A PROJECT REPORT

ON
“Study of Consumer Awareness,
Perception and Practice Regarding
of Mutual Fund Investment”

SUBMITTED TOWARDS THE PARTIAL FULFILLMENT

OF
POST GRADUATE DIPLOMA IN
BUSINESS MANAGEMENT
ACCADEMIC SESSION
(2007-2009)

Submitted To:- Submitted by:-

 ACKNOWLEDGEMENMT

To test the student’s academic knowledge in practical conditions of

industry, eight weeks summer training has been included in the PGDM
course. I express my gratitude of …….. for allowing me to undergo
summer training in SBI Funds Management Pvt. Ltd.

I have the honour to express my sincere thanks to the management of

SBI Funds Management for providing me the opportunity to pursue my
training in their esteemed organization. I place on record my thanks to
……… for giving me every sort of help and guidance.

My summer training has added to my practical knowledge and build up

my confidence. I thank once again all the staff members of SBI Funds
Management with the active support ot whom I was able to complete
my project report successfully. I am also greatful to …………. New Delhi
and the faculty who have supported a lot and given me the permission
of Summer Training in SBI Funds Management Pvt. Ltd.
Also I would like to give regards to my Parents, seniors, friends who
have helped a lot in completing this project.
 TO WHOM IT MAY CONCERN

This is to certify that …….. student of ……….. has done his live
Summer training project under my guidance and supervision from 13th
May 2008 to 27th June 2008.

He has completed the project titled “Study of Consumer Awareness,

Perception and Practice Regarding of Mutual Fund Investment”
towards the partial fulfillment of PGDBM under my supervision.

During his project he was found to be very sincere and attentive to small
details whatsoever told to him.

I wish him luck and success in future.

 TABLE OF CONTENTS

CONTENT PAGE

ACKNOWLEDGEMENT 2

EXECUTIVE SUMMARY 8

INTRODUCTION TO MUTUAL FUND 10

 Structure consists of Sponsor

 Asset Management Company (AMC)

RISK-RETURN TRADE-OFF 17

 Return
 Risk

BENEFIT OF MUTUAL FUND INVESTMENT 25

 Recent trends in mutual fund industry

 Structure of the Indian mutual fund industry
 Mutual Fund Companies in India
 Major Mutual Fund Companies in India

ASSOCIATION OF MUTUAL FUND IN INDIA (AMFI) 35

 The objectives of AMFI

 Net Asset Value (NAV)

TYPES OF MUTUAL FUNDS SCHEMES 41

 Open-end Funds
 Closed-ended Funds
INVESTMENT OBJECTIVE 43

 Equity Oriented Schemes

 Debt Based Schemes
 Hybrid Schemes
Special Schemes
 Tax Saving schemes
Liquid Income Schemes
Money Market Schemes

SNAPSHOT OF MUTUAL FUND SCHEMES 49

THE OFFER DOCUMENT 50

What is an Offer Document? 50

 Contents
 Regulation and Investors' Rights
SEBI Guidelines

Where to Obtain the Updated Offer Documents? 55

Investor’s rights & Obligations

Rights - Legal Limitations
Obligations

CHOOSING A FUND 57

 Benchmark returns
 Time period
 Market conditions
 Final checklist

Compare funds that are similar 60

HISTORY OF INDIAN MUTUAL FUNDS INDUSTRY 62

 First Phase – 1964-87

 Second Phase – 1987-1993 (Entry of Public Sector Funds)
 Third Phase – 1993-2003 (Entry of Private Sector Funds)
 Fourth Phase – since February 2003

BROKERAGE 67

Asset Management Business: 67

 Broking
 Mutual Fund
 Trends
 Nothing Speaks like Money
 Larger than Life

When do you take a

this a Sales Call?

 Fund Manager
 Research
 Marketing
 Sales
 Dealing
 Operations
 Technology

SBI MUTUAL FUNDS 75

 Introduction
 Company Profile
 Product Profile
 Equity Schemes
 DEBT Schemes
 BALANCED SCHEMES

SBIMF WAS FOUNDED WITH A VISION 82

 Vision
METHODOLOGY 85

 Research Methodology

SOURCE OF DATA COLLECTION 86

 Primary data
 Secondary data

DATA ANALYSIS & INTERPRETATION 87

 Interpretation 101

People who invest in mutual fund 102

People who do not invest in mutual fund 104

LIMITATION 105

RECOMMENDATION 106

CONCLUSIONS 107

QUESTIONNIRE SURVEY 109

 EXECUTIVE SUMMARY

Individual saving means spending less on consumption than

available from one's disposable income. What an individual saves can
be held in many ways. It can be deposited in a bank, put into a pension
fund, used to buy a business, pay down debt, or kept under the
mattress, for example. The common element is the claim on assets that
can be used to pay for future consumption. If there is a return on the
saving in the form of interest, dividend, rent, or capital gain, there can
be a net gain in individual saving, and thus in individual wealth. In
current scenario, the inflation rate is quite high and the interest rates
are quite low so people don’t get satisfactory returns on their
investments. While opting for traditional tax saving instruments like PPF
and Fix Deposits the investor will get a return of 7% to 8% and sacrifice
superior returns given by stocks. So study concentrate on Equity linked
Saving Schemes offered by Mutual Funds. A mutual fund’s business is to
invest the funds thus collected, according to the wishes of the investors
who created the pool. In many markets these wishes are articulated as
“Investment mandates”. Usually, the investors appoint professional
investment managers, to manage their funds. The same objective is
achieved when professional investment managers create a “product”,
and offer it for the investment to the investor. This product represents a
share in the pool, and pre-states investment objectives. For Example, a
mutual fund, which sells a “money market mutual fund,” is actually
seeking investors willing to invest in a pool that invest predominately in
money market

This healthy growth of saving has been boosted by the household

sector which has contributed a substantially high percentage to total
domestic savings. Traditionally, GIC, banks, LIC, and PFs have been
intermediaries to mobilise domestic savings to the productive sectors of
the economy. With the growth of capital markets and the emergence of
alternative savings instruments, investors are tend to move towards
liquid short term instruments as the units of the mutual funds along with
corporate equities and debentures

Mutual funds have been the latest growing institution during this
period in the household savings sector. Growing market complications
and investment risk in the stock market with high inflation have pushed
households further towards mutual funds.
 INTRODUCTION TO MUTUAL FUND

Mutual Fund

A Mutual Fund is a trust that pools the savings of a number of investors

who share a common financial goal. The money thus collected is
invested by the fund manager in different types of securities depending
upon the objective of the scheme. These could range from shares to
debentures to money market instruments. The income earned through
these investments and the capital appreciation realized by the scheme
is shared by its unit holders in proportion to the number of units owned
by them. Thus a Mutual Fund is the most suitable investment for the
common man as it offers an opportunity to invest in a diversified,
professionally managed portfolio at a relatively low cost. The small
savings of all the investors are put together to increase the buying
power and hire a professional manager to invest and monitor the
money. Anybody with an i surplus of as little as a few thousand rupees
can invest in Mutual Funds

it pre specifies the investment objectives of the fund, the risk

associated, the costs involved in the process and the broad rules for
entry into and exit from the fund and other areas of operation. In India,
as in most countries, these sponsors need approval from a regulator,
SEBI (Securities exchange Board of India) in our case. SEBI looks at track
records of the sponsor and its financial strength in granting approval to
the fund for commencing operations.
A sponsor then hires an asset management company to invest the funds
according to the investment objective. It also hires another entity to be
the custodian of the assets of the fund and perhaps a third one to
handle registry work for the unit holders (subscribers) of the fund.

In the Indian context, the sponsors promote the Asset Management

Company also, in which it holds a majority stake. In many cases a
sponsor can hold a 100% stake in the Asset Management Company
(AMC).

Saving AMC
s
Trus Investment
t s
Unit
Unit s Return
holders s

Registrar

Trust
SEBI
Custodian AMC
The structure consists of Sponsor

Sponsor is the person who acting alone or in combination with

another body corporate establishes a mutual fund. Sponsor must
contribute at least 40% of the net worth of the Investment
Managed and meet the eligibility criteria prescribed under the
Securities and Exchange Board of India (Mutual Funds) Regulations,
1996.The Sponsor is not responsible or liable for any loss or
shortfall resulting from the operation of the Schemes beyond the
initial contribution made by it towards setting up of the Mutual
Fund.

Trust

The Mutual Fund is constituted as a trust in accordance with the

provisions of the Indian Trusts Act, 1882 by the Sponsor. The trust
deed is registered under the Indian Registration Act, 1908.
The Fund Sponsor acts as the Settler of the Trust, contributing to
its initial capital and appoints a Trustee to hold the assets of the
Trust for the benefit of the unit-holders, who are the beneficiaries
of the Trust. The fund then invites investors to contribute their
money in the common pool, by subscribing to "units" issued by
various schemes established by the trust, units being the evidence
of their beneficial interest in the fund.
It should be understood that a mutual fund is just "a pass-through"
vehicle. Under the Indian Trusts Act. The Trust or the Fund has no
independent legal capacity itself, rather it is the Trustee or
Trustees who have the legal capacity and therefore all acts in
relation to the trust are taken on its behalf by the Trustees. The
Trustees hold the unit-holders' money in a fiduciary capacity i.e.
the money belongs to the unit-holders and is entrusted to the fund
for the purpose of investment. In legal parlance, the investors or
the unit holders are the "beneficial owners" of the investments held
by the Trust, even as these investments are held in the name of
the trustees on a day-to-day basis. Being Public Trusts, mutual
funds can invite any number of investors as beneficial owners in
their investment schemes.

Trustee

Trustee is usually a company (corporate body) or a Board of

Trustees (body of individuals). The main responsibility of the
Trustee is to safeguard the interest of the unit holders and inter-
alia ensure that the AMC functions in the interest of investors and
in accordance with the Securities and Exchange Board of India
(Mutual Funds) Regulations, 1996, the provisions of the Trust Deed
and the Offer Documents of the respective Schemes. At least 2/3rd
directors of the Trustee are independent directors who are not
associated with the Sponsor in any manner.
The Board or the Trustee Company, as an independent body, acts
as protector of the unit-holders' interests. The Trustees do not
directly manage the portfolio of securities. For this specialist
function, they appoint an Asset Management Company. They
ensure that the fund is managed by the AMC as per the defined
objectives and in accordance with the Trust Deed and SEBI
Regulations.

The trust is created through a document called the Trust Deed that
is executed by the Fund Sponsor in favour of the Trustees. The
Trust Deed is required to be stamped as registered under the
provisions of the Indian Registration Act and registered with SEB!.
Clauses in the Trust Deed, inter alia, deal with the establishment of
the Trust, the appointment of Trustees, their powers and duties,
and the obligations of the Trustees towards the unit-holders and
the AMC. These clauses also specify activities that the fund/AMC
cannot undertake. The Third Schedule of the SEBI (MF) Regulations,
1996 specifies the contents of the Trust Deed.

The Trustees being the primary guardians of the unit-holders' funds

and assets, a Trustee has to be a person of high repute and
integrity. SEBI has laid down a set of conditions to be fulfilled by
the individuals being proposed as trustees of mutual funds - both
independent and non-independent. Besides specifying the
"disqualifications", SEBI has also set down the Rights and
Obligations of the Trustees. Broadly, the Trustees must ensure that
the investors' interests are safeguarded and that the AMCs
operations are along professional lines. They must also ensure that
the management of the fund is in accordance with SEBI
Regulations. Some important rights and obligations are listed
below. For details, please refer to Chapter IIIL of the SEBI (MF)
Regulations-1996.

Asset Management Company (AMC)

The Trustee as the Investment Manager of the Mutual Fund

appoints the AMC. The AMC is required to be approved by the
Securities and Exchange Board of India (SEBI) to act as an asset
management company of the Mutual Fund. At least 50% of the
directors of the AMC are independent directors who are not
associated with the Sponsor in any manner. The AMC must have a
net worth of at least 10 crores at all times.

