Project Report By Vikram Dhumal(523)

Topic: Mutual und Analysis & Portfolio Managemaent

Firm: Vantage Wealth Management Solutions Pvt. Ltd.
College(MMM): Sinhgad Institute of Business Administration And Computer
Application

CONTENT

CHAPTER 1:- INTRODUCTION ..4

1.1 OBJECTIVE OF THE PROJECT ...5

1.2 SELECTION OF THE TOPIC ...6
1.3 OBJECTIVE OF THE STUDY ...7
1.4 METHODOLOGY OF THE PROJECT ...8
1.5 SCOPE OF THE STUDY ...9
1.6 LIMITATIONS OF THE PROJECT ..10

CHAPTER 2:- PROFILE OF THE ORGANISATION .11

2.1 A] COMPANY PROFILE .12

B] COMPANY MISSION .14
2.2 AREA OF SERVICES .16

CHAPTER 3:- INVESTMENT MANAGEMENT .19

3.1 EQUITY PORTFOLIO MANAGEMENT .20

3.2 EQUITY FUNDS .21
3.3 TYPES OF EQUITY INSTRUMENTS .23
3.4 EQUITY CLASSES .24
3.5 DEBT PORTFOLIO MANAGEMENT .25
3.6 A REVIEW OF INDIAN DEBT MARKET .26
3.7 INVESTMENT POLICIES & RESTRICTIONS .32

1
CHAPTER4:- INTRODUCTION OF MUTUAL FUNDS ..36

4.1 CONCEPT OF MUTUAL FUND ..37

4.2 EMERGENCE OF MUTUAL FUNDS ..38
4.3 HISTORY OF MUTUAL FUNDS ...39
4.4 PLACE OF MUTUAL FUNDS IN FINANCIAL MARKET 44
4.5 THE ADVANTEGES OF MUTUAL FUNDS ...47
4.6 THE DISADVANTAGES OF MUTUAL FUNDS ...50
4.7 CLASSIFICATION OF MUTUAL FUNDS ...53
4.8 WHO CAN INVEST? ...55
4.9 INVESTORS RIGHTS & OBLIGATION 55
4.10 OFFER(DOCUMENTS) BY MUTUAL FUNDS . ...57
4.11 ACCOUNTING OF MUTUAL FUNDS 59

CHAPTER 5:- MEASURING & EVALUATING OF MUTUAL

FUND PERFORMANCE 63

5.1 NECESSARY FOR MEASURING MUTUAL FUND ....64

PERFORMANCE
5.2 DIFFERENT MEASURES OF FUND PERFORMANCE ..65

CHAPTER 6:- MUTUAL FUND FEES & EXPENSES 72

CHAPTER 7:- ACCOUNTING & VALUATION OF MUTUAL

FUND 75

CHAPTER 8:-SECURITIES & EXCHANGE BOARD OF INDIA..79

2
8.1 MANAGEMENT BOARD OF INDIA ..81
8.2 FUNCTIONS OF BOARD ..82
8.3 REGISTRATION CERTIFICATE ..83

CHAPTER 9:- RULES & REGULATIONS 87

CHAPTER 10:- PENALTIES & ADJUDICATION 92

CHAPTER 11:- SUGGESTIONS .95

GLOSSERY 100

BIBLIOGRAPHY .131

3
 CHAPTER 1:-

INTRODUCTION

4
 1. INTRODUCTION

1.1 OBJECTIVE OF THE PROJECT

Theoretical Knowledge without Practical Experience is like a Body without

Soul. So without Practical implementations, theory remains no use. Hence
we need to gain the Practical Experience. And what better would be, then a
Project work for the same.

Also as a part of our MBA curriculum, we need to undergo the training

programmed for minimum of 60 days, in a company.

I selected area of MUTUAL FUND INDUSTRY, which pools the funds &
reduces risk by investing in different diversified assets. I studied as to how
this industry proves to an option for the investors, by studying the
performance of mutual funds for few months considering their Net Asset
Values.

Hence this is a project work on a Mutual Fund Analysis & Portfolio

Management .

5
1.2 SELECTION OF TOPIC

Generally when we decide to study the investment options available in

today s complex & risky scenario, we should thoroughly evaluate the option
upon various factors. These factors should include:

The Past Performance of the option under study

Risk adjusted returns from the invested plan
Share in the Portfolio Policy
Fund House

When observed the above parameters for the evolution of The

Financial Performance of the option under study, then immediate concept
that clicks our mind is MUTUAL FUNDS . So for this, I have selected
Mutual Funds performance to study as investment option.

Study of Mutual Fund includes

Study of Equity, Debt, Bonds, Securities, etc.

Investment Decision
Risk Measurement & risk diversifications
Portfolio Management
Analyzing the Option (a Particular Security/ Instrument).

6
1.3 OBJECTIVE OF THE STUDY

Vision is a long term policy & to reach there you can t just leap &
jump. To there the stairs of objectives need to be climbed successfully an so
objectives of this project are

How to find the RIGHT SCRIPT to buy & sell at RIGHT

TIME , thereby mobilizing the saving aptly.

How to get good return on investment

How to achieve Capital appreciations

How to form a right PORTFOLIO & How to invest in

RIGHT PORTFOLIO .

To analyze the performance of Mutual Funds.

7
1.4 METHODOLOGY OF THE PROJECT

Defining objective won t suffice unless & until a proper methodology

is to achieve the objectives.

1. The methodology of the project here is to analyse the investments

Opportunities available for the investors & study the returns &
risk involved in various investment opportunities.

2. Study of investment management, risk management & portfolio

Diversification.

3. The methodology of the project here is to analyze the Mutual

Fund performance based on:-

NAV (NET ASSET VALUE) :- It tracked the daily NAV s

Of the Mutual Funds to compute the performance.

Total Return Basis: By taking into account dividends

distributed by the funds between the two NAV s change
To arrive at a total return.

Portfolio turnover Ratio: This means the Amount of Buying

& selling done by a fund.

Asset Purchased/ Sold

PTR= Funds Net Assets

Study Financial & Legal obligations of Mutual Funds.

8
1.5 SCOPE OF THE STUDY

The study encompasses different aspects from point of view of investors as

follows.

1. Investment portfolio selection

2. types of Mutual Funds
3. Expected returns on investment
4. Investment in Tax Saving Schemes.

Despite various problems, India Could still have a lot of profitable

opportunities to offer in this sector. And given the fact it is the major
emerging market to open up. It is equally important that, even if its various
Fund Investments can harness a small part of the total funds available
internationally, Indian Foreign Exchange reserves will shoot up.

According to World Bank Study, portfolio investment in the emerging

markets will rise above a massive $100 Billion by 2002. Actual figures are
yet not published for the same.

9
1.6 LIMITATIONS OF THE STUDY

This project is not funded one, hence it gets restricted to a mere in

depth study & few guidelines for investors.

This study is carried out in pursuance of curriculum MBA, which

is mandatory for period of two months; hence exhaustive data is
not available upon which conclusion can be relied upon.

NAV are prone to environmental factors 7 which would influence

the value during trading.

Investments in Securities carry risks & Mutual Fund units are no

exception.

Risk being erosion in the Market value of the Investment of

decrease in the percentage dividends declared by the Mutual
Fund. The risk factors inherent in a Mutual Fund Schemes are
the schemes, market risk, & the investment experience of the
Asset Management Company.

Factors affecting the Market Price of Investment may be due to

Market forces, performance of the companies, Govt. Policies,
Interest rates & so on.

Study for all the existing Mutual Fund Schemes is not feasible,
Sample schemes of all Mutual Fund Types are considered for

10
the Study.

CHAPTER 2 :-

PROFILE OF THE ORGANIZATION

11
 2. PROFILE OF THE ORGANIZATION

VANTAGE INSURANCE SERVICES PVT. LTD.

VANTAGE WEALTH MANAGEMENT SOLUTIONS PVT. LTD.

2.1 A] COMPANY PROFILE:-

Vantage is Financial intermediary with diversified presence across

various Financial services encompassing a range of Risk & Wealth Mgmt.
solutions with a PAN India presence spreader across- Mumbai, Pune,
Bangalore, Chennai, Hyderabad & Gurgaon, the group has created a mark in
the Financial Services market with the unique concept of being a one stop
solution for Corporates & Individuals catering to needs in the field of
Insurance- Life & General, Investments, such as Mutual Funds, Fixed
Income Instruments, Portfolio Advisory, Life stage planning among others
& also Tax Planning.

Vantage Wealth Mgmt. is primarily focused on an end to end solutions

provider for all investment & insurance needs of an Individual. Vantage
Insurance Services, an IRDA mandated, Direct Insurance Broker, with a
License in both Life & General Insurance is focused on providing the best

12
Risk Mgmt. solution to a Corporate. A synergy of both the group companies
offers a wide array of services & products to suit Individual & Corporate
needs.

Later, it forayed into the Register & Share transfer activities &
subsequently into Financial Services. All along, Vantage Group is Strong
ethic & Professional background leveraged with Information Technology
enabled it to deliver quantity to the individual.

A decade of Commitment, Professional Integrity & Vision

helped Vantage to achieve a leadership position in its field when it handled
the number of issues ever handled in the history of the Indian Stock Market
in a year.

Thereafter, Vantage Group made inroads into a host of Capital

market services- Corporate & Retail which provided to be a sound Business
Synergy. Today, Vantage has assessed to millions of Indian Shareholders,
besides companies, Banks, Financial Institutes & regulatory agencies. Over
the Past one & decades, Vantage has evolved as a veritable link between
Industry, Finance & people.

13
2.1 B] COMPANY MISSION

We endeavor to move beyond a Transactional Approach in Insurance

Broking & Investment Advisory to faster growth of Consultative
relationship with our Clients aimed at delivering an Integrated Solution in
the areas of Risk & Wealth Management.

To achieve & retain leadership, Vantage Group shall aim for complete
Customer Satisfactions, by combining its Human & Technology Resources,
to provide superior quality Financial Services.

QUALITY OBJECTIVES

As per the Quality Policy, Vantage Group will:-

Build in-house processes that will ensure transparent & harmonious

relationships with its Clients & Investors to provide high quality
of services.

Establish a partner relationship with its Investors Service agents &

Vendors that will help in keeping Commitments to the Customers.

Provide high quality of Work Life for all its Employees & Equip
them with adequate Knowledge & Skills so as to respond to
Customer s needs.

14
Continue to uphold values of Honesty & Integrity & Strive to
Establish unparalleled standards in Business ethics.

Use State-of-the art Information Technology in developing new &

Innovative Financial Products & Services to meet changing needs
Of Investors & Clients.

Strives to be a reliable source of value added Financial Products &

Services & constantly guide the Individuals& Institutions in making
A Judicious choice of same.

Strive to keep all Stale-holders (Share-holders, Clients, Employees,

Suppliers & Regulatory authorities ) proud & satisfied.

15
2.2 AREA OF SERVICES/ PRODUCTS RANGE

ASSETS PRODUCTS

Mutual Fund

Tax Saving Bonds

Capital Gain Bonds

State & Central Govt. Bonds

Equity Funds

SERVICES PRODUCTS

Insurance Advisory Services

Tax Advisory Services

Stock Broking Services

Investment Consultancy Services

Project Finance & Consultancy

Portfolio Management

Sub- Broker for the New Issues

BSE Trading & settlement

16
 NSE Trading & settlement

BUSINESS GROUPS:- Corporates Solution Groups

Personal Financial Consultancy Group

CORPORATES SOLUTION GROUPS

1. I.R.D.A recognized Direct Insurance Broker with License to

intermediate in both General Insurance & Life Insurance Business.

2. Focus on delivering Integrated Risk Mgmt. solution across diverse

areas such as:-

Employee Benefit Insurance PAN India more than 2, 50.000

Members covered through Vantage managed Health, Accident &
Life Insurance solutions.

Over 45-50 Corporates including, some of the largest

most respected corporate in the IT & ITes Industry, have entrusted
up with their Employee benefit Insurance Programme.

Property Insurance Including Extensive experience in Project &

Machinery Insurance. Business Interruption / Loss of Profit insur
-ence is another area where we have rendered our expertise to cer
-tain key corporates.

Liability Insurance Experienced in delivering solution for Comp

lex Global Liability Exposures worked with many leading IT &
ITes companies in this area.

Specialized Risk covers including Movie & Event Insurance.

1. Web enabled solution in Employee Benefit Insurance.
2. Vantage draws Technical Expertise in Risk Mgmt.with Advisory

17
 Support from the core group consisting of experienced Experts
From Insurance Cooperation, Valuers, Loss Assessors, Property.

PERSONAL FINANCIAL CONSULTANCY GROUP:-

Vantage is an AMFI Registered Mutual Fund Distributors.

Focus on delivering customized Financial Planning Solution keeping in

a view an Individual s requirements such as:

1) Financial Goals & Investment Objective.

2) Life Insurance Coverage
3) Retirement Planning
4) Tax Planning

Online Portfolio updates.

18
 CHAPTER 3 :-

INVESTMENT MANAGEMENT

19
 3. INVESTMENT MANAGEMENT

3.1 EQUITY PORTFOLIO MANAGEMENT

An equity portfolio manager s task consists of two major steps:

a) Constructing a Portfolio of Equity shares or equity linked instrument

That is consistent with the Investment objective of the fund &

b) Managing or constantly re-balancing the portfolio to produce capital

Appreciation & earning that would reward the investors with superior
Returns.

STOCK SELECTION

The equity Portfolio manager has available to him a whole universe of

equity shares & other instruments such as preference shares, warrants or
convertible debentures issued by many companies. However, more specially,
the equity portfolio manager will choose from a universe of shares in
accordance with:

A) The nature of the Equity instrument, or a particular stock s unique

characteristics, &

B) A certain investment styles or Philosophy in the process of choosing.

20
3.2 EQUITY FUNDS

Form categories based on risk-return profile

- Diversified , Index , Sectorial & Specialized

Form categories based on fund manager s style

- Value and Growth

Evaluate Performance
- Peer Group and Benchmark comparison

Consider Structural Characteristics

- Size of the Fund
- Fund History
- Portfolio Manager Experience
- Cost of Investing: Expense Ratio

Consider Portfolio Characteristics

- Percentage Cash
- Portfolio Concentration
- Market Capitalization of Fund
- Portfolio Turnover: Churn
- Portfolio Risk Characteristics
R-squared
Beta
Dividend Yield
- High R Squared , Low Beta And High Dividend yield preferred

21
OTHER VARITIES OF EQUITY FUNDS

Specialized Funds:-

1) Sector Funds
2) Offshore Funds
3) Small Cap Equity Funds
4) Option Income funds - writes options
5) ELSS - Indian Variety
6) Equity Index Funds
7) Value Funds
8) Equity Income Funds - invest in co. with higher dividend yields
i.e. Power/utilities

Other Equity Oriented Funds:

Hybrid Funds
-Balanced Funds
-Growth & Income Funds
-Assets Allocation Funds

Commodity Funds

Real Estate Funds

Debt Funds :

Diversified Debt Funds

Focused Debt Funds
Sector / Specialized / Offshore
Municipal bonds / infrastructure cost bond funds
Mortgaged backed

22
 High yield debt funds
Assured Return Funds - Indian variety
Liquid Funds

3.3 TYPES OF EQUITY INSTRUMENTS

Ordinary Shares:

Ordinary Shareholders are the true owners of the company, & each share
entitles the holders of ownership privileges such as dividends declared by
the company & voting right at the meetings. Losses as well as profits are
shared by the equity shareholders. Without any guaranteed income or
security, equity share are risk investment briefing with them potential for the
capital appreciation in return for the addition that the investors undertakes in
the comparison to debt instrument with guaranteed income.

