ASSOCIATION OF MUTUAL FUND OF INDIA

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 organisation. 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 programme 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.

THE SPONSORERS OF ASSOCIATION OF MUTUAL FUNDS IN INDIA :

BANK SPONSORED
• SBI Fund Management Ltd.

• BOB Asset Management Co. Ltd.

• Can bank Investment Management Services Ltd.

• UTI Asset Management Company Pvt. Ltd.

Institutions

• GIC Asset Management Co. Ltd.

• Jeevan Bima Sahayog Asset Management Co. Ltd

Private Sector
Indian:-

• Benchmark Asset Management Co. Pvt. Ltd.

 • Cholamandalam Asset Management Co. Ltd.

• Credit Capital Asset Management Co. Ltd.

• Escorts Asset Management Ltd.

• JM Financial Mutual Fund

• Kotak Mahindra Asset Management Co. Ltd.

• Reliance Capital Asset Management Ltd.

• Sahara Asset Management Co. Pvt. Ltd

• Sundaram Asset Management Company Ltd.

• Tata Asset Management Private Ltd.

Predominantly India Joint Ventures:-

• Birla Sun Life Asset Management Co. Ltd.

• DSP Merrill Lynch Fund Managers Limited

• HDFC Asset Management Company Ltd.

Predominantly Foreign Joint Ventures:-

• ABN AMRO Asset Management (I) Ltd.

• Alliance Capital Asset Management (India) Pvt. Ltd.

• Deutsche Asset Management (India) Pvt. Ltd.

• Fidelity Fund Management Private Limited

• Franklin Templeton Asset Mgmt. (India) Pvt. Ltd.

• HSBC Asset Management (India) Private Ltd.

• ING Investment Management (India) Pvt. Ltd.

• Morgan Stanley Investment Management Pvt. Ltd.

• Principal Asset Management Co. Pvt. Ltd.

 • Prudential ICICI Asset Management Co. Ltd.

• Standard Chartered Asset Mgmt Co. Pvt. Ltd.

GLOSSARY OF SOME CONCEPTS

AMC

The AMC is the corporate entity, which markets and manager and manages a mutual
fund scheme and in return receives a management fee from the fund corpus. SEBI
specifies that an AMC must be separate entity the trust that manages it.

NAV

It is the value of unit of a Mutual Fund scheme and represents its true worth. NAV is
arrived at by dividing total value of all investment made under the scheme by number of
units of the scheme. NAV is critical yardstick of the funds performance.

UNITS

Units in a mutual fund scheme are similar to shares of a joint company. These are always
in denominations of Rs. 10 each the sum total of all the units constitutes corpus of mutual
fund.

SPONSORS

Sponsor of a mutual fund are those who establish the mutual fund trust and the AMC they
constitute the shareholders of the AMC and receive dividends on profits made by the
AMC. SEBI rules stipulate that mutual fund trust as well as the AMC must maintain an
arms length relationship with the sponsors to avoid any conflict to interests, which may
affect the unit holders.
INCOME FUND

These Funds invest largely in fixed income securities like bonds and debentures. Such
funds earn returns more regularly than a growth fund but level of returns over longer
periods normally lag behind those offered by growth funds while returns in such funds
may be regular, their scale may fluctuate depending upon the prevalent interest rates and
credit quality of the debt securities.

GROWTH FUNDS

Growth funds predominantly invest in stock market securities and carry risks larger than
income funds. Since stock markets travel through a natural cycle of boom and bursts one
should normally stay invested inequity funds for a longer times to earn higher returns.

Equity funds may earn higher but they also carry larger risks. For risk taking investor
equity are best suited.

BALANCED FUNDS

A balanced fund is the mixture of income fund and growth fund invested partly in equity
to achieve a trade-of between risk and return.

CLOSE ENDED

In a close-ended fund an investor is allowed to subscribe only during the period of the
initial offer. Close-ended funds mature after a specified period.

OPEN ENDED FUNDS

Funds in which investor can invest & withdraw whenever he wishes, after the close of
initial offer. Withdrawals are allowed at NAV minus a back end load.
LOCK IN PERIOD

Period of time during which you can neither redeem nor transfer your holdings to others.
Lock in period is imposed to allow fund manager to deploy money for an adequate period
of time to earn a reasonable return premature withdrawals may destabilize the fund & are
not beneficial to the interests of investors.

MANAGEMENT FEES

An AMC that mangers & markets a mutual fund scheme is entitled to a management
fee@ 1% to 25% of the total funds managed, it could be charged to the scheme
irrespective of the performance of the scheme.

REDEMPTION

Disbursement of the unit capital on maturity of the scheme to all exiting unit holders.

MARKET PRICE

Price at which units of mutual funds are quoted in stock exchange where they are listed.

REGISTRAR

Organization appointed by an AMC to the schemes it is registered, monitored, and

regulated by SEBI, it provides required services like system capabilities back up, accepts
and processes investors applications in informs AMC about amounts received/disbursed
for subscription/ purchase/ redemption it also handles communications with investors,
perform data entry services and dispatches account statements.

CUSTODAIN

Banking organization that keeps in safe custody all the securities & other instruments
belonging to the fund to insure smooth inflow & outflow of securities. It is also approved
regulated and registered with SEBI.
EXIT LOAD

Value of deduction from NAV on the date when one choose to withdraw from a fund,
load is imposed because withdrawals carry transaction cost to AMC it can not be more
than 6% of NAV of corpus as prescribed by SEBI many schemes offer redemption
facility without exit load.

ENTRY LOAD

Charge paid by unit holder when he invests an amount in the scheme. Mutual funds incur
many expenses during an issue, which are charged to the scheme. Such load is called
entry load.

LIQUIDITY

Ability of investors to change its unit into cash within minimum time as and when he
needs money.

TRANSPARENCY
Basic feature of mutual funds is transparency, their functioning is very efficient, well
monitored & transparent working of AMC is regulated by SEBI it is audited weekly, it
has to work under strict guidelines issued by SEBI, and its NAV is calculated and
published daily so that there is no chance of any default in the working of Mutual
Funds.
 INTRODUCTION

CONCEPT OF MUTUAL FUNDS

These days you are hearing more and more about mutual funds as a means of investment.
If you are like most people, you probably have most of your money in a bank savings
account and your biggest investment may be your home. Apart from that, investing is
probably something you simply do not have the time or knowledge to get involved in.
You are not the only one. This is why investing through mutual funds has become such a
popular way of investing.

WHAT IS A MUTUAL FUND?

Mutual fund is a mechanism for pooling the resources by issuing units to the investors
and investing funds in securities in accordance with objectives as disclosed in offer
document.

Investments in securities are spread across a wide cross-section of industries and sectors
and thus the risk is reduced. Diversification reduces the risk because all stocks may not
move in the same direction in the same proportion at the same time. Mutual fund issues
units to the investors in accordance with quantum of money invested by them. Investors
of mutual funds are known as unit holders.

The investors in proportion to their investments share the profits or losses. The mutual
funds normally come out with a number of schemes with different investment objectives,
which are launched from time to time. A mutual fund is required to be registered with
Securities and Exchange Board of India (SEBI), which regulates securities markets
before it can collect funds from the public.

WHAT DOES A MUTUAL FUND DO WITH INVESTOR'S MONEY?

Anybody with an investible surplus of as little as a few hundred rupees can invest in
mutual funds. The investors buy units of a fund that best suits their investment objectives
and future needs. A Mutual Fund invests the pool of money collected from the investors
in a range of securities comprising equities, debt, money market instruments etc. after
charging for the AMC fees. The income earned and the capital appreciation realized by
the scheme, are shared by the investors in same proportion as the number of units owned
by them.

MUTUAL FUNDS V/S PORTFOLIO MANAGEMENT SCHEMES

In case of mutual funds, the investments of different investors are pooled to form a
common investible corpus and gain/loss to all investors during a given period are same
for all investors while in case of portfolio management scheme, the investments of a
particular investor remains identifiable to him. Here the gain or loss of all the investors
will be different from each other.

MUTUAL FUND V/S BANK DEPOSIT

When you deposit money with the bank, the bank promises to pay you a certain rate of
interest for the period you specify. On the date of maturity, the bank is supposed to return
the principal amount and interest to you. Whereas, in a mutual fund, the money you
invest, is in turn invested by the manager, on your behalf, as per the investment strategy
specified for the scheme. The profit, if any, less expenses of the manager, is reflected in
the NAV or distributed as income. Likewise, loss, if any, with the expenses, is to be
borne by you.
TYPES OF RETURNS FROM A MUTUAL FUND :-

Mutual Funds give returns in two ways - Capital Appreciation or Dividend Distribution.

