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Mutual funds

Submitted to: Shaheed Sukhdev College of business studies, University Of delhi

Submitted by:

Sanchi Padia (4808)

Diksha Choudhary (4818)

Jaspreet Kaur (4843)

BBS(2008-11)

1

FINANCIAL

MANAGEMENTMUTUAL FUNDS

2010

Sanchi Padia (4808)Diksha Choudhary (4818)

Jaspreet Kaur Sethi (4843)


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ACKNOWLEDGMENTS

This project is a part of the practicum of FINANCIAL MANAGEMENT,

BBS, Fourth Semester. We would like to thank our project guide, Mrs.

Neha Matlani, for her unconditional support and guidance, at all stages

of the making of this project. It is due to her constant help only that

we were able to complete this project successfully.

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TABLE OF CONTENTS

S.NO TOPIC PAGE

NUMBER

1. EXECUTIVE SUMMARY 5

2. PASSING THROUGH THE GROWTH

PHASE

7

3. CHANGING INVESTOR PROFILE 8

4. INTRODUCTION 9

5. WHAT IS A MUTUAL FUND 10

6. HISTORY OF MUTUAL FUNDS IN

INDIA

12

7. TYPES OF MUTUAL FUNDS 15

8. MUTUAL FUND INVESTMENT

STRATEGIES

21

9. PERFORMANCE EVALUATION 22

10. MEASUREMENT OF RISK 24

11. HOW TO CALCULATE THE VALUE OF A

MUTUAL FUND

25

12. MEASURING MUTUAL FUND

PERFORMANCE

26

13. RETURNS 28

14. FUND EVALUATION AGAINST

BENCHMARK

30

15. TAX TREATMENT FOR THE INVESTORS 33

16. COMPUTATION OF CAPITAL GAIN 34

17. HOW IS A MUTUAL FUND SET UP 39

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18. TIPS ON BUYING MUTUAL FUND 43

19. STUDY AND SURVEY 45

20. KEY FINDINGS 52

21. CONCLUSION 53

22. QUESTIONNAIRE 54

23. JARGON 58

24. REFERENCES 61

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EXECUTIVE SUMMARY

The Indian mutual fund industry in recent years, has experienced

exponential growth and yet it is still at a very nascent stage. We

believe that the mutual fund industry has grown in terms of size orchoices available, but is a long distance from being regarded as a

mature one. To understand this one has to look at the global scenario.

If one looks at the global mutual fund industry, one can see that

assets have grown by 185% between 2000 and 2006. In comparison,

Indian assets outgrew at a staggering 446%, where as the US only

grew by 158% and Europe by 242%.

As our economy continues to grow at a spectacular rate there is a

huge amount of wealth creating opportunities surfacing everywhere.

Financial Planners have an immensely responsible role to play by

identifying these opportunities and channeling them into wealth

,creating initiatives that would enable people to address their financial

needs. To give an overview of a recent study conducted by Invest

India, there are about 321.8 millions paid workers in India. Of this only

5.3 millions have an exposure to mutual funds. This is less than 2% of

total work force. Even more interesting fact is that 77% of them reside

in super metros and Tier I cities. Again, about 4 millions come in the

Rs 90,000-5 lack income bracket. The penetration among the less than

Rs 90,000 and more than Rs.5 lack income bracket is very low. Theneed for the hour is to expend the market boundaries and expand

scope in Tier II and Tier III cities.

India is also one of the fastest growing markets for mutual funds,

attracting a host of global players. Hence, investors will have an even

wider range of products to choose from. The combination of the

increase in number of fund houses along with new schemes and the

increase in the number of people parking their saving in mutual funds

has resulted in per cent during April-December 2007. This now standsat Rs.30314 billions as against Rs.13476 billions for the corresponding

period last year.

As on January 31, 2008, Indian assets stood at $ 137 billions and are

growing. We already have many experts expressing their

concentration at the frequency of NFO launches. Yet we have less than

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1000 schemes in India, compared to 15000 in the US and 36000 in

Europe. The gap is significant and has to be filled up with unique and

better priced products.

There has also been a rapid rise in the HNI segment. India stands only

second-best to Korea in the Asia- Pacific region in terms of percentagegrowth. The total HNWI (High Net Worth Individual) assets stood at

about Rs.12 trillion and their assets are distributed over various assets

classes. To top them MFs will have to come up with structured

products, real estate funds, commodity based funds, art funds and the

like.

Indian house holds have also increased their exposure to the capital

market. Very interestingly, the MF proportion in this has increased. In

fact, there has been more than 2000% growth in the assets coming toMFs in the last 3 years. Statistics reveal that a higher portion of

investors savings is now invested in market-linked avenues like

mutual funds as compared to earlier times.

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PASSING THROUGH THE GROWTH PHASE

We have always read that fund industry has seen three phases the

UTI phase, the public sector phase and the post UTI phase. But if we

study a bit more closely, there have been four clear stages.

- UTI Phase (1964 1987)

- Public sector phase (1987 1993), during which the likes of

SBI,BOB and Canara Bank comes in to existence

- The emergence phase (1993 2003), when international players

come in to India. Some have wound up their operations and a

few of them are looking for re-entry.

- Post UTI phase (2003 2007), when domestic players alongwith some global players have consolidated the MF industry.

And now we are entering Phase V of the industry, when not only are

newer players readying to enter the market but are also looking at

penetration and market expansion.

All in all, this is a win-win situation for Indian investors. We have also

come up a long way from plain vanilla equity funds to hybrid funds,

from balanced funds to arbitrage funds, from sectoral funds to quant

strategies.

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CHANGING INVESTOR PROFILE

Todays investor is quite young and very unlike the older generation.

He follows a contrarians approach. He buys when the market flips and

books profit when it rallies. While the market corrected by almost 22%during the January mayhem, mutual funds were net buyers to the tune

of Rs.4,200 crores. Much of this support came from domestic

investors. The retail participation in equity schemes has also increased

tremendously. The total AUM of 330 schemes in December last year

stood at Rs.2,157 billions as compared to 197 schemes and Rs92

billions In march 2000. Also in the last three years, mobilizations from

NFOs stood at Rs.95,000 crores. Although many complain that the

industry is still brokerage driven, the trends clearly suggest that

investors prefer NFOs to enter equities.

Our economy is booming, we have now a sustained GDP growth of

8%, which is likely to remain at this level for years to come, our per

capita income is about to touch $ 1000 by the end of 2008. The

number of AMCs is increasing. Their presence across India is

expanding. Distributors too are expanding their networks. Besides, the

regulator has taken up measures to safeguard investor interests.

These are all drivers for the fund industry. Together, these greet

investor warmly. The need of the investor populace has changed,

resulting in a change in asset management styles. In a way, this isleading to the design of new and competitively-priced products,

implying greater emphasis on higher quality of intermediation. This in

itself is both an opportunity and a challenge. As our economy

continuous to grow at a spectacular rate there is a huge amount of

wealth creating opportunities surfacing everywhere. Financial Planners

have an immensely responsible role to play by identifying these

opportunities and channeling them into wealth creating initiatives that

would enable people to adequately address their financial needs.