PREFERENCE SHARES

Unlike equity share, preferences share entitled the holder to dividend at the
rate subject to availability of profit after tax. If preference shares are
cumulative, unpaid dividend for years of inadequate are paid in subsequently
year preference share do not entitled the holder to ownership privileges such
as voting right at the meeting. This preference shares are generally redeemed
after certain period.

EQUITY WARRANTS

These are long terms right offer holder the right to purchase equity share in a
company at a fixed price (Usually Higher than current Market Price) within
the specified period. Warrants are in the nature of option on stocks.

CONVERTIBLE DEBENTURE

As the term suggest, this are fixed rate debt instrument that are covered into
a specified number of equity share at the end of specified period for Ex.- A

23
company may issue 10% CD for Rs. 100 each that would be conversed into
5 equity share after 2 years. That is a holder of 1 debenture at the time issue
would become a holder of 5 equity share in the 2 years time.

3.4 EQUITY CLASSES

Equity shares generally classified on the basic of either the market

capitalization or the anticipated movement of the accompany earning. It is a
imperative for the Fund Manager to understand these elements of the stocks
before he selects form the inclusion in the portfolio.

CLASSIFICATION IN TERMS OF MARKET CAPITALIZATION

Market is the equivalent to the current value of a company i.e. current

market price per share time per the number of outstanding shares. There are
large capitalization company, Mid-cap Company & small company.
Different scheme of a fund may define there fund objective as a preference
for large or mid or small-cap companies shares. Large cap share are more
liquid & hence easily tradable. Mid or small cap share may be thought of as
having to track this different classes of share.

CLASSIFICATION IN TERMS OF ANTICIPATED EARNING

In terms of anticipated earning of the share are generally classified on the

basis of their market price in relation to one of the following measures:-

1] PRICE / EARNING RATIO (P/E Ratio)

Price/ Earning ratio is a price of share divided by the earning per share &
indicates weather the investors are willing to pay for a company earning
prudential. Young &/or fast growing companies usually high P/E ratios.
Established companies in nature industries may have P/E Ratios. The P/E
analysis is sometimes supplemented with the rate such as Market Priceto
Book Value & Market Price to cash flow per share.

2] EARNING PER SHARE (EPS)

24
Earning per Share is the amount of total earning received on each share. The
values of EPS are got by dividing total earning by number of shares. Thus
more the EPS more beneficial is for the Shareholder.

3.5 DEBT PORTFOLIO MANAGEMENT

Debt portfolio has to contend with the construction & management of

portfolio debt instrument, the primary objective of generating income. Just
as the inquiry fund manager has to go through a stock selection process, a
debt fund manager has to select from whole universe of debt securities he
wants to invest in.

Classification of Debt Securities

Many instruments give regular income. However, in the context of debt

mutual funds, manager invest only in market-trader instrument (not in
loans as done by the bank) debt instrument may be secured by the assets of
the borrowers as in case of corporate, or be unsecured as is the case with
Indian Financial Bond.

A Debt is issued by a borrower & is often known by the issuer category thus
giving us Government security & Corporate Securities or FI Bonds.
Debt instrument are also distinguished by their maturity profile. Thus,
instrument issued with short term maturities, typically under one year
maturities are classified as Money Market Securities instrument carrying
Long then one year maturities are generally called Debt Securities.

Most debt securities are interested bearing. However, there are securities that
are discounted securities or zero coupon bonds that are generally fixed that
pay interest on a Floating Rate basis. There are lots of new instruments
coming in the debt markets.

25
3.6 A REVIEW OF THE INDIAN DEBT MARKET

Instruments in the Indian Debt Market

The objective of a debt is to provide investors with a stable income stream.

Hence, a debt fund invests mainly in instrument that yields a fixed rate of
return & where the principal is secured. The debt market in Indian offers the
following instruments for investment for by Mutual Funds.

Certificates of Deposits

Certificates of Deposit (CD) are issued by scheduled commercial banks

excluding regional rural banks. These are unsecured negotiable promissory
notes. Banks CDs have a maturity period of 91 days to one year, while those
issued by FI s have maturities between one & three years.

Commercial Paper

Commercial Paper (CP) is a short term, unsecured issued by corporate

bodies (Public & Private) to meet short-term working capital requirement.
Maturity varies between 3 months & 1 year. This instrument can be
incorporated in Indian. CP s can be issued to NRI s on non-repatriable &
non- transferable basis.

Corporate Debentures

The debentures are usually issued by manufacturing companies with

physical assets, as secured instruments; in the form of certificates they are

26
assigned a credit rating by rating agencies. Trading in Debentures is
generally based on the current yield & market values are based on yield of
maturity. All publicly issued Debentures is listed on exchange.

Floating Rate Bonds

These are short to medium term bearing instruments issued by the financial
intermediaries & corporate. The typical maturity of these bonds is 3 to 5
years. FRB s issued by Financial Institutions are generally unsecured while
those from private corporate are secured. The FRB s are pegged to different
reference as much as T- bill or bank deposits rates. The FRB s issued by the
Government of Indians are in the form of Stock Certified of issued by credit
to SGL accounts maintained by the RBI.

Government Security

These are medium to long term interest bearing obligations issued through
the RBI by the Government of India & State Governments. The RBI decides
The cut-off on the basis of bids received during the auctions. These are
issued where the rates are pre-specified & the investor s only bids for the
quality. In most cases, the coupon is paid semi annually with bullet
redemption features.

A large part of the trading is concentrated in those government securities

that are eligible for repost (repurchase) transition, i.e. sale of a security with
a parallel agreement to repurchase the same at a future date. The RBI acts as
the depository, its public debt office maintain an SGL account for various
banks & Financial Institution, & issues or transfers the securities in the form
of book entries made in SGL accounts. If a fund does not have an SGL
account, it may open a constitution account with any RBI- registered bank.

Treasury Bills

T- Bills are shortly obligation issued through the RBI by the Government of
India at a discount the RBI Issues T-Bills for different tenures: 14 days, 91

27
days & 364 days. These treasury bills are issued through an auction
procedure. The yield is determined on the basis bids tendered & accepted.

Bank/ FI Bond

Most of the institutional bonds are in the form of promissory notes

transferable by endorsement & delivery. These are negotiable, issued by the
Financial Institution such as IDB/ ICICI/ IFCI or by commercial bank.
These instruments have been issued both as regular income bonds & as
discounted long term instruments (deep discount bonds).

Public Sector Undertaking (PSU) Bonds

PSU Bonds are medium & long term obligation issued by Public sector
companies in which the government share holding is generally greater then
51% . Some PSU Bonds carry tax exemptions. The maximum maturity is 5
year for Taxable bonds & 7 years for Tax- Free Bonds. PSU bonds are
generally not guaranteed by the government & are in the form of promissory
notes transferable by endorsement & delivery. PSU bonds in Electronic form
(Demat) are eligible report transactions.

Basic Characteristics of Money Market Security

Money Market fund invest always exclusively in money market security,

which are instrument of under 1 Year Maturity many of them of discounted
or zero coupon delivery. Money market fund portfolios may include
government corporate of bank issued security. In India, certificates of
deposits, treasury bills & commercial papers from the three major types of
Instruments where MF s usually invest in.

Basic Characteristics of Bonds or Debt Security

28
A debt fund or a bond fund generally invest a large part of its corpus in
longer term fixed income in debit securities issued by government,
companies or Banks/ FI s. A small part is invested in money market. In
Indian context, long dated government securities, corporate debentures & FI
Bonds from the bulk of debt fund portfolios.

Bonds have the following four keys characteristics set at the time of issue:

Par Value : This is the principal amount that investors will be paid upon
Maturity of the bonds, & is also known as the face value.

Coupon : This is the annual rate of interest paid on the par value of the
Bond to the investor.

Maturity : This refers to the term of the bond that is , the date on which
the Bond that is , the date on which the issuer has to repay the principle
amount of the Bond.

Call or Provision: These are included in some bond contracts to allow

the issuer the option to redeem the bonds before Maturity thereby allow
-ing refinance of debt at lower interest rates

Measuring of Bond Yields: Returns on a fixed income security is generally

computed in the form of Current Yield or a Yield to Maturity.

Current Yield: This relates interest on a Bond to its Current Market Price
by dividing the annual coupon interest by the current market price.

1) Yield to Maturity (YTM): This is a sophisticated technique of

bond analysis. Posen defines YTM (also known as the bonds
IRR) as the annual rate of return & investors would realize if he
a bond at a particular price, & received the principal at maturity.
YTM allows investors to compare bond with different coupons,
maturities & price & is quoted for trading purposes. The
relationship between the price & YTM of a bond is expressed
by the following formula:

29
 PRICE= Coupon / (1+ YTM) + Coupon2 / (1+ YTM) 2 .+
(Coupon Principle) / (1+ YTM) n

The inverse relation between price & YTM is important in bond

portfolio management.

Yield Curve: This is the graph showing yields for bonds

various maturities, using a benchmark group of bond, such as
the Government Securities. This is also known as the Term
Structure of Interest Rates (TRIR). This yields curve usually
upwards sloping become longer maturities generally offer
higher yields. This is because longer term debt carries higher
risk on account of inflation & other economic factors. The yield
curve is important indicators of expected trends in interest rates.

RISK IN INVESTING IN BOND:

1) Interest Rates-Risk: The price of bond will change in a direction

opposite to movement in interest rates. When interest rates rises bond
price will fall, thus an existing bond portfolio losing valve. A sound
analysis of interest rates movement is therefore essential.

2) Reinvestment Risk: A bonds yield to maturity assumes

reinvestment of interest received during the term at a constant rate.
This not may be possible if interest rate changes & risk is of
uncertain cash flow being reinvested at a lower rate.

3) Call Risk: If a bond has been issued with a call provision the issuer
may call them back & return the proceeds to the investors whenever
interest rates fall, so the borrowing can be replaced with cheaper debt.
The investor thus cannot keep a high yield bond.

30
 4) Default Risk: A bond is a subject to the risk that is assured may
default on its obligation to make timely principle & interest
payments. A fund needs to assess this risk based on the bonds rating
& the analysis generated by its research on issuer s cash flows.

5) Inflation Risk: When the inflation rate rises, purchasing power

decline. Therefore, the value of interest payment is reduced.
Investors will therefore expect higher yields in bonds. Higher interest
rate will make the existing bond lose value again.

6) Liquidity Risk: This refer to the ease with which investment in a

bond can be liquidated (or sold) at a price near its value. This
element is important for a fund because its investments are made on
behalf of unit-holder & market conditions may require the fund to
liquidate a part of its portfolio within a short time.

Instruments in the market

§ Equity
1) Ordinary shares
2) Pref. shares
3) Equity warrants
4) Convertible Debentures

§ P/E Ratio
§ Dividend Yield
§ Cyclical / Growth / Value Stocks

Market Capitalization =Sum total of CMP of shares * no. of shares

31
3.7 INVETMENT POLICIES AND RESTRICTION

Investment Policy:
Investment Policies of each scheme are dictated by its investment
objective as stated in the offer document. In practice the board
policy guidelines are included in the offer documents while the day-
to-day policies are laid down by the AMC management for the fund
manager to conform to fund manager do have some flexibility in
alerting the strategy in the light of changing market condition & in
specific selection.

Investment strategy of an equity fund will lay down guideline on

which sectors & what ki8nd of companies to invest in, what
percentage will be held in the form of cash or money market
securities or how much in debt securities. Usually minimum &
maximum allocation of funds to each class- Equity & Cash is
specified.

Investment policies of a debt fund will also lay down guidelines on

the portfolio & their average maturity. Minimum & Maximum
percentage of Cash / money market instruments in the portfolio has
to be specified too.

Investment policy of balanced funds will specify the minimum &

maximum asset allocations to equity & debt / cash besides the
normal guidelines for the equity & debt components.

Investment policies of the money market funds will largely specify

the type of instrument preferred & their profile.

Investment Restriction by SEBI:

32
While the AMC management the AMC determines the investment
policies & its fund manager must also comply with the restriction
imposed by regulator-mostly SEBI & in case of money market fund
the RBI.

SEBI s main objective in laying down restriction on AMC s is to

ensure investor protection.

The objective is attained by:

1. Maintaining minimum level of diversification in Mutual Fund

Investments &

2. Ensuring that the Investor s funds are used to favour a few or

associated invested in approved securities only. To attain this
Regulatory objectives, some major restrictions imposed by
SEBI.

Minimum Portfolio Diversification Norms

Investment in equity shares or equity related instruments of a

single company are restricted to 10% of the NAV as a scheme.
However the limit of 10 % does not apply in case of sector /
industry specified schemes subject to adequate discloser in the
offer documents. The basic objective here is to ensure that a
fund a fund has an adequately diversified portfolio unless the
specified objective if the scheme is to limit the investments.

Similarly for debt schemes, SEBI restricts the investment in

rated investment grade debt instrument issued by a single issuer
is not allowed to exceed 10% of the NAV subject to approval of
board of AMC & trustee company?

These restriction do not apply to & money & government

securities. SEBI s restriction on the investment in unlisted share
to a minimum of 10 % of the NAV of a scheme for closed end

33
 scheme. In case of open ended the limits may be made more
stringent to 5% of the NAV of the scheme as there is
continuous purchase by investors in such a scheme.

Approved and Unapproved Investment:

1. A Mutual Fund under all its scheme taken together will not own more
than 10 % of any company paid up capital voting rights. The objective
is not only to assure diversified investment but also to prevent fund
sponsor trying to acquire control of any company through fund
investment route.

2. Scheme may invest in another scheme under the same AMC or any
other Mutual Fund without charging any fees, provided that the
aggregate inter scheme investment made by all scheme under the
same management does not exceed 5% of the net asset value of the
Mutual Fund. The objective here is to prevent an artificial inflection
of fund size by inter scheme investment.

3. Debt instrument in which scheme invests must be rated as investment

Grade by at least one recognized rating agency. Unrated investment
could denote favors extended to a borrower or in any case do not
protect the investor.

4. Mutual Funds may buy & sell securities only on the basis deliveries as
Short selling or carry forward transaction is not in general consonance
with Mutual Funds as investment vehicles.

5. In case of long term investment securities should be purchased or

transferred in the name of Mutual Scheme. Securities cannot be held
in a general account & transferred later various scheme to main
certain profile or loss objective. Each investment must be done with
the objective of a scheme in mind therefore be immediately assigned
to a given scheme.

34
6. Pending investment of funds pursuant to the objective the fund may
invest the same in short term deposit of scheduled commercial banks.
Case is to the scheduled banks for general investor protection.

7. Mutual Funds are not allowed to advance any loans. But lead security
in accordance with SEBI s Stock Leading Scheme. Mutual Fund must
invest in marketable securities not in unmarketable loans.

8. A Mutual Fund is prohibited from investing in any unlisted security

or a security issued through private placement by an associated or
Group Company of the sponsor. In the case of listed securities of
group companies of the sponsor or group company of the sponsor, it
is not allowed to invest an amount in exceed of 25% of the net assets
of any of its scheme of fund. The objective is to ensure that the fund
sponsor do not use investor funds to bolster their other group
companies.

9. A Mutual Fund may transfer investment from one scheme to another

Provided the transfer is at the current market rate & in conformity
with the investment objective of the scheme to which to losses form
one group of investor to another.

35
 CHAPTER 4:-

INTRODUCTION TO MUTUAL FUNDS

36
 4. INTRODUCTION TO MUTUAL FUND

4.1 THE CONCEPT OF A MUTUAL FUND

A Mutual Fund is a common pool money into which investor place their
contribution that is to be investors in accordance with a stated objective.
The ownership of the joint or Mutual , the fund belongs to the
contribution make a single investor s ownership of the fund to the total
amount of the fund.

A mutual fund is a collective investment that allows many investors, with

a common objective, to pool individual investments and give to a
professional manager who in turn would invest these monies in line with
the common objective.