Capital Appreciation:

An increase in the value of the units of the fund is known as capital appreciation. As the
value of individual securities in the fund increases, the fund's unit price increases. An
investor can book a profit by selling the units at prices higher than the price at which he
bought the units.

Dividend Distribution: The profit earned by the fund is distributed among unit holders
in the form of dividends. Dividend distribution again is of two types. It can either be re-
invested in the fund or can be on paid to the investor.
 MUTUAL FUND TERMINOLOGY

NET ASSET VALUE (NAV)

Net Asset Value (NAV) denotes the performance of a particular scheme of a mutual fund.
In simple words, Net Asset Value is the market value of the securities held by the
scheme. Since market value of securities changes every day, NAV of a scheme also
varies on day-to-day basis. The NAV per unit is the market value of securities of a
scheme divided by the total number of units of the scheme on any particular date.

Unit Capital is the investor’s subscriptions. In mutual funds it is not treated as a liability.

Investments made on behalf of the investors are reflected on the assets side of the balance
sheet.

There are liabilities of short-term nature.

 Fund’s Net Asset = Asset – Liabilities
 Net Asset Value = Net Assets of the scheme / No. of Outstanding Units

The NAV reflects the liquidation value of the fund's investments on that particular day
after accounting for all expenses. It is calculated by deducting all liabilities (except unit
capital) of the fund from the realizable value of all assets and dividing it by number of
units outstanding.
For example, if the market value of securities of a mutual fund scheme is Rs 200 lakhs
and the mutual fund has issued 10 lakhs units of Rs. 10 each to the
investors, then the NAV per unit of the fund is Rs.20. NAV is required to be disclosed by
the mutual funds on a regular basis - daily or weekly - depending on the type of scheme.

The factors affecting the NAV are as following:

• Capital Gains or Losses on the sale or purchase of the Investment securities.

• Dividend and income earned on the assets.
• Capital Appreciation in the underlying value of the stocks held in the portfolio.
• Other assets and liabilities.
• Number of units sold or purchased.

LOAD

• The charge collected by a Mutual Fund from an investor for selling the units or
investing in it.
• When a charge is collected at the time of entering into the scheme it is called an
Entry load or Front-end load or Sales load. The entry load percentage is added to
the NAV at the time of allotment of units.
• An Exit load or Back-end load or Repurchase load is a charge that is collected at
the time of redeeming or for transfer between schemes (switch). The exit load
percentage is deducted from the NAV at the time of redemption or transfer
between schemes.
• Some schemes do not charge any load and are called "No Load Schemes"
SALE PRICE

It is the price paid by an investor when investing in a scheme of a Mutual Fund. This
price may include the sales or entry load.

MUTUAL FUND INVESTMENT CYCLE

Funds will also usually give you a choice either to receive a cheque for distributors or to
reinvest the earnings and get more shares. The flow chart above describes broadly the
working of mutual fund
MUTUAL FUND ORGANIZATION:-

There are many entities involved and the diagram below illustrates the organizational set
up of a mutual fund:
 ORGANISATION OF MUTUAL FUND INDUSTRY

STRUCTURE OF THE INDIAN MUTUAL FUND INDUSTRY :

The Unit Trust of India dominates the Indian mutual fund industry, which has a total
corpus of 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 category of mutual funds is the ones floated by nationalized banks.
Can bank 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 aggregate corpus of funds managed by this category of
AMCs is about Rs150bn.

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 Birla Sun Life AMC. The aggregate corpus of assets managed by this category of
AMCs is in excess of Rs250bn

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.

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.

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 crore at all
times.

REGISTRAR AND TRANSFER AGENT

The AMC if so authorized by the Trust Deed appoints the Registrar and Transfer Agent
to the Mutual Fund. The Registrar processes the application form; redemption requests
and dispatches account statements to the unit holders. The registrar and transfer agent
also handles communications with investors and updates investor records.

CUSTODIAN
Custodian is the agency, which will have the physical possession of all the securities
purchased by the mutual fund.

Deutsche Bank, AG
• The Trustee has appointed Deutsche Bank, AG located at Kodak House, Ground
Floor, 222 Dr. D.N.Road, Mumbai-400 001, as the Custodian of the securities that
are bought and sold under the Scheme. A Custody Agreement has been entered
with Deutsche Bank in accordance with SEBI Regulations. The Custodian is
approved by SEBI under registration no. IN/CUS/003 to act as Custodian for the
Fund.
 FUND STRUCTURE

Fund Sponsor

Trustees

Asset Management Company

Depository Agent

Custodian
 ADVANTAGES OF MUTUAL FUNDS

Small investments: Mutual funds help you to reap the benefit of returns by a portfolio
spread across a wide spectrum of companies with small investments. Such a spread
would not have been possible without their assistance.

Professional Fund Management: Professionals having considerable expertise,

experience and resources manage the pool of money collected by a mutual fund. They
thoroughly analyze the markets and economy to pick good investment opportunities.

Spreading Risk: An investor with a limited amount of fund might be able to to invest in
only one or two stocks / bonds, thus increasing his or her risk. However, a mutual fund
will spread its risk by investing a number of sound stocks or bonds. A fund normally
invests in companies across a wide range of industries, so the risk is diversified at the
same time taking advantage of the position it holds. Also in cases of liquidity crisis where
stocks are sold at a distress, mutual funds have the advantage of the redemption option at
the NAVs.

Transparency and interactivity: Mutual Funds regularly provide investors with

information on the value of their investments. Mutual Funds also provide complete
portfolio disclosure of the investments made by various schemes and also the proportion
invested in each asset type. Mutual Funds clearly layout their investment strategy to the
investor.

Liquidity: Closed ended funds have their units listed at the stock exchange, thus they can
be bought and sold at their market value. Over and above this the units can be directly
redeemed to the Mutual Fund as and when they announce the repurchase.

Choice: The large amount of Mutual Funds offers the investor a wide variety to choose
from. An investor can pick up a scheme depending upon his risk / return profile.
Regulations: All the mutual funds are registered with SEBI and they function within the
provisions of strict regulation designed to protect the interests of the investor.

Other Advantages of investing in a Mutual Fund are:

• Diversification
• Convenient Administration
• Return Potential
• Low Costs
• Flexibility
• Tax benefits
 INDIAN MUTUAL FUND INDUSTRY

The history of Indian mutual fund industry can be distinctly divided into two phases - the
period before liberalization when only public sector players existed with one dominant
player Unit Trust of India and the post-liberalization era where the industry
was opened up to private players.

Unit Trust of India (UTI) was established in 1963 and launched its legendary first
scheme 'US-64' in 1964. UTI witnessed a slow and steady growth over seventies and
eighties and by end of 1988 it had an AUM of Rs. 67,000 million. From 1987, non-UTI,
public sector mutual funds were allowed and public sector banks and financial
institutions set up a series of mutual fund companies. At the end of1993 the overall AUM
of mutual fund industry was Rs. 470,004 million.

The mutual fund industry was opened up for private participation 1993 and a new era
was ushered in, paving the way for an unprecedented choice of products and services to
Indian investors. Detailed guidelines were established and the mutual fund industry
(except UTI) came under the regulation of Securities Exchange Board of India (SEBI).
Many reputed foreign mutual funds such as Templeton, Alliance, Prudential group etc.
set up operations in India. As at the end of January 2003, there were 33 mutual funds
with total assets of Rs. 1,218,050 million.

In February 2003, the Unit Trust of India Act 1963 was repealed and UTI was broken
into two separate entities. One is the Specified Undertaking of the Unit Trust of India,
still under the control of Government of India with AUM of Rs. 298,350 million as at the
end of January 2003. 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.

As at the end of October 31, 2003, there were totally 31 funds in India, with assets under
management of about Rs. 1,267,260 million. As at the end of March 04, the total of
mutual fund reaches to 1,396,160 million. As the end of September 2004, there were 29
funds, which manage assets of Rs. 1531080 million under 521 schemes. But at the end of
financial year (05-06) the total of Mutual Fund reaches Rs. 2318620 million.