The role of an AMC is to act as the Investment Manager of the

Trust.

The sponsors, or the Trustees, if so authorized by the Trust Deed,

appoint the AMC. The AMC so appointed is required to be approved
by SEBI. Once approved, the AMC functions under the supervision
of its own Board of Directors, and also under the direction of the
Trustees and SEBI. The Trustees are empowered to terminate the
appointment of the AMC by majority and appoint a new AMC with
the prior approval of SEBI and unit-holders. The AMC would, in the
name of the Trust, float and then manage the different investment
"schemes" as per SEBI Regulations and as per the Investment
Management Agreement it signs with the Trustees. Chapter IV of
SEBI (MF) Regulations, 1996 describes the issues relevant to
appointment, eligibility criteria, and restrictions on business
activities and obligations of the AMC.
The AMC of a mutual fund must have a net worth of at least Rs. 10
crores at all times. Directors of the AMC, both independent and
non-independent, should have adequate professional experience in
financial services and should be individuals of high moral standing,
a condition also applicable to other key personnel of the AMC. The
AMC cannot act as a trustee of any other mutual fund. Besides its
role as the fund manager, it may undertake specified activities
such as advisory services and financial consulting, provided these
activities are run independently of one another and the AMCs
resources (such as personnel, systems, etc.) are properly
segregated by activity. The AMC must always act in the interest of
the unit-holders and report to the trustees with respect to its
activities.
 RISKS ASSOCIATED WITH MUTUAL FUNDS

Risk & Return

The performance of a fund depends upon two things must be
considered-

 Return, and
 Risk

Return
All investments are characterized by the expectation of a return in
the future. In fact, investments are made with the primary
objective of deriving a return. The return may be received in the
form of yield plus capital appreciation. The difference between the
sale price and the purchase price is capital appreciation. The
dividend or interest received from the investment is the yield. The
return from an investment depends upon the nature of the
investment, the maturity period and a host of other factors.

But important thing is that the future is uncertain, so is the future

expected return. The expected return is the uncertain future return
that an investor expects to get from his investment. The realized
return on the contrary, is the certain return that an investor has
actually obtained from his investment at the end of the holding
period. The investor makes the investment decision based on the
expected return from the investment. The actual return realized
from the investment may not correspond to the expected return.
This possibility of variation of the actual return from the expected
return is termed as risk.

There are three types of returns that can be calculated

 Absolute return
 Simple annualized return
 Compounded annualized return

The formulae for each of the above mentioned returns are as

follows:

ABSOLUTE RETURN
Rn = (N2a-N1)* 100 / N1

SIMPLE ANNUALIZED RETURN

Rn = (N2a-N1)* 100*365 / (N1*n)

COMPOUNDED ANNUALIZED RETURN

Rn=[{(N2a/N1)^(365/n)}-1]*100

Risk

In general, it refers to the possibility of incurring a loss in a

financial transaction. “Risk” is the potential for variability in
returns.” Risk arises where there is a possibility of variation
between expectations and realizations with regard to an
investment.

The variation in returns is caused by a number of factors. These,

factors which produce variations in the returns from an investment
constitute the elements of risk.

The elements of risk may be broadly classified into two groups. The
first, group

Comprises factors that are external to a company and affect a large

number of securities simultaneously. These are mostly
uncontrollable in nature. The second, group includes those factors
which are internal to the companies and affect only those particular
companies. These are controllable to a great extent.
Risk produced by the first group of factors is known as systematic
risk, and that produced by the second group is known as
unsystematic risk.

The total variability in returns of a security represents the total risk

of that security. Where,

Total risk = systematic risk + unsystematic risk

Systematic risk

As the society is dynamic, changes occur in the economic, political

and social systems constantly. These changes have an influence on
the performance of companies and thereby on their stock prices
but these changes affect all companies and all securities in varying
degrees.

Thus the impact of economic and political and social changes is

system wide and that portion of total variability in security returns
caused by such system-wide factors is referred as systematic risk.
systematic risk is further subdivided into

 Interest rate risk

 Price risk
 Reinvestment risk
 Market risk and
 Purchasing power risk (inflation risk)

Interest Rate Risk

In a free market economy interest rates are difficult if not
impossible to predict. Changes in interest rates affect the prices of
bonds as well as equities. If interest rates rise the prices of bonds
fall and vice versa. Equity might be negatively affected as well in a
rising interest rate environment.

Market Risk

Sometimes prices and yields of all securities rise and fall. Broad,
outside influences affecting the market in general lead to this. This
is true, may it be big corporations or smaller mid-sized companies.
This is known as Market Risk.

Purchasing power risk

The root cause, “Inflation” is the loss of purchasing power over

time. A lot of times people make conservative investment decisions
to protect their capital but end up with a sum of money that can
buy less than what the principal could at the time of the
investment. This happens when inflation grows faster than the
return on your investment.

Unsystematic risk

The returns from a security may sometimes vary because of certain

factors affecting only the company issuing such security. When
variability of returns occurs because of such firm – specific factors,
it is known as unsystematic risk.

The unsystematic risk affecting specific securities arises from two

sources:
  The operating environment of the company, and
 The financing pattern adopted by the company.

These two types of unsystematic risk are referred to as business

risk and financial risk respectively.

Business risk is a function of the operating conditions faced by a

company and is the variability in operating income caused by the
operating conditions of the company.

Financial risk is the variability in EPS (earning per share) due to the
presence of debt in the capital structure of a company.

Measurement of risk

Risk or variability in returns can be measured and can be analyzed

in two ways

 on portfolio basis, where the asset is held as one of a number

of assets in a portfolio, and
 On stand alone basis, where the asset is considered in
isolation.

Measuring stand alone risk- The Standard Deviation

Variance is a measure of fluctuation in returns. And like variance

standard deviation is a comprehensive risk measure that considers
both market return and company return, a higher valuation of
standard deviation higher is the risk.
The variance and the standard deviation measure the extent to
which returns are expected to vary around an average over time.
They measure the riskiness of a

Measuring systematic risk

Beta

One of the most popular indicators of risk is a statistical measure

called beta. Stock analysts use this measure all the time to get a
sense of stocks' risk profiles.

Beta is a measure of a stock's volatility in relation to the market.

Beta is the only relevant measure of a stock's risk. It measures a

stock's relative volatility - that is, it shows how much the price of a
particular stock jumps up and down compared with how much the
stock market as a whole jumps up and down.

The Beta coefficient, or financial elasticity is a sensitivity of the

asset returns to market returns, relative volatility. Beta can also be
defined as the risk of the stock to a diversified portfolio. Therefore
the beta of a stock will be much lower than its (the stock's)
standard deviation. The formula for the Beta of an asset is

The β coefficient measures the asset's non-diversifiable risk, also

called systematic risk or market risk, where,

rm measures the rate of return of the market and

ra measures the rate of return of the asset.

On an individual asset level, measuring beta can give clues to

volatility and liquidity in the marketplace. On a portfolio level,
measuring beta is thought to separate a manager's skill from his
willingness to take risk.

Disadvantages of Beta

 However, if you are investing in a stock's fundamentals, beta

has plenty of shortcomings. Like,
 Beta doesn't incorporate new information.
 At the same time, many new stocks are so new to the market
that they have insufficient price history to establish a reliable
beta.
 Another troubling factor is that past price movements are
very poor predictors of the future. Betas are merely rear-view
mirrors, reflecting very little of what lies ahead.

Lastly, the beta measure on a single stock tends to flip around over
time, which makes it unreliable. Granted, for traders looking to buy
and sell stocks within short time periods, beta is a fairly good risk
metric. But for investors with long-term horizons, it's less useful.
Benefits of Mutual Fund investment
Professional Management

Mutual Funds provide the services of experienced and skilled

professionals, backed by a dedicated investment research team
that analyses the performance and prospects of companies and
selects suitable investments to achieve the objectives of the
scheme.

Diversification

Mutual Funds invest in a number of companies across a broad

cross-section of industries and sectors. This diversification reduces
the risk because seldom do all stocks decline at the same time and
in the same proportion. You achieve this diversification through a
Mutual Fund with far less money than you can do on your own.

Convenient Administration

Investing in a Mutual Fund reduces paperwork and helps you avoid

many problems such as bad deliveries, delayed payments and
follow up with brokers and companies. Mutual Funds save your time
and make investing easy and convenient.

Return Potential

Over a medium to long-term, Mutual Funds have the potential to

provide a higher return as they invest in a diversified basket of
selected securities.
Low Costs

Mutual Funds are a relatively less expensive way to invest

compared to directly investing in the capital markets because the
benefits of scale in brokerage, custodial and other fees translate
into lower costs for investors.

Liquidity

In open-end schemes, the investor gets the money back promptly

at net asset value related prices from the Mutual Fund. In closed-
end schemes, the units can be sold on a stock exchange at the
prevailing market price or the investor can avail of the facility of
direct repurchase at NAV related prices by the Mutual Fund.

Transparency

You get regular information on the value of your investment in

addition to disclosure on the specific investments made by your
scheme, the proportion invested in each class of assets and the
fund manager's investment strategy and outlook.

Flexibility

Through features such as regular investment plans, regular

withdrawal plans and dividend reinvestment plans, you can
systematically invest or withdraw funds according to your needs
and convenience.

Affordability
Investors individually may lack sufficient funds to invest in high-
grade stocks. A mutual fund because of its large corpus allows even
a small investor to take the benefit of its investment strategy.

Well Regulated

All Mutual Funds are registered with SEBI and they function within
the provisions of strict regulations designed to protect the interests
of investors. The operations of Mutual Funds are regularly
monitored by SEBI.

Recent trends in mutual fund industry

The most important trend in the mutual fund industry is the

aggressive expansion of the foreign owned mutual fund companies
and the decline of the companies floated by nationalized banks and
smaller private sector players.

Many nationalized banks got into the mutual fund business in the
early nineties and got off to a good start due to the stock market
boom prevailing then. These banks did not really understand the
mutual fund business and they just viewed it as another kind of
banking activity. Few hired specialized staff and generally chose to
transfer staff from the parent organizations. The performance of
most of the schemes floated by these funds was not good. Some
schemes had offered guaranteed returns and their parent
organizations had to bail out these AMCs by paying large amounts
of money as the difference between the guaranteed and actual
returns. The service levels were also very bad. Most of these AMCs
have not been able to retain staff, float new schemes etc. and it is
doubtful whether, barring a few exceptions, they have serious
plans of continuing the activity in a major way.

The experience of some of the AMCs floated by private sector

Indian companies was also very similar. They quickly realized that
the AMC business is a business, which makes money in the long
term and requires deep-pocketed support in the intermediate
years. Some have sold out to foreign owned companies, some have
merged with others and there is general restructuring going on.

The foreign owned companies have deep pockets and have come in
here with the expectation of a long haul. They can be credited with
introducing many new practices such as new product innovation,
sharp improvement in service standards and disclosure, usage of
technology, broker education and support etc. In fact, they have
forced the industry to upgrade itself and service levels of
organizations like UTI have improved dramatically in the last few
years in response to the competition provided by these.

Structure of the Indian mutual fund industry

The origin of mutual fund industry in India is with the introduction

of the concept of mutual fund by UTI in the year 1963. Though the
growth was slow, but it accelerated from the year 1987 when non-
UTI players entered the industry.
The Unit Trust of India dominates the Indian mutual fund industry,
which has a total corpus of more than Rs700bn collected from more
than 20 million investors. The UTI has many funds/schemes in all
categories i.e. equity, balanced, income etc with some being open-
ended and some being closed-ended. The Unit Scheme 1964
commonly referred to as US 64, which is a balanced fund, is the
biggest scheme with a corpus of about Rs200bn. UTI was floated by
financial institutions and is governed by a special act of Parliament.
Most of its investors believe that the UTI is government owned and
controlled, which, while legally incorrect, is true for all practical
purposes.