A Mutual Fund used the money collected from investors to buy those assets,
which are specifically permitted by its stated investment objective. Thus an
equity fund would buy equity asset- ordinary shares, preferences share,
warrants etc. a bond fund would buy debt instrument such as debentures,
bonds, or government securities. It is these assets, which are owns by the
investor in the same proportion as their contribution bears to the total
contribution of all investor put together.

Since each owner is a part owner of a Mutual Fund, it is necessary to

establish the value of his part. In other words, each share or unit that
investors hold needs to be assigned a value. Since the unit held by investors

37
evidence the ownership of the funds asset, the value of total asset of the fund.
When divided by the total number of units issued by the Mutual Fund gives
us the value of one unit. This is generally called the net asset value (NAV)
of the number of unit held.

4.2 EMERGENCY OF MUTUAL FUNDS

Mutual Funds now represent perhaps the most appropriate investment

opportunity for most investor, as financial markets become more
sophisticated & complex. Investors need a Financial Intermediary who
provides the required knowledge & professional expertise on successful
investing. It is no wonder then in the birthplace of Mutual Fund the
U.S.A. the fund industry has already overtaken the banking industry
more funds being under Mutual Fund Management than deposited with
the bank.

The Indian Mutual Fund Industry is a fast growing segment of the

economy. The Industry consists of 36 Mutual Funds including Unit
Trust of India. With 397 schemes spread over variety products the
industry today manages assets close to Rs. 97,000 crores.

The Indian Mutual Fund Industry has already started opening up, of
many of exciting investment opportunity to Indian investors. We have
started witnessing the phenomenon of more saving now being entrusted
to the funds than to the banks. Mutual Funds as still a new Financial
Intermediary in India. Hence it is important that the investors should
make proper analysis of the available scheme in the market. The
investment advisor & even the fund employees acquire better
knowledge of what Mutual Funds are. What, they can do for investor &
what they cannot & how they function differently from other
intermediaries such as the banks. The association of Mutual Funds in
India has commissioned a workbook, as the basic compellation of the

38
 minimum knowledge requires by both fund distributors & the
employees. The workbook provided by AMFI can serve as a guide
distributors & employees.

4.3 HISTORY OF MUTUAL FUNDS IN INDIA

The Indian Mutual Fund Industry began with the formation of the Unit Trust
of India (UTI) in 1964 by the Government. UTI was formed as a non-profit
organization governed under a special legislation, the Unit Trust of India Act,
1963. It had a monopoly up to 1987 & during this period, UTI launched a
series of equity & debt schemes & established itself as a household name
with assets under management of Rs. 4563 crore & unit holder accounts of
slightly under 3 Million by mid 1987. UTI s growth continued up to 1996
when the strong entry of private sector players saw its share of the market
reducing sharply although UTI continues to be a dominant force in the
Indian Financial Services industry with assets of over Rs. 67,000 crore as of
December 31, 1999.

In 1987, the Industry saw the entry of Public Sector Mutual Funds, i.e. funds
promoted by public sector banks & financial institutions, such as SBI,
Canara Bank, LIC & IDBI. Predictably they were given the brand of their
promoters such as SBI Mutual Fund, Canbank Mutual Fund, and LIC
Mutual Fund & IDBI Mutual Fund. Other Public Sector Mutual Funds also
entered the market but UTI continued to remain the dominant player with a
share of 84% in 1991-92.

The Government first allowed private sector participation in 1993 & the
subsequent entry of a large number of players has made the industry very
competitive. The diagram below shows the three segments & a few of the
players in each segment.

39
UTI was started, at the initiative of the Reserve Bank of India & the
Government of India. The objective then was to attract the small investors &
introduce them to market investment. Since, then the History of Mutual
Funds in India can be broadly divided into three distinct phases.

Phase I: 1964 87 (Unit Trust Of India)

This phase spans from 1964 to 1988. In 1963, UTI was established by an act
of Parliament & given a monopoly. Operationally, UTI was set up by the
Reserve Bank of India, but was later de-linked from the RBI. The first &
still one of the largest schemes, launched by the UTI was Unit Scheme 1964.
Over the years, US-64 attracted & probably still has the largest number of
investors in any single investments schemes.

First Phase (1964- 1987) :-

Establishment of UTI in 1963.

In 1978, UTI was delinked from the RBI & the Industrial Development
Bank of India (IDBI) & took over the regulatory & administrative control
in place of RBI.

The first scheme launched by UTI was Unit Scheme in 1964.

At the end of 1988 UTI had Rs.6, 700 crores of assets under Mgmt.

UTI had grown large as evidence by the following statistics:

1987- 88

Amount mobilized (Cr) Asset Under Mgt (Cr) Mobilization

as % GDP

40
UTI 2175 670 3.1 %

Phase II: 1987-1993 (Entry of Public Sector Funds)

1987, Marked the entry of non-UTI public sector Mutual Funds, bringing in
competition. With the opening of economy, many public sector bank &
financial institution were allowed to establish Mutual Funds. The State Bank
of India established the first non-UTI Mutual Fund- SBI Mutual Fund- in
November 1987. This was followed by Can Bank Mutual Fund ( launched in
December, 1987), LIC Mutual Funds ( launched in 1989 ) & Indian Bank
Mutual Funds ( launched in 1990 ) followed by Bank Of India Mutual Fund,
GIC Mutual Fund & PNB Mutual Fund.

The private sector players, after an indifferent start in the early years, have
made a strong impression especially in the larger cities, with a high quality
of fund management, sales & customer service. This sector has dented UTI s
dominance resulting in a falling market share towards the end of the last
millennium.

Assets under Management

June 30, 2000 Sep. 30, 2001
UTI 57.09 % 53.60 %
Bank Sponsored 3.66 % 3.78 %
Institutions 4.12 % 4.46 %
Private Sector 35.13 % 38.16 %
Total 100.00 % 100.00 %
Total ( Rs. In Crore ) 97953 91811

OPEN CLOSE ASSURED TOTAL

END END RETURN
INCOME 85 28 29 142

41
GROWTH 96 15 - 111
BALANCED 31 4 - 35
LIQUID/ MONEY MARKET 28 - - 28
GILT 24 - - 24
ELSS 19 52 - 71
TOTAL 283 99 29 411

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

1987 marked the entry of Non- UTI, Public Sector Mutual Fund setup by
Public Sector Banks & LIC of India & 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.1987), Punjab
National Bank Mutual Fund (Aug.1989), Indian Bank Mutual Fund
(Nov.1989), Bank of India (Jan.1990), Bank of Baroda Mutual Fund
(Oct. 1992).

LIC established its Mutual Fund in June 1989 while GIC had setup its
Mutual Fund in Dec. 1990.

At the end of 1993, THE Mutual Fund Industry had assets under Mgmt.
Of Rs. 47,004 Crores.

Gilt Funds

1. Next only to money market fund in risk order

2. Gilts- government securities with medium to long term maturities
over one year
3. Investment in government paper called dated securities
4. Negligible risk of default
5. Risk arising out of changes in market price of debt securities
6. Debt securities prices fall when interest rate rise.

Debt Funds

1. Invest in debt securities issued not only by government but also

42
 Corporate & financial institutions
2. Target low risk & stable income
3. Higher price fluctuation risk as compared to money market funds
due to significantly higher maturity period exposures
4. Higher credit risk than gilt funds due to corporate profile
5. Do not target capital appreciation; generate high current income &
distribution substantial part of surpluses to investors.

Third Phase (1993-2003) / Entry of Private Sector Funds:-

1993, the entry of Private Sector a new era started in the Indian Mutual
Fund Industry, giving the Indian Investor a wider choice of Fund Family

Also 1993, was the year in which the First Mutual Fund Regulation came
into being, under which all Mutual Fund expects UTI were to be register
& Governed. The Kothari Pioneer (now merged with Franklin Temleton)
was the First Private Sector Mutual Fund registered in July 1993.

In 1993 SEBI (MF) Regulations were substituted by a more

Comprehensive & revised MF Regulations in 1996.

At the end of Jan.2003 there were 33 MF with Total Assets of Rs.1,21,80

5 Crore. The UTI with Rs.44, 541 Crores of Asset under Mgmt. was way
ahead of other MF Industry has witnessed several Merges & Acquisitions.

Fourth Phase (Since Feb. 2003):-

In Feb.2003, UTI was bifurcated into two separate entities.

1. One is the specified Undertaking of the UTI with assets under Mgmt.
of Rs. 29,835 Crores as at end of Jan.2003, functioning under an
administrator & under the rules framed by Govt. of India & does not
come under preview of MF Regulation.
2. The second is UTI MF Ltd. Sponsored by SBI, PNB, BOB & LIC. It is
Registered with SEBI & Functions under the MF Regulations.

Bifurcation of UTI in Mar.2000 more than Rs. 76,000 Crores of assets

Under Mgmt. & with the setting up of a UTI MF conforming to the SEBI

43
 MF Regulations.

At the end of Sept.2004, there were 29 Funds which Manages assets of

Rs. 1, 53,108 Crores under 421 Schemes.

4.4 PLACE OF MUTUAL FUND IN FINANCIAL MARKET

Indian household started allocating more of their saving to the capital

market in 1980 s with the investment flowing into equity & Debt
instrument beside the conventional mode of the bank deposits.

Until 1992 Primary Market investors were assured good return as the
price of the new equity issues was controlled. After Introduction of free
pricing of shares & with greater volatility in the Stock Markets, many
investors who bought over priced shares lost money & withdrew from
the markets altogether. Even those investors who continued as direct
investors in the Stock Market realized that the key to the successful
investing on the capital markets lay in the building a diversified
portfolio that in turn require substantial capital. Besides selecting
securities with growth & income was not possible for all investor.
Under similar circumstances in other countries, Mutual Fund had
emerged as Professional Intermediaries.

Besides providing the expertise in stock market, investing these funds

allows investing in small amount& yet holding a diversified portfolio to
limit risk. In India, Unit Trust of India occupied this place as the only
capital market intermediary Institution is emerging in India, as
elsewhere as a good alternative to direct investing in the Capital Market.

Mutual Funds serves as a link between the saving public & the capital
market in that they mobilized saving from investors & bring them to
borrower in the Capital Market. By the Very nature of their activities &
by virtue of being knowledgeable & informed investors , they influence
the Stock Market & play an active role in promoting good corporate

44
 governance, investor protection & the health of capital market. Mutual
Fund have imparted much needed liquidity into the financial system &
challenged the hitherto dominant role of banking & financial institution
in the Capital Markets.

Mutual Fund Operation Flow Chart:

INVESTORS

RETURNS FUND MANAGER

SECURITIES

45
 Structure
Foreign
Sponsor Trustee
Partner

Asset Management Other Service

Trust
Company Providers

Scheme 1 Scheme 2 Scheme 3

Organization of a Mutual Fund :

MUTUAL FUND - FRAMEWORK- India

Sponsor

Trustee Company Asset Management

Company

Fiduciary Fund Operations Marketing

responsibility to Management
the
Distribution
Investors Brokers Registrar
Custody
Markets Bank

46
4.5 THE ADVANTAGES OF MUTUAL FUNDS

Portfolio Diversification: Each Investor in a Fund is a part of the funds

entire asset, thus enabling him to hold a diversified investment Portfolio
even with a small amount of investment, which would otherwise requires
big capital.

Professional Management: Even if an investor has a big amount of

Capital available to him, he benefits from the professional management
Skill brought in by the fund in the management of the investor s portfolio.
The investment management skills, along with the needed research into
available investment option, ensure a much better return than what an
Investor can manage on his own. Few investors have the skill & resource
of their own to success in today s fast moving, global & sophisticated
markets.

47
Reduction / Diversification of Risk: When an investor invest directly,
all the risk of Potential loss is his own, weather he places deposits with
a company or bank, or buys a share debenture on his own or in any other
instrument benefits of a collective investment vehicle is from the Mutual
Fund.

Reduction of Transaction Costs: What is true of risk is also the

transaction costs. The investors bear all the cost of investing such as
brokerage or custody of securities. When through a fund, he has the
benefit of economic of scale; the fund pay lesser costs because of large
volume, a benefit passed on to is investor.

Liquidity : Often, investors hold share or bonds they cannot directly,

easily & quickly sell. When they invest in the units of a fund, they can
generally case their investment any time, by selling their units to the fund
if open-ended , or selling them in the market if the fund is closed end.
Liquidity of investment is clearly a big benefit.

Open-ended
-Assures liquidity
-As liquid as the banks.
Close-ended
-Buying and selling can be done through the stock exchange

Conventional & Flexibility: Mutual Fund Management companies offer

many investors services that a direct market investor cannot get. Investors
can easily transfer their holding form one scheme to the other,get updated
market information, easy to Invest, Reduces excessive Paperwork etc,

Safety: SEBI & RBI have a control over Mutual Fund Making investme
nt in Mutual Fund a safe investment. A very good example here quoted
can be of Government of India coming to rescue of UTI s US- 64
Schemes.

48
Affordability:
-Provides an opportunity for a small investor
-Invest as less as an amount of

Wide Choice:
-Offers a Varieties of Schemes
-Meet the investment needs of all Investors

MF s and Tax Benefits:

Income Tax Benefits
-Equity funds - 10% TDS
-Debt Funds - Dividends are taxable

Capital Gain Benefits - Section 112 (1)

-Long term capital gain tax of 10% without indexation, or
-Long term capital tax of 20% with indexation

49
 Mutual Funds:
A Packaged Product

Professional
Management Diversification

Convenience
Liquidity
Tax
Benefits

4.6 THE DISADVANTAGES OF MUTUAL FUNDS

No Control Over Costs: An investors in a Mutual Fund has no control

Over the overall cost of investing. He pays investment management fees

50
 as long as he remains with the funds, in return for the professional manag
ment & research. Fees are payable even while the value of his investment
may be declining. A mutual fund investors also pays fund distribution
costs, which he would not incur in direct investing.

No Tailor-made Portfolios: Investors who invest on their own can build

their own portfolios of shares, bonds & other securities. Investing through
Funds means he delegates this decision to the fund manager. The very high
-net-worth individuals or large corporate investors may find this to be a
constraint in achieving their objectives.

Managing a Portfolio of Funds: Availability of a large number of funds

can actually mean too much choice for the investor. He may again need
advice on how to select a fund achieve his objectives, quite similar to the
situation when he has to select individual shares or bonds to invest in.

Developing a Model Portfolio

Work with Investor to develop long-term goals

Determine Asset Allocation of the investment

Determine the sector distribution

Select specific Fund Manager & their schemes

Model Portfolio

Creativity & forecasting

Shortcomings in Operation of Mutual Fund

1. The Mutual Funds are externally managed. They do not have emplo
yees of their own. Also there is no specific law to supervise the

51
 Mutual Fund in India. There are multiple regulations. While UTI is
governed by its own regulations, the banks are supervised by Reser
ved Bank of India, the Central Government & Insurance Company
mutual regulations funds regulated by Central Government.

2. At present, the investors in India prefers to invest in Mutual Fund as

a substitute of fixed deposits in Banks. About 75% of the investors
are not willing to invest in Mutual Funds unless there was a promise
of a minimum return.

3. Sponsorship of Mutual Funds has a bearing on the integrity &

efficiency of fund management, which are key to establishing
investor s confidence. So far, only public sector sponsorship or
ownership of Mutual Fund organizations had taken care of this need.

4. Unrestrained fund rising by schemes without adequate supply of

scrip can create severe imbalance in the market & exacerbate the
distortions.

5. Many small companies did very well last year, by schemes with
out adequate imbalance in the market but Mutual Funds cannot
reap their benefits because they are not allowed to invest in smaller
companies.

6. The Mutual Funds in India are formed as trusts. As there is no

Distinction made between sponsors, trustees & fund managers, the
trustees play the roll of fund managers.