The MAJOR PLAYERS in the Indian Mutual Fund Industry are:

GROWTH IN ASSETS UNDER MANAGEMENT

 HISTORY OF THE INDIAN MUTUAL FUND
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

An Act of Parliament established Unit Trust of India (UTI) on 1963. 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 (lOBI) 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 (LlC) and General Insurance Corporation
of India (GIC). SBI Mutual Fund was the first non- UTI Mutual Fund established in June
1987 followed by Can bank 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). LlC 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- 1996 EMERGENCE OF PRIVATE FUNDS

A new era in the Mutual Fund industry began in 1993 with the permission granted for the
entry of private sector funds. This gave the Indian investor a broader choice of fund
families and an increasing competition to the existing public sector funds. Quite
significantly, foreign fund management companies were also allowed to operate mutual
funds. These private funds have brought with them the latest product innovation,
investment management techniques and investor servicing technology that make the
Indian mutual fund industry today a vibrant and growing financial intermediary. The
factors that contributed to greater inventor’s confidence were:

1. The development of SEBI, s regulatory framework for the Indian mutual fund
industry.
2. The steadily improving performance of several funds houses.
Investors now clearly saw the benefits of investing through mutual funds and
became discerning and selective.

FOURTH PHASE - 1996-1999: GROWTH AND SEBI REGULATION

Since 1996 the mutual fund industry in India saw tighter regulation and higher growth. It
scaled new heights in terms of mobilization of funds and number of players. Measures
were taken by SEBI to protect the investor and by the Government to enhance investor's
returns through tax benefits. A comprehensive set of regulation for all mutual funds
operating in India was introduced with SEBI Regulation s, 1996. These regulations set
uniform standards for all funds. Similarly the Budget of Union Government in 1996 took
a big step in exempting all mutual funds dividends from income tax in the hands of
investors. . During this phase, both SEBI and AMFl launched investor awareness
programmed aimed at educating the investors in investing through mutual funds.

FIFTH PHASE - 1999-2004: EMERGENCE OF LARGE AND UNIFORM

INDUSTRY

The other major development in the fund industry has been the creation of level playing
field for all mutual funds operating in India. This happened in February 2003, when the
UTI Act was repealed .UTI no longer had a special legal status and had to adopt the
same structure as any other fund in India -a Trust and an Asset Management Company.
Between 1999 and 2005, the size of the industry has doubled in terms of assets under
management, which have gone from about Rs. 6800 to over Rs. 150,000 crores. Within
the growing industry relative market shares of different players in terms of amount
mobilized and assets under Management has also undergone changes.

SIXTH PHASE - 2004: CONSOLIDATION AND GROWTH

The industry has lately witnessed a spate of mergers and acquisitions, most recent one
being the acquisition of schemes of Alliance Fund by Birla Sun Life etc. At the same
time, more international players continue to enter India .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.
 TYPES OF MUTUAL FUND SCHEMES

Wide variety of Mutual Fund Schemes exists to cater to the needs such as financial
position, risk tolerance and return expectations etc. The table below gives an overview
into the existing types of schemes in the Industry.
 TYPES OF MUTUAL FUNDS SCHEMES :

Mutual fund schemes may be classified on the basis of its structure and its investment
objective.

BY STRUCTURE:

OPEN-ENDED FUND/ SCHEME

• Available for subscription and repurchase on a continuous basis.
• These schemes do not have a fixed maturity period.
• Investors can conveniently buy and sell units at Net Asset Value (NAV) related
prices, which are declared on a daily basis.
• The key feature of open-end schemes is liquidity.
• Unit capital of the fund is not fixed but variable.
• Fund size and its total investment go up if more new subscriptions come in than
redemptions and vice-versa.

CLOSE-ENDED FUND/SCHEME
• Stipulated maturity period e.g. 5-7 years.
• Fund is open for subscription only during a specified period at the time of
launch of the scheme.
• 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 the units are listed.
• Investors are not allowed to buy or redeem the units directly from the funds.
• Some funds offer repurchase after a fixed period. For example, UTI MIP offers
a repurchase after 3 years.
• Units’ maybe traded at a discount or premium to NAV based on investor’s
perception about the funds future performance and other market factors.
DIFFERENCE BETWEEN OPEN-END AND CLOSED-END FUNDS

Open-end funds, also known as mutual funds, are open to new investors (they can create
as many shares as needed). However, when a mutual fund closes to new investors it does
not make it a closed-end fund. When a mutual fund closes, it still allows current investors
to buy more shares and when those investors want to sell their holdings, they don't need
to find a buyer.

Closed-end funds, on the other hand, have a fixed number of shares. Much like a new
publicly traded stock, closed-end funds have an IPO. They also trade according to market
demands. Every seller must have a buyer.

ADVANTAGES OF CLOSED-END FUNDS

• Closed-end funds can sometimes be purchased at a discount, meaning they are

trading below their NAV.
• Closed-end funds can sometimes be sold at a premium, meaning they can be sold
for more than their NAV. Remember, buy low, sell high.
• Closed-end funds have access to some investments and strategies that mutual
funds shy away from. Examples include buying illiquid securities or using
leverage.

DISADVANTAGES OF CLOSED-END FUNDS

• As mentioned above, the fund shares could be trading at a discount or premium,

which could work against you.
• Closed-end funds are plagued with broker trading fees.
• Closed-end funds are generally riskier.
 • Closed-end funds are less liquid, meaning they are much harder to sell. Unlike
mutual funds, the shares are not redeemable (meaning the company does not have
to buy the shares back)

• Closed-end funds tend to charge between 1-2 percent a year for management fees.
• Closed-end fund price information is not always available.

As a general rule, open-end funds attract better management talent because they can
grow by attracting new investors over time.

INTERVAL FUNDS.

• These funds combine the features of both open–ended and close-ended funds wherein the
fund is close-ended for the first couple of years and open-ended thereafter.

• Some funds allow fresh subscriptions and redemption at fixed times every year (say
every six months) in order to reduce the administrative aspects of daily entry or exit, yet
providing reasonable liquidity.

BY INVESTMENT OBJECTIVE:

GROWTH FUNDS
The aim of growth funds is to provide capital appreciation over the medium to long-
term. Such schemes normally invest a majority of their corpus in equities. It has been
proven that returns from stocks, have outperformed most other kind of investments held
over the long term. Growth schemes are ideal for investors having a long-term outlook
seeking growth over a period of time.
INCOME FUNDS
• Invest in debt instruments issued not only by government, but also by private
companies, banks and financial institutions and other entities such as
infrastructure companies/utilities.
• Target low risk and stable income for the investor and not capital appreciation.
• Have higher price fluctuation as compared to money market funds due to interest
rate fluctuation.
• Have a higher risk of default by borrowers as compared to Gilt funds.
• Carry both credit risk and interest rate risks.
• Debt funds can be categorized further based on their risk profiles.
• Are best suited for the medium to long-term investors who are averse to risk and
seek capital preservation.

TYPES OF INCOME FUNDS

 Diversified Debt Funds

 Focused Debt Funds
 High yield Debt Funds
 Assured return Debt funds

BALANCED FUNDS / HYBRID FUNDS

Aim of Hybrid funds is to provide both growth and regular income as such schemes have
a portfolio comprising of debt instruments, convertible securities, and preference and
equity shares.
• Almost equal proportion of debt/money market securities and equities. Normally
funds maintain a Equity-Debt ratio of 55:45 or 60:40.
• Objective is to gain income, moderate capital appreciation and preservation of
capital.
• Ideal for investors with a conservative and long-term orientation.
TYPES OF HYBRID FUNDS
• Balanced funds- seek to provide regular income and capital appreciation
• Growth income funds- seek to provide high dividend and capital appreciation
• Asset allocation funds- flexible asset allocation between debt equity and Money
Market

MONEY MARKET FUNDS

• Invest in securities of short-term nature I.e. less than one-year maturity.

• Invest in Treasury bills issued by government, Certificates of deposit issued by
banks; Commercial Paper issued companies, government securities and inter-bank
call money.
• Aim to provide easy liquidity, preservation of capital and moderate income.
• High liquidity and safety of principal
• Low risk and low returns
• Period of investment could be as short as a day.
• Have emerged as an alternative for savings and short-term fixed deposit accounts
with comparatively higher returns.
• These funds are ideal for Corporate, institutional investors and business houses

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.

OTHER SCHEMES:

TAX SAVING SCHEMES

These schemes offer tax rebates to the investors under specific provisions of the Indian
Income Tax laws as the Government offers tax incentives for investment in specified
avenues. Investments made in Equity Linked Savings Schemes (ELSS) and Pension
Schemes are allowed as deduction u/s 88 of the Income Tax Act, 1961. The Act also
provides opportunities to investors to save capital gains u/s 54EA and 54EB by investing
in Mutual Funds, provided the capital asset has been sold prior to April 1, 2000 and the
amount is invested before September 30, 2000.