The second largest categories of mutual funds are the ones floated
by nationalized banks. Canbank Asset Management floated by
Canara Bank and SBI Funds Management floated by the State Bank
of India are the largest of these. GIC AMC floated by General
Insurance Corporation and Jeevan Bima Sahayog AMC floated by
the LIC are some of the other prominent ones.

The third largest category of mutual funds is the ones floated by

the private sector and by foreign asset management companies.
The largest of these are Prudential ICICI AMC and Franklin
Templeton AMC and HDFC AMC. The aggregate corpus of assets
managed by this category of AMCs is in excess of Rs 300 bn.

In the past decade, Indian mutual fund industry had seen dramatic
improvements, both quality wise as well as quantity wise. Before,
the monopoly of the market had seen an ending phase; the Assets
under Management (AUM) were Rs. 67bn. The private sector entry
to the fund family raised the AUM to Rs. 470 bn in March 1993 and
till April 2005; it reached the Height of 1,640 bn.
Putting the AUM of the Indian Mutual Funds Industry into
comparison, the total of it is less than the deposits of SBI alone,
constitute less than 11% of the total deposits held by the Indian
banking industry.

The main reason of its poor growth is that the mutual fund industry
in India is new in the country but perception changing very fast
now days. Large sections of Indian investors are yet to be educated
with the concept. Hence, it is the prime responsibility of all mutual
fund companies, to market the product correctly abreast of selling.
The mutual fund industry can be broadly put into four phases
according to the development of the sector. Each phase is briefly
described as under.

Mutual Fund Companies in India

The concept of mutual funds in India dates back to the year 1963.
The era between 1963 and 1987 marked the existence of only one
mutual fund company in India with Rs. 67bn assets under
management (AUM), by the end of its monopoly era, the Unit Trust
of India (UTI). By the end of the 80s decade, few other mutual fund
companies in India took their position in mutual fund market.

The new entries of mutual fund companies in India were SBI Mutual
Fund, Canbank Mutual Fund, Punjab National Bank Mutual Fund,
Indian Bank Mutual Fund, Bank of India Mutual Fund.
The succeeding decade showed a new horizon in Indian mutual
fund industry. By the end of 1993, the total AUM of the industry
was Rs. 470.04 bn. The private sector funds started penetrating the
fund families. In the same year the first Mutual Fund Regulations
came into existence with re-registering all mutual funds except UTI.
The regulations were further given a revised shape in 1996.

Kothari Pioneer was the first private sector mutual fund company in
India which has now merged with Franklin Templeton. Just after ten
years with private sector player’s penetration, the total assets rose
up to Rs. 1218.05 bn. Today there are 33 mutual fund companies in
India.

Major Mutual Fund Companies in India

RELINACE

Reliance Mutual Fund (RMF) is one of India’s leading Mutual Funds, with
Average Assets Under Management (AAUM) of Rs. 84563.92 Crs (AAUM
for June 30th 08 ) and an investor base of over 68.38 Lakhs. Reliance
Mutual Fund, a part of the Reliance - Anil Dhirubhai Ambani Group, is
one of the fastest growing mutual funds in the country. RMF offers
investors a well-rounded portfolio of products to meet varying investor
requirements and has presence in 118 cities across the country.
Reliance Mutual Fund constantly endeavors to launch innovative
products and customer service initiatives to increase value to investors.
"Reliance Mutual Fund schemes are managed by Reliance Capital Asset
Management Limited., a subsidiary of Reliance Capital Limited, which
holds 93.37% of the paid-up capital of RCAM, the balance paid up capital
being held by minority shareholders

ICICI-Pru to unveil first FMP for retail investors

Mumbai: India's second largest mutual fund house ICICI-Prudential is

offering a fixed maturity plan for retail investors. ICICI Prudential's
equity-linked Fixed Maturity Plan (FMP) endeavors to couple the best
features of equity and FMP. The most attaining feature of equity is its
growth potential and the most salient feature of 'FMP' is its structure of
downside protection. We hope to achieve the twin objective through the
product. ICICI's product was India's first equity-linked FMP. Conventional
investors fear a loss of money when the equity markets go down. This
product will have ideally protected investors from wealth erosion in the
recent crash. The equity-linked FMP brings an investment solution that
offers risk-managed returns. This kind of product is popular among HNI
clients of foreign banks. The minimum ticket size for the product being
offered by foreign banks is Rs 10 lakh and above. The investors profit
when the Nifty goes up. If the Nifty goes down, the fund is designed
such that investors do not lose their initial corpus

HDFC MUTUAL FUND

HDFC Asset Management Company (AMC) is the first AMC in India to

have been assigned the ‘CRISIL Fund House Level – 1’ rating. This is its
highest Fund Governance and Process Quality Rating which reflects the
highest governance levels and fund management practices at HDFC
AMC It is the only fund house to have been assigned this rating for two
years in succession. Over the past, we have won a number of awards
and accolades for our performance. Average Assets under Management
for April 2008 : Rs. 51,770.82 crore, No. of investors : 2,865,557 , No. of
ARN certified distributors : 26,061

UTI

UTI Asset Management Company presently manages a corpus of over

Rs. 46, 120 Crores * as on 31st July 2008 UTI Mutual Fund has a track
record of managing a variety of schemes catering to the needs of every
class of citizenry. It has a nationwide network consisting 98 UTI
Financial Centres (UFCs) and UTI International offices in London, Dubai
and Bahrain. With a view to reach to common investors at district level,
3 satellite offices have also been opened in select towns and districts.

We have a well-qualified, professional fund management team, who

have been highly empowered to manage funds with greater efficiency
and accountability in the sole interest of unit holders. The fund
managers are also ably supported with a strong in-house securities
research department. To ensure better management of funds, a risk
management department is also in operation

SBI MUTUAL FUND

SBI Mutual Fund is India’s largest bank sponsored mutual fund and
has an enviable track record in judicious investments and
consistent wealth creation. In twenty years of operation, the fund
has launched 38 schemes and successfully redeemed fifteen of
them. In the process it has rewarded it’s investors handsomely with
consistently high returns. A total of over 5.4 million investors have
reposed their faith in the wealth generation expertise of the Mutual
Fund. Schemes of the Mutual fund have consistently outperformed
benchmark indices and have emerged as the preferred investment
for millions of investors and HNI’s. Today, the fund manages over
Rs. 31,794 crores of assets and has a diverse profile of investors
actively parking their investments across 36 active schemes. The
fund serves this vast family of investors by reaching out to them
through network of over 130 points of acceptance, 28 investor
service centers, 46 investor service desks and 56 district
organisers.

Association of Mutual Funds in India(AMFI)

With the increase in mutual fund players in India, a need for mutual
fund association in India was generated to function as a non-profit
organization. Association of Mutual Funds in India (AMFI) was
incorporated on 22nd August, 1995.

AMFI is an apex body of all Asset Management Companies (AMC)

which has been registered with SEBI. Till date all the AMCs are that
have launched mutual fund schemes are its members. It functions
under the supervision and guidelines of its Board of Directors.
Association of Mutual Funds India has brought down the Indian
Mutual Fund Industry to a professional and healthy market with
ethical lines enhancing and maintaining standards. It follows the
principle of both protecting and promoting the interests of mutual
funds as well as their unit holders.

The objectives of Association of Mutual Funds in

India

The Association of Mutual Funds of India works with 30 registered

AMCs of the country. It has certain defined objectives which
juxtaposes the guidelines of its Board of Directors. The objectives
are as follows: This mutual fund association of India maintains a
high professional and ethical standard in all areas of operation of
the industry.
It also recommends and promotes the top class business practices
and code of conduct which is followed by members and related
people engaged in the activities of mutual fund and asset
management.

The agencies who are by any means connected or involved in the

field of capital markets and financial services also involved in this
code of conduct of the association.

AMFI interacts with SEBI and works according to SEBIs guidelines in

the mutual fund industry.]

Association of Mutual Fund of India do represent the Government of

India, the Reserve Bank of India and other related bodies on
matters relating to the Mutual Fund Industry.

It develops a team of well qualified and trained Agent distributors.

It implements a program of training and certification for all
intermediaries and other engaged in the mutual fund industry.

AMFI undertakes all India awareness programme for investors in

order to promote proper understanding of the concept and working
of mutual funds.

At last but not the least association of mutual fund of India also
disseminate information’s on Mutual Fund Industry and undertakes
studies and research either directly or in association with other
bodies.

Net Asset Value (NAV)

The net asset value of the fund is the cumulative market value of
the assets fund net of its liabilities. In other words, if the fund is
dissolved or liquidated, by selling off all the assets in the fund, this
is the amount that the shareholders would collectively own. This
gives rise to the concept of net asset value per unit, which is the
value, represented by the ownership of one unit in the fund. It is
calculated simply by dividing the net asset value of the fund by the
number of units. However, most people refer loosely to the NAV per
unit as NAV, ignoring the "per unit". We also abide by the same
convention.

For the purpose of the NAV calculation, the day on which NAV is
calculated by a fund is known as the valuation date.

Calculation of NAV

The most important part of the calculation is the valuation of the

assets owned by the fund. Once it is calculated, the NAV is simply
the net value of assets divided by the number of units outstanding.
The detailed methodology for the calculation of the asset value is
given below.

Asset value is equal to

Sum of market value of shares/debentures

+ Liquid assets/cash held, if any

+ Dividends/interest accrued

- Amount due on unpaid assets

- Expenses accrued but not paid

Details on the above items for liquid shares/debentures, valuation
is done on the basis of the last or closing market price on the
principal exchange where the security is traded.

For illiquid and unlisted and/or thinly traded shares/debentures, the

value has to be estimated. For shares, this could be the book value
per share or an estimated market price if suitable benchmarks are
available. For debentures and bonds, value is estimated on the
basis of yields of comparable liquid securities after adjusting for
liquidity. The value of fixed interest bearing securities moves in a
direction opposite to interest rate changes Valuation of debentures
and bonds is a big problem since most of them are unlisted and
thinly traded. This gives considerable leeway to the AMCs on
valuation and some of the AMCs are believed to take advantage of
this and adopt flexible valuation policies depending on the
situation.

Interest is payable on debentures/bonds on a periodic basis say

every 6 months. But, with every passing day, interest is said to be
accrued, at the daily interest rate, which is calculated by dividing
the periodic interest payment with the number of days in each
period. Thus, accrued interest on a particular day is equal to the
daily interest rate multiplied by the number of days since the last
interest payment date.

NAV of all schemes must be calculated and published at least

weekly for closed end schemes and daily for open-end schemes.
NAV's for a day must also be posted on AMFI's website by 8.00 p.m.
on that day. This applies to both the open-end and closed-end
funds. One exception is those closed end schemes which are not
mandatory required to be listed in any stock exchange- these funds
may publish NAV at monthly or quarterly intervals as permitted by
SEBI. An example of such permitted schemes is the Monthly Income
Schemes that are not listed on a stock exchange.

A fund's NAV is affected by four sets of factors:

 Purchase and sale of investment securities

 Valuation of all investment securities held
 Other assets and liabilities, and
 Units sold or redeemed

Nowadays, many funds calculate and announce their NAVs even

daily. Such frequent computations of asset values involve valuation
of all investment securities at their market prices and inclusion of
other assets and liabilities. "Valuation" of securities is covered in
the following Section Two.