7. The increase in the number of Mutual Funds & various schemes

has increased competition. Hence it has been remarked by Senior
Broker Mutual Funds are too busy trying to race against each
other. As a result they lose their stabilizing factor in the market.

8. While UTI publishes details of accounts their investments but

Mutual Funds have not published any profit & loss Account &
Balance Sheet even after its operation.

52
 9. The Mutual Fund have eroded the Financial clout of institution
in the Stock market for which cross transaction between Mutual
Funds & Financial institutions are not only allowing speculators
to manipulate price but also providing cash leading to distortion
of balanced growth of market.

10. As the Mutual Fund is very poor in standard of efficiency in

Investors service; such as dispatch of certificates, repurchase
& attending to inquiries lead to the detoriation of interest of
the investors towards Mutual Fund.

11. Transparency is another area in Mutual Fund, which was neglect

till recently. Investors have right to know & asset management
companies have an obligation to inform where how his money
has been deployed. But investors are deprived of getting
information.

4.7 CLASSIFICATION OF MUTUAL FUNDS

Types of Mutual Fund

53
 By Constitution

By Investment Objective

By Nature Of Investment

By Constitution

OPEN-END: No fixed maturity

Variable Corpus
Not Listed
Buy from and sell to the Fund
Entry/Exit at NAV related prices

CLOSED-END: Fixed Maturity

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

LOAD or NON-LOAD FUNDS

TAX EXEMPT or NON-TAX EXEMPT

By Nature of Investments

Financial Assets (Equity/Debt/Money Market)

Physical Assets (Metal/ Real Estate)

Diversified Growth Funds : Diversified Debt Funds

Focused Debt Funds : Sector / Specialized / Offshore

Municipal bonds/ infrastructure cost bond fund
Mortgaged backed

54
 High yield debt funds : Assured Return Funds - Indian variety
Liquid Funds

By Investment objective / patterns

1) Growth - Equity
2) Income - Debt
3) Balanced - Equity and Debt
4) Money Market - Liquid Debt
5) Tax Saving - Equity
6) Specialized - Equity
7) Assured Return - Equity and Debt

Mutual Fund can also be classified as open/ closed ended Mutual Fund

Open Ended Mutual Fund Close Ended Mutual Fund

Units available for the sale & Unavailable
repurchase
Investor can buy or redeem units Investors can buy units from fund
from the Mutual Fund itself only at IPO subsequently buying &
selling at the Stock Exchange
Unit Capital is variable Unit capital is fixed
Pricing at NAV +/- depending on Prices may be quoted at premium or
load charges discount on the exchange depending
on perception about fund s future
performance

4.8 WHO CAN INVEST?

1. Resident including : 1) Resident Indian Individual

55
 2) Indian Companies
3) Indian Trust/ Charitable Institution
4) Banks / FIs/ Partnership Firms
5) NBFC s
6) Insurance companies
7) Provident Funds

2. Non- residents including : 1) NRI s

2) OCBs

3. Foreign entities : 1) FIIs registered with SEBI

4.9 INVESTORS RIGHTS AND OBLGATION

Investors Rights

1. Proportionate right to beneficial ownership of scheme s assets

2. Right to obtain information from trustees
3. Entitled to receive divided warrants within 30 days of declaration of
Dividend
4. Inspect major documents of the funds
5. Appointment of the AMC can be terminated by 75% of the unit
holders of the scheme present & voting
6. Right to approve of changes in fundamental attributes of a close
ended schemes so that they can redeem
7. Receive Annual Reports & A/C Statements

Legal limitations to Investors Rights

1. Unit holders cannot use the Trust

2. Can imitate legal proceeding against trustees
3. Buyers beware

56
 4. Sponsor of Mutual Funds have no obligation to meet any shortfall in
the assured return-unless explicitly guaranteed in the offer document
5. No rights to a prospective investor

Minimum portfolio diversification

1. Equity schemes- single company under 10% of NAV, not applicable

to index & sector funds
2. Debts funds- single issuer not more than 15% of NAV, can be
relaxed to 20% with approval of trustees % AMC
3. Unrated as well as rated but below investment grade, not more than
10% of NAV per issuer
4. All such issuers put together not more than 25% of NAV.

Investors Obligations

1. Carefully study the offer document before investing

2. Monitor his investment in a scheme by referring Financial statements,
performance updates & research report sent by the AMC
3. Complaints readdress
4. SEBI entertains complaints

Required sponsor to appoint compliance office who has to give due

diligence certificate can remove AMC with 75% vote to this effect. No
recourse to any company law.

4.10 OFFER ( DOCUMENT) BY MUTUAL FUND

Contents of an offer document

57
 1. Summary information- at a glance
2. Type of scheme growth / income / balanced
3. Name of AMC
4. Price of units
5. If assured return-name of guarantor
6. Opening & Closing dates of the schemes
7. Disclaimer clause of SEBI
8. Details of the sponsor & the AMC
9. Description of the scheme & the investment philosophy
10. Terms of issue
11. Historical statistics
12. Investors rights & services
13. Abridged offer document/key information memorandum with
application form

Significance

Legal document that protects and governs the right of the investor to
information

Is the primary vehicle for the investment decision

Is the operating document and describes the fundamental attributes of

schemes.

One of the most important sources of information for the prospective

investor

Is a reference document for the investor to look for relevant information

at any time.

Mandatory Information

§ Details of the Sponsor

§ Description of the scheme and investment objective/strategy

58
 § Terms of issue
§ Historical statistics
§ Investors Rights and Services

Key Information Memorandum that is distributed with the application form

is an abridged version of the offer document.

Investment Options & Features

Options
Growth
Dividend and Dividend Reinvestment
Plans
Systematic Investment Plan - SIP
Value Averaging Plan - VAP
Systematic Withdrawal Plan - SWP
Systematic Transfer Plan - STP
Other
Nomination facility

4.11 ACCOUTING OF MUTUAL FUND

Balance Sheet of a Mutual Fund is different from that of a bank. All the
Funds belong to the investors & are held in fiduciary capacity for them.

59
NAV : Investor s subscriptions are unit capital rather than deposits
or liability.

Investments made on behalf on investors are reflected on

assets side

There are liabilities but of strictly short term nature.

NAV= (Market value of investment + Receivables + Other

Accrued income + Other Assets) (Accrued Expense
+ Other Payables + Other Liabilities) / No: of Units
Outstanding as at NAV date.

NAV of all schemes to be calculated & published daily. Close-

Ended schemes that are not mandatory required to be listed on
Stock Exchange may declare NAV once in a month or quarter
as permitted by SEBI.

Mutual Fund NAV is affected by four set of factors

Purchase & sale of investment securities
Valuation of all investment securities held
Others assets & liabilities
Units sold or redeemed

Other assets include any income due to the fund but not actual
received as on the valuation date. Other liabilities includes
similar liabilities include similar liabilities. These are to be
accounted for on an accrual basis. Major expenses like Mana
gement fee to be accrued on a daily basis. If non-accrual does
not affect the NAV by more than 1% then it may not be
accrued for that valuation date.

Non-recording of addition /sales of investments transaction or

Sales/purchase of units can be postponed to the next valuation
date in case such non-recording is not impacting the NAV by
more then 2%.

60
 NAV

NAV = Net assets of scheme / No of units Outstanding

i.e. Market value of investments+ Receivables+

Other accrued income+ Other assets- accrued
expenses- Other Payables- Other liabilities
No. of units outstanding as at the NAV date

HOW NAV IS COMPUTED

§ Market value of Equities - Rs.100 crore - Asset

§ Market value of Debentures - Rs.50 crore - Asset
§ Dividends Accrued - Rs.1 crore - Income
§ Interest Accrued - Rs.2 crore - Income
§ Ongoing Fee payable - Rs.0.5 crore - Liability
§ Amt..payable on shares purchased -Rs.4.5 crore - Liability
§ No. of units held in the Fund : 10 crore units

§ NAV per unit = [(100+50+1+2)-(0.5+4.5)]/10

= [153-5]/10
= Rs. 14.80

NAV - Other information

Open end funds to declare NAV daily

61
 NAV to be published at least weekly

Close end Schemes (which are not listed) may publish NAV
monthly/qt with prior approval from SEBI (MIP)

NAV has to consider up to date transactions

Non - recorded transactions not to affect NAV calculation

by more than 2%

§ NAV is influenced by-

1) Purchase and sale of Investment
2) Valuation of Investment
3) Other assets and Liabilities
4) Units sold or redeemed.

CHANGE IN NAV

FORMULA :

For NAV change in absolute terms =

(NAV at end of period - NAV at beginning of period) * 100
NAV at beginning of period

For NAV change in annualised terms =

( NAV change in % in absolute terms) * (365 / No. of days)

Loads

§ Entry Load or front ended load

Paid at the time of purchase
Sale Price = NAV / (1- Sales Load, if any)

62
§ Exit Load or back ended load
Paid at the time of exit
Redemption Price = NAV/ (1+ Exit Load)

§ Contingent Deferred Sales Load (CDSL)

Deferred exit load depending on the period
Also known as deferred load

Sale Price

§ Sale Price is the price at which units are sold to investors.

§ Sale Price = NAV + Entry load
§ Formula for computation of Sale Price =
NAV/ (1-Load)
Assuming an entry load of 2% in the earlier
NAV computation example
Sale Price = 14.80/ (1- 0.02)
= 15.10

63
 CHAPTER 5 :-

MEASURING & EVALUATING FUND PERFORMANCE

5. MEASURING & EVALUATING OF MUTUAL FUND

64
5.1 NECESSARY FOR MEASURING MUTUAL FUND
PERFORMANCE

When an investing entrusts his saving to Mutual Fund naturally he hopes to

increase wealth by seeing the value of his investment grow. Having
understood the conceptual & operation aspects of Mutual Funds it is
important to analyze the issues involved in the evaluation of Fund
performance.

The Investor Perspective: - The investor would naturally be interested

In tracking through the value of as investment whether invests directly
in the markets or indirectly through Mutual Funds. He would have to
make intelligent decisions on whether he gets an acceptable return on
his investment in the funds selected by him. Or if he needs to switch to
another fund, he therefore needs to understand the basis of appropriate
performance measurement for the fund & acquire the basic knowledge
of the different measures of evaluating the performance well or not, &
make the right decisions.

The Adviser s Perspective: - If you were an intermediary recommend

A Mutual Fund to a potential investor he would accept you to give him
proper advice on which funds have a performance track record. If you
want to be an effective investment adviser, then you too have to known
how to measure & evaluate the performance of the different funds that
are available to the investor. The need to compare different fund s per
formance required the advisor to have the knowledge of the correct &
appropriate measure of evolution the fund performance.

5.2 DIFFERENT MEASURES OF FUND PERFORMANCE

65
 § Different valuation methods
§ Change in NAV
§ Total Return
§ Total Return with dividend reinvested at NAV
§ Change in NAV - The most common

NAV on day 1 = Rs.10

NAV on day x = Rs.12
% Change in NAV = dayx-day1/day1 * 100
= 2/10 *100 = 20 %
Limitations:
Does not account for dividend
Suitable only for growth plans

Total Return

NAV on day 1 = Rs.20

NAV on day x = Rs.22
Dividend = Rs.4 per unit
Total Return = ((Distribution + Change in NAV)/day1 NAV)* 100
= ((4+ (22-20)/20)*100
= 30%

Limitation:
Does not account for reinvestment

§ Return on Investments - most suitable

§ NAV on day 1 = Rs.20
§ Dividend = Rs.4 per unit NAV at Rs. 21
§ Div reinvested = Rs (4 /21) = 0.19 units allotted
§ Total units = 1.19 (original +new allotted)
§ NAV at year end = Rs.22
§ Total Return = (NAV on year end*total units )-day1
NAV)/ day 1 NAV* 100
= ((22*1.19) - 20))/20*100
= 30.9%

Performance Measure

66
Section one:

Equity Funds: NAV Growth

Total Return

Total Return with reinvestment at NAV annulized Return

& Distributed

Computing Total Return (per share Income & Expenses,

Per Share Capital Change , Ratio, Share Outstanding )

The expenses Ratio Portfolio Turnover Rate Fund Size

Transaction Cost

Cash Flow Leverage

Debt Funds: Peer Group Companies

The Income Ratio Industry Exposure & Concentration

NPA s

Besides NAV Growth

Expenses Ratio

Section Two: Concepts of benchmarking for performance evolution

Performance benchmarking in the Indian Contest

Active Fund Performance against market indices as bench

Mark

Debt Fund-interest rate on alternative investment as bench

67
 Mark.

Total Return Index

Money Market Funds Short Term Govt. Instrument

Interest rates as benchmarks.

Section Three: Tracking a funds performance Newspaper, Periodicals,

Research, Annual Report, Prospectus, Reports from
Tracking agencies, Internet & Interpretation of Data.

Other Parameters

§ Expense ratios - indicates fund efficiency and cost effectiveness

§ Portfolio Turnover ratio - measures amount of buying and selling
done by the fund
§ Transaction cost
§ Fund size
§ Cash holdings

Working of Mutual Fund & Their Performance :- It needs to be certified

that MF invest their funds in Capital market instruments such as Shares,

68
Debentures, Bonds, & Money Market Instruments & therefore the NAV of
such investments will reflect the market values of underlying assets. These
Market values fluctuate & therefore the NAV of the MF Schemes also
fluctuate. All the capital market instruments have varying degrees of risk,
the Degree of risk being the highest in equities & the risk factor is
highlighted in the respective offer documents as well as in the abridged offer
documents.

The investors therefore are in the full knowledge &

understanding of the risks involved in various schemes. As per SEBI
Regulation all MF disclose their portfolio periodically & all open-ended
Funds offer exit option to investors at NAV based price.

RISK RETURN GRID

Risk / Tolerance / Focus Suitable Products Benefits offered

Return Excepted by MF

Low Debt Bank / Company Liquidity, Better

FD, Debt Funds post- Tax Returns

Partially Balanced Funds, Liquidity, Better

Debt, some Diversified Post- Tax Returns
Medium Partially Equity Funds & Better Mgmt,
Equity some Debt Funds, Diversification
Mix of Shares & FD

Capital Market, Diversification,

High Equity Equity Funds Expertise in
( Diversified as Stock Picking,
well as Sector ) Liquidity, Tax

69
 Free Dividends.

The Risk Return Trade-off

The Risk Return Trade-off

Hedge Funds

Growth Funds Sectoral Funds

Potential
Aggressive, Value,
for Growth
return
Debt
Funds Balanced Funds
Gilt Funds, Bond Ratio of Debt : Equity
Funds, High
Yield Funds

Liquid Funds
Risk

70
 Equities are the best long term bet
percentage of studied period in which

Other 14%
investment
outperformed 37%
44%
Stocks
outperformed
56% 86%
63%
1 year 3 year 5 year
Source : RBI Report on Currency and Finance (1997-98)
BSE Sensitive Index of Equity Prices - BSE

71
Equities are the best long term bet
Cumulative annualised returns (1980 - 98)
25.0%
20.16%

20.0%
14.47%
15.0%
9.2% 9.74%
7.62%
10.0%

5.0%

0.0%
Inflation Gold Bank FD Co. FD Equities

Inflation Gold Bank FD Co. FD Equities

Source: RBI report on Currency & Finance (1997-98); BSE Sensitive index of Equity prices -
BSE

72
 CHAPTER 6:-

MUTUAL FUND FEES & EXPENSES

73
 6. MUTUAL FUND FEES & EXPENSES

Initial Issue Expenses

Transaction Cost: Entry / Exit Load

CDSE for No-Load Fees

Annual Recurring Expenses: AMC Fee

Custodian Fee
Registry Exp.
Trustee Fee
Audit Fee
Marketing & Selling Exp.
Brokerage Exp.
Others

§ Initial Issue expenses

For launching of the scheme
Can charge up to 6%

§ Recurring Expenses
Marketing exp including brokerage
Transaction cost
R&T cost
Custodian Fees
Audit fees etc
Investor Communication s cost

§ AMC a charge Investment management fee to the fund on weekly avg.

net assets.