SPECIAL SCHEMES
 Industry Specific Schemes
Industry Specific Schemes invest only in the industries specified in the offer document.
The investment of these funds is limited to specific industries like InfoTech, FMCG, and
Pharmaceuticals etc

 Index Schemes
Index Funds attempt to replicate the performance of a particular index such as the BSE
Sensex or the NSE 50

 Sectoral Schemes
Sectoral Funds are those, which invest exclusively in a specified industry or a group of
industries or various segments such as 'A' Group shares or initial public offerings.
 LOOK BEFORE INVESTMENT

The mutual funds industry in India has also finally come of age. An indication of this is
the number and variety of funds offered by the issuers, as well as the depth of the market
in terms of the secondary trading. So today one doesn’t need Rs. 100,000 minimum to
start investing in shares of sensex pivotal. One can invest in them for as little as Rs 1000.
Also diversification, sector concentration, availing of the interest rate swings is all-
possible through the diversified or sector dedicated as well as Debt funds. Mutual funds
issuers have cast their nets wide by offering a plethora of instruments which aim to
maximize returns while minimizing risk They offer the advantage of professionals
managing your money; and the funds are usually liquid.

CHECK OUT THE MACROS

Don’t just blindly look at every new float as an opportunity to invest. As you would do
with investing in the market directly, always keep the background in mind. What are the
current economic scenario, industrial growth, and liquidity position in the markets?
Don’t be alarmed by all the economic jargon, just a thorough read of the newspaper
everyday will give you all this dope. Against a turbulent background, where the economy
is in a downtrend, the liquidity position is tightening, inflation is up, perhaps you can
wait to pick up the new float after it is listed rather than at the time of the offer.
SENSE OF THE SENSEX

One of the cardinal rules of investing is getting the price right. So, watch the sensex has
it been rising or falling, or has it been steady. In case the sensex has been consistently on
a high, then remember, the fund will invest your money into scrip’s at these high prices,
and then perhaps it will not be able to generate a positive momentum in its NAV, as these
prices may be difficult to reach again. Remember the InfoTech funds which today are
quoting below par, they had all invested in the frenzy of the ICE age and have been
caught on the wrong foot in the subsequent meltdown.
INTEREST RATES AND LIQUIDITY
In case you are keen on a balanced or debt fund, you must check out the interest rate
scenario. Remember the basic rule - interest rates and bond prices are inversely
proportional. When one goes up, the other comes down. So in case you are expecting a
fall in the interest rates, which normally happens when the liquidity position is loose in
the market, look for investing in Debt funds (which have a medium to long term
horizon). In case you are expecting a rise in the interest rates then look at Gilt funds
(which have a shorter time horizon) or at balanced funds.

CHECK OUT THE MICROS

After a risky of the Macros, it is time to check out the Micros. What is the parentage of
the Fund house proposing the issues what has been their past in terms of good
management and reporting practices, dispatch of dividends and certificates etc? Their
financial performance in terms of dividend and NAVs. Look at the track record of the
mutual fund under consideration, track record of the fund manager (if possible) and
objectives of the particular scheme. Other aspects like availability of an exit route,
specific service standards promised (like maximum time to be taken in mailing
repurchase/redemption proceed).

Lastly, Time the market. As we had mentioned earlier timing the market is the essence of
success. See if the time is right to invest in equity funds, i.e.-overall economic scenario
seems positive, sensex has been on the upswing but not necessarily peaking, overall
sentiment is flat to good. For balanced funds to debt funds check out the interest rate
scenario. And then decide which type of fund you want to invest in. Have a look at the
NAV performance of other funds floated in the same quarter.

POINTS TO REMEMBER BEFORE INVESTMENT :

1) People invest in mutual funds in order to achieve diversification without the time and
cost of tracking hundreds of individual securities.

2) There is no ideal number of mutual funds to own.

3) Before picking a mutual fund, consider your investment goals, time frame, and
amount of investment capital.

4) Diversify among different asset classes to help reduce risk and potentially increase the
rate of return of your portfolio.

5) Diversify among different investment styles to potentially reduce risk and increase
returns.

6) Owning too many funds means you may be paying for active management when you
really hold the market.

7) Your investment adviser can help you evaluate each fund to determine its role in your
portfolio.

8) In choosing mutual funds, your first task is to formulate your investment objectives
and identify your time frame.

9) The next step is to identify which types of mutual funds match your investment goals
and risk tolerance.

10) Companies such as Crisil and dedicated websites provide statistical information on
mutual funds.

ABOUT THE COMPANY

RELIANCE CAPITAL ASSET MANAGEMENT LTD.

Reliance Capital Asset Management Ltd. (RCAM), a company registered under the
Companies Act, 1956 was appointed to act as the Investment Manager of Reliance
Mutual Fund (w.e.f November 2003, the name of Reliance Capital Mutual Fund has been
changed to -Reliance Mutual Fund). It is a wholly owned subsidiary of Reliance
Capital Ltd.

Reliance Capital Asset Management Limited is a wholly owned subsidiary of Reliance

Capital Limited, the sponsor. The entire paid-up capital (100%) of Reliance Capital
Asset Management Limited is held by Reliance Capital Limited. Reliance Capital Asset
Management Limited was approved as the Asset Management Company for the Mutual
Fund by SEBI vide their letter no IIMARP/1264/95 dated June 30, 1995. The Mutual
Fund has entered into an Investment Management Agreement (IMA) with RCAM dated
May 12, 1995 and was amended on August 12, 1997 in line with SEBI (Mutual Funds)
Regulations, 1996. Pursuant to this IMA, RCAM is authorized to act as Investment
Manager of Reliance Mutual Fund. The net worth of the Asset Management Company
including preference shares as on March 31, 2005 is Rs.30.13 crores. Reliance Mutual
Fund has launched twenty five Schemes till date, namely: Reliance Vision Fund
(September 1995), Reliance Growth Fund (September 1995) Reliance Income Fund
(December 1997), Reliance Liquid Fund (March 1998), Reliance Medium Term Fund
(August 2000), Reliance Short Term Fund (December 2002), Reliance Fixed Term
Scheme (March 2003), Reliance Banking Fund (May 2003), Reliance Gilt Securities
Fund (July 2003), Reliance Monthly Income Plan (December 2003), Reliance
Diversified Power Sector Fund (March 2004) Reliance Pharma Fund ( May 2004),
Reliance Floating Rate Fund (August 2004), Reliance Media & Entertainment Fund
(September 2004), Reliance NRI Equity Fund (October 2004), Reliance NRI Income
Fund (October 2004), Reliance Index Fund (January 2005), Reliance Equity
Opportunities Fund (February 2005), Reliance Fixed Maturity Fund - Series I (March
2005), Reliance Fixed Maturity Fund - Series II (April 2005), Reliance Regular Saving
Fund (May 2005), Reliance Liquidity Fund (June 2005), Reliance Tax Saver (ELSS)
Fund (July 2005), Reliance Fixed Tenor Fund (November 2005) and Reliance Equity
Fund (Feb 2006).

RELIANCE MUTUAL FUND

Reliance Mutual Fund (RMF) has been established as a trust under the Indian Trusts Act,
1882 with Reliance Capital Limited (RCL), as the Settler/Sponsor and Reliance Capital
Trustee Co. Limited (RCTCL), as the Trustee.

RMF has been registered with the Securities & Exchange Board of India (SEBI) vide
registration number MF/022/95/1 dated June 30, 1995. The name of Reliance Capital
Mutual Fund has been changed to Reliance Mutual Fund effective 11th. March 2004 vide
SEBI's letter no. IMD/PSP/4958/2004 date 11th. March 2004. Reliance Mutual Fund was
formed to launch various schemes under which units are issued to the Public with a view
to contribute to the capital market and to provide investors the opportunities to make
investments in diversified securities.

The main objectives of the Trust are:

 • To carry on the activity of a Mutual Fund as may be permitted at law and
formulate and devise various collective Schemes of savings and investments for
people in India and abroad and also ensure liquidity of investments for the Unit
holders;
• To deploy Funds thus raised so as to help the Unit holders earn reasonable returns
on their savings and
• To take such steps as may be necessary from time to time to realize the effects
without any limitation.