 "Other Assets" include any income due to the fund but not
received as on the valuation date (for example, dividend
announced by a company yet to be received). "Other
Liabilities" have to include expenses payable by the fund, for
example custodian fees or even the management fees
payable to the AMC. These income and expense items have to
be "accrued" and included in the computation of the NAY.
SEBI requires, therefore, that all expenses and incomes are
accrued up to the valuation date and considered for NAV
computation. Major expenses such as management fees
 should be accrued on a day-to-day basis, while others need
not be so accrued, if non-accrual does not affect NAV by more
than 1 %.
 It can be seen from the NAV definition that additions to and
sales from the portfolio of securities, and changes in the
number of units outstanding will both affect the per unit asset
value. Such changes in securities and number of units must
be recorded by the next valuation date. If frequency of NAV
declaration does not permit this, recording may be done
within 7 days of the transaction, provided that the non-
recording does not affect NAV calculations by more than 2%.
For example, if a fund declares NAV every week, with the next
declaration date being January 15, then all sales/purchases/
redemptions up to January 14 have to be reflected in the NAV
as of January 15, except for transactions whose value does
not affect the NAV by more than 2%. Such unrecorded
transactions have to be included in the next week's NAV
calculation. If a fund calculates NAV daily, it will include all
transactions concluded up to today, except for small-value
transactions, which can be reflected in the next day's NAV
subject to the 2% restriction. Open-end funds are required to
declare their NAVs daily.

Types of Mutual Fund Scheme

Mutual fund schemes may be classified on the basis of its structure

and its investment objective.

By Structure

Open-end Funds
An open-end fund is one that is available for subscription all
through the year. These do not have a fixed maturity. Investors can
conveniently buy and sell units at Net Asset Value ("NAV") related
prices. The key feature of open-end schemes is liquidity.

Benefits of Open-ended Schemes

Liquidity

In open-ended mutual funds, you can redeem all or part of your

units any time you wish. Some schemes do have a lock-in period
where an investor cannot return the units until the completion of
such a lock-in period.

Convenience

An investor can purchase or sell fund units directly from a fund,

through a broker or a financial planner. The investor may opt for a
Systematic Investment Plan (“SIP”) or a Systematic Withdrawal
Advantage Plan (“SWAP”). In addition to this an investor receives
account statements and portfolios of the schemes.

Flexibility

Mutual Funds offering multiple schemes allow investors to switch

easily between various schemes. This flexibility gives the investor a
convenient way to change the mix of his portfolio over time.

Transparency

Open-ended mutual funds disclose their Net Asset Value (“NAV”)

daily and the entire portfolio monthly. This level of transparency,
where the investor himself sees the underlying assets bought with
his money, is unmatched by any other financial instrument. Thus
the investor is in the know of the quality of the portfolio and can
invest further or redeem depending on the kind of the portfolio that
has been constructed by the investment manager.

Closed-ended Funds

A closed-end fund has a stipulated maturity period which generally

ranging from 3 to 15 years. The fund is open for subscription only
during a specified period. Investors can invest in the scheme at the
time of the initial public issue and thereafter they can buy or sell
the units of the scheme on the stock exchanges where they are
listed. In order to provide an exit route to the investors, some
close-ended funds give an option of selling back the units to the
Mutual Fund through periodic repurchase at NAV related prices.
SEBI Regulations stipulate that at least one of the two exit routes is
provided to the investor.

 Fixed Maturity
 Fixed Corpus
 Generally Listed
 Buy and sell in the Stock Exchanges
 Entry/Exit at the market prices

Investment Objective

Equity Oriented Schemes

These schemes, also commonly called Growth Schemes, seek to

invest a majority of their funds in equities and a small portion in
money market instruments. Such schemes have the potential to
deliver superior returns over the long term. However, because they
invest in equities, these schemes are exposed to fluctuations in
value especially in the short term.

Equity schemes are hence not suitable for investors seeking regular
income or needing to use their investments in the short-term. They
are ideal for investors who have a long-term investment horizon.
The NAV prices of equity fund fluctuates with market value of the
underlying stock which are influenced by external factors such as
social, political as well as economic.

Debt Based Schemes

These schemes, also commonly called Income Schemes, invest in

debt securities such as corporate bonds, debentures and
government securities. The prices of these schemes tend to be
more stable compared with equity schemes and most of the returns
to the investors are generated through dividends or steady capital
appreciation. These schemes are ideal for conservative investors or
those not in a position to take higher equity risks, such as retired
individuals. However, as compared to the money market schemes
they do have a higher price fluctuation risk and compared to a Gilt
fund they have a higher credit risk.

Hybrid Schemes

These schemes are commonly known as balanced schemes. These

schemes invest in both equities as well as debt. By investing in a
mix of this nature, balanced schemes seek to attain the objective
of income and moderate capital appreciation and are ideal for
investors with a conservative, long-term orientation.

General Purpose

The investment objectives of general-purpose equity schemes do

not restrict them to invest in specific industries or sectors. They
thus have a diversified portfolio of companies across a large
spectrum of industries. While they are exposed to equity price
risks, diversified general-purpose equity funds seek to reduce the
sector or stock specific risks through diversification. They mainly
have market risk exposure.

Sector Specific

These schemes restrict their investing to one or more pre-defined

sectors, e.g. technology sector. Since they depend upon the
performance of select sectors only, these schemes are inherently
more risky than general-purpose schemes. They are suited for
informed investors who wish to take a view and risk on the
concerned sector.

Special Schemes

Index schemes

The primary purpose of an Index is to serve as a measure of the

performance of the market as a whole, or a specific sector of the
market. An Index also serves as a relevant benchmark to evaluate
the performance of mutual funds. Some investors are interested in
investing in the market in general rather than investing in any
specific fund. Such investors are happy to receive the returns
posted by the markets. As it is not practical to invest in each and
every stock in the market in proportion to its size, these investors
are comfortable investing in a fund that they believe is a good
representative of the entire market. Index Funds are launched and
managed for such investors

Tax Saving schemes

Investors (individuals and Hindu Undivided Families (“HUFs”)) are

being encouraged to invest in equity markets through Equity Linked
Savings Scheme (“ELSS”) by offering them a tax rebate. Units
purchased cannot be assigned / transferred/ pledged / redeemed /
switched – out until completion of 3 years from the date of
allotment of the respective Units.

The Scheme is subject to Securities & Exchange Board of India

(Mutual Funds) Regulations, 1996 and the notifications issued by
the Ministry of Finance (Department of Economic Affairs),
Government of India regarding ELSS.Subject to such conditions and
limitations, as prescribed under Section 88 of the Income-tax Act,
1961, subscriptions to the Units not exceeding Rs.10, 000 would be
eligible to a deduction, from income tax, of an amount equal to
20% of the amount subscribed.

Real Estate Funds

Specialized real estate funds would invest in real estates directly,

or may fund real estate developers or lend to them directly or buy
shares of housing finance companies or may even buy their
securitized assets.

Liquid Income Schemes

Similar to the Income scheme but with a shorter maturity than

Income schemes.

Money Market Schemes

These schemes invest in short term instruments such as

commercial paper (“CP”), certificates of deposit (“CD”), treasury
bills (“T-Bill”) and overnight money (“Call”). The schemes are the
least volatile of all the types of schemes because of their
investments in money market instrument with short-term
maturities. These schemes have become popular with institutional
investors and high networth individuals having short-term surplus
funds.
Gilt Funds

This scheme primarily invests in Government Debt. Hence the

investor usually does not have to worry about credit risk since
Government Debt is generally credit risk free

Balanced Funds

The aim of balanced funds is to provide both growth and regular

income. Such schemes periodically distribute a part of their earning
and invest both in equities and fixed income securities in the
proportion indicated in their offer documents. In a rising stock
market, the NAV of these schemes may not normally keep pace, or
fall equally when the market falls. These are ideal for investors
looking for a combination of income and moderate growth.

Load Funds

A Load Fund is one that charges a commission for entry or exit.

That is, each time you buy or sell units in the fund, a commission
will be payable. Typically entry and exit loads range from 1% to
2%. It could be worth paying the load, if the fund has a good
performance history.

No-Load Funds

A No-Load Fund is one that does not charge a commission for entry
or exit. That is, no commission is payable on purchase or sale of
units in the fund. The advantage of a no load fund is that the entire
corpus is put to work.
Snapshot of Mutual Fund Schemes
Mutual Fund Objective Risk type Investment Who shouldInvestment
Type Portfolio invest horizon
Money market Liquidity +Negligible Treasury Bills,Those who park2 days - 3
moderate income + Certificate oftheir funds inweeks
reservation of Deposits, current account
capital Commercial papers,or short term
call money bank deposit
Short term fundsLiquidity +Little interestCall money,Those with3 weeks - 3
(Floating ShortModerate Income rate commercial papers.surplus shortmonths
term) Treasury bills,term funds
CD’s, Short Term
G- secs.

Bond funds Regular Income Credit risk &Predominantly Salaried &More than 9 -
(Floating Long- Interest rate risk Debentures, conservative 12 months
term) Government investors
securities,
corporate Bonds

Gilt funds Security& income Interest rate risk Government Salaried and12 months &
securities conservative more
Equity funds Long term capitalHigh risk Stocks Aggressive 3 years plus
appreciation investors with
long term out
look.

Index funds To generate returnsNav, vary withPortfolio index likeAggressive 3 years plus
which areindex BSE NIFTY etc investors.
commensurate withperformance
returns of
respective index
Balanced funds Growth & regularCapital marketBalanced ratio ofModerate &2 year plus
income risk and interestequity and debtAggressive
risk funds to ensure
igher returns at
lower risk

OFFER DOCUMENT
INTRODUCTION

What is an Offer Document?

When an Asset Management Company or a Fund Sponsor wishes to

launch a new scheme of a mutual fund, they are required to
formulate the details of the scheme and register it with SEBI before
announcing the scheme and inviting the investors to subscribe to
the fund. The document containing the details of a new scheme
that the AMC or Sponsor prepares for and circulates to the
prospective investor is called the Prospectus or the Offer
Document.

Many investors are familiar with the prospectuses for new issues of
shares in the primary markets. The Offer Documents issued by
mutual funds serve the same purpose of inviting investors and
giving them the information about the new issue.

The prospectus of a closed-end fund is issued only once at the time

of issue, as the units are normally not re-purchasable from
investors. In fact, investment in a closed-end fund is like investing
in a company issuer's new shares. However, it should be
understood that the open-end mutual funds could issue and
repurchase units on an ongoing basis. This means that the offer
document of the open-end funds is valid for all the time, until
amended, though it will be first issued at the time of the launch of
the scheme. SEBI requires the offer document of an open-end fund
to be revised every two years

Importance for the Investor

The offer document is one of the most important sources of
information from the perspective of the prospective investor
considering investment in a new mutual fund. Apart from the
scheme details, the Offer Document also gives much valuable
information that is relevant for the investor's decision making on
whether he should consider subscribing to the new scheme being
proposed. It is imperative that the investor carefully studies the
information contained in the offer document before committing his
investment.

In particular, the investor must understand the fundamental

attributes of the scheme, before he makes his investment decision.
Fundamental attributes are the essence of the scheme and include
key information such as the objectives and the terms of the
scheme. Any change in the scheme attributes can only be made
with the investors' approval or knowledge.

The offer document is the operating document and describes the

product i.e. the scheme on offer. For the investor to understand
what he is buying, he needs to study the offer document carefully.
As in the case of physical goods, the principle of 'BUYER BEWARE"
applies here i.e. an investor who invests in units of a mutual fund
without studying the information contained in the offer document
cannot subsequently hold the fund responsible for loss. The
investor must appreciate that he is buying units at his risk subject
to information contained in the offer document.

The offer document contains all of the important "disclosures" that

the mutual fund has to make, by regulation. The fund's obligation
to give the relevant information to the investor ends with the
disclosures in the prospectus. The investor must base his decision
on these disclosures. His right to ask for more information
generally is not tenable later on. The offer document is, therefore,
the primary vehicle for the investment decision, a legal document
that protects and governs the right of the investor to information
before he takes his decision, and a reference document for the
investor to look for the relevant information at any time. The
investor and his advisor must, therefore, read and acquaint
themselves thoroughly with this document. The offer document
contains a statement that SEBI does not approve. or disapprove
anything contained in the offer document; however, the trustees
must vet the document before it is issued.

