MUTUAL FUND Presented by Ir. Subedi SBL/Siddhartha Capital

The Presentation Nature of Capital Market Mutual Fund Basics Mutual Fund in Nepal Current Status

Nature of Capital Market

Investing in the market successfully requires;  Financial knowledge  Time to analyze financial statements  Up to date financial data  Financial tools required for analysis of the data  Ability to interpret the analyzed data and relate it to market price (over/under priced shares)  Investable amount sufficient enough to diversify the investment

Rationale for Mutual Funds Participation of greater number of people is required for the development of capital market Mutual funds increases investor participation and helps mobilize savings Therefore, governments in different countries, promote mutual funds through various means such as tax incentives

Rationale for Mutual Funds Since, general people lack the time and skills to manage their funds, it is very difficult for them to enter the market In this scenario, Mutual fund is the only alternative solution for native investors.

Mutual Fund Basics

Mutual Fund A form of collective investment scheme that pools funds from investors and invests it in various securities such as stocks, bonds, money market instruments etc. The investment proceeds are then passed on to the individual investors

Worldwide Scenario India:  Started by government in 1963  1993 onwards entry of private and foreign players  Currently around 33 mutual fund companies with Rs. 7,00,000 cores assets under management.  Major players are:-HDFC, Tata, SBI, Reliance, DSP, Black Rock U.S.A  Around 15,000 types of mutual funds with $13.1 trillion assets under management Worldwide  $ 24.7 trillion assets under management

Types of Mutual Funds Mutual fund schemes are mainly of Two (2) types ;  Open-ended schemes  Close-ended schemes Based on investment objective, risk and return of the fund, investment areas, it can further be categorized into ;  Growth fund  Income fund  Balanced fund  Money market funds  Infrastructure fund, index fund, real estate funds etc.

Close ended schemes Collective investment scheme with initial public offering of limited number of units with maturity period. Units are traded in the secondary market Unit price is based on Net Asset value(NAV) NAV is published by the fund manager on weekly, or other periodic basis as prescribed by the regulator. From the profit, dividends may be distributed to the unit holders on annual basis. Schemes are closed after it’s Maturity Period.

Open ended schemes Open for subscription/Redemption on an ongoing basis Liquidity is the key feature of such schemes Investors get annual returns Buying and selling of units at prevailing NAV adding or deducting entry and exit load. No Maturity period for such scheme.

Benefits of Mutual fund to Investors Affordability Professional Management Convenience Diversification and risk minimization Cost effectiveness Liquidity Transparency Tax saving

Benefits of Mutual fund to the Market Increased investor participation Motivates companies to issue securities Price stabilization in the market Enhance the transparency and credibility of security market Add new instrument to the market

Benefits to the Economy Saving Increases Increases investment in the productive sector Increases the economic activity and generates employment Participation of general people in the benefit from the industrial sector

MUTUAL FUNDS IN NEPAL

Regulatory Mechanism Legal framework  Securities Act,2007  A collective investment scheme such as mutual fund should not be operated without obtaining permission from SEBON  Mutual Fund Regulation,2010  This Regulation is based on section 116 of Securities Act,2007  Provision regarding registration of mutual fund, fund manager, fund supervisor, depository.  Mutual Fund Guidelines,2012  Provision for issuance and management of scheme  Format of prospectus of the scheme

Introduction of Siddhartha Capital (SC) Siddhartha Capital Limited (SCL) is a subsidiary of Siddhartha Bank Limited, which holds 51 percent of the paid up capital of Siddhartha Capital Limited, the balance paid up being held by the institutions and individuals who are actively involved in different businesses in Nepal. SCL is licensed by Securities Board of Nepal as a Mutual Fund Manager and Depository as per the Mutual Fund Regulation, 2010.