74
 § The limits are: (Subject to overall limit of 6%)
1.25% for up to Rs.100 cr of weekly avg net assets
1% in excess of Rs.100 cr.
No Load schemes can charge an additional fee of 1%

§ Total Expenses that can be charged to the Fund ( excluding entry and
exit loads):
Equity Debt
On the first Rs.100 cr 2.50% 2.25%
On the next Rs.300 cr 2.25% 2.00%
On the next Rs.300 cr 2.00 % 1.75%
On the balance assets 1.75% 1.50%

Based on average weekly net assets

§ Initial issue expenses

Charge to the scheme capped at 6% of the initial resources
raised under that scheme

§ Entry/Exit Loads - Transaction costs

Sale price not greater than 107% / Re-purchase price not lower
than 93% (95% for close-ended schemes) of the NAV

§ Contingent Deferred Sales Charge ( For No-Load Schemes)

Ceiling For redemption within 1year 4%
For redemption within 2years 3%
For redemption within 3years 2%
For redemption within 4years 1%

75
 CHAPTER 7:-

ACCOUTING & VALUATION OF MUTUAL FUND

76
 7. ACCOUNTING & VALUATION OF MUTUAL FUND

Accounting Policies

§ Investments to be marked to market on market prices.

§ Unrealised appreciation cannot be distributed.
§ Purchase & sale of investments to be recognised on the trade date and
not on settlement date.
§ Investments to be taken as NPA if it gives no return through interest
for more than 6 months
§ Dividend / Bonus/ rights to be recognised on ex-dividend / ex-bonus
dates and not on declared dates.
§ Income receivable on Invest NOT accrued for more than 3 months
should be provided for.
§ For determining gain/ loss on investments - avg cost is to be taken

Mutual Fund Valuation

§ Marking to Market
§ Equity Valuation Norms - Listed, Unlisted, NPA, Untreated
§ Debt valuation norms - Listed, Unlisted, Illiquid
§ Money Market Instruments - valuation norms
§ Effect of Buybacks, Mergers
§ Valuation Models - CRISIL

Valuation

§ TRADED SECURITIES
Last quoted closing price on the SE where principally traded
If Not traded on any SE on a particular day, then earliest previous
day price is taken (not more than 30 days)
Valuation = MP * current holding

77
 § NON - TRADED SECURITIES
Stocks which are not traded for more than 30 days on any SE are valued on
good faith basis by AMC within following parameters

§ Debt - YTM basis

§ Equity capitalization of earning or NAV or combination of both

Disclosures and Reporting

§ Audit by independent auditor

§ Audited Annual report every year
§ Un-audited accounts to be published within 1 month after March 31 &
September 30
§ Within 6 months of closure, publish abridged summary of report
scheme-wise in newspapers
§ Summary to be forwarded to SEBI & unit holders
§ Full portfolio disclosure to be made within a month from the half-year
ended March 31 & September 30

§ Reporting to SEBI
Annual audited accounts
Six monthly unaudited a/cs
Half yearly statement of movements in net assets of each scheme
Qtr portfolio statement
Monthly amount mobilized

§ Communication to investor
Qtr portfolio
Annual report

Taxation

§ Capital Gain Benefits

Long term capital gain tax of 10% without indexation

Long term capital gain tax of 20% with indexation.

78
Investment Restrictions as a % of Net assets - AMC

§ Max. Investment under all schemes of the AMC in paid up capital

carrying voting rights in single Co. - 10 %
§ Max. Inter scheme investments of the same AMC - 5 % (no AMC fee
payable)
§ Inter scheme transfers at CMP and within the objectives of scheme
§ Max. Investment in listed shares of Group Co s - 25 % for each
scheme.
§ No investments allowed in unlisted/private placement of
group/associate cos.
§ Can borrow only to meet liquidity requirements. Max for 6 months &
not more than 20% of NAV of scheme.

Investment Restrictions as a % of Net Assets -Debt

§ Max. Investment in Rated paper in single Co - 15% (can be increased

to 20% with approval by Board of AMC/Trustee)
§ Max.Investment in Unrated/ Rated but below investment grade in
single issuer- 10% of NAV
§ Max. Investment in Unrated/Rated but below investment grade in all
cost - 25% (subject to approval of Board of AMC /Trustee).
§ Restrictions not applicable to Govt. Securities/Money Market
§ Can only invest in marketable securities - no loans

Investment Restrictions as a % of Net Assets -Equity

§ Max. Investment in Equity/Equity related instruments of single - 10%

§ No restrictions in case of Index Fund
§ Max. Investment in Unlisted Cos. - 10% in close ended & 5% in open
ended funds
§ Buy & Sell securities on Delivery position , No short selling/ carry
forward allowed.

79
 CHAPTER 8:-

SEBI
[SECURITIES EXCHANGE BOARD OF INDIA]

80
 SEBI

[THE SECURITIES & EXCHANGE BOARD OF INDIA ACT]

In 1992, an Act to provide for the establishment of a Board to Protect the

interests of Investors in Securities & to promote the development of & to
regulate the Securities market & for matters connected therewith or
incidental thereto on the 30 Jan. 1992 under Section 3.

8.1 MANAGEMENT OF BOARD

A Chairman

2 Members from the Officials of the (Ministry) of the Central Govt.

dealing with Finance (& Administration of the Companies Act, 1956
2 of 1934)

1 Member from the Officials of RBI.

5 Other Members of whom at least 3 shall be the whole time members.

The General Superintendence, Director, Mgmt. of the Affairs of the

Board as exercise all powers & do all acts & things which may be
exercised or done by the Board.

The Chairman & Members referred in clauses (1) & (4) are appointed by
the Central Govt. of India & the Members referred in clauses (2) &(3) are
nominated by the Central Govt. & RBI.

The Central Govt. has a right to terminate the Service of the Chairman or
Other appointed Members by giving him a Notice of not less than 3
Months in writing or 3 Months salary & allowance in lieu.

81
Removal of Members from Office: - The Central Govt. shall remove a
Member from Office if He/ She

1. Adjudicated as insolvent

2. Unsound mind & Stands so declared by a Competent Court

3. Convicted of an Offence, involves a Moral Turpitude

4. Abused his / her Position as to render his / her Continuation in Office

detrimental to the Public Interest.

Members not to Participate in Meetings in Certain Cases: - Any Member,

who is a Director of a Company & who as such Director has any Direct or
indirect pecuniary interest in any Matter coming up for consideration at a
meeting of a Board.

82
8.2 FUNCTIONS OF BOARD

Subjects to the provisions of this Act; it shall be Duty of Board to Protect

the Investors in Securities to Promote & Development & to Regulate the
Securities Market by such measures as it thinks fit.

Registering & Regulating the Working of Stock Brokers, Sub-Brokers,

transfer agents, bankers to an Issue, trustees of Trusts deeds, Registrars
to an Issue, Merchant bankers, underwriters, portfolio managers, invest
ment adverse & such other intermediaries who may be associated with
securities markets in any manner.

Registering & Regulating the Working of the Depositories, (Participants)

Custodians of Securities, Foreign Institution Investors credit rating
agencies & such other intermediaries.

Promoting & Regulating the Self- Regulatory Organization.

Prohibiting fraudulent & unfair trade practices relating to securities

market insider trading in Securities.

Calling for Information from, undertaking Inspection, conducting

inquiries & audits of the Stock Exchanges, (Mutual Fund) & other
persons associated with the Securities market & intermediaries & self-
regulatory organization in the Securities Market.

Conducting Research

Summoning & enforcing the attendance of Persons & examining them on

oath.

Board to Regulate or Prohibit issue of Prospectus, offer document or

advertisement soliciting money for issue of Securities.

The investigating Authority shall keep in its custody the Books, Registers,
other documents & record seized under this section for such period later
than the conclusion of the investigation.

83
8.3 REGISTRATION CERTIFICATE

No Stock- Broker, sub- Broker, Share Transfer Agent, Banker an Issue,

Trustee of Trust deed, Register to an Issue, Merchant Banker, under
writer, portfolio manager, investment adviser& such other intermediary
who may be associated with securities market shall buy, sell or deal in
securities except under & in accordance with the regulation made under
this Act.

No Depository, (Participant), custodian of Security, foreign institutional

Investor, Credit rating agency or any other intermediary associated with
the Securities markets as the Board may be notification in this behalf
Specify.

No person shall Sponsor or cause to be Sponsored or carry on or cause

to be carried on any venture Capital Funds or collective investment
Schemes including Mutual Fund, unless he obtains a certificate of
Registration from the Board in accordance with the Regulations.

The Board may by order, suspend, cancel or Certificate of Registration

in such manner as may be determined by Regulations.

Prohibition of Manipulative & Deceptive Devices, insider trading &

Substantial acquisition of Securities & Control :-

Use or Employ, in connection with the issue, purchase or sale of any

Security listed or proposed to be listed on a recognized Stock Exchange
& any manipulative or deceptive device or contrivance in contravention
of the provisions of this Act or the rules or the regulations made under.

Employ any device, scheme or artificial to defraud in connection with

Issues or dealing in Securities which are listed or proposed to be listed
on a recognized Stock Exchange.

84
Grants by the Central Govt. for all Grants, fees & charges received by
the Board under SEBI Act made by Parliament:-

All sums received by the Board from such other sources as may be
decided upon by the Central Govt.

The salaries allowances & other remuneration of members officers &

other employees of the Board & other expenses of the Board on objects
& for other purposes are funded by Central Govt.

The Board shall maintain proper accounts & other relevant records &
prepare an annual statement of A/C in such form as may be prescribed
by the Central Govt. in consultation with the comptroller & Auditor-
General of India.

Only then can the Mutual Funds hope to stage a recovery & regains some of
the recent heavy losses with a reshuffling of portfolios & net appreciation in
equity values.

All Mutual Funds / AMC/ Trustee Companies to be registered with SEBI

Responsible for protecting investors interest and promote orderly growth

of Mutual Fund Industry

Formulates regulations, monitors performance and conduct of Mutual

funds and enforces compliance to regulations through reviewing reports
and regular inspections

85
Reserve Bank of India & SE

RBI
Dual supervision for bank sponsored AMC s
Issue concerning ownership bank promoted AMC falls with RBI

Stock Exchange (SE)

Close ended MF listed of SE. Needs to comply with listing
guidelines.

Office of public Trustee

MF being public trustee - governed by Indian Trust Act , 1882

Trustee Co or Board of Trustee accountable to office of Public Trustee

Public trustees reports to Charity Comm.

86
Trustee and AMC to comply with Cos Act 1956

Registrars of Companies (ROC)

Department of Company Affairs

Company Law Board (CLB)

Ministry of Law & Justice

87
 CHAPTER 9:

RULES & REGULATIONS

88
 9. RULES & REGULATIONS

Legal Frame Work: - 20 Sept.1995 The Depositories Act, 1996

Companies Act, 1956
30 Jan.1992 SEBI Act
16 Feb. 1957 The Securities Contracts
(Regulations) Act 1956

I] 1. Short Title, Extent & Commencement:

a) This Act may be called as Depositories Act, 1956
b) It extends to the whole of India
c) Come into force on 20 day of Sept. 1995

2. Definitions :- 1) Beneficial Owner means a person whose name is

Recorded as such with a depository.
2) Board means SEBI est. Under section 3 of SEBI
Act , 1992.
3) Bye- Laws means made by a Depository under
section 26.
4) Company Law Board means the Board of
Company Law Administration constituted under
Section 10 E of the Companies Act, 1956.
5) Depository means a Company formed & register
under the Companies Act, 1956 & which has been
garneted a Certificate of Registration under Sub-
section (1A) of section 12 of the SEBI Act, 1992.
6) Issuer means any person making an Issue of
Securities.
7) Participant means a Person Registered as such
Under, sub-section (1A) of section of SEBI Act.
8) Prescribed means a Prescribed by Rules made
under this Act.

89
 9) Record includes the records maintained in the
Form of Books or stored in a Computer or in such
form as may be determined by Regulations.
10) Registered Owner means a Depository whose name
entered as such in the Register of the Issuer.
11) Regulation means Regulation made by the Board.
12) Security means Security as may be specified by the
Board.
13) Service means any Service connected with the
Recording of Allotment of Securities or Transfer of
Ownership of Securities in the Record of Depository.

II ] Certificate of Commencement of Business by Depositories:-

1. No Depository shall act as a Depository unless it obtains a Certificate

of Commencement of Business from the Board.
2. The Board shall not grant a Certificate under sub- section; unless it is
satisfied that the Depository has adequate Systems & Safeguards to
prevent Manipulation of Records & Transactions.

III] Rights & Obligations of Depositories, Participants, Issuers &

Beneficial Owners:-

Agreement between Depository & Participant: With one or more

participants as its Agents, Specified by the Bye- Laws.
1. Services of Depository- Any Person, through a Participant may enter
into an Agreement, in such form as may be specified by the Bye-
Laws, with any Depository for availing its services.

Surrendered of Certificate of Security :

1. Any Person who has entered into an Agreement under section 5 shall
surrendered the Certificate of Security, for which he seeks to avail
the Services of a Depository.

90
2. The issuer, on receipt of Certificate of Security under Sub- Section (1)
shall cancel the Certificate of Security & Substitute in its Rewards the
name of Depository as a registered Owner in respect of that Security
& inform the Depository accordingly.
3. A Depository shall on receipt of information under Sub-section (2),
enter the name of the Person referred in Sub-section (1) in its records
as the Beneficial Owner.

Registration of Transfer of Securities with Depository:

1. Every Depository shall, on receipt of intimation from a Participant,
Register the Transfer of Security in the name of the Transferee.
2. If a beneficial owner or a Transferee of any Security seeks to have
Custody of such Security, the Depository shall inform the Issuers
accordingly.

Options to Receive Security Certificate or Hold Securities with a

Depository: - Where a Person opts to hold a security with a Depository,
the issuer shall intimate such Depository the details of allotment of the
Securities, & on its receipt of such information the Depository shall enter
in its records the name of the auoltee as the beneficial owner of that
Security.

Securities in Depositories to be in Fungible Form: - Nothing contained

in Sections 153, 153A, 153B, 187B, 187C & 372 of companies Act, 1956
shall be apply to the Securities held by a Depository on behalf of a
Beneficial Owners.

Rights of Depositories & Beneficial Owner :-

1. Depository shall be deemed to be the registered Owner for the Purpose
of effecting transfer of Ownership of Security on behalf of a Beneficial
owner.
2. The Depository as a registered owner shall not have any voting rights
or any other rights in respect of Securities held by it.
3. The beneficial owner shall be entitled to all the Rights, benefits & be
subjected to all the liabilities in respect of his securities held by a
Depository.

91
Register of Beneficial Owner: Every Depository shall maintain a
Register & an Index of Beneficial Owners in the manner provided in
section 150, 151, & 152 of the Companies Act, 1956.

Pledge or Hypothecation of Securities held in a Depository:

1. Every Beneficial Owner shall give intimation of such Pledge or
Hypothecation to the Depository & such Depository shall there upon
make entries in its Records accordingly.
2. Any entry in the records of a Depository under Sub-section (2) shall
be evidence of s Pledge or Hypothecation.

Furnishing of Information & records by Depository & Issuer:-

1. Every Depository shall furnish to the issuer information about the
transfer of Securities in the name of beneficial owners at such interval
& in such manner as may be Specified by the Bye- Laws.
2. Every issuer shall make available to the Depository Copies of the
relevant records in respect of securities held by such Depository.

