Presentation by; ASHISH SIDDIQUI,

ASSISTANT PROFESSOR, SANSKRITI SCHOOL OF BUSINESS

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Worldwide, Mutual Fund or UnitTrust as it is referred to in some parts of the world, has a long and successful history.The popularity of Mutual Funds has increased manifold in developed financial markets, like the United States. As at the end of March 2008, in the US alone there were 8,064 mutual funds with total assets of about US$ 11.734 trillion (Rs.470 lakh crores)*.

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The mutual fund industry in India started in 1963 with the formation of Unit Trust of India, at the initiative of the Government of India and Reserve Bank of India. The history of mutual funds in India can be broadly divided into four distinct phases

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First Phase 1964-87 Unit Trust of India (UTI) was established on 1963 by an Act of Parliament. It was set up by the Reserve Bank of India and functioned under the Regulatory and administrative control of the Reserve Bank of India. In 1978 UTI was de-linked from the RBI and the Industrial Development Bank of India (IDBI) took over the regulatory and administrative control in place of RBI. The first scheme launched by UTI was Unit Scheme 1964. At the end of 1988 UTI had Rs.6,700 crores of assets under management.

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Second Phase 1987-1993 (Entry of Public Sector Funds) 1987 marked the entry of non- UTI, public sector mutual funds set up by public sector banks and Life Insurance Corporation of India (LIC) and General Insurance Corporation of India (GIC). SBI Mutual Fund was the first non- UTI Mutual Fund established in June 1987 followed by Canbank Mutual Fund (Dec 87), Punjab National Bank Mutual Fund (Aug 89), Indian Bank Mutual Fund (Nov 89), Bank of India (Jun 90), Bank of Baroda Mutual Fund (Oct 92). LIC established its mutual fund in June 1989 while GIC had set up its mutual fund in December 1990. At the end of 1993, the mutual fund industry had assets under management of Rs.47,004 crores
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Third Phase 1993-2003 (Entry of Private Sector Funds) With the entry of private sector funds in 1993, a new era started in the Indian mutual fund industry, giving the Indian investors a wider choice of fund families.

Also, 1993 was the year in which the first Mutual Fund Regulations came into being, under which all mutual funds, except UTI were to be registered and governed. The erstwhile Kothari Pioneer (now merged with Franklin Templeton) was the first private sector mutual fund registered in July 1993.

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Fourth Phase since February 2003 In February 2003, following the repeal of the Unit Trust of India Act 1963 UTI was bifurcated into two separate entities. One is the Specified Undertaking of the Unit Trust of India with assets under management of Rs.29,835 crores as at the end of January 2003, representing broadly, the assets of US 64 scheme, assured return and certain other schemes. The Specified Undertaking of Unit Trust of India, functioning under an administrator and under the rules framed by Government of India and does not come under the purview of the Mutual Fund Regulations.
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The second is the UTI Mutual Fund, sponsored by SBI, PNB, BOB and LIC. It is registered with SEBI and functions under the Mutual Fund Regulations. With the bifurcation of the erstwhile UTI which had in March 2000 more than Rs.76,000 crores of assets under management and with the setting up of a UTI Mutual Fund, conforming to the SEBI Mutual Fund Regulations, and with recent mergers taking place among different private sector funds, the mutual fund industry has entered its current phase of consolidation and growth
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The 1993 SEBI (Mutual Fund) Regulations were substituted by a more comprehensive and revised Mutual Fund Regulations in 1996. The industry now functions under the SEBI (Mutual Fund) Regulations 1996. The number of mutual fund houses went on increasing, with many foreign mutual funds setting up funds in India and also the industry has witnessed several mergers and acquisitions. As at the end of January 2003, there were 33 mutual funds with total assets of Rs. 1,21,805 crores. The Unit Trust of India with Rs.44,541 crores of assets under management was way ahead of other mutual funds.
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Mutual Fund is a trust that pools the savings of a number of investors who share a common financial goal. The money thus collected is then invested in capital market instruments such as shares, debentures and other securities.

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The income earned through these investments and the capital appreciation realised are shared by its unit holders in proportion to the number of units owned by them. Thus a Mutual Fund is the most suitable investment for the common man as it offers an opportunity to invest in a diversified, professionally managed basket of securities at a relatively low cost.

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Professional Management Diversification Convenient Administration Return Potential Low Costs Liquidity Transparency Flexibility Choice of schemes Tax benefits Well regulated
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 Net

Asset Value is the market value of the assets of the scheme minus its liabilities. The per unit NAV is the net asset value of the scheme divided by the number of units outstanding on the valuation date
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NAV