THE PRODUCTS

EQUITY SCHEMES :-

RELIANCE EQUITY FUND

(An open-ended diversified Equity Scheme.) The primary investment objective of the
scheme is to seek to generate capital appreciation & provide long-term growth
opportunities by investing in a portfolio constituted of equity & equity related securities
of top 100 companies by market capitalization & of companies which are available in the
derivatives segment from time to time and the secondary objective is to generate
consistent returns by investing in debt and money market securities.

RELIANCE TAX SAVER (ELSS) FUND

(An Open-ended Equity Linked Savings Scheme.) The primary objective of the scheme is
to generate long-term capital appreciation from a portfolio that is invested predominantly
in equity and equity related instruments.
RELIANCE EQUITY OPPORTUNITIES FUND
(An Open-Ended Diversified Equity Scheme.) The primary investment objective of the
scheme is to seek to generate capital appreciation & provide long-term growth
opportunities by investing in a portfolio constituted of equity securities & equity related
securities and the secondary objective is to generate consistent returns by investing in
debt and money market securities.

RELIANCE VISION FUND

(An Open-ended Equity Growth Scheme.) The primary investment objective of the
Scheme is to achieve long-term growth of capital by investment in equity and equity
related securities through a research based investment approach.

RELIANCE GROWTH FUND

(An Open-ended Equity Growth Scheme.) The primary investment objective of the
Scheme is to achieve long-term growth of capital by investment in equity and equity
related securities through a research based investment approach.

RELIANCE INDEX FUND

(An Open Ended Index Linked Scheme.) The Investment Objective under the Nifty Plan
is to replicate the composition of the Nifty, with a view to endeavor to generate returns,
which could approximately be the same as that of Nifty. The Investment Objective under
the Sensex plan is to replicate the composition of the Sensex, with a view to endeavor to
generate returns, which could approximately be the same as that of Sensex.

RELIANCE NRI EQUITY FUND

(An open-ended Diversified Equity Scheme.) The Primary investment objective of the
scheme is to generate optimal returns by investing in equity or equity related instruments
primarily drawn from the Companies in the BSE 200 Index.

DEBT SCHEMES :-

RELIANCE MONTHLY INCOME PLAN

(An Open Ended Fund. Monthly Income is not assured & is subject to the availability of
distributable surplus) The Primary investment objective of the Scheme is to generate
regular income in order to make regular dividend payments to unit holders and the
secondary objective is growth of capital. Primarily the investment shall be made in debt
and money market securities (i.e. 80%) with a small exposure (i.e. up to 20%) in equity.

RELIANCE GILT SECURITIES FUND

(Short Term Gilt Plan & Long Term Gilt Plan Open-ended Government Securities
Scheme) - The primary objective of the Scheme is to generate Optimal credit risk-free
returns by investing in a portfolio of securities issued and guaranteed by the central
Government and State Government

RELIANCE INCOME FUND

(An Open-ended Income Scheme) The primary objective of the scheme is to generate
optimal returns consistent with moderate levels of risk. This income may be
complemented by capital appreciation of the portfolio. Accordingly, investments shall
predominantly be made in Debt & Money Instruments.

RELIANCE MEDIUM TERM FUND

(An Open End Income Scheme with no assured returns.) The primary investment
objective of the Scheme is to generate regular income in order to make regular dividend
payments to unit holders and the secondary objective is growth of capital

RELIANCE SHORT TERM FUND

(An Open End Income Scheme) The primary investment objective of the scheme is to
generate stable returns for investors with a short investment horizon by investing in Fixed
Income Securities of short term maturity.

RELIANCE LIQUID FUND

(Open-ended Liquid Scheme). The primary investment objective of the Scheme is to
generate optimal returns consistent with moderate levels of risk and high liquidity.
Accordingly, investments shall predominantly be made in Debt and Money Market
Instruments.

RELIANCE FIXED TERM SCHEME

(Close-ended Income Scheme) The primary objective of the Scheme is to seek to achieve
regular returns / growth of capital by investing in a portfolio of fixed income securities
normally maturing in line with the time profile of the plan with the objective of limiting
interest rate volatility.

RELIANCE FLOATING RATE FUND

(An Open End Income Scheme) The primary objective of the scheme is to generate
regular income through investment in a portfolio comprising substantially of Floating
Rate Debt Securities (including floating rate securitised debt and Money Market
Instruments and Fixed Rate Debt Instruments swapped for floating rate returns). The
scheme shall also invest in Fixed rate debt Securities (including fixed rate securitised
debt, Money Market Instruments and Floating Rate Debt Instruments swapped for fixed
returns

RELIANCE NRI INCOME FUND

(An Open-ended Income scheme) The primary investment objective of the Scheme is to
generate optimal returns consistent with moderate levels of risks. This income may be
complimented by capital appreciation of the portfolio. Accordingly, investments shall
predominantly be made in debt Instruments.
RELIANCE FIXED MATURITY FUND - SERIES I
(A Close Ended Income Scheme)The primary investment objective of the Scheme is to
seek to achieve regular returns / growth of capital by investing in a portfolio of fixed
income securities normally maturing in line with the time profile of the Plan with the
objective of limiting interest rate volatility.

RELIANCE FIXED MATURITY FUND - SERIES II

(A closed ended Income Scheme) The primary investment objective of the Scheme is to
seek to achieve growth of capital by investing in a portfolio of fixed income securities
normally maturing in line with the time profile of the respective plans.

RELIANCE LIQUIDITY FUND

(An Open - ended Liquid Scheme) The investment objective of the Scheme is to
generate optimal returns consistent with moderate levels of risk and high liquidity.
Accordingly, investments shall predominantly be made in Debt and Money Market
Instruments.

RELIANCE REGULAR SAVINGS FUND(AN OPEN - ENDED SCHEME)

THE INVESTMENT OBJECTIVES:

Debt Option: The primary investment objective of this plan is to generate optimal
returns consistent with moderate level of risk. This income may be complemented by
capital appreciation of the portfolio. Accordingly investments shall predominantly be
made in Debt & Money Market Instruments.
Equity Option: The primary investment objective is to seek capital appreciation and or
consistent returns by actively investing in equity / equity related securities.
Hybrid Option: The primary investment objective is to generate consistent return by
investing a major portion in debt & money market securities and a small portion in equity
& equity related instruments.

SECTOR SPECIFIC SCHEMES :-

Sector Funds are specialty funds that invest in stocks falling into a certain sector of the
economy. Here the portfolio is dispersed or spread across the stocks in that particular
sector. This type of scheme is ideal for investors who have already made up their mind to
confine risk and return to a particular sector.

RELIANCE BANKING FUND

Reliance Mutual Fund has an Open-Ended Banking Sector Scheme which has the
primary investment objective to generate continuous returns by actively investing in
equity/equity related or fixed income securities of banks.
RELIANCE DIVERSIFIED POWER SECTOR FUND
Reliance Diversified Power Sector Scheme is an Open-ended Power Sector Scheme -
The primary investment objective of the Scheme is to seek to generate consistent returns
by actively investing in equity / equity related or fixed income securities of Power and
other associated companies.

RELIANCE PHARMA FUND

(Reliance Pharma Fund is an Open-ended Pharma Sector Scheme) The primary
investment objective of the Scheme is to generate consistent returns by investing in
equity / equity related or fixed income securities of Pharma and other associated
companies.

RELIANCE MEDIA & ENTERTAINMENT FUND

(Reliance Media & Entertainment Fund is an Open-ended Media & Entertainment sector
scheme). The primary investment objective of the Scheme is to generate consistent
returns by investing in equity / equity related or fixed income securities of media &
entertainment and other associated companies.
SALIENT FEATURES :

§ Record collection of over Rs. 5700 crore from over 9.29 lac applications. § Highest
NFO collection ever in the history of the Indian mutual fund industry.

March 14, 2008: The recently concluded Reliance Equity Fund NFO has created history
with collections of over Rs. 5700 crores from over 9.29 Lac applications. The fund has
received a tremendous response from investors across the length and breadth of the
country. A diversified equity fund with derivative strategies that aim to minimize risk
and take advantage of both the rising and falling market conditions, the Reliance Equity
Fund was launched at a time when the markets were at an all time high and there was a
need for such an innovative product. Because markets may rise. And markets may fall.
Went the advertisements, striking just the right chord amongst the investor community.
Backed by a huge marketing push, the Reliance Equity Fund NFO collection is the
highest ever in the 42-year history of the Mutual Fund industry in the country. It has
replaced the 14-year-old record of the UTI Mastergain IPO. Mastergain had garnered Rs.
4,472 crore. The recent record mobilization in any equity fund was Rs. 2,855 crore
mopped up by SBI Mutual Fund in its Blue Chip Fund that closed this January.