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INTRODUCTION

A mutual fund is a professionally-managed form of collective

investments that pools money from many investors and invests it in

stocks, bonds, short-term money market instruments, and/or othersecurities. In a mutual fund, the fund manager, who is also known as

the portfolio manager, trades the fund's underlying securities, realizing

capital gains or losses, and collects the dividend or interest income.

The investment proceeds are then passed along to the individual

investors. The value of a share of the mutual fund, known as the net

asset value per share (NAV) is calculated daily based on the total value

of the fund divided by the number of shares currently issued and

outstanding.

Legally known as an "open-end company" under the InvestmentCompany Act of 1940(the primary regulatory statute governing

investment companies), a mutual fund is one of three basic types of

investment companies available in the United States. Outside of the

United States (with the exception of Canada, which follows the U.S.

model), mutual fundmay be used as a generic term for various types

of collective investment vehicle. In the United Kingdom and Western

Europe (including offshore jurisdictions), other forms of collective

investment vehicle are prevalent, including unit trusts, open-ended

investment companies (OEICs), SICAVs and unitized insurance funds.In Australia and New Zealand the term "mutual fund" is generally not

used; the name "managed fund" is used instead.

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WHAT IS A MUTUAL FUND?

Mutual funds belong to the class of firms known as investment

companies. While companies may offer a "family" of funds under a

single umbrella name and common administration - for example, theVanguard Group, Fidelity Investments, or Strong Funds - each fund

offered is a separately incorporated investment company. These are

entities that pool investor money to buy the securities that make up

the funds portfolio. The idea behind this pooling of investor money is

to give each investor the benefits that come from the ownership of a

diversified portfolio of securities chosen and monitored daily by

experience, professional advisers.

The funds create and sell new shares on demand. Investors` shares

represent a portion of the funds portfolio and income proportional to

the number of shares they purchase. Individual shareholders of the

mutual funds have voting rights in the operation of the fund, just as

most holders of common stocks in corporations have the right to vote

on certain issues involving the running of the company. The key

attribute of a mutual fund, regardless of how it is structured, is that

the investor is entitled to receive on demand, or within a specified

period after demand, an amount computed by reference to the value

of the investors proportionate interest in the net assets of the mutual

fund. This means that the owner of mutual fund shares can "cash in,"

or redeem his or her shares at any time.

Mutual funds, therefore, are considered a liquid investment. The

investors selling (redemption) price may be higher or lower than the

purchase price. It all depends on the performance of the funds

portfolio. The fund has an adviser who charges a fee for managing the

portfolio. The adviser decides when and what securities to buy and

sell, and is responsible for providing or causing to be provided all

services required by the mutual fund in carrying on its day-to-day

activities. All fund investors get this built-in portfolio management

whether they own 50 shares or 10,000.The adviser generally

purchases many different securities for the portfolio, since investment

theory holds that diversification reduces risk. It is this diminished risk

that is one of the attractions of mutual funds. The fund also has a

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custodian, usually a financial institution such as a bank, which holds all

cash and securities for the fund.

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Mutual Fund from the State Bank of India became the first non-UTImutual fund in India. SBI Mutual Fund was later followed by CanbankMutual Fund, LIC Mutual Fund, Indian Bank Mutual Fund, Bank of IndiaMutual Fund, GIC Mutual Fund and PNB Mutual Fund. By 1993, theassets under management of the industry increased seven times to Rs.

47,004 crores. However, UTI remained to be the leader with about80% market share.

1992-93

Amou

ntMobili

sed

Assets

UnderManage

ment

Mobilisat

ion as %

of grossDomesti

c

Savings

UTI11,057

38,247 5.2%

Public

Sector1,964 8,757 0.9%

Total13,021

47,004 6.1%

Phase III. Emergence of Private Sector Funds - 1993-96

The permission given to private sector funds including foreign fundmanagement companies (most of them entering through jointventures with Indian promoters) to enter the mutual fund industry in1993, provided a wide range of choice to investors and morecompetition in the industry. Private funds introduced innovative

products, investment techniques and investor-servicing technology. By1994-95, about 11 private sector funds had launched their schemes.

Phase IV. Growth and SEBI Regulation - 1996-2004

The mutual fund industry witnessed robust growth and stricterregulation from the SEBI after the year 1996. The mobilization offunds and the number of players operating in the industry reached

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new heights as investors started showing more interest in mutualfunds.

Inventors interests were safeguarded by SEBI and the Governmentoffered tax benefits to the investors in order to encourage them. SEBI

(Mutual Funds) Regulations, 1996 was introduced by SEBI that setuniform standards for all mutual funds in India. The Union Budget in1999 exempted all dividend incomes in the hands of investors fromincome tax. Various Investor Awareness Programmes were launchedduring this phase, both by SEBI and AMFI, with an objective toeducate investors and make them informed about the mutual fundindustry.

In February 2003, the UTI Act was repealed and UTI was stripped ofits Special legal status as a trust formed by an Act of Parliament. Theprimary objective behind this was to bring all mutual fund players onthe same level. UTI was re-organized into two parts:1. The Specified Undertaking,2. The UTI Mutual Fund

Phase V. Growth and Consolidation - 2004 Onwards

The industry has also witnessed several mergers and acquisitionsrecently, examples of which are acquisition of schemes of Alliance

Mutual Fund by Birla Sun Life, Sun F&C Mutual Fund and PNB Mutual

Fund by Principal Mutual Fund. Simultaneously, more international

mutual fund players have entered India like Fidelity, Franklin

Templeton Mutual Fund etc. There were 29 funds as at the end of

March 2006. This is a continuing phase of growth of the industry

through consolidation and entry of new international and private sector

players.

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TYPES OF MUTUAL

FUNDS

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1. Schemes according to Maturity Period:-

A mutual fund scheme can be classified into open-ended

scheme or close-ended scheme depending on its maturityperiod.

OPEN-ENDED FUND/ SCHEME:-

An open-ended fund or scheme is one that is available for subscription

and repurchase on a continuous basis. These schemes do not have a

fixed maturity period. Investors can conveniently buy and sell units at

Net Asset Value (NAV) related prices which are declared on a daily

basis. The key feature of open-end schemes is liquidity.

CLOSE-ENDED FUND/ SCHEME:-

A close-ended fund or scheme has a stipulated maturity period e.g. 5-

7 years. The fund is open for subscription only during a specified

period at the time of launch of the scheme. Investors can invest in the

scheme at the time of the initial public issue and thereafter they can

buy or sell the units of the scheme on the stock exchanges where the

units are listed. In order to provide an exit route to the investors,

some close-ended funds give an option of selling back the units to the

mutual fund through periodic repurchase at NAV related prices. SEBIRegulations stipulate that at least one of the two exit routes is

provided to the investor i.e. either repurchase facility or through listing

on stock exchanges. These mutual funds schemes disclose NAV

generally on weekly basis.

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2. Schemes according to Investment Objective:-

A scheme can also be classified as growth scheme, income scheme, or

balanced scheme considering its investment objective. Such schemes

may be open-ended or close-ended schemes as described earlier. Such

schemes may be classified mainly as follows:

GROWTH / EQUITY ORIENTED SCHEME:-

The aim of growth funds is to provide capital appreciation over the

medium to long- term. Such schemes normally invest a major part of

their corpus in equities. Such funds have comparatively high risks.