The Contents

Broadly, the offer documents issued by mutual funds in India are

required by SEBI to include the following information:

 Details of the Sponsor and the AMC

 Description of the Scheme and the investment
objective/strategy
 Terms of Issue
 Historical statistics
 Investors' Rights and Services

In addition, an abridged version of the offer document is usually

distributed with the application form. This is called the Key
Information Memorandum.
SEBI Regulations lay down the format for a standard Offer
Document and Key Information Memorandum. Mutual funds in India
are required to follow this format. They may also include other
disclosures, which are considered material by the Trustees from the
investors' perspective.

Section Two, which follows, outlines the specific items that must be
included in the Offer Document. However, before we get into the
specifics, we need to develop an appreciation of some of the
practical aspects of the Offer Document.

Regulation and Investors' Rights

Investors' Right to Information on Material Changes in Schemes

SEBI does not permit a scheme to be launched unless the Offer

Document is filed with it. The Offer Document must contain all of
the essential information about the scheme. Hence, the Offer
Document remains valid as long as the information it contains
remains valid. In other words, the offer document will remain
effective until a material change in any of its contents occurs. In
any mutual fund scheme, material changes do occur over a period
of time, thereby creating the need to revise the Offer Document.

 Examples of such major changes include:

 reconstitution of the AMC
 imposing or enhancing of entry or exit loads
 change in the key personnel of the AMC especially the fund
manager
 addition of new plans in the existing scheme
 change in management/controlling interest of the AMC
  fresh litigation cases or adjudication proceedings referred by
SEBI against sponsors or any company associated with the
sponsors, penalties imposed, etc.

SEBI Guidelines

SEBI wants to ensure the investors' basic right to information about

the funds. The information source is primarily the Offer Document.
Hence, SEBI has framed certain guidelines, with the objective being
to help the investors to get all the material information about their
schemes at all times, not just before they take investment
decisions. These SEBI guidelines include:

Periodic Revisions required in Offer Document

 The offer document and the memorandum (i.e. abridged offer

document) have to be fully revised and updated at least once
in two years.
 After completion of one year by any open ended scheme, its
condensed financial information has to be included in the
offer document and the memorandum. This information also
has to be updated in the subsequent years in the form of
addendum to the offer document till the time new revised
offer document is printed.

Distribution of Revised Documents Specified

 Till the time the offer document is revised and reprinted, an

addendum giving details of each of the changes has to be
attached to offer documents and the memorandum. The
addendum has to be circulated to all the distributors/brokers,
so that the same can be attached to all offer documents and
abridged offer documents already in stock. The addendum
has also to be sent to the existing unit holders.
  The date of the revised offer document/latest addendum has
to be given in the offer document. It may be mentioned in the
offer document that the investors may also like to ascertain
any further changes, after the date of the offer document,
from the mutual funds its investor service centers/
distributors or brokers.
 The mutual funds have to make arrangements to display the
modifications in the offer document in the form of a notice in
all the investor service centers and in the offices of their
distributors/brokers. The mutual funds may also give an
advertisement or may issue a press release about new
changes and these can also be displayed on the websites of
mutual funds.

 A copy of all changes has to be filed with SEB!.

Where to Obtain the Updated Offer Documents?

In view of the fact that the Offer Document is the only source of
comprehensive, authentic. information about the scheme on offer
and the fund itself, it is imperative that the investor secures a copy
and studies it carefully. It is the investors' legal right to ask for a
detailed offer document; the investor may obtain a copy of the
Offer Document directly from the AMC/fund office or through an
agent. The Key Information Memorandum is a concise version of
the Offer Document, and it would be easier for the investor to
obtain a copy with the application form at various distribution
points such as the banks, the agents and brokers.
Investor’s rights & Obligations

Rights - Legal Limitations

 Unit holders are not distinct from trust, they cannot sue trust.

 Sponsors do not have any legal obligations (Limited to initial

contribution)
 No rights to prospective investors

Obligations

 Must read offer doc & AOD

 Beware of risk factors
 Must monitor investments regularly

Investor’s complaint redressal mechanism

 Client Servicing
 Compliance Officer
 Companies Act cannot protect investors.
 Choosing a Fund

Choosing a mutual fund seems to have become a very complex

affair lately. There is no dearth of funds in the market and they all
clamor for attention. The most crucial factor in determining which
one is better than the rest is to look at returns. Returns are the
easiest to measure and compare across funds.

At the most trivial level, the return that a fund gives over a given
period is just the percentage difference between the starting Net
Asset Value (price of unit of a fund) and the ending Net Asset
Value. Returns by themselves don't serve much purpose. The
purpose of calculating returns is to make a comparison. Either
between different funds or time periods.

Absolute returns

Absolute returns measure how much a fund has gained over a

certain period. So you look at the NAV on one day and look at it,
say, six months or one year or two years later. The percentage
difference will tell you the return over this time frame.

But when using this parameter to compare one fund with another,
make sure that you compare the right fund. So the returns of a
diversified equity fund (one that invests in different companies of
various sectors), should be compare with other diversified equity
funds. Don't compare it with a sector fund, which invests only in
companies of a particular sector. Don't even compare it with a
balanced fund (one that invests in equity and fixed return
instruments).
Benchmark returns

This will give a standard to make the comparison. It basically

indicates what the fund has earned as against what it should have
earned.

A fund's benchmark is an index that is chosen by a fund company

to serve as a standard for its returns. The market watchdog, the
Securities and Exchange Board of India, has made it mandatory for
funds to declare a benchmark index. In effect, the fund is saying
that the benchmark's returns are its target and a fund should be
deemed to have done well if it manages to beat the benchmark.

Let's say the fund is a diversified equity fund that has

benchmarked itself against the Sensex. So the returns of this fund
will be compared vis-a-vis the Sensex. Now if the markets are doing
fabulously well and the Sensex keeps climbing upwards steadily,
then anything less than fabulous returns from the fund would
actually be a disappointment.

If the Sensex rises by 10% over two months and the fund's NAV
rises by 12%, it is said to have outperformed its benchmark. If the
NAV rose by just 8%, it is said to have under performed the
benchmark. But if the Sensex drops by 10% over a period of two
months and during that time, the fund's NAV drops by only 6%,
then the fund is said to have outperformed the benchmark.

A fund's returns compared to its benchmark are called its

benchmark returns.

At the current high point in the stock market, almost every equity
fund has done extremely well but many of them have negative
benchmark returns, indicating that their performance is just a side-
effect of the markets' rise rather than some brilliant work by the
fund manager.

Time period

The most important thing while measuring or comparing returns is

to choose an appropriate time period. The time period over which
returns should be compared and evaluated has to be the same over
which that fund type is meant to be invested in.

If you are comparing equity funds then you must use three to five
year returns. But this is not the case of every other fund. For
instance, cash funds are known as ultra short-term bond funds or
liquid funds that invest in fixed return instruments of very short
maturities. Their main aim is to preserve the principal and earn a
modest return. So the money you invest will eventually be returned
to you with a little something added.

Investors invest in these funds for a very short time frame of

around a few months. So it is all right to compare these funds on
the basis of their six-month returns.

Market conditions

It is also important to see whether a fund's return history is long

enough for it to have seen all kinds of market conditions.

For example, at this point of time, there are equity funds that were
launched one to two years ago and have done very well. However,
such funds have never seen a sustained declining market (bear
market). So it is a little misleading to look at their rate of return
since launch and compare that to other funds that have had to face
bad markets.

If a fund has proved its mettle in a bear market and has not dipped
as much as its benchmark, then the fund manager deserves a pat
on the back.

Final checklist

Compare funds that are similar

Compare a fund with it's own stated benchmark, not another. For
instance, Fidelity Equity, Escorts Growth and BoB Growth are all
diversified equity funds with different benchmarks.

While there are other factors that have to be considered when

investing in a mutual fund, return is the most important. So make
sure you do your homework right on this count.

The rational choice is to choose an option where the tax liability is

the lowest.

Of course, the choice may be superceded by some specific

requirements. You will consider dividend payout if you need a
regular income. Or, if you want your investment to grow over the
years, you should opt for the growth option.

 If you want to invest in an equity fund for less than a year, it

is better to go for dividend payout or re-investment option as
it reduces your tax liability.
 Debt funds are not so simple, as you have to balance out
between the capital gains tax and the dividend distribution
tax.
 For a person whose total income falls below the minimum
taxable limits, it is advisable to go for a growth or a bonus
option. This will save the investor from dividend distribution
tax and nor will he be subject to capital gains tax.
 If you are a taxpayer and plan to hold a debt fund for less
than one year and fall under the 10% tax slab, then go for the
growth option or the bonus option, as this will save you from
the 12.5% dividend distribution tax, while your capital gains
tax will be at the lower rate of 10%.
 However, if you fall in a higher tax slab of 20% or 30%, then it
would make more sense to go for the dividend payout or re-
investment option, which will save you more on the capital
gains tax, even after factoring in the dividend distribution tax
in most of the cases.
 As regards the long-term investment in a debt-oriented fund,
it would be advisable to go for growth or bonus option. This is
because the capital gains tax liability on such an investment
cannot be more than 10% and you will not shell out the 12.5%
dividend distribution tax.
 While evaluating the performance of a portfolio, the return
earned on the portfolio has to be evaluated in the context of
the risk associated with that of portfolio.
 HISTORY OF INDIAN MUTUAL FUNDS INDUSTRY

The mutual fund industry in India started in 1963 with the

formation of Unit Trust of India, at the initiative of the Government
of India and Reserve Bank the. The history of mutual funds in India
can be broadly divided into four distinct phases.

First Phase – 1964-87

Unit Trust of India (UTI) was established on 1963 by an Act of
Parliament. It was set up by the Reserve Bank of India and
functioned under the Regulatory and administrative control of the
Reserve Bank of India. In 1978 UTI was de-linked from the RBI and
the Industrial Development Bank of India (IDBI) took over the
regulatory and administrative control in place of RBI. The first
scheme launched by UTI was Unit Scheme 1964. At the end of 1988
UTI had Rs.6,700 Crores of assets under management.

Second Phase – 1987-1993 (Entry of Public Sector Funds)

1987 marked the entry of non- UTI, public sector mutual funds set
up by public sector banks and Life Insurance Corporation of India
(LIC) and General Insurance Corporation of India (GIC). SBI Mutual
Fund was the first non- UTI Mutual Fund established in June 1987
followed by Canbank Mutual Fund (Dec 87), Punjab National Bank
Mutual Fund (Aug 89), Indian Bank Mutual Fund (Nov 89), Bank of
India (Jun 90), Bank of Baroda Mutual Fund (Oct 92). LIC
established its mutual fund in June 1989 while GIC had set up its
mutual fund in December 1990.
At the end of 1993, the mutual fund industry had assets under
management of Rs.47,004 Crores.
Third Phase – 1993-2003 (Entry of Private Sector Funds)
With the entry of private sector funds in 1993, a new era started in
the Indian mutual fund industry, giving the Indian investors a wider
choice of fund families. Also, 1993 was the year in which the first
Mutual Fund Regulations came into being, under which all mutual
funds, except UTI were to be registered and governed. The
erstwhile Kothari Pioneer (now merged with Franklin Templeton)
was the first private sector mutual fund registered in July 1993.
The 1993 SEBI (Mutual Fund) Regulations were substituted by a
more comprehensive and revised Mutual Fund Regulations in 1996.
The industry now functions under the SEBI (Mutual Fund)
Regulations 1996.
The 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. As at the end of
January 2003, there were 33 mutual funds with total assets of Rs.
1,21,805 Crores. The Unit Trust of India with Rs.44, 541 Crores of
assets under management was way ahead of other mutual funds.

