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MUTUAL FUND

Mutual fund is a trust that pools the savings of a number of investors who share a commonfinancial goal. This pool of money is invested in accordance with a stated objective. The joint

ownership of the fund is thus “Mutual”, i.e. the fund belongs to all investors. The money thuscollected is then invested in capital market instruments such as shares, debentures and other securities. The income earned through these investments and the capital appreciations realizedare shared by its unit holders in proportion the number of units owned by them. Thus a MutualFund is the most suitable investment for the common man as it offers an opportunity to invest ina diversified, professionally managed basket of securities at a relatively low cost. A Mutual Fundis an investment tool that allows small investors access to a well-diversified portfolio of equities, bonds and other securities. Each shareholder participates in the gain or loss of the fund. Units areissued and can be redeemed as needed. The fund’s Net Asset value (NAV) is determined eachday.

Investments in securities are spread across a wide cross-section of industries and sectors

and thus the risk is reduced. Diversification reduces the risk because all stocks may notmove in the same direction in the same proportion at the same time. Mutual fund issuesunits to the investors in accordance with quantum of money invested by them. Investors of mutual funds are known as unit holders.

When an investor subscribes for the units of a mutual fund, he becomes part owner of the assetsof the fund in the same proportion as his contribution amount put up with the Corpus (the totalamount of the fund). Mutual Fund investor is also known as a mutual fund shareholder or a unitholder.



Any change in the value of the investments made into capital market instruments (such as shares,debentures etc) is reflected in the Net Asset Value (NAV) of the scheme. NAV is defined as themarket value of the Mutual Fund scheme's assets net of its liabilities. NAV of a scheme iscalculated by dividing the market value of scheme's assets by the total number of units issued tothe investors.

NAV (For a particular day)

= Market Value of the scheme / Number of unit-holders

Where,

Numerator= Market value of investment+receivables+other Accrued Income +Other Assets-Accrued Expenses-Other Payables-Other Liabilities.

SETUP OF MUTUAL FUNDS:

A mutual fund is set up in the form of a trust, which has sponsor, trustees, Asset ManagementCompany (AMC) and custodian. The trust is established by a sponsor or more than one sponsor

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who is like promoter 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 managers the fund by makinginvestments in various schemes of the in its custody. The trustees are vested with the general power of superintendence and direction over AMC. They monitor the performance andcompliance of SEBI regulations by the mutual fund.

SEBI regulations require that at least two thirds of the directors of trustee 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 withSEBI before they launch any scheme. The performance of a particular scheme of a mutual fundis denoted by net value (NAV).

ADVANTAGES OF MUTUAL FUNDa) Portfolio Diversification

b) Professional management

c) Reduction / Diversification of Risk

d) Liquidity

e) Flexibility & Convenience

f) Reduction in Transaction cost

g) Safety of regulated environment

h) Choice of schemes

i) Transparency

DISADVANTAGE OF MUTUAL FUND

a) No control over Cost in the Hands of an Investor

b) No tailor-made Portfolios

c) Managing a Portfolio Funds

d) Difficulty in selecting a Suitable Fund Scheme

MUTUAL FUND INDUSTRY

HISTORY



In the beginning:

Historians are uncertain of the origins of investment funds; some cite the closed-endinvestment companies launched in the Netherlands in 1822 by King William I as the firstmutual funds, while others point to a Dutch merchant named Adrian van Ketwich whoseinvestment trust created in 1774 may have given the king the idea. Van Ketwich probablytheorized that diversification would increase the appeal of investments to smaller investors withminimal capital. The name of van Ketwich's fund, EENDRAGT MAAKT MAGT, translates to"unity creates strength". The next wave of near-mutual funds included an investment trustlaunched in Switzerland in 1849, followed by similar vehicles which is followed by many kindof companies created in Scotland in the 1880s.

The idea of pooling resources and spreading risk using closed-end investments soon took root inGreat Britain and France, making its way to the United States in the 1890s. The Boston PersonalProperty Trust, formed in 1893, was the first closed-end fund in the U.S. The creation of theAlexander Fund in Philadelphia, Pennsylvania, in 1907 was an important step in the evolutiontoward what we know as the modern mutual fund. The Alexander Fund featured semi-annual

issues and allowed investors to make withdrawals on demand.

The Arrival of the Modern Fund:

The creation of the Massachusetts Investors' Trust in Boston, Massachusetts, heralded thearrival of the modern mutual fund in 1924. The fund went public in 1928, eventually spawningthe mutual fund firm known today as MFS Investment Management. State Street Investors' Trustwas the custodian of the Massachusetts Investors' Trust. Later, State Street Investors started itsown fund in 1924 with Richard Paine, Richard Saltonstall and Paul Cabot at the helm. Saltonstall

was also affiliated with Scudder, Stevens and Clark, an outfit that would launch the first no-load fund in 1928. A momentous year in the history of the mutual fund, 1928 also saw thelaunch of the Wellington Fund, which was the first mutual fund to include stocks and bonds, asopposed to direct merchant bank style of investments in business and trade.