These schemes provide different options to the investors like dividend

option, capital appreciation, etc. and the investors may choose an

option depending on their preferences. The investors must indicate the

option in the application form. The mutual funds also allow the

investors to change the options at a later date. Growth schemes are

good for investors having a long-term outlook seeking appreciation

over a period of time.

INCOME / DEBT ORIENTED SCHEME:-

The aim of income funds is to provide regular and steady income to

investors. Such schemes generally invest in fixed income securities

such as bonds, corporate debentures, Government securities and

money market instruments. Such funds are less risky compared to

equity schemes. These funds are not affected because of fluctuations

in equity markets. However, opportunities of capital appreciation are

also limited in such funds. The NAVs of such funds are affected

because of change in interest rates in the country. If the interest rates

fall, NAVs of such funds are likely to increase in the short run and vice

versa. However, long term investors may not bother about these

fluctuations.

BALANCED FUND:-

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

income as such schemes invest both in equities and fixed income

securities in the proportion indicated in their offer documents. These

are appropriate for investors looking for moderate growth. They

generally invest 40-60% in equity and debt instruments. These funds

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are also affected because of fluctuations in share prices in the stock

markets. However, NAVs of such funds are likely to be less volatile

compared to pure equity funds.

MONEY MARKET OR LIQUID FUND:-

These funds are also income funds and their aim is to provide easy

liquidity, preservation of capital and moderate income. These schemes

invest exclusively in safer short-term instruments such as treasury

bills, certificates of deposit, commercial paper and inter-bank call

money, government securities, etc. Returns on these schemes

fluctuate much less compared to other funds. These funds are

appropriate for corporate and individual investors as a means to park

their surplus funds for short periods.

GILT FUND :-

These funds invest exclusively in government securities. Government

securities have no default risk. NAVs of these schemes also fluctuate

due to change in interest rates and other economic factors as is the

case with income or debt oriented schemes.

INDEX FUNDS :-

Index Funds replicate the portfolio of a particular index such as the

BSE Sensitive index, S&P NSE 50 index (Nifty), etc. These schemes

invest in the securities in the same weightage comprising of an index.

NAVs of such schemes would rise or fall in accordance with the rise or

fall in the index, though not exactly by the same percentage due to

some factors known as "tracking error" in technical terms. Necessary

disclosures in this regard are made in the offer document of the

mutual fund scheme.

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3. Sector specific funds/schemes:-

These are the funds/schemes which invest in the securities of only

those sectors or industries as specified in the offer documents. e.g.

Pharmaceuticals, Software, Fast Moving Consumer Goods (FMCG),

Petroleum stocks, etc. The returns in these funds are dependent on

the performance of the respective sectors/industries. While these

funds may give higher returns, they are more risky compared to

diversified funds. Investors need to keep a watch on the performance

of those sectors/industries and must exit at an appropriate time. They

may also seek advice of an expert.

4. Tax Saving Schemes:-

These schemes offer tax rebates to the investors under specific

provisions of the Income Tax Act, 1961 as the Government offers tax

incentives for investment in specified avenues. e.g. Equity Linked

Savings Schemes (ELSS). Pension schemes launched by the mutual

funds also offer tax benefits. These schemes are growth oriented and

invest pre-dominantly in equities. Their growth opportunities and risks

associated are like any equity-oriented scheme.

5. Fund of Funds (FoF) scheme:-

A scheme that invests primarily in other schemes of the same mutualfund or other mutual funds is known as a FoF scheme. An FoF scheme

enables the investors to achieve greater diversification through one

scheme. It spreads risks across a greater universe.

6. Load or no-load Fund:-

A Load Fund is one that charges a percentage of NAV for entry or exit.

That is, each time one buys or sells units in the fund, a charge will be

payable. This charge is used by the mutual fund for marketing and

distribution expenses. Suppose the NAV per unit is Rs.10. If the entryas well as exit load charged is 1%, then the investors who buy would

be required to pay Rs.10.10 and those who offer their units for

repurchase to the mutual fund will get only Rs.9.90 per unit. The

investors should take the loads into consideration while making

investment as these affect their yields/returns. However, the investors

should also consider the performance track record and service

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standards of the mutual fund which are more important. Efficient funds

may give higher returns in spite of loads. A no-load fund is one that

does not charge for entry or exit. It means the investors can enter the

fund/scheme at NAV and no additional charges are payable on

purchase or sale of units.

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MUTUAL FUND INVESTMENT STRATEGIES

Systematic Investment Plan (SIPs):

These are best suited for young people who have started their careers andneed to build their wealth. SIPs entail an investor to invest a fixed sum ofmoney at regular intervals in mutual fund scheme the investor haschosen. For instance an investor opting for SIP in xyz mutual fund schemewill need to invest a certain sum of money every month / quarter /halfyear in the scheme.

Systematic Withdrawal Plan (SWPs):

These plans are best suited for people nearing retirement. In these plansan investor invests in a mutual fund scheme and is allowed to withdraw a

fixed sum of money at regular intervals to take care of expenses.

Systematic Transfer Plan (STPs):

They allow the investors to transfer on a periodic basis a specified amountfrom one scheme to another within the same fund family meaning twoschemes belonging to the same mutual fund. A transfer will be treated asredemption of units from the scheme from which the transfer is made.Such redemption or investment will be at the applicable NAV. This serviceallows the investor to manage his investment actively to achieve hisobjectives. Many funds do not even charge even any transaction feed forthis service an added advantage for the active investor.

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PERFORMANCE EVALUATION

PARAMETERS OF MUTUAL FUND EVALUATION:

Risk

Returns

Liquidity

Expense Ratio

Composition of Portfolio

Risks Associated With Mutual Funds

Investing in mutual funds as with any security, does not come withoutrisk. One of the most basic economic principles is that risk and reward aredirectly correlated. In other words, the greater the potential risk, thegreater the potential return. The types of risk commonly associated withmutual funds are:

Market Risk:

Market risk relate to the market value of a security in the future. Marketprices fluctuate and are susceptible to economic and financial trends,supply and demand, and many other factors that cannot be preciselypredicted or controlled.

Political Risk:

Changes in the tax laws, trade regulations, administered prices etc. issome of the many political factors that create market risk. Althoughcollectively, as citizens, we have indirect control through the power of ourvote, individually as investors, we have virtually no control.

Inflation Risk:

Inflation or purchasing power risk, relates to the uncertainty of the futurepurchasing power of the invested rupees. The risk is the increase in cost ofthe goods and services, as measured by the Consumer Price Index.

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Interest Rate Risk:

Interest Rate risk relates to the future changes in interest rates. Forinstance, if an investor invests in a long term debt mutual fund schemeand interest rate increase, the NAV of the scheme will fall because the

scheme will be end up holding debt offering lowest interest rates.

Business Risk:

Business Risk is the uncertainty concerning the future existence, stabilityand profitability of the issuer of the security. Business Risk is inherent inall business ventures. The future financial stability of a company can notbe predicted or guaranteed, nor can the price of its securities. Adversechanges in business circumstances will reduce the market price of thecompanys equity resulting in proportionate fall in the NAV of mutual fund

scheme, which has invested in the equity of such a company.