Fourth Phase – since February 2003

In February 2003, following the repeal of the Unit Trust of India Act
1963 UTI was bifurcated into two separate entities. One is the
Specified Undertaking of the Unit Trust of India with assets under
management of Rs.29, 835 crores as at the end of January 2003,
representing broadly, the assets of US 64 scheme, assured return
and certain other schemes. The Specified Undertaking of Unit Trust
of India, functioning under an administrator and under the rules
framed by Government of India and does not come under the
purview of the Mutual Fund Regulations.
The second is the UTI Mutual Fund Ltd, sponsored by SBI, PNB, BOB
and LIC. It is registered with SEBI and functions under the Mutual
Fund Regulations. With the bifurcation of the erstwhile UTI which
had in March 2000 more than Rs.76, 000 Crores of assets under
management and with the setting up of a UTI Mutual Fund,
conforming to the SEBI Mutual Fund Regulations, and with recent
mergers taking place among different private sector funds, the
mutual fund industry has entered its current phase of consolidation
and growth. As at the end of September, 2004, there were 29
funds, which manage assets of Rs.153108 Crores under 421
schemes.

The graph indicates the growth of assets over the years.

GROWTH IN ASSETS UNDER MANAGEMENT

Note:
While UTI was bifurcated into UTI Mutual Fund and the Specified
Undertaking of the Unit Trust of India effective from February 2003.
The Assets under management of the Specified Undertaking of the
Unit Trust of India has therefore been excluded from the total
assets of the industry as a whole from February 2003 onwards.
The Assets under Management of UTI was Rs. 67bn. by the end of
1987. The performance of mutual funds in India through figures is
appreciable. From Rs. 67bn. the Assets under Management rose to
Rs. 470 bn. in March 1993 and the figure had a three times higher
performance by April 2004. It rose as high as Rs. 1,540bn.
The net asset value (NAV) of mutual funds in India declined when
stock prices started falling in the year 1992. Those days, the
market regulations did not allow portfolio shifts into alternative
investments. There was rather no choice apart from holding the
cash or to further continue investing in shares. One more thing to
be noted, since only closed-end funds were floated in the market,
the investors disinvested by selling at a loss in the secondary
market.
The performance of mutual funds in India suffered qualitatively.
The 1992 stock market scandal, the losses by disinvestments and
of course the lack of transparent rules in the whereabouts rocked
confidence among the investors.
Funds now have shifted their focus to the recession free sectors
like pharmaceuticals, FMCG and technology sector. Funds
performances are improving. Funds collection, which averaged at
less than Rs100bn per annum over five-year period spanning 1993-
98 doubled to Rs210bn in 1998-99. In the 2000 mobilization had
exceeded Rs300bn. Total collection for the financial year ending
March 2000 reached Rs450bn.
India had been at the first stage of a revolution that has already
peaked in the U.S. The U.S. boasts of an Asset base that is much
higher than its bank deposits. In India, mutual fund assets are not
even 10% of the bank deposits, but this trend is beginning to
change. The figures indicate that in the first quarter of the year
1999-2000 mutual fund assets went up by 115% whereas bank
deposits rose by only 17%. (Source: Think tank, The Financial
Express September, 99) This is forcing a large number of banks to
adopt the concept of narrow banking wherein the deposits are kept
in Gilts and some other assets which improves liquidity and
reduces risk. The basic fact lies that banks cannot be ignored and
they will not close down completely. Their role as intermediaries
cannot be ignored. It is just that Mutual Funds are going to change
the way banks do business in the future
 Brokerage

Industry Overview

Asset Management Business:

What do you do if all you want to deal is in money and the people
who make money (at least in the bull run), want to meet CEOs of
large listed companies on a regular basis and thinking about
becoming the next Peter Lynch out of India: join the business of
managing money i.e. Asset Management.

Asset Managers are the professionals who manage your portfolio

investments in mutual funds. Broadly, Asset Managers' role is to
convert mass-savings in to profitable investments. Typically asset
management is used in a more restrictive sense of investing in
securities and instruments that are issued in either Money Market
or in Capital Market. In larger sense, it can also be used for
investments in currently non-tradable securities, however expected
to become tradable sometime in future, such as Venture Capital.
The asset manager's role is specified by the investment objectives
which he or she seeks to achieve by investing in a variety of
instruments. Generic categories invested in are obviously Debt and
Equity. However based on two factors, duration and uncertainty or
risk, each of these could be segmented in to several types such as
call money, short-term debt, government debt, corporate debt,
defensive shares, aggressive shares, convertibles etc.

The industry consists of several participants such as investment

bankis, brokerages, mutual funds, insurance companies and
commercial banks. These different outfits provide different roles
and opportunities to the interested professionals. Mutual Funds are
the firms that are of central importance in this whole scheme, while
Brokerages are the exchange-registered firms that are authorised
to buy and sell securities on the behalf of these funds. Investment
Banking is a profession in its own right, and is of peripheral interest
in talking about Asset Management. Investment Banks play a role
in origination of fresh securities, acting as intermediaries both, in
private placements deals as well as in IPOs. Banks and Insurance
companies also invest in various asset classes, as a part of asset-
liability matching exercise.

The firms that play the most active roles in securities business are
Brokerages and Mutual Funds. Typical roles that exist in the
business are in Sales/Dealing, Research and Portfolio Management.
The former two are found in Broking, while all the three are found
in a Mutual Fund.

Broking

The roles that are of interest to finance professionals in a

Brokerage, related to this business are in Sales/ Dealing and in
Research. Sales is about generating the buy/ sell orders from the
clients as well as providing a variety of services to these clients.

Dealing relates to execution of these orders. In some brokerages,

the same team does dealing in the market hours, while is selling is
done in the after-market hours. Research in brokerage is done as
an advisory "free" service to the clients. Research done in
Brokerages houses is called sell -side research. The focus is on
generating brokerage business by providing buy-sell advice. There
is a high-degree of client focus in sell-side research. Some
researchers focus on just providing information, while others
provide full-fledged research reports on Companies, Industries and
Economy.

Mutual Fund

Mutual Funds provide the most comprehensive roles in the asset

management business to the finance professionals. The roles exist
in Research, Portfolio Management and Dealing/ Trading.

Trends

Mutual funds in India are experiencing never before collections

riding on the bull run, slew of new products, improved customer
service and huge advertising campaigns. The industry, which was
dominated earlier by public sector (UTI and others), is shifting
towards private sector domination with the emergence of new
layers like Birla, ICICI Prudential, Kothari Pioneer etc. The lure of
Indian markets has not left even the largest mutual fund in the
world, Fidelity untouched which is about to make its debut soon.
The other new player in the market is Principal Group of USA (in
collaboration with IDBI). Most of the foreign and private sector
banks (Standard Chartered, ANZ, Amex, HDFC) are thinking about
mutual fund plans.

The hottest development in the industry is internet trading with

SEBI allowing individuals to put their buy and sell order thru the
inernet. A lot of action (and bloodbath) is expected in the sector in
coming months.

Nothing Speaks like Money

The money in asset management probably can’ t match that in

investment banking, but it is becoming almost as good. Good fund
managers and brokers tend to earn as good money as anybody in
investment banking and

if you like the game of stock investing and trading, then probably
you could end up making more bucks from your personal portfolio
than you would care to get in salary. And all this without the
pressure packed work life of investment banking.

Larger than Life

If Fidelity created a Peter Lynch in USA, the mutual fund industry in

India is creating many in the form of Sameer Arora, Bharat Shah
and Ketan Parekh. If you are successful in making more money
from money, then nothing can beat you. Whether you are a
research analyst or a fund manager, a good performance at work
has the potential to catapult you into the big league where you
would be almost worshipped by people.

When do you take a Break?

After a period of time you won't be able to distinguish when you're

working and when you're not. When you are home after watching
BSE sensex gyrate 300 points up and 250 points down, you would
be tuned to CNBC to find out the latest Infy price on NASDAQ (the
premier technology exchange based in USA for the uninitiated).
That's not to say you won't be able to get away to the Goa from
time to time, but your mind will always be on stocks and the stock
market. You will be completely addicted to finding the next bit of
news and data on the stock you added to your portfolio recently.
Your brain will take over your apartment.

Is this a Sales Call?

If you happen to be part of the sales team at brokerage houses,
prepare to be hated, hung up on, abused, and ignored. Cold calling
is the most ego-battering, exhausting form of misery ever devised.
But calling people regularly who give you business and thus
bonuses (read fund managers) is part of the ritual everyday, if you
plan to sell and sell well. You will soon forget this when you get a
glimpse of your year-end bonus. Good sales people are the most
wanted and highest paid professionals in the business

Employment Tips

Key Jobs

 Fund Manager
 Research
 Dealing
 Sales
 Marketing
 Ttechnology
 Operations (back office)

Fund Manager

This is the biggest of them all. If you are in fund management,

that’s what you aspire to be. But getting here is not easy. Most of
the fund managers are groomed internally, typically have research
background and have to prove themselves before they are
promoted to the position.

As a fund manager, you would be involved in stock allocation,

sector allocation, putting buy and sell orders to trading room,
portfolio review and reporting. The operations in asset
management companies are centered around fund managers. With
the advent of more opportunities and growth in the sector, the
demand for good fund manager is rising and you can expect to
become a fund manager with 4-5 year of research experience
except in some public sector funds (UTI) where you can expect
much bigger responsibilities much early in your career.

Research

This is where most of the fresh MBAs are absorbed. In a mutual

fund this will be called ‘buy side research’ where in you would be
making internal research for investment decisions and your
research will not be published. While in brokerages you will be part
of ‘sell side research’ and your reports will go out to fund managers
and other people connected to the markets. Typically you would be
assisting a senior research analyst who could be handling research
in a number of industry sectors, securities markets or economy.

A research analyst values individual stocks by forecasting cash

flows, profits and other efficiency parameters. This job typically
involves meeting company management, tracking industry
dynamics, quarterly results, daily news and other corporate
developments to arrive at forecasts. After putting in few years of
research work, you can expect to graduate to being a research
head or an assistant fund manager. Propelled by the demand being
driven by surging stock markets, you would probably find it easy to
get a research job. But to excel in research you need to have good
analytical and communication skills (at least writing skills) and a
good understanding of theoretical concepts in finance.

Marketing
If you aspire to be a marketing wizard, the growth of the mutual
fund industry by leaps and bound provides you plenty of
opportunities to hone your skills and put your creative energies to
work.

The marketing budgets at most of the asset management

companies are being reworked to meet the increased demand and
you will be able to work on product launches, target markets, and
entirely new marketing concepts like internet distribution and
financial supermarkets. Also a fair amount of your time will be
spent watching the rearview mirror so that you don't get beaten to
the punch with a hot new product from "Kothari Pioneer".

Sales

As a sales person, you could be involved in retail or institutional

sales. In mutual funds you would be selling the schemes. While in a
broker house your time will be used in soliciting business (i.e. buy
and sell orders) from clients. The key to success in a sales job is
building of lasting client relationships.

Dealing

Did you watch your mom haggling over the price of vegetable
during your wonder years. Think you can do the same. Then you
are (over) qualified for being a dealer. Dealers are responsible for
executing the buy and sell orders given by fund managers. To excel
in a dealer’s job you require a cool head (to be able to take 300+
and 200 down movement of BSE within an hour), speed of thinking
(to get that lot of Wipro before someone else does), and great
people skills.

Operations
The role of back office is to handle post trade activities including
settlement, payments etc. In mutual funds, they would be also be
involved in calculating NAVs of the funds.

Technology

That’s where many challenging opportunities are coming. The

convergence in banking and mutual fund product offerings and new
channels of distribution (including internet) has created a lot of
space for technology people within the sector. You would be
involved in automating the processes and integration of various
platform used for dealing, distribution.
 SBI MUTUAL FUNDS
INTRODUCTION

SBI Mutual Fund is India’s largest bank sponsored mutual fund and
has an enviable track record in judicious investments and
consistent wealth creation. The fund traces its lineage to SBI -
India’s largest banking enterprise. The institution has grown
immensely since its inception and today it is India's largest bank,
patronized by over 80% of the top corporate houses of the country.

SBI Mutual Fund is a joint venture between the State Bank of India and
Société Générale Asset Management, one of the world’s leading fund
management companies that manages over US$ 500 Billion worldwide.
SGAM was established in the year 1996 and has presence in United
States, Continental Europe, United Kingdom and Asia SBI Mutual Funds
is the first mutual fund set up by the public sector bank.