Regulation and Expansion:

By 1929, there were 19 open-end mutual funds competing with nearly 700 closed-end

funds. With the stock market crash of 1929, the dynamic began to change as highly-leveragedclosed-end funds were wiped out and small open-end funds managed to survive.

Government regulators also began to take notice of the fledgling mutual fund industry. Thecreation of the Securities and Exchange Commission (SEC), the passage of the Securities Act of 1933 and the enactment of the Securities Exchange Act of 1934 put in place safeguardsto protect investors: mutual funds were required to register with the SEC and to providedisclosure in the form of a prospectus. The Investment Company Act of 1940 put in place

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additional regulations that required more disclosures and sought to minimize grievance of investor of different categories conflicts of interest.

The mutual fund industry continued to expand. At the beginning of the 1950s, the number of open-end funds topped 100. In 1954, the financial markets overcame their 1929 peak, and themutual fund industry began to grow in earnest, adding some 50 new funds over the course of thedecade. The 1960s saw the rise of aggressive growth funds, with more than 100 new fundsestablished and billions of dollars in new asset inflows.

Hundreds of new funds were launched throughout the 1960s until the bear market of 1969 cooledthe public appetite for mutual funds. Money flowed out of mutual funds as quickly as investorscould redeem their shares, but the industry's growth later resumed.

Massachusetts Investors Trust (now MFS Investment Management) was founded on March 21,1924, and, after one year, had 200 shareholders and $392,000 in assets. The entire industry,which included a few closed-end funds, represented less than $10 million in 1924.

The stock market crash of 1929 slowed the growth of mutual funds. In response to the stock market crash, Congress passed the Security Act of 1933 and the Securities Exchange Act of 1934. These laws require that a fund be registered with the SEC.

INDIAN MUTUAL FUND INDUSTRY

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. Though the growthwas slow, but it accelerated from the year 1987 when Non-UTI players entered into theIndustry.

In the past decade, Indian mutual fund industry had seen a dramatic improvement, bothqualities wise as well as quantity wise. In March 1987, the Asset Under Management(AUM) was Rs.4564 crores. The private sector entry to the fund family raised the AUM toRs. 47000 crores in March 1993 and till April 30, 2010; it has reached the height of Rs. 7,19,133 crores.

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The Mutual Fund Industry is obviously growing at a tremendous space with the mutualfund industry can be broadly put into four phases according to the development of thesector. Each phase is briefly described as under.

Phase I. Establishment and Growth of Unit Trust of India - 1964-87

Unit Trust of India enjoyed complete monopoly when it was established in the year 1963 by anact of Parliament. UTI was set up by the Reserve Bank of India and it continued to operate under the regulatory control of the RBI until the two were de-linked in 1978 and the entire control wastransferred in the hands of Industrial Development Bank of India (IDBI). UTI launched its firstscheme in 1964, named as Unit Scheme 1964 (US-64), which attracted the largest number of investors in any single investment scheme over the years. UTI launched more innovativeschemes in 1970s and 80s to suit the needs of different investors. It launched ULIP in 1971, sixmore schemes between 1981 and 1984, Children's Gift Growth Fund and India Fund (India's firstoffshore fund) in 1986, Master share (India’s first equity diversified scheme) in 1987 andMonthly Income Schemes (offering assured returns) during 1990s. By the end of 1987, UTI'sassets under management grew ten times to Rs. 6700 crores.

Phase II. Entry of Public Sector Funds - 1987-1993

The Indian mutual fund industry witnessed a number of public sector players entering the marketin the year 1987. In November 1987, SBI Mutual Fund from the State Bank of India became thefirst non-UTI mutual fund in India. SBI Mutual Fund was later followed by Canbank MutualFund, LIC Mutual Fund, Indian Bank Mutual Fund, Bank of India Mutual Fund, GIC MutualFund and PNB Mutual Fund. By 1993, the assets under management of the industry increasedseven times to Rs. 47,004 crores. However, UTI remained to be the leader with about 80%

market share.

1992-93Amount Mobilized

(In Rs. crores)Assets Under Management

(In Rs. crores)

Mobilization as %of Gross Domestic

Savings

UTI 11,057 38,247 5.2%

Public Sector 1,964 8,757 0.9%

Total 13,021 47,004 6.1%

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

The permission given to private sector funds including foreign fund management companies(most of them entering through joint ventures with Indian promoters) to enter the mutual fundindustry in 1993, provided a wide range of choice to investors and more competition in theindustry. Private funds introduced innovative products, investment techniques and investor-servicing technology. By 1994-95, about 11 private sector funds had launched their schemes.