Economic Risk :

Economic Risk involves uncertainty in the economy, which, in turn canhave an adverse effect on a companys business. For instance, ifmonsoons fall in a year, equity stocks of agriculture bases companies willfall and NAVs of mutual funds, which have invested in such stocks, will fallproportionately.

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MEASUREMENT OF RISK

There are 3 different methods with the help of which we can measure therisk

I. Beta Coefficient Measure Of Risk :

Beta relates a funds return with a market index. It basically measures thesensitivity of funds return to changes in market index.If Beta = 1Fund moves with the market i.e. Passive fundIf Beta < 1Fund is less volatile than the market i. e Defensive FundIf Beta > 1Funds will give higher returns when market rises & higher losses when

market falls i.e. Aggressive Fund

II. Ex Marks or R-squared Measure Of Risk :

Ex Marks represents co relation with markets. Higher the Ex-markslower the risk of the fund because a fund with higher Ex-marks is betterdiversified than a fund with lower Ex-marks.

III. Standard Deviation Measure Of Risk :

It is a statistical concept, which measures volatility. It measures thefluctuations of funds returns around a mean level. Basically it gives youan idea of how volatile your earnings are. It is broader concept than BETA.It also helps in measuring total risk and not just the market risk of theportfolio.

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HOW TO CALCULATE THE VALUE OF AMUTUAL FUND:

The investors funds are deployed in a portfolio of securities by the fund

manager. The value of these investments keeps changing as the marketprice of the securities change. Since investors are free to enter and exitthe fund at any time, it is essential that the market value of theirinvestments is used to determine the price at which such entry and exitwill take place. The net assets represent the market value of assets, whichbelong to the investors, on a given date.Net Asset Value or NAV of a mutual fund is the value of one unit ofinvestment in the fund, in net asset terms.

NAV = Net Assets of the scheme / Number of Units Outstanding

Where Net Assets are calculated as:-

(Market value of investments + current assets and other assets + Accruedincome current liabilities and other liabilities less accrued expenses) /No. of Units Outstanding as at the NAV date

NAV of all schemes must be calculated and published at least weekly forclosed-end schemes and daily for open-end schemes.

The major factors affecting the NAV of a fund are:

Sale and purchase of securities Sale and repurchase of units Valuation of assets Accrual of income and expenses

SEBI requires that the fund must ensure that repurchase price is not lowerthan 93% of NAV (95% in the case of a closed-fund). On the other side, afund may sell new units at a price that is different from the NAV, but thesale price cannot be higher than 107 % of NAV. Also the differencebetween the repurchase price and the sale price of the unit is notpermitted to exceed 7% of the sale price.

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MEASURING MUTUAL FUND PERFORMANCE:

We can measure mutual funds performance by different method:

Absolute Return Method:

Percentage change in NAV is an absolute measure of return, which findsthe NAV appreciation between two points of time, as a percentage.e .g: If NAV of one fund changes from Rs.20 to Rs.22 in 12 months thenAbsolute return = (22 20)/20 X 100 =10%

Simple Annual Return Method :

Converting a return value for a period other than one year, into a value forone year, is called as annualisation. In order to annualize a rate, we findout what the return would be for a year, if the return behaved for a year,in the same manner it did, for any other fractional period.E .g: If NAV of one fund changes from Rs.20 to Rs.22 in 6 months thenAnnual Return = (22 20) /20 X 12/6 X 100 = 20%

Total Return Method:

The total return method takes into account the dividends distributed bythe mutual fund, and adds it to the NAV appreciation, to arrive at returns.Total Return =(Dividend distributed + Change in NAV)/ NAV at the start X 100e .g: If NAV of one fund changes from Rs.20 to Rs.22 in 6 months if inbetween dividend of Rs.4 has been distributed thenTotal Return = {4 + (22 20)}/20 X 100 = 30%

Total Return when dividend is reinvested:

This method is also called the return on investment (ROI) method. In this

method, the dividends are reinvested into the scheme as soon as they arereceived at the then prevailing NAV (ex-dividend NAV).= ((Value of holdings at the end of the period/ value of the holdings at thebeginning) 1)*100E.g. An investor buys 100 units of a fund at Rs. 10.5 on January 1, 2007.On June 30, 2007 he receives dividends at the rate of 10%. The ex-

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dividend NAV was Rs. 10.25. On December 31, 2007, the funds NAV wasRs. 12.25.

Value of holdings at the beginning period= 10.5*100= 1050Number of units re-invested = 100/10.25 = 9.756

End period value of investment = 109.756*12.25 = 1344.51 Rs.

Return on Investment = ((1344.51/1050)-1)*100= 28.05%

Compounded Average Annual Return Method:

This method is basically used for calculating the return for more than 1year. In this method return is calculated with the following formula:

A = P X (1 + R / 100) N

Where P = Principal invested

A = maturity valueN = period of investment in yearsR = Annualized compounded interest rate in %

R = {(Nth root of A / P) 1} X 100E. g: If amount invested is Rs.100 & in the end we get return of Rs. 200& period of investment is 10 years then annualized compounded return is

200 = 100 (1 + R / 100) 10Rate = 7.2 %

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RETURN S:

Returns have to be studied along with the risk. A fund could have earnedhigher return than the benchmark. But such higher return may beaccompanied by high risk. Therefore, we have to compare funds with thebenchmarks, on a risk adjusted basis. William Sharpe created a metric forfund performance, which enables the ranking of funds on a risk adjustedbasis.

Sharpe Ratio = Risk PremiumFunds Standard Deviation

Treynor Ratio = Risk PremiumFunds Beta

Risk Premium = Difference between the Funds Average return and Riskfree return on government security or treasury bill over a given period .

LIQUIDITY:

Most of the funds being sold today are open-ended. That is, investors cansell their existing units, or buy new units, at any point of time, at pricesthat are related to the NAV of the fund on the date of the transaction.Since investors continuously enter and exit funds, funds are actually ableto provide liquidity to investors, even if the underlying markets, in whichthe portfolio is invested, may not have the liquidity that the investorseeks.

EXPENSE RATIO:

Expense ratio is defined as the ratio of total expenses of the fund to theaverage net assets of the fund. Expense ratio can actually understate thetotal expenses, because brokerage paid on transactions of a fund are notincluded in the expenses. According to the current SEBI norms, brokeragecommissions are capitalized and included in the cost of the transactions.

Expense ratio = Total ExpensesAverage Net Assets

COMPOSITION OF THE PORTFOLIO:

Credit quality of the portfolio is measured by looking at the credit ratingsof the investments in the portfolio. Mutual Fund fact sheets show thecomposition of the portfolio and the investments in various asset classesover time.

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Portfolio turnover rate is the ratio of lesser of asset purchased or sold byfunds in the market to the net assets of the fund.If Portfolio ratio is 100% means portfolio has been changed fully. WhenPortfolio ratio is high means expense ratio is high.

Portfolio Ratio = Total Sales & PurchaseNet Assets of fund

In order to meaningfully compare funds some level of similarity in thefollowing factors has to be ensured:

Size of the funds Investment objective Risk profile Portfolio composition

Expense ratios

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FUND EVALUATION AGAINST BENCHMARK:

Funds can be evaluated against some performance indicators which areknown as benchmarks.There are various types of benchmarks:

Relative to market as whole Relative to other comparable financial products Relative to other mutual funds Relative to market as whole:

There are different ways to measure the performance of fund with respectto market asEquity Funds

Index FundAn Index fund invests in the stock comprising of theindex in the same ratio. This is a passive management style.