Last year SBI Mutual Funds as one of the fastest growing AMCs (Assets
Managements Company) in the country registered a total Income at
Rs.127.77 crs. posted a YOY growth of 55% and Profit After Tax at
Rs.47.77 crs. posted a YOY growth of 81%. Its assets under
management of Rs. 30,132 Crores as on June 2008.

The Board of Trustees of SBI MF has entrusted the management of the

fund to SBI Funds Management Pvt. Ltd., the AMC.
COMPANY PROFILE

SBI Funds Management Pvt. Ltd. (SBIMF) having it’s corporate office at
191, Maker Tower “E”, 19th Floor, Cuffe Parade, Mumbai 400 005 is a
joint venture between SBI and SGAM. Today the Fund has an investor base of over

2.8 million spread over 23 schemes. Pursuant to the shareholder’s and Share
Purchase Agreement dated November 5, 2004 entered into amongst
State Bank of India (SBI), Societe Generale Asset Management (SGAM),
Societe Generale S.A. and SBI Funds Management Private Limited
(SBIFM), 37% of the paid up share capital of the AMC (i.e. 18,50,000
equity shares of Rs. 100/- each) had been transferred by SBI to SGAM on
December 21, 2004.

SBIFM had entered into an Investment Management Agreement with the

Trustees of SBI Mutual Fund on 14th May, 1993 and also a supplemental
thereto on 28th April, 2003 and the same have been replaced by
Restated and Amended Investment Agreement entered into between
SBIMFTCPL and SBIMF on December 29, 2004. in terms of this
Agreement, SBIMF has assumed the day to day investment
management of the fund and in that capacity makes investment
decisions and manages the SBI Mutual Fund Schemes in accordance
with the scheme objectives, Trust deed, provisions of Investment
Management Agreement and SEBI Regulations & Guidelines.

To date, SBIMF has successfully launched and managed 37 schemes

(including 2 offshore funds) of SBI Mutual Funds of which 19 schemes
have been redeemed. Of the 18 schemes still being managed, 16 are
open-ended schemes and the rest are close-ended schemes, with total
net assets of Rs. 30,132 Crores as on June 2008.

In addition to the Investment Management activity, SBI Funds

Management Private Limited has also been granted a certificate of
registration as a Portfolio Manager with registration code INP000000852.
the certificate of registration is valid for a period of three years up to
15th January 2007. The AMC certifies that there would be no conflict
between the Asset Management activity and the Portfolio Management
activity.

Sponsor

Sponsor is a person who sets up a Mutual Fund. Sponsor contributes to

the initial capital of the Trust. Sponsor appoints the Board of Trustees.
Sponsor appoints Asset Management Company. Sponsor contributes
minimum 40% of net worth of AMC. For SBI Mutual Fund the sponsor is
State Bank of India

Board of Trustees

Trustees appointed by the Sponsor with SEBI approval. Trustees oversee

the functioning of AMC. The trustee company is SBI Mutual Fund Trustee
Company Private Limited

Registrar & Transfer Agent

The Registrar & Transfer Agent issues, redeems, transfers units of MF

schemes and Keeps Unit Holders A/c’s upto date. For SBI MF The
Registrar is Computer Age Management Services Pvt. Ltd.,
Computronics Financial Services India Ltd and Datamatics Financial
Software Services Ltd.
Custodian

A Custodian keep record & account of Securities / Investments and

Collects benefits under Securities. The custodian for SBI MF is Citi Bank,
HDFC Bank Ltd. And Stock Holding Corporation of India.

PRODUCT PROFILE
 SCHEMES OF SBI

1) EQUITY SCHEMS
2) DEBT SCHEMES
3) BALANCED SCHEMES

EQUITY

The investments of these schemes will predominantly be in the stock

markets and endeavor will be to provide investors the opportunity to
benefit from the higher returns which stock markets can provide.
However they are also exposed to the volatility and attendant risks of
stock markets and hence should be chosen only by such investors who
have high risk taking capacities and are willing to think long term.
Equity Funds include diversified Equity Funds, Sectoral Funds and Index
Funds. Diversified Equity Funds invest in various stocks across different
sectors while sectoral funds which are specialized Equity Funds restrict
their investments only to shares of a particular sector and hence, are
riskier than Diversified Equity Funds. Index Funds invest passively only
in the stocks of a particular index and the performance of such funds
move with the movements of the index.
  Magnum COMMA Fund
 Magnum Equity Fund
 Magnum Global Fund
 Magnum Index Fund
 Magnum MidCap Fund
 Magnum Multicap Fund
 Magnum Multiplier Plus 1993
 Magnum Sector Funds Umbrella

 MSFU - Emerging Businesses Fund

 MSFU - IT Fund
 MSFU - Pharma Fund
 MSFU - Contra Fund
 MSFU - FMCG Fund

 SBI Arbitrage Opportunities Fund

 SBI Blue chip Fund
 SBI Infrastructure Fund - Series I
 SBI Magnum Tax gain Scheme 1993
 SBI ONE India Fund
 SBI TAX ADVANTAGE FUND - SERIES I

DEBT
Debt Funds invest only in debt instruments such as Corporate Bonds,
Government Securities and Money Market instruments either completely
avoiding any investments in the stock markets as in Income Funds or
Gilt Funds or having a small exposure to equities as in Monthly Income
Plans or Children's Plan. Hence they are safer than equity funds. At the
same time the expected returns from debt funds would be lower. Such
investments are advisable for the risk-averse investor and as a part of
the investment portfolio for other investors.

 Magnum Children`s Benefit Plan

 Magnum Gilt Fund

1. Magnum Gilt Fund (Long Term)

2. Magnum Gilt Fund (Short Term)
 Magnum Income Fund

 Magnum Income Plus Fund

1. Magnum Income Plus Fund (Saving Plan)

2. Magnum Income Plus Fund (Investment Plan)

 Magnum Insta Cash Fund

 Magnum InstaCash Fund -Liquid Floater Plan
 Magnum Institutional Income Fund
 Magnum Monthly Income Plan
 Magnum Monthly Income Plan Floater
 Magnum NRI Investment Fund
 SBI Capital Protection Oriented Fund - Series I
 SBI Debt Fund Series

1. SDFS 15 Months Fund

2. SDFS 90 Days Fund
 3. SDFS 13 Months Fund
4. SDFS 18 Months Fund
5. SDFS 24 Months Fund
6. SDFS 30 DAYS
7. SDFS 30 DAYS
8. SDFS 60 Days Fund
9. SDFS 180 Days Fund
10. SDFS 30 DAYS

 SBI Premier Liquid Fund

 SBI Short Horizon Fund

1. SBI Short Horizon Fund - Liquid Plus Fund

2. SBI Short Horizon Fund - Short Term Fund

BALANCED

Magnum Balanced Fund invests in a mix of equity and debt investments.

Hence they are less risky than equity funds, but at the same time
provide commensurately lower returns. They provide a good investment
opportunity to investors who do not wish to be completely exposed to
equity markets, but is looking for higher returns than those provided by
debt funds.

 Magnum Balanced Fund

 Magnum NRI Investment Fund - Flexi Asset Plan
 SBI Mutual Fund was founded with a vision:

SBI MF draws its strength from India's Largest Bank State Bank of
India and Societe Generale Asset Management, France

SBI Mutual Fund is celebrating 20 years of rich experience in fund

management. We are a joint venture between State Bank of India—one
of India's largest banking enterprises—and Societe Generale Asset
Management (France)—one of the world's leading fund management
companies.

vision:

“To reach out to the smallest of the small investor and provide them
with alternate investment options to help achieve their financial goals.”

It is our endeavour to be a globally respected organisation whose core

values lie in the integrity and consistency with which we provide expert
investment solutions and value to our investors.

In 1987, we took on the challenging task of establishing mutual funds as

a viable investment option to the masses in our country. For this, we
developed innovative, need specific products and educate them about
the benefit of investing in capital markets through mutual funds. Today,
we offer our investment expertise not only in domestic mutual funds but
also offer an Offshore Fund, and Portfolio Management Services for
institutional clients through SBI Funds Management Pvt. Ltd.
Empowering dreams of investors has always been our singular focus.

At SBI MF, we devote considerable resources to gain, maintain and

sustain our profitable insights into market movements. We consistently
push the envelope to ensure our investors get value for their
investments. The trust reposed on us by over 37 lac investors is a
genuine tribute to our expertise in Fund Management and dedication to
our singular focus. This has also resulted in various awards and
accolades for us from the mutual fund industry. But naturally, this
motivates us to do better.

Today, SBI MF has created an identity of its own by proposing and

practicing customer care, financial inclusion and governance of the
highest standards. We are now synonymous with Innovation and
Performance—our benchmarks of success over the years. Our expertise
and performance are frequently recognised by the industry and are
responsible for us becoming proud recipients of numerous awards

OBJECTIVES

Significance:
Significance of the project is to analyze various tax saving investment
instrument. This study will try to analyze various tools that help in
judging the performance of mutual funds. The study will try to find out
that out of a number of tax saving funds available in market how can an
investor select a fund on the basis of its performance and volatility
measures with the help of certain statistical tools.
The study also provides various investment options available for the
investors.
The study will compare various mutual funds that are eligible for
deduction under section 80 C.

Objectives:
To study the Mutual funds industry in detail
To study the Investment options available for investors
To study the deduction under section 80 C for investment in various
instruments.
To do a comparative analysis of various Tax Saving Mutual Funds in
Industry.
To compare various tax saving funds on the basis of Standard Deviation,
Sharp Ratio, Beta Ratio, R- Squared and Expense Ratio.

Scope of the Study:

In current scenario, the inflation rate is quite high and the interest rates
are quite low so people don’t get satisfactory returns on their
investments. While opting for traditional tax saving instruments like PPF
and Fix Deposits the investor will get a return of 7% to 8% and sacrifice
superior returns given by stocks. So study will concentrate on Equity
linked Saving Schemes offered by Mutual Funds.
There is a large number of tax saving funds available in the market. The
study will concentrate on to do a comparative analysis of the funds on
the basis of various ratios and other statistical tools.
 METHODOLOGY

RESEARCH METHODOLOGY

I decided to do the project in two parts. The first part of the project is
comprised of the study of Mutual Funds as a whole and the second part
deals with the investor’s perception regarding their investment
preferences about investment in Mutual Funds.

The first part of the project i.e. descriptive study is comprising an overall
study of Mutual funds as what it is ,why to invest and where to invest,
risk factor associated with it ie, an overview of whole Mutual fund
industry.

The second part of the project that is related to investors perception

about investment in Mutual funds available in market. Indian Stock
market has undergone tremendous changes over the years. Investment
in Mutual Funds has become a major alternative among Investors. The
project has been carried out to understand investor’s perception about
Mutual Funds in the context of their trading preference and explore
investor’s risk perception.

The first part of the project relating the study of Mutual funds is
collected through secondary data obtained from internet & books
whereas the second part relating the Investors perception about
investment in Mutual Funds is covered using primary data.
 SOURCE OF DATA COLLECTION

Both Primary and Secondary data are required

Primary data is the first hand information collected directly from the
respondents. The tool used here is questionnaire. Primary Data is
collected through survey among existing clients along with the other
investors

Secondary data is collected through internet, books. I had prepared a

questionnaire for collecting information about second part of the project.
 DATA ANALYS AND INTERPRETATION

Q1. Do you invest in mutual fund?

YES
2. NO

QUESTION RESPONDENTS

YES 50

NO 150

180
160
140
120
100
80 NUMBER
60
40
20
0
Yes No

(A) If yes than

Q2. What is your main objective of investing in mutual funds?

Objectives of investment Respondent

20
Growth
Liquidity 8
Safety 4
Tax-saving 16
Immediate gains 2
Any other 0

20
15
10
5 numbers

0
Grow th safety Imm ediate
gains

Q3:- For how long have you been investing in mutual funds?