The Reliance Equity Fund aims to capitalize on both the rising and falling markets. The
investment strategy being that even if the markets go down, the fund has a part of its
portfolio hedged, which aims at minimizing the downside risk. The fund will not only
use hedging techniques to limit the downside risk but will also try & capitalize on short
selling opportunities to generate additional returns for the investors
 BOARD OF DIRECTORS & MANAGEMENT TEAM

• Board of Directors
• Amitabh Jhunjhunwala
• Amitabh Chaturvedi
• Kanu Doshi
• Manu Chadha
• Management Team

• President
Vikrant Gugnani
• Chief Investment Officer
K.Rajagopal
• Head Equity Investments
Madhusudan Kela
• Equity Fund Managers
• Equity Fund Manager
 Ashish N Mehta

• Equity Fund Manager

Sunil B. Singhania

• Equity Fund Manager

Ashwani Kumar

• Equity Fund Manager

Shailesh Raj Bhan

• Debt Fund Managers

Head Fixed Income : Amitabh Mohanty

• Debt Fund Manager

Amit Tripathi

• Debt Fund Manager

Ramesh Rachuri

• Debt Fund Manager

Prashant Pimple

• Head Of Departments
• Brand and Communication
Abraham Alapatt
• Finance and Accounts
Amit Bapna
 • Human Resource Development
Rajesh Derhgawen

• Information Technology
Vinay Nigudkar

• Legal & Compliance

Balkrishna Kini

• Operations & Settlement

Geeta Chandran

• Product Management
Ramaswamy Subramanian
• R&T operations
Prashanth D Pereira
• Risk Management
Sangya Nigam
• Sales and Distribution
Sundeep Sikka

ZONAL HEADS

Northern Zone Head Himanshu Vyapak

Western Zone Head Devendra Daga

Eastern Zone Head Gurbir Chopra

THE SPONSORS.
RELIANCE CAPITAL LIMITED
Registered Office
Reliance Capital Ltd, Village Meghpar, Padana Taluka Lalpur, District Jamnagar -
361280 - Gujarat.

Corporate Office
Reliance Capital Ltd. Old ICI Godown, Fosbery Road, Off Reay Road Station (East),
Mumbai - 400033.

Reliance Capital Asset Management Ltd. is a wholly owned subsidiary of Reliance

Capital Limited, the sponsor. The entire paid-up capital (100%) of Reliance Capital
Asset Management Ltd is held by Reliance Capital Ltd.

OBJECTIVES OF THE STUDY

1. The objective of the research is to study and analyze the awareness level of

investors of mutual funds through Reliance Mutual fund .

2. To measure the satisfaction level of investors regarding mutual funds.

3. An attempt has been made to measure various variable’s playing in the minds of

investors in terms of safety, liquidity, service, returns, tax efficiency.

 RESEARCH METHODOLOGY

My research project has a specified framework for collecting the data in an effective
manner. Such framework is called “RESEARCH DESIGN”. The research process which
was followed by me consisted following steps.

A. PROBLEM:

The problem at hand was to study and measure the awareness level of people regarding
mutual funds in the city.

B. DEVELOPING THE RESEARCH PLAN :

The development of Research Plan has the following Steps :

DATA SOURCES
Two types of data were taken into consideration i.e. Secondary data & primary data. My
major emphasis was on gathering the primary data. The secondary data has been used to
make things more clear.

i. Primary Data: Direct collection of data from the source of information,

technology including personal interviewing, survey etc.
ii. Secondary Data: Indirect collection of data from sources containing
past or recent past information like Bank’s Brochures, Annual publications,
Books, Newspaper & Magazines etc.

RESEARCH INSTRUMENT

A close friend questionnaire was constructed for my survey. A Questionnaire consisting a

set of questions was presented to respondents for their answers.

SAMPLING PLAN

The sampling plan calls for three decisions.

a. Sampling Unit: I have completed my survey in Yamuna Nagar District .

b. Sample Size: The sample consisted of 50 respondents. The sample was drawn
from walk in customers of Reliance Mutual fund. The selection of the
respondents was done on the basis of simple random sampling.
c. Contact Methods : I have contacted the respondents through personal
interviews.

COLLECTING THE INFORMATION

After this, I have collected the information from the respondents with the help of
questionnaire

ANALYZE THE INFORMATION

The next step is to extract the pertinent findings from the collected data. I have tabulated
the collected data & developed frequency distributions. Thus the whole data was grouped
aspect wise and was presented in tabular form. Thus, frequencies & percentages were
prepared to render impact of the study.

LIMITATIONS

• Due to paucity of time and resources a countrywide survey was not possible.

Hence only Yamuna Nagar district has been taken for the study.

• Since a smaller sample was chosen so it may not be a true representative of the

population under study.

• The possibility of the respondent’s responses being biased cannot be ruled out.

RELIANCE MUTUAL FUND,

SALES
OPERATIONS
o INHOUSE IFA’S
 o KARVY BACKEND BANKS-
SERVICE PRIVATE BANKS
PUBLIC SECTOR
BANKS

OPERATIONS AND CUSTOMER SATISFACTIONS

IMPORTANCE OF OPERATIONS AND CUSTOMER SATISFACTION

What makes service industry so distinct from manufacturing ones is their immediacy.
Balancing the supply and demand sides is not easy. Services are direct; they cannot be
inventoried. The perishability of services leaves the manager without an important buffer
that is available to manufacturing managers. Whereas the consumption of goods can be
delayed, as a general rule services are produced and consumed almost simultaneously.
There is a high degree of producer consumer interaction in the production of service,
which is a mixed blessing; on the one hand, consumers are a source of productive
capacity, but on the other, the consumer’s role creates uncertainty for managers about the
process’s time, the product’s quality, and the facility’s accommodation of the consumer’s
needs.

Operations form the spinal cord, which supports the organization. It not only helps in
saving huge amount of hidden cost but it also generates huge amount of profit as in the
process of handling queries it creates a sale. Furthermore, it supplies adequate
information to each and every person associated with the organization. A great deal of
focus is on efficiency and effectiveness of processes. Therefore, operations management
often includes substantial measurement and analysis of internal processes.

CUSTOMER RELATIONSHIP
 Barnes’ 4 R’s
Customer Customer
Retention Relationships

Customer Recovery
Referrals

Custome
r
Satisfact
ion

Custome
r
Retentio Quality
n& services
Increase
d Profits

Employe
e
Loyalty

INHOUSE
 • Receiving of applications from different brokers, Banks & investors directly
before 3 p.m.
• Scrutinize the applications for investor’s Bank Account no., Pan no., Address,
Broker’s code, His signature.
• Make sure the cheque is not post-dated & it should be of local clearing with
customer’s signature.
• At the time of punching, it should be noted that the punching machine releases the
same stamp.
• Out of these, one should be on application form; one on the backside of the
cheque & the third stamp is for the purpose of customers on acknowledgement.
• A DTR (Daily Transactions Record) prepares to keep a track of the transactions.
• Applications, if related to liquid funds then we do all punching, keep all record &
then send to near Karvy Branch.
• Cheques are then send to respective Bank. The respective amounts are credited
into the bank accounts of various schemes of Reliance Mutual fund.
• Applications, if related to non-liquid funds then we only put time punching on
that & send to the Registrar Karvy Branch.
• When customers apply in particular fund then they receive statement next day.

KARVY BACKEND SERVICE

• Receive applications from our office after 3 p.m. & then Karvy put data punching
in K-BOLT (Karvy Branch Online transactions)
• Send scan image or hard copy of transactions & DTR report to Karvy Head
Office, Hyderabad & send cheques to HDFC bank.
• HDFC bank give report about the clearance or rejection of the cheques to Karvy.
• Keep all record of rejection of cheques for future references. Rejection can be
arise by mis-matching of signatures, post-dated cheques or incomplete bank
details.
 • If cheque clears then the respective amount credited into bank accounts of various
schemes of Reliance Mutual Fund.
• Karvy Head Office sends all record to Reliance Head Office, Mumbai.
•
Operations required a lot of observation and involvement in the day-to-day working and
grasping things rapidly. The foremost was how one can improve the systems to help the
individual working at the reception to minimize his time in searching for things like
papers, files etc. and thereby maximizing time with the investor by assisting him
promptly and efficiently which is only possible if things are organized.