For example,

Market Index Fund - BSE Sensex

Nifty Index Fund - NIFTY

The difference between the return of this fund and its index benchmarkcan be explained by TRACKING ERROR.

Active Equity Funds:

The fund manager actively manages this fund. To evaluate performancein such case we have to select an appropriate benchmark.

Large diversified equity fund - BSE 100

Sector fund - Sectoral Indices

Debt Funds:

Debt fund can also be judged against a debt market index e.g. I-BEX

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Relative to other comparable financialproducts:

Schemes Return

Convenience

Safety Volatility Liquidity

Equity HighModerate

Low High High

FI Bonds ModerateHigh

High Moderate Moderate

CorporateDebentures

ModerateLow

Moderate Moderate Low

Company FixedDeposits

ModerateModerate

Low Low Low

Bank Deposits LowHigh

High Low High

PPF ModerateHigh

High Low Moderate

Life Insurance LowModerate

High Low Low

Gold ModerateLow

High Moderate Moderate

Real Estate HighLow

Moderate High Low

Mutual Funds HighHigh

High Moderate High

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Schemes Investment

Objective

Risk

Tolerance

Investment

Horizon

Equity Term Capital Appreciation High Long

FI Bonds Income Low Medium toLong term

CorporateDebentures

Income High Moderate Medium toLong term

Company Fixed

Deposits

Income Moderate Low Medium

Bank Deposits Income Generally Flexible all terms

PPF Income Low Long

Life Insurance Risk Cover Low Long

Gold Inflation Hedge Low Long

Real Estate Inflation Hedge Low Long

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TAX TREATMENT FOR THE INVESTORS(UNITHOLDERS):-

Tax benefits of investing in the Mutual Fund

As per the taxation laws in force as at the date of the Offer Document,some broad income tax implications of investing in the units of theScheme are stated below. The information so stated is based on theMutual Fund's understanding of the tax laws in force as of the date ofthe Offer Document, which have been confirmed by its auditors. Theinformation stated below is only for the purposes of providing generalinformation to the investors and is neither designed nor intended tobea substitute for professional tax advice. As the tax consequences arespecific to each investor and in view of the changing tax laws, each

investor is advised to consult his or her or its own tax consultant withrespect to the specific tax implications arising out of his or her or itsparticipation in the Scheme.

Implications of the Income-tax Act, 1961 as amended by the Finance

Act, 2006

To the Unit holders

(a.) Tax on Income

In accordance with the provisions of section 10(35)(a) of the Act,income received by all categories of unit holders in respect of units ofthe Fund will be exempt from income-tax in their hands.Exemption from income tax under section 10(35) of the Act would,however, not apply to any income arising from the transfer of theseunits.

(b.) Tax on capital gains:

As per the provisions of section 2(42A) of the Act, a unit of a MutualFund, held by the investor as a capital asset, is considered to be ashort-term capital asset, if it is held for 12 months or less from thedate of its acquisition by the unit holder. Accordingly, if the unit is heldfor a period of more than 12 months, it is treated as a long-termcapital asset.

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COMPUTATION OF CAPITAL GAINCapital gains on transfer of units will be computed after taking into

account the cost of their acquisition. While calculating long-termcapital gains, such cost will be indexed by using the cost inflation indexnotified by the Government of India.Individuals and HUFs, are granted a deduction from total income,under section 80C of the Act upto Rs.100,000, in respect of specifiedinvestments made during the year (please also refer paragraph d).

Long-term capital gainsAs per Section 10(38) of the Act, long-term capital gains arising fromthe sale of unit of an equity oriented fund entered into in a recognized

stock exchange or sale of such unit of an equity oriented fund to themutual fund would be exempt from income-tax, provided suchtransaction of sale is chargeable to securities transaction tax.Pursuant to an amendment made in the Finance Act, 2006, effective 1April 2006, companies would be required to include such long termcapital gains in computing the book profits and minimum alternatedtax liability under section 115JB of the Act.

Short -term capital gainsAs per Section 111A of the Act, short-term capital gains from the saleof unit of an equity oriented fund entered into in a recognized stockexchange or sale of such unit of an equity oriented fund to the mutualfund would be taxed at 10 per cent, provided such transaction of saleis chargeable to securities transaction tax.

The said tax rate would be increased by a surcharge of:- 10 per cent in case of non-corporate Unit holders, where the totalincome exceeds Rs.1,000,000,- 10 per cent in case of resident corporate Unit holders, and- 2.5 per cent in case of non-resident corporate unit holdersirrespective of the amount of taxable income.

Further, an additional surcharge of 2 per cent by way of education cesswould be charged on amount of tax inclusive of surcharge.In case of resident individual, if the income from short term capitalgains is less than the maximum amount not chargeable to tax, thenthere will be no tax payable.

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Further, in case of individuals/ HUFs, being residents, where the totalincome excluding short-term capital gains is below the maximumamount not chargeable to tax1, then the difference between thecurrent maximum amount not chargeable to tax and total incomeexcluding short-term capital gains, shall be adjusted from short-term

capital gains. Therefore only the balance short term capital gains willbe liable to income tax at the rate of 10 percent plus surcharge, ifapplicable and education cess.

Non-residentsIn case of non-resident unit holder who is a resident of a country withwhich India has signed a Double Taxation Avoidance Agreement(which is in force) income tax is payable at the rates provided in theAct, as discussed above, or the rates provided in the such agreement,if any, whichever is more beneficial to such non-resident unit holder.

Investment by MinorsWhere sale / repurchase is made during the minority of the child, taxwill be levied on either of the parents, whose income is greater, wherethe said income is not covered by the exception in the proviso tosection 64(1A) of the Act. When the child attains majority, such taxliability will be on the child.

Losses arising from sale of units

- As per the provisions of section 94(7) of the Act, loss arising ontransfer of units, which are acquired within a period of three monthsprior to the record date (date fixed by the Fund for the purposes ofentitlement of the unit holder to receive the income from units) andsold within a period of nine months after the record date, shall not beallowed to the extent of income distributed by the Fund in respect ofsuch units.

- As per the provisions of section 94(8) of the Act, where any units("original units") are acquired within a period of three months prior tothe record date (date fixed by the Fund for the purposes of entitlementof the unit holder to receive bonus units) and any bonus units areallotted (free of cost) based on the holding of the original units, theloss, if any, on sale of the original units within a period of nine monthsafter the record date, shall be ignored in the computation of the unit

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holder's taxable income. Such loss will however, be deemed to be thecost of acquisition of the bonus units.

--Each Unit holder is advised to consult his / her or its ownprofessional tax advisor before claiming set off of long-term

capital loss arising on sale / repurchase of units of an equityoriented fund referred to above, against long-term capital gainsarising on sale of other assets.

- Short-term capital loss suffered on sale / repurchase of unitsshall be available for set off against both long-term and short-term capital gains arising on sale of other assets and balanceshort-term capital loss shall be carried forward for set off againstcapital gains in subsequent years.