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Phase IV. Growth and SEBI Regulation - 1996-2004

The mutual fund industry witnessed robust growth and stricter regulation from the SEBI after theyear 1996. The mobilization of funds and the number of players operating in the industry reachednew heights as investors started showing more interest in mutual funds. Investors' interests weresafeguarded by SEBI and the Government offered tax benefits to the investors in order toencourage them. SEBI (Mutual Funds) Regulations, 1996 was introduced by SEBI that setuniform standards for all mutual funds in India. The Union Budget in 1999 exempted alldividend incomes in the hands of investors from income tax. Various Investor AwarenessPrograms were launched during this phase, both by SEBI and AMFI, with an objective toeducate investors and make them informed about the mutual fund industry. In February 2003,the UTI Act was repealed and UTI was stripped of its Special legal status as a trust formed by anAct of Parliament. The primary objective behind this was to bring all mutual fund players on thesame level.

UTI was re-organized into two parts:1. The Specified Undertaking2. The UTI Mutual FundPresently Unit Trust of India operates under the name of UTI Mutual Fund and its past schemes(like US-64, Assured Return Schemes) are being gradually wound up.However, UTI Mutual Fund is still the largest player in the industry. In 1999, there was asignificant growth in mobilizations of funds from investors and assets under management whichis supported by the following data:

ASSETS UNDER MANAGEMENT (RS. CRORES)

AS ON UTIPUBLICSECTOR

PRIVATESECTOR

TOTAL

31-March-9953,32

08,292 6,860 68,472

Phase V. Growth and Consolidation - 2004 Onwards

The industry has also witnessed several mergers and acquisitions recently, examples of which are

acquisition of schemes of Alliance Mutual Fund by Birla Sun Life, Sun F&C Mutual Fund andPNB Mutual Fund by Principal Mutual Fund. Simultaneously, more international mutual fund players have entered India like Fidelity, Franklin Templeton Mutual Fund etc. There were 38funds as at the end of April 2010. This is a continuing phase of growth of the industry throughconsolidation and entry of new international and private sector players.





MUTUAL FUND STRUCTURE

In India, the following are involved in mutual fund operations: the sponsor, the mutual fund, thetrustees, the asset management company, the custodian, and the registrars and transfer agents.

Fund Sponsor:

The sponsor of a mutual fund is like the promoter of a company. The sponsor may be a bank,a financial institution, or a financial service company. It may be Indian or foreign. Thesponsor is responsible for setting up and establishing the mutual fund. The sponsor is thesettler of the mutual fund trust. The sponsor delegates the trustee functions to the trustees.

Mutual fund :

The mutual funds constituted as a trust under the Indian trust act, 1881, and registered withSEBI.

Trustees:

A trust is a notional entity that cannot contract in its own name. so, the trust enters into

contracts in the name of the trustees. Appointment by the sponsor, the trustees can be either individuals or a corporate body. Typically it is the latter. The trustees appoint the assetmanagement company (AMC), secure necessary approval, periodically monitor how theAMC functions, and hold the properties of the various schemes in trust for the benefits of investors.

Asset Management Company:

It also referred to as the investment manager, is a separate company appointed by the trusteesto run the mutual fund. The AMC should have a certificate from SEBI to act as portfoliomanager under SEBI rules and regulations, 1993.

Custodian:

The custodian handles the investment back office operations of a mutual fund. It looks after the receipt and delivery of securities, collection of income, distribution of dividends, andsegregation of assets between schemes. The sponsor of a mutual fund cannot act as itscustodian.

Registrars and Transfer Agents:



The registrars and transfer agents handle investor related services such as issuing units,redeeming units, sending fact sheets and annual reports, and so on. Some funds handle suchfunctions in house, while others outsource it to be SEBI approved registrars and transfer agents like Karvy and CAMS. The legal structure and organization of mutual funds as laiddown by SEBI guidelines is as follows.

Indian Mutual Fund Industry

Thirteen out of 37 fund houses witnesses a growth in average AUM in January, 2010, with

Reliance Mutual Fund continuing the largest fund house by asset at Rs. 1.17 trillion. HDFC was

at the second spot at Rs. 948 billion, followed by ICICI Prudential Mutual Fund at Rs. 784

billion. UTI Mutual Fund and Birla Sun Life Mutual Fund followed with an average AUM of Rs.

745 billion and Rs. 626 billion, respectively. The share of top 5 MF’s in the industry’s asset was

at 56% while that of top 10 funds’ asset was close to 80% in January 2010.

As per AMFI data, UTI Mutual Fund had the highest number of investor folios at 10 million as

of December 2009. The total number of investor folios for the mutual fund industry stood at 48

million as of December 2009.

The average AUM data analyzed for equity oriented schemes showed that Reliance Growth Fund

held the highest corpus of around Rs. 70 billion, followed by HDFC top 200 fund, Reliance

diversified Power Sector fund, HDFC equity fund and SBI magnum Tax Gain Scheme1993 with

an average AUM Rs. 61billion, Rs.58 billion, Rs. 55 billion, Rs. 54 billion, respectively.