Sale Price

Is the price you pay when you invest in a scheme. Also called Offer Price. It may include a sales load. Repurchase Price Is the price at which units under open-ended schemes are repurchased by the Mutual Fund. Such prices are NAV related. Redemption Price Is the price at which close-ended schemes redeem their units on maturity. Such prices are NAV related. Sales Load Is a charge collected by a scheme when it sells the units. Also called, Frontend load. Schemes that do not charge a load are called No Load schemes. Repurchase or Back-endLoad Is a charge collected by a scheme when it buys back the units from the unitholders.
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 All

investments whether in shares, debentures or deposits involve risk: share value may go down depending upon the performance of the company, the industry, state of capital markets and the economy; generally, however, longer the term, lesser the risk; companies may default in payment of interest/principal on their debentures /bonds/ deposits; the rate of interest on an investment may fall short of the rate of inflation reducing the purchasing power.
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While risk cannot be eliminated, skillful management can minimize risk. Mutual Funds UNDERSTANDING AND MANAGING RISK help to reduce risk through diversification and professional management. The experience and expertise of Mutual Fund managers in selecting fundamentally sound securities and timing their purchases and sales, help them to build a diversified portfolio that minimizes risk and maximizes returns.
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Step1..Identify your investment needs. Step2..Choose the right Mutual Fund. Step3..Select the ideal mix of Schemes. Step4..Invest regularly Step4..Keep your taxes in mind Step5..Start early Step6..The final step

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SYSTEMATICE INVESTMENT PLANS (SIPs)

A Systematic Investment Plan allows an investor to buy units of a mutual fund scheme on a regular basis by means of periodic investments into that scheme in a manner similar to installments paid on purchase of normal goods. The investor is allotted units on a predetermined date specified in the application form of the scheme based on that days NAV. Here the Plan allows the investor to take advantage of the Rupee Cost Averaging methodology..minimum investment of Rs 500 every month.

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Systematic Withdrawal Plan A Systematic Withdrawal Plan permits the investor to receive a pre-determined amount / units from his investment in a mutual fund scheme on a periodic basis. Retirees in need of a regular income often opt for this.

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Systematic Transfer Plan An STP allows the investor to transfer a predetermined amount from his investment in a mutual fund scheme to another mutual fund scheme (of the same company) on a periodic basis. This Plan is generally used to transfer sums from a Money Market / Liquid / Cash scheme to another scheme.

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SEBI (Mutual Funds) Regulations, 1996 ASSOCIATION OF MUTUAL FUNDS OF INDIA (AMFI)

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An applicant proposing to sponsor a mutual fund in India must submit an application in Form A along with a fee of Rs.25,000. The application is examined and once the sponsor satisfies certain conditions such as being in the financial services business and possessing positive net worth for the last five years, having net profit in three out of the last five years and possessing the general reputation of fairness and integrity in all business transactions, it is required to complete the remaining formalities for setting up a mutual fund. These include inter alia, executing the trust deed and investment management agreement, setting up a trustee company/board of trustees comprising two- thirds independent trustees, incorporating the asset management company (AMC), contributing to at least 40% of the net worth of the AMC and appointing a custodian. Upon satisfying these conditions, the registration certificate is issued subject to the payment of registration fees of Rs.25.00 lacs For details, see the SEBI (Mutual Funds) Regulations, 1996.

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Every mutual fund shall compute the Net Asset Value of each scheme by dividing the net assets of the scheme by the number of units outstanding on the valuation date. (2) The Net Asset Value of the scheme shall be calculated and published at least in two daily newspapers at intervals of not exceeding one week : [Provided that the Net Asset Value of a close ended scheme, other than that of equity linked savings scheme, shall be calculated on daily basis and published in at least two daily newspapers having circulation all over India.]
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(1) The price at which the units may be subscribed or sold and the price at which such units may at any time be repurchased by the mutual fund shall be made available to the investors.

(2) The mutual fund, in case of open-ended scheme, shall at least once a week publish in a daily newspaper of all India circulation, the sale and repurchase price of units.
(3) While determining the prices of the units, the mutual fund shall ensure that the repurchase price is not lower than 93 per cent of the Net Asset Value and the sale price is not higher than 107 per cent of the Net Asset Value: Provided that the repurchase price of the units of close ended scheme launched prior to the commencement of the Securities and Exchange Board of India (Mutual Funds) (Amendment) Regulations, 2009 shall not be lower than ninety five per cent of the Net Asset Value:] Provided further that the difference between the repurchase price and the sale price of the unit shall not exceed 7 per cent calculated on the sale price
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Certification SEBI vide its Gazette Notification dated May 31, 2010 has notified that with effect from June 1, 2010 all the distributors, agents, any persons employed or engaged or to be employed or to be engaged in the sale and/ or distribution of Mutual Fund Products shall be required to have a valid certification from the National Institute of Securities Market (NISM) by passing their certification examination 'NISM Series V-A : Mutual Fund Distributors Certification Examination'. For further details as well as for study material, which can be downloaded, please log on to the website of NISM www.nism.ac.in. It is further notified that if the said associated person possesses a valid AMFI Mutual Fund (Advisors) Module Certificate obtained before June 1, 2010, he shall be exempted from the requirement of the abovementioned NISM Certification Examination.

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Q1.How Do I Invest Mutual Fund? Q2.What Does Risk Means In Mutual Fund? Q3.How Do Mutual Funds Minimize Risk? Q4.How Much Return Can I Expect? Q5. How Can Know Performance Of My M.F On Daily Basis? Q6. How The Returns Distributed? Q7.How Is Investment In M.F Is Different From Investment In F.D?
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Q.8. What Are Tax Exempt And Non Exempt Tax Funds?? Q.9. Can M.F Help In Saving Tax?? Q.10. What Are The Advantages In Investing In Sip ?? Q.11. What Should Investor Look Into Offer Document?
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