 Less than 1 year

 Between 1 to 2 years.
 Between 2 to 3 years.
 More than 3 years.
 Period of Investment
Respondents
6
Less than one year
Between 1 to 2 year 10
Between 2 to 3 years 14
More than 3 years 20

20

15

10
num bers
5

0
less than 1 yr. Betw een 1 & 2 yr. Betw een 2 & 3 yr. More than 3 yr.

Q4:- Which type of mutual fund do you own?

 Sector wise
• Public sector funds
• Private sector funds
 Nature wise
• Open ended funds
• Close ended funds
 Type wise
• Equity
• Debt
• Balanced
• Blue chip
 Sector wise investment Respondent

Public sector funds 34

Private sector funds 16

Public Sector
Privae Sector

Nature wise investment Respondent

Open ended funds 38

Close ended funds 12

40
35
30
25 Open ended funds
20
Close ended funds
15
10
5
0
 Type wise investment Respondent
Equity 20
Debt 14
Balanced 6
Blue-chip 10

25

20

15
numbers
10

0
Equity De bt Balanced blue-chip

Q5:- Which information do you rely on?

 Prospectus/Self analysis
 News-paper
 Investment adviser
 TV.(CNBC,etc)
 Friends/Relatives
 Information Rely Respondent

Prospectus/self analysis 14
News paper 8
Investment advisor 12
T.V(NDTV, etc) 10
Friends and relatives 6

14
12
10
8
6
Numbers
4
2
0
Prospectus Invest. Friends &
Advisor Relatives

Q6:- What is the most important criterion for you for selecting
a
particular mutual fund?
 Past performance
 Service
 Promoter’s background
 Any other

Criterion for selection of fund Respondent

Past performance 30
Service 4
 Promoter’s background 8
Any other 8

30
25
20
15
10 NUMBER

5
0
PAST SERVICE PROMOTER ANY OTHER
PERFORMANCE BACKGROUND

Q7:- What is your level of satisfaction from your mutual fund?

 Satisfied
 Dissatisfied
 Neither satisfied Nor dissatisfied

Level of satisfaction Respondents

Satisfied 35
Dissatisfied 0

Neither satisfied nor dissatisfied 15

 35
30
25
20
15 NUMBER

10
5
0
SATISFIED DISSATISFIED INDIFFERENT

Q8:- What deficiencies do you find in your mutual fund?

 Track record
 Transparency
 Service quality
 Any other

Deficiencies in funds Respondent

Track records 6
Transparency 20
Service quality 14
Any other 10
 20

15

10
NUMBER
5

0
TRACK RECORDSTRANSPARENCY SERVICE ANY OTHER
QUALITY

Q10:- If you are given an option to invest, in which mutual fund

would you like to invest In ?
 UTI mutual fund
 SBI mutual fund
 Prudential ICICI mutual fund
 HDFC mutual fund
 Franklin Templeton mutual fund
 HSBC mutual fund

Major Responses
UTI mutual fund 6
SBI mutual fund 14
Prudential ICICI mutual fund 8
HDFC mutual fund 4
Franklin Templeton mutual fund 14
HSBC mutual fund 6
 14
12
10
8
6 NUMBER
4
2
0
UTIMF SBIMF ICICIMF HDFCMF FRTMF HSNCMF

Q11. Are you aware that mutual fund industry is regulated by

SEBI?
 Yes
 No
Awareness about SEBI Respondent
Regulation

Yes 40

No 10

40
35
30
25
20
NUMBER
15
10
5
0
YES NO
Q11:-Do you think SEBI regulations regarding mutual fund are
appropriate?
 Yes
 No

Appropriation of SEBI regulation Respondent

Yes 35

No 15

35
30
25
20
15 Numbers

10
5
0
Yes No
Q12:-What do you think about the future of mutual fund in
India?
 Very bright
 Bright
 Very bleak
 Bleak
 Does not know

Future of mutual fund in India Respondent

Very bright 8
Bright 20
Very bleak 0
Bleak 6
Doesn’t know 16

20

15

10
Numbers
5

0
Very Bright Bleak Very Dsnt
Bright Bleak Know

If no then
Q13:- Why you have not invested in mutual fund?
 Lack of information
 Past bad experience
 High risk
 Any other

Reason to not invest in mutual fund Respondent

Lack of information 80
Past bad experience 20
High risk 16
Any other 34

80
70
60
50
40
30 Numb
20
10
0
Lack of Past bad High Risk Any Other
knowledge Experience
Q14:- Would you consider investing in mutual fund?
 Yes
 No

Will you invest in mutual funds Respondent

Yes 50

No 100

100

80

60
Numbers
40

20

0
Yes No
 Interpretation
 It was found that Bank deposits are still the most preferred
investment instruments among most of the investors. The second
most preferred investment instrument is the Insurance. Then
comes the Bonds/Debentures, any Other (PPf, GPF, Property),
Equity Shares, Mutual fund.

 On the basis of survey conducted only 25% people invested in

mutual fund, and 75% people are not invested in mutual fund.

People who invest in mutual fund

 The objective of investing in mutual fund is Growth, second main
objective is Tax saving.

 Generally people have more than 3 years’ experience of investing

in mutual fund. Some people have 2 to 3 years’ experience of
investing in mutual fund.

 Also most of people own Public sector mutual funds. They

preferred the nature of mutual fund as an open-ended fund, and
the type of mutual funds they preferred are Debt funds. Then
comes Balanced and Equity fund.

 People rely more on information supplied by friends,/relatives and

by the investment adviser.

 Mostly people are Satisfied with their mutual funds, some of them
Neither satisfied Nor dissatisfied.

 The main problem that the people find with mutual funds is
Transparency in both Public and Private sector funds.

 Regarding preference of mutual fund Prudential ICICI preferred by

most of the investors. Second preference some investor preferred
UTI, SBI, HDFC.

 Above 80% of people aware that mutual fund industry is regulated

by SEBI.
 70% people think that SEBI regulations regarding mutual fund are
appropriate.

 According to survey 32% people Do not know about the future of

mutual fund in India, 40% people think that the future of mutual
fund is Bright.
 People who do not invest in mutual fund

 Also in India most of the people lack of awareness about mutual

fund. They don’t know any thing about what is mutual fund, how it
works. How fund managers invest people’s money in different
portfolios and provide the better returns to the customers.

 55% people were not considering to invest in mutual fund because

they have had bad experience or they simply don't have money to
invest.
 LIMITATIONS

There were certain limitations faced during the study.

 Some people were not willing to disclose the investment profile
 The biased ness was being taken care of.
 The area of sample was decided after taking into consideration the
major factors like
 Availability of investors
 Approachability,
 Time available with investor for interaction, etc.
 RECOMMENDATIONS

From my study I have found out that very less number of people are
aware about Mutual Funds so the various Asset Management
Companies should try to increase the Awareness level of the people
collectively in the interest of both the investors and the industry. The
advertisements should be put more into Financial Newspapers and on
Business Channels as they are considered as highly Reliable by the
investors.

Various Asset Management Companies such as Fidelty, Franklin

Templeton and other who were not in the top 5 companies as
perceived by the investors should try to increase the awareness level
of the people about their Brands.

To maintain the investor’s faith in a Brand name it must provide good

services and try to ensure the safety and profitability of their
investment as they correlate a Good Brand name with Good Service.
 CONCLUSION
Today large number of Mutual fund companies are there in the
market. Presently all the mutual fund companies are governed by the
rules and regulation framed by the (SEBI ) Securities and Exchange
Board of India.
Thus realizing the necessity of the performance appraisal of various
mutual fund schemes in the present scenario comparative study of
selected mutual fund schemes (Equity and tax saving schemes ) with
the SBI mutual fund schemes has been undertaken. Comparison
has been done taking into consideration the Various parameter like
standard deviation , sharpe ratio, R Squared ratio, Alpha values , beta
values etc.
In conducting the study secondary data has been used which was
collected from various books magazines, Newspapers , Internet,
etc.and required information was also collected from various Mutual
fund houses by visiting their offices.
The comparative analysis of the mutual fund schemes enables us to
rank the performance of various portfolios and evaluate the
adequacy of their performance. These are abundantally relied both
by the portfolio managers and investors in their investment decisions
making process. It is shown in the study that schemes have perform
well in the long run There are variation of return in the short run so
investor may get benefit from a particular scheme and may earn loss
in the short run but when we see the long run return the results are
satisfactory . Schemes selected in the study ie. Equity schemes and
Tax Saving schemes give better return over three year period, tax
saving schemes have lock in period of three year so these schemes
are better for long term investment they save tax and give
satisfactory return also. It is advisable for the investor to invest
money in the mutual fund for long period of time and not for a month
or two month , in the short run performance may or may not be
satisfactory, in the long run mutual fund give better return
 QUESTIONNIRE SURVEY
My Name is Lalit Kumar Chhoda; I am from “SBI Funds
Management Pvt. Ltd”. I have been advised to conduct a survey
concerning, “ To assess the Study of Consumer Awareness,
Perception and Practice Regarding of Mutual Fund Investment
and investors with various investment in mutual fund how to increase
the market potential of “SBI MUTUAL FUND”. The Objective of the
study is to know about the customer awareness, perception regarding of
mutual fund, and market potential of this organization and customers
desire related to current situation for improvement in quality of products
and performance of services of this organization. We will maintain full
secrecy of data provided by you. I would be greatly obliged if you will
fill this questionnaire.

QUESTIONNIRE SAMPLE

Q-1:- Do you invest in mutual fund?

Yes No

(A) If yes than

Q2:- What is your main objective of investing in mutual funds ?

Growth Liquidity Safety
Tax-saving Immediate gains Any other

Q3:- For how long have you been investing in mutual funds?
Less than 1 year Between 1 to 2 years
Between 2 to 3 years More than 3 years
Q4:- Which type of mutual fund do you own?
a. Sector wise
Public sector funds Private sector funds
b. Nature wise
Open ended funds Close ended funds
c. Type wise
Equity Debt
Balanced Blue chip
Q5:- Which information do you rely on?
Prospectus/Self analysis News-paper
Investment adviser TV.(CNBC,etc)
Friends/Relatives

Q6:- What is the most important criterion for you for selecting a
particular mutual fund?
Past performance Service
Promoter’s background Any other

Q7:- What is your level of satisfaction from your mutual fund?

Satisfied Dissatisfied
Neither satisfied Nor dissatisfied

Q8:- What deficiencies do you find in your mutual fund?

Track record Transparency
Service quality Any other
Q9:- If you are given an option to invest, in which mutual fund
would you like to invest in?
UTI mutual fund SBI mutual fund
Prudential ICICI mutual fund HDFC mutual fund
Franklin Templeton mutual fund HSBC mutual fund

Q10:- Are you aware that mutual fund industry is regulated by

SEBI?
Yes No

Q11:-Do you think SEBI regulations regarding mutual fund are

appropriate?
Yes No

Q12:-What do you think about the future of mutual fund in

India?
Very bright Bright
Very bleak Bleak
Does not know

If no then

Q13:- Why you have not invested in mutual fund?

Lack of information Past bad experience
High risk Any other

Q14:- Would you consider investing in mutual fund?

Yes No
NAME ______________________________________________________

SEX M F

AGE: <25 25-45

46-60 ABOVE 61

OCCUPATION:

SERVICE BUSINESS PROFESSIONAL

SELF EMPLOYED HOUSE WIFE

INCOME:

0-100000 100001-300000

300001-500000 500001 and above

ADDRESS---------------------------------------------------------------------------
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MOBILE-----------------------------------------
************************************THANKS*************************
********

BIBLIOGRAPHY

1. www.sbimf.co.in
2. www.mutualfundsindia.com
3. www.indiainfoline.com
4. www.amfiindia.com
5. www.sebi.gov.in
6. www.moneycontrol.com
7. www.valueresearchonlin.com
8. www.nseindia.com

Books Referred
Amfi Mutual funds

News Papers and Magazines

1. The Economic Times
2. Business Standard
3. Business World