Latest Average Asset Under Management for all

Mutual Fund houses & Ranking according to the

AAUM

Mutual Fund

Name

No. of

Schem

es*

Asset Under Management (Amount in Rs. Crore)

As on Corpus As on CorpusNet inc/dec

in corpus

AIG Global

Investment

Group Mutual

Fund

44 May

31,

2010

1,030.86 Apr 30,

2010

1,093.24 -62.378

Axis Mutual

Fund

58 May

31,

2010

4,715.89 Apr 30,

2010

3,477.98 1237.912

Baroda Pioneer

Mutual Fund

31 May

31,

2010

4,759.53 Apr 30,

2010

4,362.69 396.845

Benchmark

Mutual Fund

14 May

31,

2010

2,263.15 Apr 30,

2010

1,930.53 332.628

Bharti AXA

Mutual Fund

45 May

31,

2010

724.17 Apr 30,

2010

595.35 128.819

Birla Sun Life

Mutual Fund

(Rank 4)

219 May

31,

2010

73,828.

03

Apr 30,

2010

69,508.6

9

4319.346

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Some facts for the growth of mutual fund industry in India:

a) 100% growth in the last 6 years. b) Numbers of foreign AMC’s are in the queue to enter the Indian markets like Fidelity

Investments, US based, with over US$1trillion assets under management worldwide.

c) Our saving rate is over 23%, highest in the world. Only channelizing these savings in

mutual funds sector is required.

d) We have approximately 37 mutual funds which are much less than US having more than

800. There is a big scope for expansion.

e) 'B' and 'C' class cities are growing rapidly. Today most of the mutual funds are

concentrating on the 'A' class cities. Soon they will find scope in the growing cities.

f) Mutual fund can penetrate rural like the Indian insurance industry with simple and

limited products.

g) SEBI allowing the MF's to launch commodity mutual funds.

h) Emphasis on better corporate governance.

i) Trying to curb the late trading practices.

j) Introduction of Financial Planners who can provide need based advice.

The Indian mutual funds business is expected to grow significantly in the coming years due to a

high degree of transparency and disclosure standards comparable to anywhere in the world,

though there are many challenges that need to be addressed to increase net mobilization of funds

in this sector, as said by Mr. A.P. Kurian, Chairman of the Association of Mutual Funds of India.

Indian Mutual f und industry exhibited 200% growth in the last 10 yrs from Rs.470 billion to

Rs1400 billion in terms of assets under management. The Mutual Funds industry is expected to

jump sharply from its present share of 6% of GDP to 40% in the next 10yrs provided the

country’s growth rate is consistently above 6%. The growing investor preference for mutualfunds has resulted in the assets under management of mutual funds growing 8-folds in last 5 yrs.

Number of foreign AMC's are in the queue to enter the Indian markets like US based Fidelity

Investments, with over US$1trillion assets under management worldwide. Our saving rate is over

23%, highest in the world. Only channeling these savings in mutual funds sector is required.

Canara Robeco

Mutual Fund

87 May

31,

2010

10,661.9

5

Apr 30,

2010

10,050.8

4

611.109

Deutsche

Mutual Fund

116 May

31,

2010

10,102.4

6

Apr 30,

2010

10,111.6

1

-9.149

DSP Blackrock

Mutual Fund

96 May

31,

2010

21,884.9

5

Apr 30,

2010

21,948.7

6

-63.814

Edelweiss

Mutual Fund

40 May

31,

2010

261.09 Apr 30,

2010

216.16 44.932

Escorts Mutual

Fund

30 May

31,

2010

198.23 Apr 30,

2010

205.46 -7.237

Fidelity Mutual

Fund

61 May

31,

2010

7,457.84 Apr 30,

2010

7,684.70 -226.865

Fortis Mutual

Fund

472 May

31,

2010

7,537.44 Apr 30,

2010

6,902.15 635.297

Franklin

Templeton

Mutual Fund

173 May

31,

2010

35,774.7

9

Apr 30,

2010

34,107.0

0

1667.789

HDFC Mutual

Fund

(Rank 2)

162 May

31,

2010

101,863

.31

Apr 30,

2010

94,702.7

9

7160.526

HSBC Mutual

Fund

88 May

31,

2010

5,851.11 Apr 30,

2010

6,005.03 -153.926

ICICI Prudential

Mutual Fund

(Rank 3)

317 May

31,

2010

87,709.

81

Apr 30,

2010

83,035.5

1

4674.3







































There is a big scope for expansion as we have 37 mutual funds which is much less than US

having more than 800.

ROLE OF MUTUAL FUND IN STOCK EXCHANGE:

Mutual funds are an ideal vehicle for investment by retail investors in the stock market for several reasons.

a) It pools investments of small investors together increasingly thereby the participation in thestock market.

b) Mutual funds being institutional investors, can invest in market analysis generally not

available or accessible to individual investors, providing therefore informed decisions tosmall investors.c) Mutual fund can diversify the portfolio in better way as compared with individual investors

due to the expertise and availability of funds.