Structure of Mutual Fund

Fund Sponsor Qualification  A body corporate performing financial business for last five years  Paid up capital equal to one billion rupees  In profit for last three years  Positive Net Worth Siddhartha Bank Limited(SBL) is the Fund Sponsor of Siddhartha Mutual Fund which was registered at SEBON

Fund Supervisor Qualification  Group of minimum five reputed professionals  Holding at least masters degree  Minimum 10 years of work experience To supervise the work of Fund Manager and Depository and act in the interest of the unit holder Informing Fund Sponsor or SEBON regarding the performance of the schemes

Fund Manager Qualification  A body corporate established for working as a fund manager to manage different schemes under mutual fund  Having minimum paid up capital of hundred million rupees  Should have net worth equal to minimum 75% of paid up capital  Should have at least 51% shareholding of concerned sponsor Siddhartha Capital Limited(SCL) is the Fund Manager of Siddhartha Mutual Fund.

Depository Qualification  A body corporate established to act as a depository  Having minimum paid up capital of hundred million rupees Maintain detailed information regarding the unit holders, transfer of units & distribution of dividend from the scheme Fund Manager can also perform the functions of Depository Siddhartha Capital Limited acts as the depository of Siddhartha Mutual Fund

Areas of Investment Fund managers can invest in following areas:  Listed shares  IPO  Debentures  Treasury bills  Bank deposits  Foreign securities  Money market instruments  Other areas taking approval of SEBON Before any IPO is launched 5% of that must be allocated for mutual funds Maximum up to 25% of any scheme can be invested in foreign securities market

Further Information Limitations on Investment 10% of fund in general shares of a company. 20% on right share and debentures issued by individual company 10% in a single issuance 20% under other mutual fund schemes 10% on bank deposits 10% on market instruments One shall not invest in securities of other schemes under the same Mutual Fund Restriction on investment on securities issued by the sponsor or Depository.

Rights of Unit Holders Receive unit certificates or statements of accounts confirming your title. Receive information about the investment policies, investment objectives, financial position and general affairs of the scheme. Receive dividend declared Right to sell/purchase units through stock exchange. Vote in accordance with the Regulations to: – change the Asset Management Company; – wind up the schemes. Right of unit holder to solve their grievance through fund manager/supervisor/SEBON Right of unit holder to be informed about NAV & financial position of schemes timely.

Current Status

Siddhartha Investment Growth Scheme-I (SIGS-I) Operating SIGS-I successfully Brief Highlights of Scheme Scheme Highlights Scheme’s Name : Siddhartha Investment Growth Scheme -I Type of Scheme : Close-end Maturity : 5 Years Liquidity : Scheme shall be listed in NEPSE Base Size : NPR. 400 million Minimum Size : NPR. 200 million Maximum Size : NPR. 500 million Scheme Approval : Approval from SEBON 14th October, 2012)

Monthly NAV of SIGS-I MONTHNAV Date NAV End of Magh, End of Poush, End of Mangsir, End of Kartik, End of Ashwin, End of Bhadra, End of Shrawan,

Monthly NAV Figure of SIGS-I

Weekly NAV of SIGS-I

Coming Scheme-Siddhartha Equity Oriented Growth Scheme Brief Highlights of Scheme Scheme Highlights Scheme’s Name : S-Equity Oriented Growth Scheme –I Type of Scheme : Close-end Maturity : 5 Years Liquidity : Scheme shall be listed in NEPSE Base Size : NPR. 800 million Minimum Size : NPR. 1 Billion Maximum Size : NPR. 400 million Scheme Approval : Under Launching

Government Initiatives for MFs Through Finance Ordinance 2070, Government has provided following incentives:  Tax exemption on income of the scheme  Tax exemption on interest and dividend income of scheme  No capital gain tax on sale and purchase of units  Other Mutual funds are also in market and some are in pipeline….

Further Inquiry…???? Siddhartha Capital Limited PO Box 21200, Third Floor, Siddhartha Insurance Complex, Babar mahal, Kathmandu, Nepal Telephone: , Fax: Website: