given by the respondents may be biased due to several reason or could be attachment to a particular bank or brand. -ue to ignorance factor some of the respondents were not able to give correct answers . $he respondents were not disclosing their exact portfolio because they have a fear in their minds that they can come under tax slabs.

-UESTIONNAIRE

:@ (ame of the customer Mr.KMrs.KMs. ;@ "ddress KBontact 1@ *ank you are dealing with <@ 5hat occupation you are in! 3@ 5hat is the age group you fall in! a@;4-14 b@14-<4 c@<4-34 d@34-C4 e@above C4

C@ 5hat is the per month income of your family! a@8ess than :4,444 A@ $ype of investment a@Burrent b@/avings c@&ixed -eposits d@/hares e@*ondsK-ebentures f@Mutual &unds =@ ,reference a@8iquidity b@Geturn c@$ax benefit d@/afety g@+oldKGeal 'state b@:4,444-14,444 c@14,444-34,444 d@"bove 34,444

2@ "re you aware of the Mutual &unds! IesK(o If yes, then please attempt next question else go to question no.:; :4@ Have you ever invested in Mutual &unds! If yes ,please attempt next five questions else go to question no.:: i@ 5hich scheme did you last invest in! ii@5hat returns did you get out of that scheme! iii@/ince how long you are in that scheme!

iv@ 5ould you like to switch to current (,) ! I'/K() v@-o you have any knowledge of the tax benefits! vi@&rom where do you get information about Mutual &unds! a@ ,rint Media b@ 'lectronic Media *rokerKInvestment e@ *ank c@ &riendsKGelatives d@

::@ If you#ve never invested in the Mutual funds then attempt the next question i@5hat has been the reason of your not investing into the mutual funds! a@ lack of confidence b@imperfect knowledge c@finds government securitiesKbonds better d@other reasons

ii@"re you aware of the /'*IKG*I guidelines! :;@ If you are not aware of the Mutual &unds then attempt the next "re you not interested in generating higher returns!

Si%nat)#e o! t"e c)*to.e#

2I2LIOGRAP4Y

"nalyst maga%ine *usiness /tandard /mart investors www.mfea.com www.investments.com.ph www.camsindia.com

INDE5

TOPICS8 /ynopsis Introduction )rigin )f Mutual &unds Gegulatory &ramework Blassification )f Mutual &unds $ypes )f Mutual &unds Investment ,lans -istribution Bhannels "ccounting Hnowledge Mutual &und ,erformance# "nalysis Marketing )f Mutual &unds /uggestions 8imitations "nnexure *ibliography

Pa&e no;