Mutual funds in India, because of their small size and slower growth in the recent past, havetended to play only a limited role in the stock market. share of mutual funds in total turnover of the stock market (BSE+NSE), which was 4.9% in January 2000, declined to 3.6% by January2003.

REGULATION OF MUTUAL FUND IN INDIA

IDFC Mutual

Fund

170 May

31,

2010

26,614.7

7

Apr 30,

2010

25,177.2

8

1437.488

ING Mutual

Fund

92 May

31,

2010

1,645.42 Apr 30,

2010

1,652.84 -7.423

JM Financial

Mutual Fund

90 May

31,

2010

8,950.43 Apr 30,

2010

8,568.80 381.625

JPMorgan

Mutual Fund

31 May

31,

2010

3,784.98 Apr 30,

2010

4,114.75 -329.768

Kotak

Mahindra

Mutual Fund

119 May

31,

2010

40,657.5

2

Apr 30,

2010

33,743.4

9

6914.032

L&T Mutual

Fund

61 May

31,

2010

5,170.69 Apr 30,

2010

4,125.69 1045.009

LIC Mutual

Fund

62 May

31,

2010

38,962.8

2

Apr 30,

2010

40,507.2

1

-1544.388

Mirae Asset

Mutual Fund

37 May

31,

2010

236.50 Apr 30,

2010

245.06 -8.562

Morgan

Stanley Mutual

Fund

11 May

31,

2010

2,253.67 Apr 30,

2010

2,305.89 -52.226

Peerless

Mutual Fund

22 May

31,

2010

823.38 Apr 30,

2010

496.26 327.119

PRINCIPAL

Mutual Fund

85 May

31,

2010

7,647.76 Apr 30,

2010

7,470.15 177.605

Quantum

Mutual Fund

11 May31,

101.72 Apr 30,2010

101.34 0.381














































ASSOCIATION OF MUTUAL FUNDS IN INDIA (AMFI)

The mutual fund industry has a trade association called Association of Mutual Funds in India

(AMFI) modeled on the lines of a Self Regulating Organization (SRO) with a view to 'promoting

and pr otecting the interest of mutual funds and their unit-holders, increasing public awareness of

mutual funds, and serving the investor’s interest by defining and maintaining high ethical and

professional standards in the mutual funds industry'. AMFI plays an important role in

disciplining members and assist the regulatory authority in protecting investors' interest.

AMFI works through a number of committees, some of which are standing committees to

address areas where there is a need for constant vigil and improvements and other which are

ad-hoc committees constituted to address specific issues. These committees consist of industry

professionals from among the member mutual funds. AMFI has now decided to become a self-

regulatory organization since it has worked very effectively as an industry body.

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 involvedin 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.

Reliance

Mutual Fund

(Rank 1)

185 May

31,

2010

118,973

.14

Apr 30,

2010

111,819.

33

7153.812

Religare

Mutual Fund

87 May

31,

2010

15,464.1

0

Apr 30,

2010

13,829.2

5

1634.85

Sahara Mutual

Fund

44 May

31,

2010

765.23 Apr 30,

2010

804.57 -39.335

SBI Mutual

Fund

116 May

31,

2010

36,235.7

6

Apr 30,

2010

39,826.3

5

-3590.585

Shinsei Mutual

Fund

11 May

31,

2010

323.71 Apr 30,

2010

222.28 101.433

Sundaram BNP

Paribas Mutual

Fund

143 May

31,

2010

13,976.1

1

Apr 30,

2010

14,361.1

8

-385.076

Tata Mutual

Fund

168 May

31,2010

22,673.4

3

Apr 30,

2010

22,051.2

7

622.154

Taurus Mutual

Fund

47 May

31,

2010

3,056.16 Apr 30,

2010

2,347.23 708.928

UTI Mutual

Fund

(Rank 5)

203 May

31,

2010

78,617.

15

Apr 30,

2010

79,456.7

0

-839.544












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

program of training and certification for all intermediaries and other engaged in themutual fund industry.

AMFI undertakes all India awareness program 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.

Securities and Exchange Board of India (SEBI)



As far as mutual funds are concerned, SEBI formulates policies and regulates the mutual funds to

protect the interest of the investors. SEBI notified regulations for the mutual funds in 1993.

Thereafter, mutual funds sponsored by private sector entities were allowed to enter the capital

market. The regulations were fully revised in 1996 and have been amended thereafter from time

to time. SEBI has also issued guidelines to the mutual funds from time to time to protect the

interests of investors.

Every mutual fund must be registered with SEBI and registration is granted only where

SEBI is satisfied with the background of the fund.

SEBI (Mutual Funds) Regulations, 1996 lays down the provisions for the appointment

of the trustees and their obligations. The Regulations have also laid down the

provisions for the approval of the AMC and the custodian.

Every new scheme launched by a mutual fund needs to be filed with SEBI and SEBI

reviews the document in regard to the disclosures contained in such documents.

SEBI has also laid down advertisement code to be followed by a mutual fund in

making any publicity regarding a scheme and its performance.