- Carry forward of losses is admissible maximum upto eight

assessment years.

(c.) Tax withholding on capital gains

Capital gains arising to a unit holder on repurchase of units by theFund should attract tax withholding as under:

- No tax needs to be withheld from capital gains arising to a FII

on the basis of the provisions of section 196D of the Act.

- In case of non-resident unit holder who is a resident of acountry with which India has signed a double taxation avoidanceagreement (which is in force) the tax should be deducted atsource under section 195 of the Act at the rate provided in theFinance Act of the relevant year or the rate provided in the saidagreement, whichever is beneficial to such non-resident unitholder. However, such a nonresident unit holder will be requiredto provide appropriate documents to the Fund, to be entitled tothe beneficial rate provided under such agreement.

- No tax needs to be withheld from capital gains arising to aresident unit holder on the basis of the Circular no. 715 dated 8August 1995 issued by the CBDT.

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Subject to the above, the provisions relating to tax withholding inrespect of gains arising from the sale of units of the various schemesof the fund are as under:

- No tax is required is to be withheld from long term capital

gains arising from sale of units in equity oriented fund schemes,that are subject to securities transaction tax.

- In respect of short-term capital gains arising to foreigncompanies (including Overseas Corporate Bodies), the Fund isrequired to deduct tax at source at the rate of 10.46 per cent(10 per cent tax plus 2.5 per cent surcharge thereon plusadditional surcharge of 2 per cent by way of education cess onthe tax plus surcharge). In respect of short-term capital gainsarising to non-resident individual unit holders, the Fund isrequired to deduct tax at source at the rate of 11.22 per cent(10 per cent tax plus 10 per cent surcharge thereon2 plusadditional surcharge of 2 per cent by way of education cess onthe tax plus surcharge).

(d.) Wealth Tax

Units held under the Schemes of the Fund are not treated as assetswithin the meaning of section 2(ea) of the Wealth Tax Act, 1957 andtherefore, not liable to wealth-tax.

(e.) Securities Transaction Tax

Nature of Transaction Current tax rate Tax rate effective (%) 1 June2006 (%) Delivery based purchase transaction in equity shares orunits of equity oriented fund entered in a recognized stock exchange0.1 0.125 Delivery based sale transaction in equity shares or units ofequity oriented fund entered in a recognized stock exchange 0.1 0.125Non-delivery based sale transaction in equity shares or units of equityoriented fund entered in a recognized stock exchange. 0.02 0.025 Saleof units of an equity oriented fund to the mutual fund 0.2 0.25 Value

of taxable securities transaction in case of units shall be the price atwhich such units are purchased or sold.A deduction in respect of securities transaction tax paid is notpermitted for the purpose of computation of business income or capitalgains.However, if the total income of an assessee includes any businessincome arising from taxable securities transactions, he shall be entitledto a rebate3 from income-tax of an amount equal to the securities

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transaction tax paid by him in respect of the taxable securitiestransactions entered during the course of his business.

The maximum amounts of total income, not chargeable to tax are asunder:

Type of person Maximum amount of income not chargeable to tax

Women Rs.135,000Senior citizens Rs.185,000Other individuals and HUFs Rs.100,000

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HOW IS A MUTUAL FUND SET UP?

A mutual fund is set up in the form of a trust, which has sponsor,

trustees, Asset Management Company (AMC) and custodian. The trust

is established by a sponsor or more than one sponsor who is likepromoter of a company. The trustees of the mutual fund hold its

property for the benefit of the unit holders. Asset Management

Company (AMC) approved by SEBI manages the funds by making

investments in various types of securities. Custodian, who is registered

with SEBI, holds the securities of various schemes of the fund in its

custody. The trustees are vested with the general power of

superintendence and direction over AMC. They monitor the

performance and compliance of SEBI Regulations by the mutual fund.

SEBI Regulations require that at least two thirds of the directors oftrustee company or board of trustees must be independent i.e. they

should not be associated with the sponsors. Also, 50% of the directors

of AMC must be independent. All mutual funds are required to be

registered with SEBI before they launch any scheme.

Association of Mutual Funds in India (AMFI)

With the increase in mutual fund players in India, a need for mutualfund association in India was generated to function as a non-profit

organization. Association of Mutual Funds in India (AMFI) was

incorporated on 22nd August, 1995.AMFI is an apex body of all Asset

Management Companies (AMC) which has been registered with SEBI.

Till date all the AMCs are that have launched mutual fund schemes are

its members. It functions under the supervision and guidelines of its

Board of Directors.

Association of Mutual Funds India has brought down the Indian Mutual

Fund Industry to a professional and healthy market with ethical lines

enhancing and maintaining standards. It follows the principle of both

protecting and promoting the interests of mutual funds as well as their

unit holders.

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The objectives of Association of Mutual Funds in India: ---

The Association of Mutual Funds of India works with 30 registered

AMCs of the country. It has certain defined objectives which

juxtaposes the guidelines of its Board of Directors. The objectives are

as follows:-

This mutual fund association of India maintains high

professional and ethical standards in all areas of operation of

the industry.

It also recommends and promotes the top class business

practices and code of conduct which is followed by members

and related people engaged in the activities of mutual fund

and asset management. The agencies who are by any means

connected or involved in the field of capital markets and

financial services also involved in this code of conduct of the

association.

AMFI interacts with SEBI and works according to SEBIs

guidelines in the mutual fund industry.

Association of Mutual Fund of India does represent the

Government of India, the Reserve Bank of India and other

related bodies on matters relating to the Mutual Fund

Industry.

It develops a team of well qualified and trained Agent

distributors. It implements a programme of training and

certification for all intermediaries and other engaged in the

mutual fund industry.

AMFI undertakes all India awareness programme for investors

in order to promote proper understanding of the concept and

working of mutual funds.

At last but not the least association of mutual fund of India also

disseminate information on Mutual Fund Industry and undertakes

studies and research either directly or in association with other bodies.

The sponsors of Association of Mutual Funds in India: ---

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- Bank Sponsored

- SBI Fund Management Ltd.

- BOB Asset Management Co. Ltd.

- Canbank Investment Management Services Ltd.

- UTI Asset Management Company Pvt. Ltd.

Institutions -

- GIC Asset Management Co. Ltd.

- Jeevan Bima Sahayog Asset Management Co. Ltd.

Private Sector: -

Indian -

- BenchMark Asset Management Co. Pvt. Ltd.

- Cholamandalam Asset Management Co. Ltd.

- Credit Capital Asset Management Co. Ltd.

- Escorts Asset Management Ltd.

- JM Financial Mutual Fund

- Kotak Mahindra Asset Management Co. Ltd.

- Reliance Capital Asset Management Ltd.

- Sahara Asset Management Co. Pvt. Ltd

- Sundaram Asset Management Company Ltd.

- Tata Asset Management Private Ltd.

- Predominantly India Joint Ventures:-

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- Birla Sun Life Asset Management Co. Ltd.

- DSP Merrill Lynch Fund Managers Limited

- HDFC Asset Management Company Ltd.

Predominantly Foreign Joint Ventures:-

- ABN AMRO Asset Management (I) Ltd.

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

- Deutsche Asset Management (India) Pvt. Ltd.