Option to opt out in respect of any Security:-

1. If a beneficial owner seeks to opt out of a Depository in respect of any
Security he shall inform the Depository accordingly.
2. The Depository shall on receipt of intimation under Sub- section (1)
make appropriate entries in its records & shall inform the Issuer.
3. Every Issuer shall, within 30 days of the receipt of intimation from the
Depository & on fulfillment of such conditions & on payment of such
Fees as may be specified by the regulations, issue the Certificate of
Securities to the beneficial Owner or the Transferee, as to the case.

Depositories to indemnify loss in certain Cases:-

1. Any loss caused to the Beneficial Owner due to the negligible of the
Depository or the Participant, the Depository shall identify such
Beneficial Owner.
2. Where the loss due to the negligible of Participant under sub-section
(1) is indemnified by the Depository, the Depository shall have the
Right to recover the same from such Participant.

92
 CHAPTER 10:-

PENALTIES & ADJUDICATION

93
 10. PENALTIES & ADJUDICATION

I] Penalty for Failure to Furnish Information, Return, etc

1. To furnish any document, return or report to the Board fails (A Penalty

of 1 Lac Rs. for each day during which such failure continues or 1 Crore
Rs. whichever is less)

2. To fail any return or furnish any information, books or other documents

Within the time specified (A Penalty or 1 Lac Rs. for each day during
which such failure continues or 1 Crore Rs. whichever is less)

3. To maintain books of accounts or records, fails (A Penalty of 1 Lac Rs.

for each day during which such failure continues, 1 Crore Rs whichever
is less)

II] Penalty for Failure by any Person to enter into an Agreement with
clients- 1 Lac Rs. for each day during which such failure continues or 1
Crore Rs, whichever is less.

III] Penalty for certain defaults in case of MF- sponsoring or carrying

on any collective investment schemes.

IV] Penalty for failure to observe Rules & Regulations by an Asset

Management Company.

V] Penalty for failure in case of Stock Brokers If fails to issues

contract notes in the form & manner specified by the Stock Exchange of
which such Broker is a member he shall be liable to a Penalty not
exceeding five times the amount for which the contract note was require
to be issued by that Broker.

VI] Fails to deliver any Security or fails to make payments of the

amount due to the Investor in the manner or within the period specified
in the Regulations.

94
VII] Penalty:-

Offences : Whosever contravenes or attempts to Contravene shall be

Punishable with imprisonment for a term which may extend to five Years
or with fine or with both.

Power of Central Govt. to make Rules: The Central Govt. may, by

notification in the Official Gazette, make rules for carrying out the
provisions of this Act.

Power of Board to make Regulations

Power of Depositories to make Bye- Laws.

Establishment, Jurisdiction, Authority & Procedure of Appellate

Tribunal: - Establishment of Securities Appellate Tribunals- The central
Govt. shall by notification, establish one or more Appellate Tribunal to
exercise the Jurisdiction, powers & authority conferred on such Tribunal by
or under this Act.

Qualification for appointment as presiding officer or member of the

Securities Appellant Tribunal-

Unless he is a sitting or retired Judge of the Supreme Court / High Court,

shall be appointed by the Central Govt. in consultation with the Chief
Justice of India or his nominee.

A member of Board or any person holding a post of senior Mgmt. level

equivalent to Executive Director in the Board shall not be appointed as
presiding officer or member of a Securities Appellate Tribunal during his
Service or tenure as such with the Board or within 2 Yrs. from the date on
which he ceases to hold office as such in the Board.

Tenure of Office of Presiding Officer & other members of Security

Appellate Tribunal: - Hold office for a term of 5 years from the date on
which he enters upon his office & shall be eligible for re-appointment.

95
CHAPTER 11:-

SUGGESTIONS

96
 11. SUGGESTIONS

Strategy To Smart Investing :

Identify Objective
Start early
Focus long-term and stay invested
Beware of the effects of inflation & taxes

The Ground Rules of Mutual Funds Investing: - Moses gave to his

followers 10 Commandments that were to be followed.

1. Assess yourself-self-assessment of One s needs: Expectations & risk

Profile is of Prime importance failing which one will make more
mistakes in putting money in Right places than otherwise. One
should identify the degree of risk bearing capacity one has & also
clearly state the expectations will only bring pain.

2. Try to Understand where the money is going : It is important to

Identify the nature of investment. One can lose substantially if one
picks the wrong kind of MP. In order to avoid any confusion, it is
better to go through the literature such as Offer Documents etc.

3. Don t rush in Picking Funds, think first: One first has to decide what
what he wants the money for & it is this investment goal that should
be the guiding light for all investments done. It is thus important to
know the risks associated with the fund & align it with the quantum
of risk one is willing to take. One should take a look at the portfolio
of the funds for the purpose

4. Invest, Don t Speculate : A Common Investor is limited in the

degree of risk that he is willing to take. One should attain from
speculating which in other words would mean getting out of one fund
& investing in another with the intention of making quick money.
One could do well to remember that nobody can perfectly time the
Market so staying invested is the Best option unless there are compel
reasons to exit.

97
5. Don t pull all the eggs in one Basket: No matter what the risk profile
of a person is, it is always advisable to diversify the risks associated.
So putting one s money in different classes is generally best option
as it averages risks in each category.

6. Be Regular: Investing should be a habit & not an exercise undertake

at one s wishes, if one has to really benefit from them. As said earlier,
Since it is extremely difficult to know when to enter/exit the market,
it is important to beat the market by being systematic. The AIP s
(Automatic Investment Plans) amount on be directly transferred from
the Investor.

7. Do your Homework: It is important for all investors to research the

avenues available to them irrespective of the investor category they
belong to. This is important because an informed investor is in a
better decision to make right decisions.

8. Find the Right Funds: Funds that charge more will reduce the yield
to the Investors. Investors of equity should keep in mind that all
dividends are currently Tax-Free in India & so their Tax liabilities
can be reduced if the dividend payout option is used. Investors of
debt will be charged a Tax on dividend distribution & so can easily
avoid the payout options.

9. Keep Track of your Investment: It is important to keep on track of

the way they are performing in market. If the market is beginning to
enter or bearish, then investor of equity too will benefit by switching
to debt funds as the losses can be minimized. One can always switch
back to equity if the equity market starts to show some buoyancy.

10. Know when to sell your Mutual Fund: Knowing when to exit a fund
too is of utmost importance. One should book profits immediately
when enough has been earned i.e. the initial expectation from the
fund has been meet with. Other factors like non-performance hike in
fee charged & change in any basic attribute of the fund etc. are some
of the reasons for to exit.

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 : When to Say Goodbye to Your Mutual Fund / Exit Point :

Not to Chase Returns

Fund is not performing When calculating performance one shouldn t

look at too short a period & make a mistake by comparing apples to
oranges. It is important to base the decision on Relative Performance, &
not absolute performance. When studying Relative Performance, one
should look at his fund & compare it to its peers. However, comparisons
should be drawn between parallels & so equity funds cannot & should be
compared with debt funds. If fund has underperformed the average of its
peers in all cases.

A change in life stage- A young man can afford to take more risks than a
person nearing his retirement can. In such cases, it pays to withdraw
money from the equity investment made earlier & put them in safer, more
conservative debt funds that offer stable return without compromising on
Risk.

A major change in any basic attribute of the fund- As mentioned earlier

in its offer documents, the investors have a choice of getting out of it.
Changes like a change in Asset Mgmt. Company, in investment style of
Fund or change of structure says from closed-end to open-end etc.

Fund doesn t comply with its objectives- One of the important parameter
in the selection of funds is alignment of risk profiles of the investor &
Fund. The objective of the fund says a lot about how funds plan to invest.

The Fund s Expenses Ratio Rises- A small rise in an expense ratio is not
a big deal, but in a case of Bond Funds on Money Market Funds, it is
highly unlikely that the Fund can increase its return enough to justify an
an increase in the Funds expenses.

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The Fund Manager has Changed: If it is an actively managed fund, then
has to keep the eyes open on the new manager. Observing the styles,
stock picking & rises under- taken by the new manager is important for
it discloses a lot about how the fund might fare in the future. If satisfied
one will have no reason to complain later but the process needs time, so
an investor has to observe the Fund Manager for sometime before one
takes a decision.

Enough has been earned- However, nothing is as important as to rein

the horses in time. The primary principle behind safety of investment is
to take risks that can be tolerated. Just as it is important to set realistic
target that one hopes to achieve from the investment, it is also important
to exit when target as excepted has been achieved irrespective of the fact
that it might be generating better returns in a short-term, would be
Cursing them for not exiting.

Remember : 1) Investment Decision are Long Term Decision

2) 1% Superior Return can make 20% difference in 25 yrs.
3) Understand the Virtues of Rupee Cost Averaging
4) Discipline is more Important than Intelligence
5) Avoid Wastage, look at Returns Net of Taxes

100
GLOSSARY

101
 : GLOSSARY OF MUTUAL FUND:

Advisor- The Organization employed by a Mutual Fund to give Professio

ional advice on the fund s investment & to surprise the Mgmt of its assets.

Asked- The price at which a MF s Shares can be purchased. The asked

or offering price is based on the Current Net Asset Value (NAV)
per Share plus any Sales Charge.

Asset Allocation Fund- A Fund that spreads its portfolio among a wide
variety of investments, including domestic & foreign Stocks & Bonds
some of these funds keep the proportions allocated between different
Sectors relatively constant, while others alter the mix to market conditions.

Automatic Reinvestment- A service that most MF offer whereby a share

holder income dividends & capital gains distributions are automatically re
invested in additional Shares.

Adjusted NAV- The Net Asset Value of a unit adjusting for all changes
caused due to divided declaration, bonus, etc. assuming reinvestment of
distributions made to the investors at the prevailing NAV.

Age of Fund- The time elapsed since the inception of the Fund.

Alpha Co-efficient- It is the excess return of fund above risk adjusted

market return, given its level of risk as measured by Beta. An Investment
with a +ve indicates that the fund has under performed, for the level of
risk taken by it.

Amortization- The systematic repayment (Ex. Monthly, quarterly, or

Yearly) of a debt or loan such as a bond or mortgage, over a specific time
Period.

Annual Report- It is yearly record of a MF Performance in a Current

Year. Under SEBI s guidelines, it is distributed to investors &/or Share
Holders.

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Annual Return- The percentage change in NAV of any Fund over a
horizon of one year; assuming reinvestment of distribution such as
dividend payments & bonus.

Annualized Returns- It is the absolute return over a period either greater

or less than a year aggregated to a period of one year.

Applicable NAV- The applicable NAV, if the application is received

before that cut-off time on a day as set by the fund. All investments or
redemptions are processed at that particular NAV. A different NAV holds
if received thereafter.

Arbitrage- The simultaneous purchase & selling of a Security in order to

profit from a differential in the Price. This usually takes place on different
exchange or market places.

Asset- Anything that has monetary value. Typical personal assets include
Stocks, real estate, jewelry, art, cars, & Bank A/C. Corporate asset receive,
Short & Long Term Investments, Investors, & Prepaid Expenses.

Asset Allocation- It is a means of diversifying the risk associated with a

Fund & refers to the distribution of total funds available with the fund into
instruments of various types such as Stocks, Bonds etc. based on the Funds
investments objectives.

Asset-Backed Securities- Securities that represent a participation in, or

are secured by & payable from, payments generated by Credit Cards,
Motor Vehicle or trade receivables & the like.

Asset Classes- The three major asset classes are cash (Short Term
investment ) Bond & Stocks.

Asset Mgmt. Company (AMC)- It is the Investment Manager for a MF.

It is a Company set up primarily for managing the investment of MF &
makes investment decisions in accordance with the Schemes Objectives,
deed of Trust & Other provisions of the Investment Mgmt. Agreement.

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Automatic Investment Plan- A Plan introduced in MF that enables the
Investor to give the mandate of allotting fresh units at specified intervals
(Monthly, Quarterly) against which the investor provide postdated Cheque
On the specified dates, the cheques are realized by the MF & on realization
Additional Units are allotted to the investor at the prevailing NAV.

Automatic Reinvestment Plan- An investment option available to MF

Unit holders in which the proceeds from either the Fund dividends, bonus
etc. is automatically used to buy more units of the Funds.

Av. Cost Method- It is the method of finding out cost per unit by adding
up all the costs involved in purchasing all the units of investment & then
dividing the sum by the Total No. of units.

Av. Credit Quality- A measure of the Creditworthiness of debt Securities

held by a Debt fund. It is weighted dv. of the Credit rating of the Securities
given their relative weights in the portfolio. For these Calculation, Govt. of
India Securities, Cash & call money instruments are taken as AAA Credit
Quality & non-rated debt instrument are taken having BBB Credit quality.

Av. Maturity - The av. Of all maturity dates for securities in a Money
market or Bond Fund. The longer av. Maturity, the more Volatile a Fund s
share price will be, moving up or down an Interest rates change.

Bank Deposits- Cash, Cheque or Draft deposited in Financial institution

for Credit to a Customer s Account. Bank differentiate between demand
deposits (checking accounts on which the customer may draw) & time
deposit, which pay interest & have a specified Maturity or require 30 Days
notice before withdrawal.

Balanced Funds- A Class of MF that aims at allocating the total assets

with it in the portfolio mix of debt as well as equity instruments.

Balanced Maturity Tenure of a Scheme- It is defined in a case of close

ended schemes as the Balance period till the redemption of the Scheme.

104
Balanced Sheet- A Company s Financial Statement that reports into asset,
Liabilities & Net worth at a specific time.

Basic Point- Most often used relating to changes in interest rates. One
Basic Point in 1/ 100 of a percentage point; therefore 1000 Basic Points
make 1%. A phrase used to describe the difference in Bond Yields. Ex. If
Bond A Yields 7.5 & Bond B Yields 7.25 . Then the difference is 0.25 is
a Basic Point.

Bear Market- It is a period in market when investors are on a selling

spree 7 the share prices are going down.

Benchmark- It is the platform or the parameter with which a scheme can

be compared. For e.g. the performance of an index fund can Benchmarked
against the appropriate index specified by it.

Below Investment Grade (High Yield) Securities- Lower rated, higher

yielding Securities issued by corporations. They are generally rated below
investment- grade (i.e. Bal/ BB+ & below) by National Bond Rating
Agencies, or if unrated, are judged by the Adviser to be of equivalent
quality. They are considered speculative & are sometimes called as
Junk Bonds .

Beta ( )- It is the measure of a Relative Sensitivity of a Stock or MF to a

Market. The market is assigned a of 1. The higher the , more sensitive
the Stock or fund is considered to be Relative to the market as a whole. In
other words, funds with more than 1 will react more to any fluctuations
(whether upward or downward) in Market than funds with B less than 1.

Blue Chip Stock- Usually high period scrip of a major corporation with a
long, fairly stable record of earnings & dividend payments & with good
expected future growth.

Bond- An interest bearing promise to pay a specified sum of money due

on a specific date in the future (Maturity Date).

Bond Rating- An evaluation of the possibility of default by a bond issuer

based on an analysis of the issuer s Financial condition & profit potential.
Bond Rating services are provided by, among others, CRISIL 7 Fitch.

105
Bonus- Bonus is allocation of additional units to the investors on basis of
their existing holdings. Basically, there is a split of existing units into more
than one unit resulting in the reduction of the NAV per unit.

Book Value- A Company s assets, minus any liabilities & intangible

assets. Book Value is literally the value of a company that can be found in
the accounting ledger & is often represented as per-share value by taking
the Company s Shareholder equity & dividing by Current No. of Share
outstanding.

Bottom- Up Investing- An investing approach in which securities are

researched & chosen individually with less consideration to economic or
market cycles.

