Apeksha jain 10MBA0040

SECURITIES
Definition:According to the Securities Contract Regulation Act 1956, securities include shares, scrip's, stocks, bonds, debentures and other marketable like securities of any incorporated company or other body corporate, or government.

Classification of Securities

On the basis of return

Source of Issue

Fixed income securities e.g. bonds, debentures and preference shares Variable income securities e.g. Equities

Government Semi-government Corporate

EQUITY SHARES

The share capital of a company is divided into number of small units of equal value is termed as SHARES
SHARE CERTIFICATE is a certificate under common seal of the company specifying the number of shares held by any member. Various forms of Equity shares

Non-voting share

Right shares & Bonus shares

Rights according to section 85 (2) of the Companies Act 1956 :Rights to..

vote at the General body meetings of the company. control the management of the company. share the profits in the firms of dividend & bonus shares. during winding up of the company pre-emption in the issue of new capital. suit if there is any discrepancies in the rights set aside.

receive a copy of the statutory report, copies of annual accounts

along with audited reports.

approach central government to call an annual meeting if the

company fails to call such meetings

Advantages of Equity share holders

Equity share holder of a limited company is liable to the companys debts only to the extend of the share in the paid up capital
Main advantages are

Capital appreciation Limited liability Free tradeabity Tax advantages Hedge against inflation

NON-VOTING SHARES

Came in force in 1994 under board guidelines

Special Features

No voting rights to the shareholders Carry additional dividends Right to participate in the bonus issue Maximum 25% of non-voting stock can be issued 20% more dividend Automatic voting rights if dividend not paid for 2 years

RIGHT SHARES

New Shares issued to the existing share holders as a matter of legal rights.
Regulated under the provisions of Companies Act & SEBI

Time period for issue of rights shares. Can be forfeited by the company through a special resolution. Renounce in the favor of shareholders nominee. May be partly paid. Minimum subscription limit is prescribed.

BONUS SHARES

Indication of higher future profits. Main aim to capitalize the free reserves

Conditions:

Issued only to existing share holders Fully paid-up shareholders Distributed in addition to cash dividend Issued without any payment of cash

PREFERENCE SHARES

Resembles features of bonds & equity. No voting rights Dividends paid at the discretion of the Board of Directors.

Forms of Preference shares:

Cumulative preference shares Non- cumulative preference shares Convertible preference shares as quasi-equity shares Redeemable preference shares Irredeemable preference shares

DEBENTURES

According to Companies Act 1956 Debenture includes debenture stock, bonds and any other securities of company, whether constituting a charge on the assets of the company or not.
Characteristics:

Certificate of indebtedness specifying date of redemption & interest rate Fixed rate of interest / coupon rate Redemption (creation of sinking fund) Indenture trust deed between the company & debenture trustee

Types of debentures

Classified on the basis of Security & convertibility

Secured or Unsecured (property involvement) Fully convertible carries low interest rate Partly convertible Non-convertible

BONDS

Long term debt instrument ,promises to pay a fixed annual sum as interest for specified period of time
Features:

Face value, issued at par or discount

Fixed / floating interest rate Specified maturity date Stated redemption value Traded in the stock market

Types of Bonds

Secured bonds & unsecured bonds Perpetual bonds & redeemable bonds Fixed interest rate bonds & floating interest rate bonds Deep discount bonds issued by IDBI & ICICI Capital indexed bonds Zero coupon bonds traced in U.S security market

WARRANTS
Is a bearer document of title to buy specified number of equity shares at a specified price.
Share Warrants Issued by Public Ltd. Co. Need for provision in the Articles of Association Should be approved by central government Share certificate Issued by Public & Private Cos. Not required Not needed

Transfer of share warrants requires no registration

Share warrants are issued to fully paid up shares Considered as a negotiable instrument

Transfer completes only if it is registered

Same Not considered like that

Mutual Funds

Definition and Its growth in India

A mutual fund is nothing more than a collection of stocks and/or bonds. Income is earned from dividends on stocks and interest on bonds. The Indian mutual funds retail market, which at present is growing at a CAGR of around 30%, is estimated to reach US$ 300 Billion by 2015.

List of Top Mutaul Fund companies in India

ABN-AMRO Baroda Pioneer Mutual Fund Benchmark Birla Sunlife Canbank DBS Chola Deutsche DSP Merrill Lynch Escorts Fidelity Franklin Templeton HDFC HSBC ING Vysya

JM Kotak Mahindra LIC Morgan Stanley Principal Prudential ICICI Reliance Sahara SBI Standard Chartered Sundaram BNP Paribas Tata UTI

History of Mutual Funds

Birthplace of Mutual Funds USA History in India:

1964-1987 (Phase I) Growth of Unit Trust of India 1987-1993 (Phase II) Entry of Public Sector Funds 1993-1996 (Phase III) Emergence of Private Funds 1996-1999 (Phase IV) Growth and SEBI Regulation 1999-2004 (Phase V) Emergence of large & uniform Industry 2004 onwards (Phase VI) Consolidation and Growth.

Objectives of Mutual Funds

Diversification-

Mutual funds hold a number of stocks, which protects them from a sharp decline in any one holding.

Growth- Rapid growth in the value of their funds. Income- Receiving income from their investments. International Exposure- It's important to have
some exposure to overseas stocks.

Low Fees-

Many "no-load" mutual funds are available that don't charge investors anything.

How do they Work?

A Person buys shares in MF, either directly from company or from broker (indirectly). That money, along with other peoples money is combined and invested in and array of different securities. It's the fund manager's job to maximize the earnings of the fund's investors. As the fund earns money, he is paid in periodic dividends. The Net Asset Value (NAV) per share is calculated and posted once a day.

Types of Funds

Closed-end Funds Open-end Funds Large cap Funds Mid-cap Funds Equity Funds Balanced Funds Growth Funds No load Funds Exchange Traded Funds

Value Funds Money market Funds International Mutual Funds Regional Mutual Funds Sector Funds Index Funds Funds of Funds

Expense Ratio: Ongoing yearly fees to keep you

invested in the fund.
shares in a fund.

Expenses & Taxes involved in Mutual Funds

Loads: Transaction fees paid when you buy or sell TAX: Each time a fund manager sells a particular asset,
the fund owes a percentage of that sale to the government in capital gains tax.

Risks involved in Mutual Funds

The Risk-return Trade-off Market Risk Credit Risk Inflation Risk Interest Rate Risk Political/Government Policy Risk Liquidity Risk

Advantages & Disadvantages of Mutual Funds

Advantages

Disadvantages

Professional Management Diversification Economies of Scale Liquidity Simplicity

Professional Management Costs Dilution Taxes

Thank You!

Mutual Funds are subject to Market risk. Please read the Offer document carefully before Investing