SEBI has the authority to inspect the books of accounts, records and documents of a

mutual fund, its trustees, AMC and custodian where it deems it necessary. SEBI also

has the authority to initiate penal actions against an erring MF.

Various investment options in Mutual Funds offer

To cater to different investment needs, Mutual Funds offer various investment options. Some of



the important investment options include:

1. Growth Option:

Dividend is not paid-out under a Growth Option and the investor realizes only the capital

appreciation on the investment (by an increase in NAV).

2. Dividend Payout Option:

Dividends are paid-out to investors under the Dividend Payout Option. However, the NAV of the

mutual fund scheme falls to the extent of the dividend payout.

3. Dividend Re-investment Option:

Here the dividend accrued on mutual funds is automatically re-invested in purchasing additional

units in open-ended funds. In most cases mutual funds offer the investor an option of collecting

dividends or re-investing the same.

4. Retirement Pension Option:

Some schemes are linked with retirement pension. Individuals participate in these options for

themselves, and corporate participate for their employees.

5. Insurance Option:

Certain Mutual Funds offer schemes that provide insurance cover to investors as an added

benefit.

INVESTMENT STRATEGIES

1. Systematic Investment Plan (SIP): under this a fixed sum is invested each month on a

fixed date of a month. Payment is made through post dated cheques or direct/auto debit



facilities. The investor gets fewer units when the NAV is high and more units when the

NAV is low. This is called as the benefit of Rupee Cost Averaging (RCA)

2. Systematic Transfer Plan (STP): under this an investor invest in debt oriented fund

and give instructions to transfer a fixed sum, at a fixed interval, to an equity scheme of the

same mutual fund.

3. Systematic Withdrawal Plan (SWP): if someone wishes to withdraw from a mutual

fund then he can withdraw a fixed amount each month.



INTRODUCTION:

The Reliance group - one of India's largest business houses with revenues of Rs. 990 billion

($22.6 billion) that is equal to 3.5 percent of the country's gross domestic product was split into

two.

The group - which claims to contribute nearly 10 per cent of the country's indirect tax revenues

and over six percent of India's exports - was divided between Mukesh Ambani and his younger

brother Anil on June 18, 2005.

The group's activities span exploration, production, refining and marketing of oil and natural gas,

petrochemicals, textiles, financial services, insurance, power and telecom. The family also has

interests in advertising agency and life sciences.

Reliance Mutual Fund (RMF) is one of India’s leading Mutual Funds, with Average Assets

under Management (AAUM) of Rs. 1, 18,973 Crores and an investor count of over 74 Lakh

folios. (AAUM and investor count as of May 2010).

Reliance Mutual Fund, a part of the Reliance - Anil Dhirubhai Ambani Group, is one of the

fastest growing mutual funds in the country. RMF offers investors a well-rounded portfolio of

products to meet varying investor requirements and has presence in 159 cities across the country.

Reliance Mutual Fund constantly endeavors to launch innovative products and customer service

initiatives to increase value to investors. "Reliance Mutual Fund schemes are managed by

Reliance Capital Asset Management Limited., a subsidiary of Reliance Capital Limited, which

holds 93.37% of the paid-up capital of RCAM, the balance paid up capital being held by

minority shareholders."

Reliance Capital Ltd. is one of India’s leading and fastest growing private sector financial

services companies, and ranks among the top 3 private sector financial services and banking

companies, in terms of net worth. Reliance Capital Ltd. has interests in asset management, life

and general insurance, private equity and proprietary investments, stock broking and other



financial services.

Reliance Capital Ltd is a part of the Reliance - Anil Dhirubhai Ambani Group, and is ranked

among the 20 most valuable private companies in India.

The Reliance Anil Dhirubhai Ambani Group is one of India's top 2 business houses, and has a

market capitalization of over Rs.2,25,000 crore (US$ 53 billion), net worth in excess of

Rs.58,000 crore (US$ 14 billion), cash flows of Rs. 12,000 crore (US$ 3 billion) and net profit of

Rs.8,000 crore (US$ 2 billion)

Reliance Mutual Fund (RMF) has been established as a trust under the Indian Trusts Act, 1882

with Reliance Capital Limited (RCL), as the Settler/Sponsor and Reliance Capital Trustee Co.

Limited (RCTCL), as the Trustee.

RMF has been registered with the Securities & Exchange Board of India (SEBI) vide registration

number MF/022/95/1 dated June 30, 1995. The name of Reliance Capital Mutual Fund has been

changed to Reliance Mutual Fund effective 11th March 2004 vide SEBI's letter no.

IMD/PSP/4958/2004 date 11th March 2004. Reliance Mutual Fund was formed to launch

various schemes under which units are issued to the Public with a view to contribute to the

capital market and to provide investors the opportunities to make investments in diversifiedsecurities.