The major areas of Queries by:

INVESTORS

• Non receipt of statements

• Corrections in the details in the statement
• Problem in SIP/STP
• Non-receipt of dividend cheques
• Non-receipt of redemption amount

BROKERS

• Delay in brokerage
• No updation of Broker’s code in switch transactions.
• Wrong updation of Broker’s code
• No information about rejection.

SALES
In business, the competition
will bite you if you
keep running. If you
stand still, they will
swallow you.
- William S. Knudsen

If you make a sale you

make a living. If you
make an investment of
time and good service
In a customer, you can
Make a fortune.
- Jim Rohn

Selling is a highly misunderstood profession. Many people, when asked what they think
of salespeople, instantly use terms such as pushy, greedy, or some other unkind adjective.
Yet professional selling is not what most people think. Professionally trained salespeople
are among the most important individuals within many companies. This is especially true
in business-to-business selling situations where the amount of promotional expense
allocated to support a sales force far exceeds expenses for advertising. Also, successful
selling requires the establishment of strong relationships with customers, relationships
that are intended to last for a long time. Salespeople whose goal is to just get the sale and
not worry about the customer satisfaction are doomed to failure. Professional selling
requires knowledge and skills that must be learnt over time.

During my training with Reliance Mutual Fund, initially I was given an overview of the
entire working of the organization, which involved right from learning about the basic
performed operations, maintaining relationships with the distributors and that with the
banks. I also got the opportunity to interact with the industry and do direct selling to
Individual customers as well as corporate customers.

PRODUCT TRAINING :

The first phase of my training involved understanding and learning about the products as
offered by Reliance Mutual Fund. The fund house offers a varying range of funds in
equity as well as debt.

My learning involved a core understanding on:

- Type of schemes

- Investment objective

- Plans & options

- Load structure

- Features available

- Past track record of funds

- Last but not least position of the funds in the market vis-à-vis competitors.

An activity such as Direct Sales infuses selling confidence.

• Improves communication skills.

• Organizing skills are also developed.
• Lead generation and materializing sales.
• Developing and maintaining relationships

As u know, sales channel of Reliance mutual fund includes:

The distributions houses generate a huge chunk of business for any fund house. Moreover
a distribution house is an agent of mutual funds of a number of fund houses. Same is the
case with Reliance Mutual funds, which generate a decent size of business from the
distributors. Hence it is very essential for the fund house to maintain healthy working
relationships with the distributors.

IFA (Individual financial Agents) channel, which is handled by Mr. Rominder Singh. He
has achieved success in this regard to a huge extent. But there were certain distributors,
which needed to be revived in terms of the business that they were generating for the
fund house, that was either in the form of low business or irregular business. Hence, I
was given the responsibility to activate such distributors for RMF (Chandigarh).
While my training, he gave me seven distributors name and address that are not giving
good business to the company. So there, my duty was to call them or visit individually
but have to make generate business from them. It was very good, interesting and
challenging one for me. But I did it very passion sly.

MY ROLE
• Call them daily & try to make aware about our schemes.
• Also told them, they can make investments in SIP rather than lump sum
amount, if they face any problem.
• Complete product training to the direct selling agents of the distribution
house.
• Try to make clear picture about other mutual funds also.
• Send daily NAV sheet to them by SMS or through Email so that they make
comparison between our funds & others funds.
• Making the aware of the risk & profit margin regarding schemes.
• Called them to come our office on tea for meeting & discussion
• Company also offers a surprise gift to them, if they start doing a business of 5
lakhs in a month.
• Sometimes, I visited to their office personally if required.
 The following are the results of various distributors,

NO. OF TOTAL BUSINESS

S.NO. NAME OF DISTRIBUTORS APP. GENERATED

1 MASTER TRUST 4 20000

2 KARVY
3 VIKSON INVESTMENTS
4 INNOVATIVE CONSULTANTS
5 B.S.D. LTD
6 R.R. INVESTORS
7 BAJAJ CAPITAL
2 2000(SIP)
3 1500(SIP)
4 3500(SIP)
4 5000(SIP)
4 22000
3 15000

OUTCOME
• Daily average applications from these distributors picked up from 21 to 35 in span
of 3 weeks.
• High level of motivation achieved.
• Training of new relationship manager to these location
• Increasing in visibility

BANKS & CORPORATES

The banks generate a huge chunk of business for any fund house. Moreover a bank is a
distributor of mutual funds of a number of fund houses. Same is the case with Reliance
Mutual Funds, which generates a decent size of business from the banks. Hence, it is very
essential for the fund house to maintain healthy working relationships with the bankers.
The bank relationship here at Reliance Mutual Funds (Chandigarh), handled by Mr.
Vinay Khera (Branch Head) & Mr. Nishant Mahajan (Territory Manager). They achieved
success in this regard to a huge extent. But there were certain bank branches, which
needed to be revived in terms of the business that they were generating for the fund
house, that was either in the form of low business or irregular business. Hence, I was
given the responsibility to activate such branches for Reliance Mutual Fund
(Chandigarh).
MY ROLE
They instruct to look after the five banks, which were not performing business. I did
various following steps to generate business:

• Complete product training to the direct selling of the agents of the banks
• Makes the sales manager aware of the risk & profit margin
• Send daily NAV sheet of our schemes by SMS or through EMAIL
• Try to make clear information about others Mutual Fund house also
• Done meeting with them to reduce their doubts.
• Makes the sales manager or financial advisors aware of the latest offers and
news from RMF.

My job further extended to collect new database of customers for them, handling
customers queries on the mutual funds and at some branches reviving existing customers
for making in further investments.

The following are the results of various banks:

NAME OF BANK NO. OF TOTAL BUSINESS
S.NO. BRANCHES APP. GENERATED

1 PNB BANK, Sec. 9 CHD 3 20000

2 UTI BANK, Sec. 8 CHD 3 2000(SIP)
3 CPOB BANK, Sec.32 CHD 4 1500(SIP)
INDUSIND BANK, Sec. 11
4 PKL 4 22500
5 HDFC BANK, PH. 7 MOHALI 3 5000(SIP)
OUTCOME

• Daily receive applications from these banks picked up from 15 to 23 in

span of 3 weeks.
• High level of motivation achieved
• Training of new Territory Manager to these location
• Increasing in visibility
While my training, there was exhibition, which was held in Hotel Shivalikview in which I
had to promote SIP of various schemes related to equity. I attended 30 customers, some
of them don’t know about mutual fund, and then I make them aware (what is risk &
profit) and later on, 8 investors invested in various schemes; 4 customers invested in SIP
& 4 invested in lump sum.

OPERATIONS AT RELIANCE MUTUAL FUNDS.

Collections of funds by investments done by

Investors directly Through bank agents

Through brokers
 Applications submitted before 3’o clock are time
stamped

A daily transactions report of the stamped applications is prepared

to keep a track of the transactions taking place on daily basis

Collected applications are then send to karvy

All the necessary data is entered for each and every application

The cheques are then submitted in the HDFC bank. The respective amounts are
credited into the bank accounts of various schemes of reliance mutual fund

The collected amount is then informed The hard copy of applications is sent to the head
to the fund manager who utilize that office of the registrar (karvy) that is in
amount accordingly Hyderabad where managers do a quality check
for every application.

The fund managers utilize the

amount keeping aside the amount After performing a quality check
required for redemption. statements are sent to the investors.

COMPLAINT MANAGEMENT MODULE :-

The general aim of a complaint management system is to restore customer satisfaction,

minimize the negative effects of customer dissatisfaction and to identify and review
company’s structural and process weaknesses.

OBJECTIVES:
  Restoring (complaint) satisfaction.

 Implementation and clarification of a customer-oriented company strategy.

 Influencing word of mouth communication.

 Analysis and usage of complaint information.

 Reduction of internal and external error costs.

This module is created as user friendly and keeping in mind the above objectives on an
excel sheet. It is created to ensure customer delight. As in the future the differentiating
point between products and services is going to be how customers are handled effectively
and timely.

COMPLAINT LOGBOOK FORMAT :-

Complaint Serial #
Date
Name of the Person Calling
Contact #
Address (if required)
Email Address (if Required)
Fax #(if required)
Name of the Client
Folio #
Contact #
Address (if required)
Email Address (if Required)
Fax #(if required)
Nature of Complaint
If any Other Please Mention
Consignment #(if required)
Name of the Person Contacted for Resolving the Problem
Contact #
Action Taken
If any Other Please Mention

Resolved
If Unresolved Please Mention Reason

GRAPHICAL PRESENTATION

Q. ARE YOU AWARE OF THE MUTUAL FUND SCHEME

BEING OFFERED BY VARIOUS INSTITUTION?