- Fidelity Fund Management Private Limited

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

- HSBC Asset Management (India) Private Ltd.

- ING Investment Management (India) Pvt. Ltd.

- Morgan Stanley Investment Management Pvt. Ltd.

- Principal Asset Management Co. Pvt. Ltd.

- Prudential ICICI Asset Management Co. Ltd.

- Standard Chartered Asset Mgmt Co. Pvt. Ltd.

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TIPS ON BUYING MUTUAL FUNDS:-

1. Determine your financial objectives and how much money

you have to invest. Make sure the funds objectives coincide with

your own. Dont change your objectives or exceed the amount setaside for investment unless you have good reason.

2. Always obtain all available information before you invest.

Request the prospectus, the Statement of Additional Information and

the latest shareholder report from each fund you are considering.

3. Never invest in periodic payment plans unless you are

virtually certain that you will not have to redeem early. If you

redeem early or do not complete the plan, you may have to pay sales

charges of up to 51% of your investment.

4. Be on the alert for incorporation by reference. You will have

"no excuse" for not knowing this information, if a problem arises. You

may be legally presumed to know materials incorporated by reference

in a prospectus or other documents.

5. Always determine all sales charges, fees and expenses

before you invest. Fees such as 12b-1 fees can cost you dearly and

charges for reinvestment of dividends and capital gains distributions

can substantially add to your costs. Shop around among the manyfunds offered and compare the various fees and costs connected with

funds that appeal to you.

6. Learn the costs of redemption. Sometimes investors are

surprised to learn that they have to pay to get out of funds through

back-end loads or redemption fees. Find out the redemption costs

before you invest so you wont be unpleasantly surprised when you

redeem your shares.

7. Never treat the risks of investment in a fund lightly. Weigh

the risks of the funds you want to buy against your ability to tolerate

the ups and downs of the market and your investment goals. Be extra

cautious when considering investing in funds with high yield/high risk

portfolios. Junk bond problems, for example, invariably affect the

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funds performance.

8. Dont be misled by the name of a fund. Some funds have been

given names denoting safety, stability and low risk, despite the fact

that the underlying investments in the portfolio are volatile and highlyrisky.

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STUDY AND SURVEY:

Objective

This study is conducted in order to find out:-

- Current trends of mutual funds in the Indian market.

- Investors perception towards mutual funds investment option.

- Different views of professional advisors.

RATIONALE OF STUDY

The study of this nature is being conducted on the behalf of IDFC AMC

(Standard charted) for prediction of future of mutual funds in Indian

emerging market. A high level of competition entering the mutual

funds sector, companies need to catch up with the ever changing

demands of the industry. The study is being conducted to get an edge

over other MFs houses in the mutual fund industry. It is also done in

order to know as to how much knowledge and money the consumers

contribute in the MFs schemes.

Survey Methodology

Survey comprises collecting, organizing, and evaluating data, reachingat a specific conclusion and at the same time careful evaluation of theconclusion. Collection of data has been done by two ways (1) primarydata collection; and (2) secondary data collection, throughquestionnaires and websites. Area of data collection was HDFC Bankbranches at Chandni chowk, Ashok vihar (Delhi). Analysis of data hasbeen done with the help ofspss software. Conclusion is drown from

result of different data processing and articles analyzation.

LIMITATIONS OF THE STUDY

The survey was conducted in chandni chowk and ashok vihar. Thestandard of living, per capita income of people, earning style, etc. of

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this region is different from other areas. Therefore, the inferencesdrawn from the survey cant be generalized.

Another major limitation was unwillingness of respondents to revealinformation. Due to lack of sufficient time and hesitation to reveal

information regarding their investments, it was a difficult task toextract information from them.Sample size was also small i.e. 100. Therefore, it is very difficult toinfer correct conclusions from small sample.

Findings

1. This graph clearly shows that young people are more likely to visit

bank branches. Thus more chances of getting long term, more risk

taker and aggressive investors.

Figure 1

Age group

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2. Here data shows that people are willing to earn more return than

that of they earn in traditional ways of investment.

Figure 2

Expected returns

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3. This graph predicts that generally consumers keep a smaller part of

their disposable income aside for different investment options.

Figure 3

% of disposable income

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4. This graphical representation clearly shows that investors give

smaller part of their investment pool to mutual funds investment.

Figure 4

% of total investment

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5. These pillars provide a clear thought to our mind that in India

professional advisors are more reliable source to get mutual funds

related information.

Figure 5

No. of persons

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6. This chart is showing that Indian investors are willing to stay

invested for time duration of more than 12 months. They have

patience, they want to earn more money on their investment, and this

is a bright sign for mutual funds industry.

Figure 6

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KEY FINDINGS:-

# Study found that more young people are likely to involved in financial

activities. They frequently visit banks and meet financial advisors. This

is an opportunity for mutual funds houses to attract these people.

# More than 50% of surveyed persons were willing to take high risk

for high rate of return. This indicates that riskier investment options

can also attract big pool of money if investors are properly convinced.

# Study shows professional advisors are considered to be a more

reliable source of mutual funds information, not because they provide

human touch to investor but others are not aggressively proposed,

advertised, availed and used.

# An observation made by study was, many a time advisors

themselves do not get timely updates from AMCs. This leads them to

not offer some of schemes that may give good returns.

# Technological advancements are at a nascent stage. Therefore these

channels will take time to come into the picture. In other words these

are seems to narrow ways to walk.

# Surveyed persons do not have knowledge of more than 10 AMCs

names and not more than 7 schemes of any one of mutual fund

houses. This requires an aggressive marketing of funds, so that

awareness levels of investor can be improved.

Professional advisors think that investors are not educated properly.

They (investor) rely on what others say or what they (advisors) say.

Its easy to convince them for investment but not so easy to make

them clear about market affecting factors. Stock market is going low

and I am already losing, you are asking for investment in market,

sorry I am not interested. an investor grievance.

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CONCLUSION:

India is an emerging market. Consumption level is rising with rising

earning level. Economic indicators - micro and macro both show a sky

facing arrows. Data shows that there will be more number ofbillionaires from India than any of other country.

We know that Indians are earning more, therefore spending more, but

the question is how much they save/invest in order to secure their

future. There are numbers of traditional ways of saving. They give

guaranteed return with low risk. High risk associated investment

options was not considered a right decision. India is a young country

having a considerably big part of young people. They need a right

direction for investment options.

Mutual funds industry is enlarging its size in India. JVs, foreign JVs and

acquisitions are in trend. AUM has gone to $8 trillion, number of

investors is rising, and number of AMCs is going up. These changes

are likely to happen. Indian monetary policy is supporting new

business. Private sector is aggressively participating in mutual funds

business. Numbers of schemes are much more than earlier.

With such shining sides, double digit inflation rate, bearish stock

market, RBIs high bank rates, squeezing liquidity and other dark sides

putting pressure on consumers saving. This situation pushes investorsback from investment. They wait and hold cash rather than investing.

This study found that investors are willing to invest with high rate of

return. They know high return always adhere to high risk but market

still is not in correction mode. It will take time.

Indian market potential is high, investors are willing to pour money in

mutual funds, despite some temporary restraints, other economic

factors are in favorable mode. Thus we need proper management of

advisory services, more schemes, financial advisors and institutions tocater untouched markets.