Reliance Mutual Fund schemes are managed by Reliance Capital Asset Management Limited., a

subsidiary of Reliance Capital Limited, which holds 93.37% of the paid-up capital of RCAM, the

balance paid up capital being held by minority shareholders.Reliance Mutual Fund(RMF) has

been sponsored by Reliance Capital Ltd(RCL).The promoter of RCL is AAA Enterprises Private

Limited.Reliance Capital Limited is a Non Banking Finance Company. Reliance Capital Limited

is one of the India’s leading and fastest growing financial services companies, and ranks among

the top three private sector financial services and banking companies, in terms of net worth.



Reliance Capital Asset Management Ltd.

Reliance Capital Asset Management Ltd. (RCAM) is an unlisted Public Limited Company

incorporated under the Companies Act, 1956 on February 24, 1995.

RCAM has been appointed as the Asset Management Company of Reliance Mutual Fund by The

Trustee vides Investment Management Agreement (IMA) dated May 12, 1995 and executed

between Reliance Capital Trustee Co. Limited and Reliance Capital Asset Management Ltd. and

amended on August 12, 1997 and January 20, 2004 in line with SEBI (Mutual Funds)

Regulations, 1996).

Vision Statement

“To be a globally respected wealth creator, with an emphasis on customer care and a culture of

good corporate governance”.

Mission Statement

“To create and nurture a world-class, high performance environment aimed at delighting their

customers”.

The Management Team

Board of directors:



Mr. Soumen Ghosh Mr. Kanu Doshi

Mr. Manu Chadha Mr. Sushil Tripathi

Management Team:

Ceo: Head Equity Investments : Head Fixed Income :Mr. Sundeep Sikka Mr. Sunil B. Singhania Mr. Amitabh

Mohanty

Fund Managers:

Equity:

Mr. Ashwani Kumar Mr. Shailesh Raj Bhan Mr. Krishan Daga

Mr. Shiv Chanani Mr. Omprakash S. Kuckian Mr. Govind Agrawal

Debt:

Mr. Amit Tripathi Ms. Anju Chhajer Mr. Prashant Pimple

Commodity:

Mr. Hiren Chandaria

Head Of Department :-

Infrastructure & Admin. Mr. Pradeep Andrade

Finance & Accounts Mr. Milind Gandhi

Human resource Development Mr. Rajesh Derhgawen

Information Technology Mr. Vinay Nigudkar

R&T operations & Investor Relations Mr. Bhalchandra Joshi

Operations & Settlement Ms. Geeta Chandran

Legal,Secretarial & Compliance Mr. Muneesh Sud

HEAD-Sales & Distribution,

Product Management,Customer Service Mr. Himanshu Vyapak

Custodian:

Deutsche Bank, AG

http://www.reliancemutual.com/AboutUs/Default.aspx?ArticleID=8c251015-d90c-4563-b85b-502ec98413bc











































A Custody Agreement has been entered with Deutsche Bank in accordance with SEBIRegulations. The Custodian is approved by SEBI under registration no. IN/CUS/003 to act asCustodian for the Fund.

Deutsche Bank AG, the Custodian shall, inter alia:

Provide post-trading and custodial services to the Mutual Fund. Keep Securities and other instruments belonging to the Scheme in safe custody. Ensure smooth inflow/outflow of securities and such other instruments as and when

necessary, in the best interests of the unit holders. Ensure that the benefits due to the holdings of the Mutual Fund are recovered and

Be responsible for loss of or damage to the securities due to negligence on its part on the part of its approved agents.

Registrar:

M/s. Karvy Computershare Pvt. Limited

M/s. Karvy Computershare Pvt. Limited (KCL) is a Registrar and Transfer Agent registered withSEBI under registration no. INR000000221.

Reliance Capital Asset Management Ltd. and the Trustee have satisfied themselves, after undertaking appropriate due diligence measures, that they can provide the services required andhave adequate facilities, including systems facilities and back up, to do so. The Trustee has alsolaid down broad parameters for supervision of the Registrar. As Registrar to the Schemes, KCLwill accept and process investor's applications, handle communications with investors, performdata entry services, dispatch Account Statements and also perform such other functions asagreed, on an ongoing basis.

The Registrar is responsible for carrying out diligently the functions of a Registrar and Transfer

Agent and will be paid fees as set out in the agreement entered into with it and as per anymodification made thereof from time to time.

Trustees:

Reliance Capital Trustee Co. Limited

Reliance Capital Trustee Co. Limited (RCTC), a company incorporated under the CompaniesAct, 1956, has been appointed as the Trustee to the Fund vide the Trust Deed dated April 25,1995 executed between the Sponsor and the Trustee.

AWARDS & ACHEIVEMENTS

CRISIL Fund House Level 1



“CRISIL Fund House Level 1” rating denotes that RCAM has been judged by CRISIL Limited(Rating Agency) to possess HIGHEST LEVEL OF PROCESS QUALITY AND RISK MANAGEMENT CAPABILITY IN FUND MANAGEMENT PRACTICES. The other levels of rating are Level, Level2, Level 3, Level 4, and Level 5 denoting High, Average, Below Averageand Poor ‘level of process quality and risk management capability in Fund ManagementPractices’, respectively.