Broker- A Broker is an intermediary who guides the Investors on one or

more investment avenues available to an investor & facilitates the process
of investment.

Brokerage- It is the fee payable to a Broker for acting as an Intermediary

in a transaction (normally a Buy Transaction). For ex. Brokerage is paid
by an investments from Investors.

BSE Index- An Index reflecting the Stock Prices of 30 Companies listed

on the (Bombay Stock Exchange) which is taken to be representative of a
stock market movement. It is usually considered as the Benchmark for
performance evaluation of equity funds.

Bull Market- Period during which the prices of Stocks in a Stock Market
keep continuously rising for a significant period of time on the back of
sustained demand for the Stocks.

Bid/ Sell Price- The price at which a MF s Shares are redeemed (bought
back) by the fund. The Bid or redemption price is the current NAV per
share, less any redemption fee or back-end load.

Bond Fund- A MF whose portfolio consists primarily of corporate,

Municipal or U.S. Govt. Bonds. These funds generally emphasize income
rather than growth.

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Capital- A amount of Money invested by an Investor.

Capital Appreciation Fund- A MF that seeks maximum Capital Apprec-

ation by investing in Companies that do not pay dividends. These Funds
may use techniques involving greater than ordinary risk, such as borrow
ing money in order to provide leverage, short selling & high portfolio
turnover.

Capital Gains- The profit realization on sale of securities & certain other
Capital assets (including units of MF) are called Capital gains. The gains
can be classified into Long Term or Short Term depending on the period
of holding the assets & are charged to tax at different rates. Gains on MF
12 months or more are Long Term gains.

Cash Flow- A measure that tells an investor whether a Company is

actually bringing cash into the Company s Offer s.

Certificate of Deposit (CD)- CD is issued by scheduled commercial bank

excluding regional rural bank. These are unsecured negotiable promissory
notes. Bank CD s have maturity of 91 Days to 1 Yr. while those issued by
DFI s have maturities between 1&3 yrs.

Commission- A fee charged by a broker for executing a securities trans-

action.

Compliance Officer- He/ she is the officer appointed by the AMC to

Comply with various regulatory requirement to redress investor grievance
associated with the Funds.

Compounding- When an investment generates earnings on reinvested

Earnings.

Consumer Price Index (CPI)- An inflation tracker, much followed by

the mainstream media. It is the measure of the price change in consumer
goods & services.

107
Contingent Deferred Sales Charge (CDSC)- It is the sales load charged
by funds in the event of redemption made within a pre-specified period of
purchase.

Corporate Bonds- Fixed income securities issued by corporations.

Corpus- The total amount of money invested by all investors in a Scheme.

Cost of Churning / Turnover Cost- It refers to costs associated with the

Churning (or changes made to the holdings) of the portfolio. Portfolio
changes have associated costs of Brokerage, Custody Fees, &Transaction
fees & registration fees which lower is the returns.

Coupon Rate- The Annual Rate of interest payable on a Debt Security,

expressed as a Percentage of the face value of an Instrument.

Current Load- It refers to the Load Structure applicable currently on any

fund. Funds keep revising the Load Structures from time to time.

Current Yield- The ratio of interest to the actual market price of the Bond
expressed as a %:- Annual Interest = Current Yield
Current Market Value

Custodian - The keeper of a Fund s Securities & other Assets.

Cut off Time- In respect of all MF regulated by SEBI, fresh subscriptions

& redemptions are processed at an particular NAV. Every fund specifies a
cut off time in respect of fresh subscription & redemption of units. All
requests received before the cut off times are processed at that day s NAV
& thereafter at the next day s NAV.

Cyclical Stock- Stock of a company whose performance is generally

related (or thought to be related) to the performance of a economy as a
whole. Paper, steel & the automotive stocks are thought to be Cyclical
because their earnings tend to be hurt when the economy slows & are
strong when the economy turns up. Food & Drug Stocks, on the other
hand, are not considered Cyclical , as consumers pretty much need to eat
& care for their Health regardless of the performance of the economy.

108
Capital Gains Distributions- Payments made usually at the end of a yr
to MF Shareholders of gains realized on the sale of Securities in the MF
Portfolio.

Capital Growth- A rise in market value of a MF s Securities, reflected in

it s Asset Value per Share. This is a specific Long-Term objective of MF.

Confirm Date- The date at which the fund processed at your transaction,
typically on the same day or a day after your Trade Date.

Debenture- A debt obligation i.e. not backed by collateral but usually

rated by credit rating agencies.

Derivative- A Financial Contract whose value is derived from another

underlying asset, such as Stocks, Bonds, Commodities, or a Market Index
such as NSE 5O. The most common type of Derivatives are option, future
& mortgage-backed Securities.

Debt / Income Funds- Funds that invest in income bearing instruments

such as corporate Debentures, PSU Bonds, Gilts, Treasury Bills, C P &
Certificates of Deposits.

Discount- When the market price of a listed Scheme is less than the actual
NAV of the units, then it is said to be trading at a Discount.

Diversification- Spreading a risk; MF spread investments among a No. of

different Securities to reduce the risk inherent in investing.

Dividend Distribution Tax - A Tax payable by a debt oriented MF (a

MF that invests more than 50% of its portfolio in a debt Market) before
Dividend is distributed to the unit Holders. The Current Dividend
Distribution Tax is 10% plus the 10% surcharge. There is no such Tax
Applicable on Open-End Equity Schemes.

Dividend Frequency-The periodicity of Dividend payout of scheme. This

is especially valid in a case of an Income / Debt Schemes like monthly
income plans that normally have regularity in such distributions.

Dividend History- The track record of Dividends declared by a fund till

Date.

109
Dividend per Unit- Total amount of dividend declared by a fund for a
Scheme dividend by total No. of units issued to all the Investors.

Dividend Plan- In a dividend plan, the fund pays dividend from time to
time as & when the dividend is declared.

Dividend Reinvestment- In a dividend reinvestment plan, the dividend is

reinvested in a Scheme itself & is not paid out to the investors i.e. instead
of receiving dividend in cash, the unit holder receive units allotted to them
at the Ex-dividend NAV.

Dividend Warrant- It is an instrument issued by Companies/ MF to an

investors for the purpose of payments of dividends.

Dividend Yield- It refers to the dividend earned per unit of a Scheme at

the prevailing per unit price.

Deferred Compensation Plan-A Tax- Sheltered investment plan to which

Employees of state & local Govt. can defer percentage of their Salary.

Dividends- MF Dividends are paid out of income from the Schemes

investments & can be announced out of the realized gains only. While
dividends in the hands of investors are free from Tax, MF are now require
to pay a distribution Tax dividend declared from debt oriented Scheme.

Dow Jones Index- It is an American Index similar to BSE Index. Here the
Basket Comprises 30 Blue Chip American Stocks whose prices are indica
-tive of a Health of a Economy.

Duration- A Calculation of the Average Life of a Bond (or Portfolio of

Bonds) i.e. a useful measures of a Bond s Price Sensitivity to interest rate
changes. The higher duration No. the greater the risk & reward potential
of the Bond.

Daily Dividend Fund- This term applies to funds which declare their
Income Dividends on a Daily basis & reinvest or distribute monthly.

110
Distributor- An individual or a corporation serving as Principle under-
Writer of a MF Shares, Buying Shares directly from the funds & reselling
them to other Investors.

Distributions- Can be used to mean either withdrawal made by the owner

from an individual retirement account (IRA) or payments of dividend &/or
Capital Gains by a MF.

Dollar- Cost Averaging- The Technique of investing a fixed sum at a

regular intervals regardless of Stock Market movements. This reduces
average Share Cost to the investor, who acquires more Shares in period of
lower Security prices & fewer Shares in period of High prices. In this way,
investment risk is spread overtime.

Earnings per Share (EPS) - A Company s earnings, also known as Net

Income or Net Profit divided by the No. of Shares Outstanding.

Equities- Shares of Stock in a company. Because they represent a propor-

tional Shares in the Business, they are Equitable Claims on the Business
itself.

Entry Load - It is the Load Charged by Fund when one invests into other
Fund. It increases the price of units to more than the NAV & is expressed
as a percentage of NAV.

Equity Linked Savings Scheme- A special product offered by MF. These

Schemes invest in equity i.e. Shares & generally have a lock-in period of 3
Yrs. The basic features of ELSS Schemes are : Tax rebate of 20% under
Section 88 of the Income Tax Act on an (Maxi.) investment of Rs.10, 000/.

Equity Schemes- Schemes where more than 50% of investment are done
in equity Shares of various companies.

Ex-Bonus NAV- The NAV declared post record date in case of a bonus
Issues are the Ex-Bonus NAV.

Ex-Dividend Date- It is effective date of a dividend distribution. When

the dividend is paid, the NAV of fund drops by the amount of dividend.

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Ex-Dividend NAV-The NAV declared post record date is the ex-dividend
NAV.

Exit Load - It is the load charged by the Fund, when one redeem the unit
from the Fund. It reduces the price of the units to less than the NAV & is
expressed as a % of NAV.

Expense Ratio The Expenses of a MF include Mgmt. fees & all the fees
associated with the Fund s daily Operations. Expense Ratio refers to the
annual % of fund s assets that is paid out in expenses.

Exchange Traded Funds- Exchange traded funds are a hybrid of MF &

Stock which track an underlying index. These funds have the flexibility of
Trading throughout the day like a Security & also offers benefits like
Diversification Professional Mgmt, low expense ratio, etc.

Equity Income Fund-A MF that invest in a portfolio of bonds & dividend

- paying Stocks. While similar to growth & income funds, they are more
likely to hold bonds & focus on Stocks that pay Higher-than-av. Dividend.

Exchange Privilege / Switching Privilege - The Right to transfer invest-

ment from one fund into another, generally within the same fund group, at
nominal cost.

Equity Linked Saving Schemes (ELSS)- These Schemes generally offer

Tax rebates to the Investor under section 88 of a Income Tax Law. These
Schemes generally diversify the Equity risk by investing in a wider array
of Stocks across sectors. ELSS is considered as a variant of diversified
Equity Schemes but with a Tax Friendly offer. Typically returns for such
Schemes have been found to be between 15-20%.

Fiscal Year- A 12-Month accounting. From April 1st to March 31st.

Fixed Income Securities-Bonds & other securities that are used by issuers
to borrow money from investors. Typically, the issuer pays the investor a
fixed, variable or floating rate of interest must repay the borrowed amount
at a specified time in the future (Maturity).

112
Floating Rate Bonds- These are Short to medium term interest bearings
instruments issued by Financial Intermediaries & corporate.

Free Loading- A term used when MF Investors who have purchased load
Funds switch from one fund family to another family of funds without
having to pay another sales charge. Not all fund families have free loading
procedures.

Face Value- The original issue price of one unit of a Scheme.

First-In, First-Out (FIFO)- A commonly used mechanism for taxation

purpose of redeemed MF Shares, it is accounting method, which assumes
that the units purchased first are the units sold first.

Fund Category- Classification of a Scheme depending on the type of

assets in which the MF Company invests the corpus. It could be a growth,
Debt, balanced, gilt or liquid scheme.

Fund Family- All the Schemes, which are managed by one MF.

Fund Mgmt. Costs -The charge levied by an AMC on a MF for managing

their funds.

Fund Manager- Appointed by the AMC, he/she is the person who makes
all the Final Decisions regarding investments of a Scheme.

Fannie Mae (Federal Mortgage Association) - An agency est. by the

Federal Govt. but owned by private Stock holders, which issues mortgage
- backed Certificates in $ 25,000 denominations. Timely payment of both
interest & principal are issued. A growing No. MF emphasize investments
in these & other mortgage backed securities.

Gilts / Govt. Securities- Securities created & issued by the central Govt.
& / or a State Govt.; & may include Securities unconditionally graduated
by the Govt.

Global Funds-MF that invest in Stocks of companies from all over World.

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Govt. Securities These are medium to long-term obligations issued by
RBI on behalf of Govt. of India& various State Govt. The RBI decides
the cut-off coupon on the basis of the bids received. These Securities are
issued by auction process on certain issues.

Gilt Funds - Funds that invest only in Govt. Securities of different Mature
They offer lower returns as the credit risk is virtually absent & there are
No chances of Govt. defaulting on its payment obligations.

Growth Funds- Funds, which invest a majority of their corpus in equity.

Growth Style Investing- An investing approach that involves buying

Stocks of Companies i.e. generally industry leaders with above average,
sustainable growth rates. Typically, Growth Stocks are the Stocks of the
fastest growing Companies in the most rapidly growing sector of the
Economy Growth Stock valuation level (e.g. Price-to-earnings Ratio) will
generally be higher than value Stocks.

Ginnie Mae (Govt. National Mortgage Association)- GNMA or

Ginnie Mae , is an agency within the U.S. Dept of Housing & Urban
Development. A govt. owned agency, it buys mortgages from lending
Institutions & pools them to form Securities, which it is then sells to
Investors. The agency guarantees timely payment of both interest &
Principal.

Growth Fund- A MF whose primary investment objective is long-term

growth of Capital. It invest principally in common Stocks with significant
growth potential.

Growth & Income Fund- A MF that seeks both long-term growth of

Capital & current dividend Income from Stocks.

Income/ Debt Funds- They are MF that invest primarily in fixed income
Securities & aim to provide reasonable returns with low degree of risks.

Index Funds- A type of MF in which the portfolio are constructed to

Mirror a specific market index. Index funds are expected to provide a rate
of return over time that will approx. or match, but not exceed, that of the
market, which they are mirrors.

114
Indexation - The Central Govt. specifies an index linked to the wholesale
Price Index. The indices of 2 yrs. (Yrs. Of purchase & the yr. of sale) are
used for the purpose Price is multiplied by the Index of the yr of purpose.

i-Money Net First Tier Retail Average- An Average consisting of non-

Govt. funds that hold paper considered to be the highest credit quality by
at least one nationally recognized statistical rating organization.

Inflation- Defined as the fall in the value of a currency, it results in rise in

Prices of goods & services over a period of time.

Inflation Risk- The chance that the value of assets or income will be
diminished as inflation shrinks the value of a currency.

Initial Public Offering (IPO) Institute Investors - A Company s first

offering of common Stock to the Public. Institutions Investors include
Pension Funds, Insurance Funds, MF, & Hedge Funds.

International Funds/ Emerging Market Funds- Funds investing in asset

or Bonds/ Shares of companies from emerging Economies. These are not
permissible in India due to regulations against investing abroad. Most of
the Schemes of Foreign Institutional Investors (FII s) investing in India is
funds of this type.

Investment Advisor- An entity that makes the recommendations & / or

Decisions regarding a Portfolio s investments. Alternatively called a Port
folio Manager.

Investment Mgmt- Investment analysis & execution of investment plans

in keeping with certain objectives.

Investment Objectives- The declared purpose of Investment of a MF

Schemes.

Investment Strategy- The internal guidelines that a Fund follows in

investing the Money received from the Investors.

115
Initial Load- A kind of sales charge i.e. paid before any amount gets
invested into the MF during its Initial Offer.

i-SEC Bond Index (I-BEX) - An Index created by ICICI Securities as a

Benchmark for returns from debt instruments in the Market.

Issuer- The Company, Municipality or Govt. agency that issues Security,

Such as a Stock, Bond or Money Market Security.

Issued Share Capital- The portion of a Corporation s equity obtained

from issuing Shares in return for case or other considerations.

Income Fund- A MF that primarily seeks current, income rather than

Growth of Capital. It will tend to invest in Stocks & Bonds that normally
Pay High Dividends & interest.

Individual Retirement A/C (IRA)- A personal, tax-sheltered retirement

A/C available to Individuals. Depending on Individual circumstances, IRA
contributions may be fully or partially tax deductible.