The industry needs to revise its business strategy. Investors

perception is not prioritized yet. Instead of completing targets,

advisors working under institutions should consider the requirement of

investors. We need to change pattern of selling mutual funds schemes.

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QUESTIONNAIRES

For staff of Standard Chartered (Sansad Marg)

1. How long have you been selling mutual funds?

2. By what way did you used to communicate to your clients?

3. Do you still follow the same modes?

4. Industry is changing, consumer`s perception is changing,Indian economy is also dynamic, growing, how do you justify

your job with such a changing scenario?

5. How do you describe technological innovation in mutual

funds , by what extent seen and foreseen changes are caused

by it?

6. If I keep all recommendations aside and simply ask you,

what factors do you consider before suggesting any scheme to a

prospective client?

7. Demand and supply mechanism moreover is applicable to

buying and selling, what is the present seen of this mechanism

for mutual funds in India?

8. Data says that in US number of mutual funds schemes are

more than that of number of listed companies at stock exchange

whereas in India not more than 1000 schemes. How do you

react on this situation?

9. One side double digit inflation rate, RBIs norms for curbing

liquidity from market, high price of fuel, are putting pressure on

consumer s savings, on the other side SEBI and RBI are relaxing

norms for AMCs business. How these two repelling poles can

stand simultaneously?

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10. Number of distribution channels is increasing just to cater

untouched market. What do you think?

11. Finally, where do you see this industry in coming 10years

horizon?

For clients of Standard Chartered Priority(Sansad

marg).

1. Which of the following age bands do you fall in to?

Less than 21

21 to 25

25 to 35

35 to 60

Above 60

2. What is your primary source of income?

Your pension

Your salary

Income from your business

Rental income from investment properties

3. What is your return expectation on your investment?

Up to 8%

Between 8% to 18%

Above 18%

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4. How would you describe/rate your level of knowledge of

financial products?

Low level of knowledge

Medium level of knowledge

High level of knowledge

5. What level of risk are you willing to accept on your investment?

I want to protect my capital

I am comfortable with a small degree of risk

I am comfortable accepting the fact that investment

could decline

I am willing to tolerate putting my principal at risk by

investing in volatile investments

6. What percent of your disposable income do you keep aside for

different investment options?

0% to 5%

5% to 10%

10% to 15%

15% to 20%

20% to 30%

Above 30%

7. What percent of above mentioned percentage part do you

invest in mutual funds?

0% to 5%

5% to 10%

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10% to 20%

20% to 30%

30% to 50%

Above 50%

8. Which of the following source of mutual funds information do

you like to opt for?

Professional advisory

Company advisory

Mutual fund prospects

Newspaper, magazine, television

Mutual fund rating service

9. How long are you planning to stay invested?

Long term > 12 months

Medium term 6 12 months

Short term < 6 months

10. How likely are you stay invested during volatile times?

Unlikely you will stay invested

Likely you will stay invested

Highly likely to remain invested

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JARGON:-

The following is a list of words associated with mutual funds

and their meanings.

Back-end Load - Charge imposed by a mutual fund when an

investor redeems shares. Redemption fees and contingent

deferred sales charges are examples.

Contingent Deferred Sales Charges - Back-end load imposed on

an investor who redeems shares. It is usually expressed as a

percentage of the original purchase price or of the value of

shares redeemed. In most cases, the longer the investor holdshis shares, the smaller the deferred sales charge.

Distribution - Payments made to shareholders by the mutual

fund. Interest and stock dividends earned by the funds portfolio

are passed to shareholders as dividends, while capital gains are

passed as capital gains distributions.

Dividend Reinvestment Fee - Fee charged when an investor uses

dividends paid by a mutual fund to purchase additional shares ofthe mutual fund.

Exchange Fee - Fee charged when an investor switches from one

mutual fund to another in the same family of funds.

Front-end Load - Sales charge applied at the time the investor

purchases shares.

Investment Companies - The companies that pool investormonies to purchase securities. The Investment Company Act of

1940 created three types of investment companies: face-amount

certificate companies, unit investment trusts and management

companies.

Management Companies - There are two types: open-end and

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closed-end. Open-end funds, which sell and buy shares back on

demand, are called mutual funds. Closed-end funds have a fixed

number of shares. After the initial public offering, shares in

closed-end funds trade only on exchanges. The price is

determined by the market and does not necessarily reflect thenet asset value of the shares.

Management Fee - A fee paid by the mutual fund to its

investment adviser and charged against fund assets, generally

1% or less per year.

Net Asset Value - In effect, the share price of a fund computed

daily by adding the value of the funds securities and other

assets, subtracting liabilities, and dividing by the number of

shares outstanding. For a mutual fund with a front-end load, net

asset value is identical to the "asked price" or "offering price."

Prospectus - A disclosure document which should provide the

investor with full and complete disclosure of all material

information needed by the investor to make a decision whether

or not to invest. The prospectus generally incorporates the SAI

by "reference." (See SAI definition.)

Redemption Fee - A fee charged to an investor who redeems

shares. It is generally expressed as a percentage of the value of

shares redeemed.

Rule 12b-1 Fee - An asset-based sales load, permitted by SEC

Rule 12b-1, representing annual charges of up to 1-1/4% for

specific sales or promotional activities of the mutual fund. Over

time, the amount paid in Rule 12b-1 fees can surpass the

amount paid in sales fees charged by load funds.

SAI - A disclosure document called a Statement of Additional

Information. The SAI is not required to be furnished by mutual

funds to investors unless investors specifically request it.

Investors are responsible for information in the SAI, even if they

dont request it.

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Total Return -A computation of mutual fund performance which

measures changes in total value over a specified time period.

Included in the computation are distributions paid to investors,

capital gains distributions and unrealized capital gains andlosses. Since all fund activity which has an effect on net asset

value is represented, this measure provides a picture of

performance which is more complete than yield.

Yield - A measure of mutual fund performance, which is figured

by dividing the income generated (dividends, capital gains

distribution, etc.) per share for a specific time period by the

funds current price per share. For example if, during a year, a

single share of a fund had paid income totaling $1 and its share

price was $10, the annual yield for that year would be figured by

dividing 1 by 10, which equals one tenth, or a yield of 10%.

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REFERENCES :-

www.IDFCMF.com

www.stanchart.com

www.wikipedia.com

www.moneycontrolindia.com

www.nse-india.com

www.amfiindia.com

www.mutualfundsindia.com

www.sebi.gov.in

www.businessmapsofindia.com

www.ceicdata.com

www.economictimes.com

www.valueresearchonline.com
http://www.idfcmf.com/http://www.stanchart.com/http://www.moneycontrolindia.com/http://www.nse-india.com/http://www.mutualfundsindia.com/http://www.sebi.gov.in/http://www.businessmapsofindia.com/http://www.ceicdata.com/http://www.economictimes.com/http://www.idfcmf.com/http://www.stanchart.com/http://www.moneycontrolindia.com/http://www.nse-india.com/http://www.mutualfundsindia.com/http://www.sebi.gov.in/http://www.businessmapsofindia.com/http://www.ceicdata.com/http://www.economictimes.com/

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