YES 100%
NO 0
 Response of Awareness amonf
the investors

150%
100%
100%
Series1
50%
0
0%
YES NO

INTERPRETATION

According to the respondents taken by me for my research all

of them are aware about the mutual funds offered by various
institutions.

Q. IF YES , ARE YOU INVESTING IN THEM?

100
Y
E
S
0
NO
 % of Investors

120% 100%
100%
80%
60%
40%
20% 0
0%
YES NO

INTERPRETATION

According to the respondents taken by me all of them are

invested in mutual funds.

Q. OUT OF THE FOLLOWING IN WHICH MUTUAL FUND

YOU ARE INVESTED?

NAMES PERCENTAGE
 TATA MUTAL FUND 14%
FRANKLIN TEMPLTON 40%
RELIANCE 32%
ICICI PRUDENTIAL 4%
SBI 10%
OTHER -

TATA MUTAL
% of investors in various FUND
mutual fund companies FRANKLIN
TEMPLTON
0%
10% RELIANCE
14%
4% ICICI
PRUDENTIAL
32% SBI
40%
OTHER

INTERPRETATION

According researcher sample size 40% investor invest in franklin templeton

because it’s a very old company and having good market experience.
32% invest in reliance due to its goodwill , 10% in SBI and 4% in
ICICI prudential.

Q. WHICH FACTOR INFLUENCES YOU MOST TO INVEST IN MUTUAL

FUNDS

Factors Percentage
 Less Risk 12%
High Returns 14%
Liquidity 34%
Safety 24%
Tax benefit 16%

Factor responsible for the invest

40%
34%
30%
Percentag 24%
e of
20%
Responde 16%
14%
nts 12%
10%

0%
Less High Liquidi Safety Tax
Series1 12% 14% 34% 24% 16%
Factors Responsible

INTERPRETATION

When asked that what factor affect most while investing in

Mutual Funds, most of respondents chose liquidity as the most
important factor, 34% of the investors preferred liquidity as the
most important thing, 24% investors choose safety,16% of the
investors think that tax benefit is the most important factor ,14
% of the investors choose high returns as the important factor
and 12% of investor choose because of less risk.

Above all one thing is there that all the above factors are
very important. An investor keeps in mind all the factors while
investing.
Q. WHAT IS YOUR AVERAGE TIME HORIZON OF
INVESTMENT ?

Percentage
Time-Horizon
6 mon – 1yr 26%
1 yr – 3 yr 40%
3 yr – 5 yr 10%
More than 5 yr 4%

% of investors average time

50% 40%
40%
26%
30%
20% 10%
10% 4%
0%
6 mon – 1yr 1 yr – 3 yr 3 yr – 5 yr More than 5
yr

INTERPRETATION

Of the total respondents considered for the survey, 26% invest

for a time period of 6 month to 1 year. Most of the investors

prefer to invest for 1 to 5 years. Very few invest for more then

5 years. About 40% invest for 1 to 3 years and about 10%

invest for 3 to 5 years. Only 4% invest for more then 5 years.

Q. WHICH SCHEME WOULD YOU PREFER WHILE
INVESTING IN MUTUAL FUNDS ?

Various Schemes Percentage

Debt 14%
Equity 56%
Balanced 30%

% of investors preference in various

Mutual fund schemes

14%
30%
Debt
Equity
Balanced
56%

INTERPRETATION

As the market conditions have changed, investors are taking

risk, 56% of the investors invest in pure equity funds, 30%

prefer investing in balanced funds and only 14% of the

investors invest in debt funds.

 Q. OUT OF THE FOLLOWING WHICH OPTION WOULD

YOU PREFER?

Open ended 74%

Close ended 26%

26%
Open ended
Close ended
74%

INTERPRETATION

74% Investors opt open ended because this option will

increase the level of liquidity and 26% investor opt close

ended option.
 Q DO YOU PREFER SIP (SYSTEMATIC INVESTMENT PLAN) OR
INVESTING LUMP SUM ?

FACTOR PERCENTAGE
SIP 48%
Lump sum 36%
Depends upon financial conditions 16%

SIP
16%

Lump sum
48%

36% Depends upon

financial
conditions

INTERPRETATION

It depends upon the availability of funds that whether an

investor should opt for SIP or lump sum. Around of the

investors prefer SIP at this stage of market. 36% the investors

prefer investing lump sum. 16% of the investors said it

depends upon the availability of funds.

Q. WHICH FACTOR INFLUENCE YOU MOST TO INVEST

THROUGH RELIANCE MUTUAL FUND ?

FACTORS PERCENTAGE
RELIANCE SERVICES 20%
SAFETY 42%
WORD OF MOUTH 14%
ADVERTISEMENT 6%
PAST EXPERIENCE 18%

RELIANCE
18% SERVICES
20%
SAFETY

6%
WORD OF
MOUTH
14% ADVERTISEMEN
T
42% PAST
EXPERIENCE

INTERPRETATION
When asked that what factor affect most while investing in

Mutual Funds through Reliance Mutual fund than wide

preference is given to safety. 42% investors choose safety.20%

Reliance services ,18% past experience ,14% word of mouth

and 6% advertisement.

Q. TO HOW MUCH EXTENT ARE YOU SATISFIED WITH

THE SERVICES OFFERED BY RELAINCE ?

80%
EXTREMELY SATISFIED
SATISFIED TO LESSER EXTENT 10%
DISSATISFIED TO LESSER 5%
EXTENT
EXTREMELY DISSATISFIED 5%

% OF INVESTORS SATISFACTION EXTREMELY

SATISFIED
LEVEL
5%
SATISFIED TO
5% LESSER EXTENT
10%
DISSATISFIED
TO LESSER
EXTENT
80% EXTREMELY
DISSATISFIED
INTERPRETATION

Out of the respondents 80% are extremely satisfied with the

services offered by Reliance Mutual fund .10% are satisfied to

lesser extent .5%are extremely dissatisfied.

Q. AS EQUITY MARKET IS GROWING WHAT ACCORDING

TO YOU IS THE FUTURE OF MUTUAL FUNDS?

DEGREE PERCENTAGE
Very strong 35%
Strong 50%
Moderate 15%

15%

35%
Very strong
Strong
Moderate

50%
INTERPRETATION

As Indian equity market is growing the future of mutual funds is very bright.
35% of the investors say that future is very strong, 50% of the investors say that
future is strong and only 15% said that future is moderate.

RECOMMODATION

INCREASING CONSUMER PARTICIPATION

• One of the most frequently asked queries by the customers is the current NAV’S.
Hence a board displaying the NAV’S should be put up at the front desk itself so
that it would save the time of the person at the reception and he could focus on
other queries of the customers.
• Non-receipt of dividend cheques is a major issue with the customers. Due to lack
of communication regarding the status of their query, it results in loss of trust of
the customers that might further lead to spreading a bad word of mouth about the
organization.
• One way to combat this problem is by having tie-ups with more number of banks
regarding direct credit facility. This would help us in saving time and tracking the
query more efficiently and providing quick services to the customers.
• Whenever the management declares dividend, the registrar from Hyderabad
releases the respective cheques. During this procedure at times the cheques get
misplaced leading to inconvenience to the customer. Hence a provision should be
there so that the cheques of a particular AMC should reach that AMC only. This
would not only result in cost efficiency for the registrar but also in better
management in giving cheques to the customers. Also it would help in reverting
back to the customer query more quickly and efficiently.
• The major problem that I encountered over here was that most of the complaints
of the customers went unregistered. As a result of which most of the times one
lost track about the status of the query. Due to large number of investors it
becomes very essential for a complaint logbook, as a dissatisfied customer would
spread a bad word of mouth, which is not good for any organization.
• Brokerage problems arise because of quarterly basis. Payment schedule
should be changed. Brokers should receive their brokerage by monthly.

FINDINGS

• Not send NAV sheet to their regular bankers.

• Not having the proper record of their meeting with the financial consultants of
banks
• Problem of not receiving the brokerage on time
 BIBLIOGRAPHY

WEBSITES:

• www.amfiindia.com
• www.reliancemutual.com
• www.valueresearchonline.com
• www.google.com
• www.rbi.org

BOOKS & MAGAZINES:

• Business world, July 2006

• Marketing Management – Philip Kotler

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