IRA Rollover- A provision in IRA Law allowing individuals who receive

Lump-sum payments from pension or profit-sharing plans to roll-over in
to, or invest that sum in, an IRA. IRA Funds can be rolled-over from one
investment to another.

Intermediate Bond Fund- A MF that invests in bonds with Maturities

Within the 5-10 yrs range.

Investment Company- A Corporation, Partnership or Trust that Invests

the pooled monies of many investors. It provides greater Professional
mgmt. & diversification of investment Companies, are the most popular
form of Investment Company.

Large- Cap Stocks- Stocks issued by large companies. Unless otherwise

defined by Fund Manager or a Advisor, a Large-Cap Company is defined
as one with a Market Capitalization of $5 Billion or more. Typically, large
-cap companies are est. well-known Companies; some may be MNC s.

116
Launch Date- The date on which a Scheme is first made upon open to the
Public for subscription.

Liabilities - Outstanding Debts.

LIBOR (London Inter Bank Offer Rate) - This is the rate of interest at
which borrow Funds from other Banks, in marketable size, in the London
Inter Bank Market.

Liquid Funds/ Money Market Funds- Funds investing only in Short-

Term Money Market instruments including treasury, Bills, Commercial
Paper & Certificates of Deposit. The objectives is to provide Liquidity &
preserve Capital. Due to the low degree of risks available, they generally
provide lower returns than other avenues.

Liquidity - The cash & cash equivalent assets available with a Fund to
meet expenses & immediate redemption requirements of the Investors. It
refers to the ability to buy or sell an asset quickly or the ability to convert
to cash quickly.

Load- A Charge that may be levied as a percentage of NAV at the time of

time of exiting from the Schemes.

Lock in Period- The period after investment in Fresh units during which
the Investor cannot redeem the units. It is normally a key features of Tax-
Schemes.

Mgmt. Expense Ratio- The ratio of Mgmt. expenses to the Total Funds
under Mgmt. It is usually specified in the offer documents as a percentage
of the Assets under Mgmt. of the Fund.

Mgmt. Fee/ Expense - The charge made to a MF for supervision of its

Portfolio, usually expressed as percentage of Assets.

Market Capitalization- Value of Corporation/other entity as determined

by the market price of its Securities.

Market Risk- It refers to the risk posed by the Market in itself i.e. the risk
that the Price of a Security will raise or falls due to changing economic,
political, or market conditions or due to a Company s Individual Situation.

117
Maturity / Maturity Date- The date upon which the Principal of Security
becomes due & payable to the Security Holder.

Mid-cap Stocks- Stocks issued by mid-sized companies, unless otherwise

defined by a Fund Manager or the Advisor, a mid-cap company is defined
as one with a Market Capitalization between $1.5 Billion & $5 Billion,
this is similar to the range of the Std. & poor Mid-Cap 400 Index (S&P
400).

MIBOR (Mumbai Inter Bank Offer Rate)- This is the rate of interest at
which Banks borrow funds from other Banks, in Marketable Size, in the
Mumbai Inter Bank Market.

Minimum Additional Investment - The minimum amount, which an

existing investor should invest for purchasing fresh units.

Minimum Balance- It is minimum amount specified by Fund that should

remain invested in a Scheme after any redemption.

Minimum Subscription- It refers to the minimum amount required to be

invested to purchase units of a Scheme of a MF.

Minimum Withdrawal- The smallest sum that investor can withdraw (get
redeemed) from the Fund at one time.

Money Market-It refer to Market for very Short- Term Securities. Money
Market instruments are forms of Debt that mature in less than a yr & are
very liquid in nature. Securities such as Treasury bill & call Money makes
up the Bulk of trading in Money Market.

Minimum Fill- This is one of the Special Conditions where a minimum

Quantity is specified for an Order. The quantity of a Trade involving an
order with a Minimum Fill attribute should at least be this minimum
quantity specified.

Money Market Instruments- Refers to CP, Treasury bill, GOI Securities

Etc. with an unexpired Maturity less than or up to one yr. Call Money,
Certificates of Deposits & any other instrument specified by the RBI.

118
Municipal Securities- Fixed Income obligations of State & Local Govt.
Investments in Municipal Securities may support special construction
Projects, such as Roads or Hospitals, in the Municipality that issues them.
Interest from Municipal Bonds is usually exempt from Federal Taxes &
from State Taxes only in the State of Issue. Some Municipal Securities
insured & guarantee timely payment of Interest & repayment of Principal.

Money Market Fund-A MF that aims to pay Money Market interest rates.
This is accomplished by investing in safe, highly Liquid Securities, include
Bank Certificates of Deposit, CP, U.S. Govt. Securities & Repurchase
Agreements. Money Market Funds make these High Interest Securities
available to the Av.

Mortgage Backed Securities- Certificate backed by pooled Mortgages

(e.g. Freddie Mac or Ginnie Mae). Issuing agencies buy Mortgages from
lending institutions & repackage them as Securities which they sell to
investors. Yields, which stem from interest & principal on underlying.

Junk Bond- A Speculative Bond rated BB or below by std & poor corp-
oration & Ba or below by Moody s Investor Service. Junk Bonds are
generally issued by corporation of questionable Financial Strength or with
out proven track records. They tend to be more Volatile & Higher Yielder
than Bonds with Superior quality ratings. Junk Bond Funds emphasize
diversified investments in these low-rated, High-Yielding debt issue.

Keogh plan- A Tax-deferred retirement account for self employed

Individuals or employed of unincorporated Businesses. Keogh plans can
be funded with MF Shares.

Load Fund- A MF that levies a sales charge upto 8.5 %. There are various
types of Load Funds including a front-end Load where the fee is levied
when buying Shares & a back-end load where fee is charged when selling
Shares.

Long-Term Bond Fund-A MF that invest in Bonds that mature than 10yr.

Long-Term Capital Gain- A Profit on the Sale of MF Shares that has

been held for more than 1 yr.

119
Low-Load Fund- A MF that charges a small sales commission, of 3.5%
or Less, for the Purchase of its Shares.

Net Asset Value (NAV)- The Value of Fund s Portfolio at Market value
less Current Liabilities divided by the No. of units outstanding. NAV is
normally computed daily or weekly & can be found in Financial Section
of the Daily Newspaper.

Net Worth-The amount by which a Person Assets exceed their Liabilities.

Nifty- An Index of Prices of a gr. of 50 Stocks listed on the NSE.

No-Load MF / No-Load Scheme- It refers to the Fund that does not

Charges any Load for buying or selling its Units.

Nominee - The person(s) to whom the Assets should be distributed upon

the Death of the Account Holders.

Non Performing Investment- Part of the Portfolio investment of a debt

fund which is not making Interest payment or Principal amount.

Objective of Investment- The purpose statement consisting of the goal &

the avenues of Investment released by the Fund.

Offer Documents/ Prospectus- It is the Official document issued by MF

prior to launch of a Fund describing the Characteristics of the proposed
fund to all its prospective investors. It contains information required by
SEBI pertaining to issues such as investment objective & polices, Services
& fees.

Offering Period- The period during which the initial offer to subscribe
for the Units of a Scheme is open.

Open-Ended Fund - Funds that do not have any fixed Maturity & are
continuously open for subscription & redemption. The key features is
Liquidity. One can convenient Buy & Sell the units held at NAV Price.

Opening NAV- The NAV disclosed by the Fund for the first time after
the closer of an IPO.

120
Operating Expenses- The cost of doing Business. Operating expenses are
deducted from revenues, & the result is, hopefully profits.

Offshore Funds- The Funds Set up abroad to channels foreign investment

in the Indian Capital Material.

Portfolio- An Individual s or entity combined holdings of Stocks, Bonds,

or Other Securities & Assets.

Profile-Summarizes key information about Mutual Fund Cost, investment

objectives, risks, & performance. Although every MF has a prospectus,
not every MF has a profile.

Prospectus-It contains information about MF Costs, investment Objective,

Risks & Performance. Prospectus is provided by MF Company, Brokers.

Purchase Fee- A Shareholder Fee that some Funds Charge when Investor
purchase MF Shares. Not the same as (& may be in addition to) a Front-
end Load.

Redemption Fee-A Shareholder Fee that some fund charge when Investor
Redeem (or sell) MF Shares. Redemption Fees (which must be paid to the
Fund) are not same as (& may be in fund) a Back-end Load (which is
typically paid to a Broker). The SEC generally limits Redemption Fees to
2%.

Sales Charge / Load- The amount that Investors pay when they purchase
(front-end load) or redeem (Back-end Load) Shares in a MF, similar to a
Commission. The SEC S rules do not limit size of sales load a fund may
Charge, but NASD rules state that MF Sales loads cannot exceed 8.5% &
must be lower depending on other fees & charges assessed.

Shareholder Service Fees- Fees paid to persons to respond to investor

inquiries & provide investors with information about their investments.
See also 12b-1 Fees.

Statement of Additional Information (SAI) - It conveys information

about an open /closed-end fund that is not necessarily needed by investors
to make an informed investment decision.

121
Total Annual Fund Operation Expense- It is expressed as a Percentage
of the Fund s average NAV. Then the Total in the Fund IS A Fund s Fee
table in a Prospectus.

Unit Investment Trust- A type of Investment Company that typically

makes a One- time Public Offering of only a Specific, fixed No. of
units. A Unit Investment Trust will terminate & dissolve on a date EST.
when the UTI is created.

Valuation Day - Day of NAV Calculation is Called as Valuation Day.

Yield- Distribution form Investment Income, usually expressed as a

percentage of NAV or Market Price. On like Total Return , yield has the
single component of Investment Income does not include Capital Gains
distributions or Capital appreciation of underlying.

Yield to Maturity- Used to determine the Rate of Return on Investor

such as a Bond is held to its Maturity date. It takes into account purchase
price, redemption value, time to Maturity, coupon yield & a time between
Interest Payments.

Zero Coupon Bond- A Bond where no Periodic Interest payments are

made. The Investor purchase the Bond at a discount price & receives one
payment at Maturity. The Maturity value an Investor receives is equal to
the Principal invested plus Interest earned Compound Semi-Annually at
the Income from Zero-Coupon on Bonds is subject to Taxes annually even
though no payments will be made.

122
123
Cost of Living

Items 1997 2017

(Rs.) (Rs.)

Colgate toothpaste 18.90 104.00

(100 gm tube )
Hamam 7.85 52.00
Soap
Masala Dosa 14.00 224.00

Petrol 25.48 259.12

(per litre)
L P G Cylinder 137.85 830.85

Zodiac men s shirt 510.00 2620.27

Source : Readers Digest Nov 1997

Cost of Living

Items 1997 2017

(Rs.) (Rs.)

Colgate toothpaste 18.90 104.00

(100 gm tube )
Hamam Soap 7.85 52.00

Masala Dosa 14.00 224.00

Petrol 25.48 259.12

(per litre)
L P G Cylinder 137.85 830.85

Zodiac men s shirt 510.00 2620.27

Source : Readers Digest Nov 1997

124
Cost of Living

Items 1997 2017

(Rs.) (Rs.)

Colgate toothpaste 18.90 104.00

(100 gm tube )
Hamam 7.85 52.00
Soap
Masala Dosa 14.00 224.00

Petrol 25.48 259.12

(per litre)
L P G Cylinder 137.85 830.85

Zodiac men s shirt 510.00 2620.27

Source : Readers Digest Nov 1997

125
Escalating costs of Higher Education*
(in Rs.)

ENGINEERI 1.0 lacs

YEAR NG
1.5 lacs
MEDICIN
1990 E 0.3 lacs
MBA

ENGINEERI
3.2 lacs
YEAR NG 5.0 lacs
MEDICIN 2.4 lacs
2000 E
MBA

Escalating costs of Higher Education*

(in Rs.)

ENGINEERI 3.2 lacs

NG
YEAR MEDICIN 5.0 lacs
2000 E
MBA 2.4 lacs

ENGINEERI 5.7 lacs

YEAR NG 8.9 lacs
MEDICIN
2010 E 4.3 lacs
MBA

ENGINEERI 10.9 lacs

YEAR NG
MEDICIN
17.0 lacs
2020 E 8.2 lacs
MBA

* At an average annual inflation of 6% p.a.

126
 Guess!
How much your little one s
wedding will cost you?

Estimate of marriage expenses

Year 2000 Year 2010 Year 2020
Rs. 2.0 lacs Rs. 3.58 lacs Rs. 6.80 lacs
Rs. 5.0 lacs Rs. 8.95 lacs Rs. 16.99 lacs
Rs. 10.0 lacs Rs. 17.9 lacs Rs. 33.99 lacs
Rs. 20.0 lacs Rs. 35.82 lacs Rs. 67.99 lacs

* At an average annual inflation of 6% p.a.

127
 What your savings can generate ?
--------------- Rate of return -------------
One - time 8% 10% -- 12%
investment
(in Rs.) (at the end of 15 yrs.)*

200,000 6,34,434 8,35,450 10,94,713

100,000 3,17,217 4,17,725 5,47,357
50,000 1,58,608 2,08,862 2,73,678
20,000 63,443 83,545 1,09,471
10,000 37,722 41,772 54,736

REGULAR SAVINGS
THE SIMPLEST WAY TO COMBAT INCREASING HOUSEHOLD
EXPENDITURE

35.12
28.31 Rs
22.8 .
In
15.01 La
cs

8% 10% 11% 12%

% Per annum
Rs. 1000 saved every month for 30 years can grow to
a sizeable amount of wealth
depending on the return generated on these savings

128
INFLATION ROBS YOUR PURCHASING POWER
(Assuming Inflation @10% P.A.)
Rs. 5,000 today 226,000

87,000

33,500
12,900

10 years 20 years 30 years 40 years

Start Investments Early : Charu is 2 yrs. Old. Her parents Invest Rs.
5,000/- every month for the next 5 yrs. Total Investment is Rs. 3 Lacs.
Rahul is 12 yrs. Old. His parents invest Rs. 5,000/- every month for the
next 5yrs. Total Investment is Rs. 3 Lacs.Who do you think has more
money at the age of 17 ?

Charu= 10.6 Lacs

Rahul= 3.9 Lacs

That means Delay of 10 Yrs. Cost Rahul 6.7 Lacs lost.

129
 THE POWER OF COMPOUNDING

Rs. 10.6 lacs

2 year old Charu s parents
invests Rs. 5,000 monthly for 5
years. They do not withdraw
any money.

12 year Rahul s parents invest a

similar amount i.e. Rs. 5,000. They
invests for 5 years and they too do Rs. 3.9 lacs
not withdraw any money

0 2 5 8 11 14 17

First, consider your .

Financial goals
Risk-taking ability
Expected Return
Investment Period

Financial Planning

Financial Goals
identifying various needs for money

Converting needs into specifics

amount of money
time frame for requirement of money

Planning saving & investment to achieve these goals

130
Professional Financial Planners

Understands investment universe

Understands risk and return profile of various investment alternatives

Assist clients in choosing the right investment mix keeping in mind

client s
- saving ability
- risk appetite
- Cash flow requirements
- Tax status

Investors Needs
Protection Need Investment Need
To protect living Financial needs served
standards, current and through investments
survival requirements and savings
- Regular Income - Children education
- Retirement Income - Housing
- Insurance Cover - Children professional
growth

131
BIBLIOGRAPHY

132
 BIBLIOGRAPHY

Books & Documents Referred:

AMFI WORKBOOK ON MUTUAL FUNDS

ECONOMIC TIMES (ET)

BSE MANUALS

NSE MANUALS

Websites Referred:

www.mutualfundindia.com

www.amfindia.com

www.indiainfoline.com

www.mutualfundind.com

www.vantageindia.com

www.capitalmarket.com

www.bseindia.com

www.google.com

www.valueresearchonline.com

www.moneycontrol.com

www.nseindia.com

www.personalfn.com

133
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