Performance & Features of Mutual Fund

P.Sathishkumar (Team Leader) Team Members P.Sathishkumar (Team Leader) M.Palnikumar S.Preethkumar R.Sakthivel S.Sivakumar

WHAT IS A MUTUAL FUND

Definition of Mutual 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.

Net Asset Value ( NAV ) * NAV = Market Value of Assets - liabilities Units Outstanding * Is the realisable value of one unit of the Fund

Advantages of Mutual Funds

Why Mutual funds…? Stock markets are very sophisticated Free pricing and integration with world markets Time , knowledge and luck Substantial capital for diversification

Mutual Funds : A Packaged Product Return Potential Diversification Convenience Liquidity Choice Well Regulated Tax Benefits

Convenience Easy Way to Invest Reduces excessive paperwork Outsourcing of expertise

Diversification Portfolio of investments spreads out Risk Attempts Minimises value erosion Potential losses are shared with other investors

Affordability Provides an opportunity for a small investor Invest as less as an amount of Rs.5000/Rs.500 and in multiples of Rs.1000/Rs.100 depending on the Scheme

Wide Choice Offers a VARIETY OF SCHEMES Meet the investment needs of all Investors

Risk Return Characteristics Sectoral Funds Potential for return Growth Funds Balanced Funds Debt Funds Liquid Funds Risk

P.Sathiskumar

History 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. First Phase – 1964-78 1963 : Unit Trust of India (UTI) was established on 1963 by an Act o Parliament 1964 : First scheme launched by UTI was Unit Scheme 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

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 . Canbank Mutual Fund), 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.

Third Phase – 1993-2003 (Entry of Private Sector Funds) 1993  In entry of private sector funds. 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.

Future of Mutual Funds By December 2004, Indian mutual fund industry reached Rs1,50,537cr It is estimated that by 2010 March-end, the total assets of all scheduled commercial banks should be Rs 40,90,000 crore. 2004 - 1,50,537 2010 - 40,90,000 The annual composite rate of growth is expected 13.4% during the rest of the decade. In the last 5 years we have seen annual growth rate of 9%. According to the current growth rate, by year 2010, mutual fund assets will be double .

100% growth in the last 6 years. Number of foreign AMC's are in the que to enter the Indian markets like Fidelity Investments, US based, with over US$1trillion assets under management worldwide. Our saving rate is over 23%, highest in the world. Only channelizing these savings in mutual funds sector is required. We have approximately 31 mutual funds which is much less than US having more than 800. There is a big scope for expansion

mutual funds are concentrating on the 'A' class cities mutual funds are concentrating on the 'A' class cities. Soon they will find scope in the growing cities. Mutual fund can penetrate rurals like the Indian insurance industry with simple and limited products. SEBI allowing the MF's to launch commodity mutual funds. Emphasis on better corporate governance

There is also enough scope for the Indian Mutual funds to enter into the semi-urban and rural areas In the future, there lies a big scope for the Indian Mutual Funds industry to expand. Indian mutual funds retail market, growing at a CAGR of about 30%, is forecasted to reach US$ 300 Billion by 2015. Income and growth schemes made up for majority of Assets Under Management (AUM) in the country

At about 94% (2010), private sector Asset Management Companies account for majority of mutual fund sales in India. Individual investors make up for 96.86% of the total number of investor accounts and contribute 36.9% of the net assets under management

S.Preethkumar Representative from Birla sunlife

R.Sakthivel Representative from UTI Mutual Fund UTI Master share UTI liquid fund

S.Sivakumar Representative from Reliance Money

Investment objective Reliance Regular Savings Fund provides you the choice of investing in Debt, Equity or Hybrid options with a pertinent investment objective and pattern for each option. Debt Option : The primary investment objective of this option is to generate optimal returns consistent with a moderate level of risk. This income may be complemented by capital appreciation of the portfolio. Accordingly, investments will predominantly be made in Debt & Money Market Instruments.

Equity Option : The primary investment objective of this option is to seek capital appreciation and/or to generate consistent returns by actively investing in Equity &Equity-related Securities. Hybrid Option : The primary investment objective of this option is to generate consistent returns by investing a major portion in Debt & Money Market Securities and a small portion in Equity & Equity-related Instruments.

Choice of Plans/Option For RRSF- Equity, & RRSF-Balanced Fund:- Growth Plan & Dividend Plan (Dividend payout option & Dividend Reinvestment option)

Doubts…………

Investment Objective The primary investment objective of the Scheme is to generate regular income in order to make regular dividend payments to unit holders and the secondary objective is growth of capital.

Choice of Plans/Options: Monthly Dividend Payout option Monthly Dividend Reinvestment option Quarterly Dividend Payout option Quarterly Dividend Reinvestment option

Doubts…………

M.Palinikumar Representative from SBI MF

Fund Manager : Mr. R. Srinivasan Experience : 16 yrs, 2 months

Investment Objective To provide the investors maximum growth opportunity through well researched investments in Indian equities, PCDs and FCDs from selected industries with high growth potential and Bonds.

% of Portfolio of Plan A & B Asset Allocation Instrument % of Portfolio of Plan A & B Risk Profile Equity,Partly Convertible Debentures, Fully Convertible Debentures & Bonds 80-100% Medium to High Money Market instruments ^ 0-20% Low

Scheme Highlights An open-ended equity scheme investing in stocks from selected industries with high growth potential. Minimum Investment Rs. 2000 and in multiples of Rs. 1000 with Dividend and Growth options available. Money Market Instruments will include Commercial Paper, Commercial Bills, Certificate of Deposit, Treasury Bills, Bills Rediscounting, Repos, Government securities having an unexpired maturity of less than 1 year, call or notice money, usance bills and any other such short-term instruments as may be allowed under the regulations prevailing from time to time.

Launch Date Minimum Application September 30, 1994 Rs. 2000 and in multiples of Rs. 1000. For Non-Resident Indians minimum application amount is Rs. 3000 and in multiples of Rs 1000 Entry Load Exit Load NA * Investments below Rs. 5 crore, exited before 3 years from the date of allotment - 1% * Investments below Rs. 5 crore, exited on or after 3 years from the date of allotment - NIL * Investments above Rs. 5 crore - NIL SIP SWP Rs 500/month - 12 months, Rs 1000/month - 6 months, Rs 1500/quarter - 12 months A minimum of Rs 500 can be withdrawn every month or quarter by issuing advance instructions to the Registrars at any time.

Fund Manager : Mr. Rajeev Radhakrishnan Experience : 7 yrs, 11 months

Investment Objective The investment objective of the scheme will be to provide attractive returns to the Magnum holders / Unit holders by means of capital appreciation through an actively managed portfolio of debt, equity and money market instruments. Income generated through the receipt of coupon payments, the amortization of the discount on the debt instruments, receipt of dividends or purchase and sale of securities in the underlying portfolio, will be reinvested. The following table shows percentage portfolio allocation.

% of Portfolio of Plan A & B Asset Allocation Instrument % of Portfolio of Plan A & B Risk Profile Equity and related instruments Not more than 25% Medium to High Debt instruments (including Securitized debt) and Govt. Securities and Money market instruments Up to 100% Low to Medium Securitized Debt Not more than 10% of investments in debt

Scheme Highlights Open ended Income Scheme. Parents/Guardians/Relatives/Institutions and NRIs can invest on behalf of the child. The child should be above 3 months and below 15 years of age as on the date of investment. Proof of age is not required. However, the Trustees and/or the AMC may, if considered necessary, in their sole discretion ask for proof of the same. Magnums / Units under the scheme can be repurchased on any business day at NAV related prices. Investors or donors investing through the parent who desire that the investment be locked-in till the Magnum holder / Unit holder attains the age of 18 years, they may do so by indicating it at the appropriate place in the application form at the time of application.

The funds collected under the scheme shall generally be invested in equity, debt and money market instruments consistent with the objective of the scheme. On reaching 18 years of age, Magnum holders / Unit holders will have an option to withdraw their holdings either as a lumpsum amount or staggered over a period of five years on annual/semiannual basis. In case the Magnum holder / Unit holder opts for the staggered redemption option, the corpus on maturity will be frozen and will be invested in instruments which seeks to provide capital protection such as bank deposits, Government Securities (the maturities of which will not exceed the residual maturity of the corpus) or in the call money market. In the case of the staggered redemption option, it is deemed that the Magnum holder / Unit holder has redeemed his investment under the scheme and will no longer be eligible for any benefits under the scheme.Alternatively, Magnum holders / Unit holders may also be permitted to continue their investment under the scheme even on completion of 18 years of age.

The scheme will provide group accident insurance cover to the Magnum holders / Unit holders or either parent against accidental death or permanent total disability relating to these accidents. In addition to this, on the accidental death of either parent the Magnum holder / Unit holder will stand to receive an additional 10% of the claim amount towards educational expenses. The cost of providing the insurance cover would be borne by the AMC. This cover will be available only for Resident Indian Magnum holders / Unit holders. At the time of application or subsequently, the investor may nominate an alternate child not exceeding 15 years of age.

Rs. 1500/- only and in multiples of Rs. 100/-. No maximum limit. Launch Date Minimum Application January 2, 2002 Rs. 1500/- only and in multiples of Rs. 100/-. No maximum limit. Entry Load Exit Load NA Within 1 year : 3%; within 2 years : 2%; Within 3 years:1% SIP SWP Rs.500/month - 12 months Rs.1000/month - 6months Rs.1500/quarter - 12 months A minimum of Rs. 500 can be withdrawn every month or quarter by indicating in the application form or by issuing advance instructions to the Registrars at any time.