CNBC TV18 - CRISIL Mutual Fund of the Year Award for 2009:

Reliance Mutual Fund has won the ‘CNBC TV18 - CRISIL Mutual Fund of the Year’ Awardin the Category – Mutual Fund House of the Year (Awarded by CRISIL Fund Services, CRISILLimited). In total 37 fund houses were considered as the award universe. Fund Houses winningat least one award for their schemes in the category level awards for 2009 were eligible to be incontention for the award. The award is based on consistency of fund house’s performance acrossvarious scheme categories in the four quarterly CRISIL Composite Performance Rankings(CPRs) released during the calendar year 2009.

Asia Manager for the year 2009:

Reliance Capital Asset Management Limited has been awarded “Asset Manager for the year2009” i.e. from July 2008 to July 2009 at Asia Risk Awards 2009 by Incisive Media PublishingLimited. The participation was open for all the Asset Managers across Asia Pacific. TwelveAsset Managers participated for the award exercise. The Asia Risk Annual Award is renownedfor recognizing and rewarding institutions for the best risk management practices adopted bythem.

The Mutual Fund has launched so many Schemes till date; some of them areas follow:

S.No. Name of the Scheme Inception Year

1. Reliance Growth Fund September 1995



2. Reliance Vision Fund September 1995

3. Reliance Income Fund December 1997

4. Reliance Liquid Fund March 1998

5. Reliance Medium Term Fund August 2000

6. Reliance Short Term Fund December 2002

7. Reliance Fixed Term Scheme March 2003

8. Reliance Banking Fund May 2003

9. Reliance Gilt Securities Fund July 2003

10. Reliance Monthly Income Plan December 2003

11. Reliance Diversified Power Sector Fund March 2004

12. Reliance Pharma Fund May 2004

13. Reliance Floating Rate Fund August 2004

14. Reliance Media & Entertainment Fund September 2004

15. Reliance NRI Income Fund October 2004

16. Reliance NRI Equity Fund October 2004

17. Reliance Equity Opportunities Fund February 2005

18. Reliance Index Fund February 200519. Reliance Fixed Maturity Fund – Series I March 2005

20. Reliance Fixed Maturity Fund – Series II April 2005

21. Reliance Regular Savings Fund May 2005

22. Reliance Liquidity Fund June 2005

23. Reliance Tax Saver (ELSS) Fund July 2005

24. Reliance Fixed Tenor Fund November 2005

25. Reliance Equity Fund February 2006

26. Reliance Fixed Horizon Fund April 2006

27. Reliance Fixed Horizon Fund I August 2006

28. Reliance Fixed Horizon Fund II November 2006

29. Reliance Long Term Equity Fund November 2006



30. Reliance Fixed Horizon Fund III March 2007

31. Reliance Interval Fund March 2007

32. Reliance Money Manager Fund March 2007

33. Reliance Equity Advantage Fund June 2007

34. Reliance Fixed Horizon Fund IV August 2007

35. Reliance Fixed Horizon Fund V September 2007

36. Reliance Gold Exchange Traded Fund October 2007

37. Reliance Equity Linked Saving Fund - Series I December 2007

38. Reliance Fixed Horizon Fund VI December 2007

39. Reliance Natural Resources Fund January 2008

40. Reliance Fixed Horizon Fund VII January 2008

41. Reliance Fixed Horizon Fund VIII March 2008

42. Reliance Fixed Horizon Fund IX March 2008

43. Reliance Banking Exchange Traded Fund May 2008

44. Reliance Fixed Horizon Fund X August 2008

45. Reliance Fixed Horizon Fund XI October 200846. Reliance Fixed Horizon Fund XII November 2008

47. Reliance Infrastructure Fund June 2009

48. Reliance small. Cap. September 2010

49. Reliance index fund –NIFTY PLAN September 2010

No. of schemes 49

No. of schemes including options 185

Equity Schemes 17

Debt Schemes 32



Short term debt Schemes 15

Equity & Debt 02

Money Market 00

Gilt Fund 06

Systematic Investment Plan (SIP)

• Periodic investments are referred to as a SIP.

That means that, every month, you commit to investing, say, Rs 1,000 in your fund. At the end

of a year, you would have invested Rs 12,000 in your fund.

Let's say the NAV on the day you invest in the first month is Rs 20; you will get 50 units.

The next month, the NAV is Rs 25. You will get 40 units.

The following month, the NAV is Rs 18. You will get 55.56 units.

So, after three months, you would have 145.56 units. On an average, you would have paid

around Rs 21 per unit. This is because, when the NAV is high, you get fewer units per Rs 1,000.

When the NAV falls, you get more units per Rs 1,000.



SIP – The best way for investment

Case Study:

• Market hit a high of 5450 in Mar 2000.• Market crashed to lows of 2600.• It took almost 4.5 years for the market to scale back the level of 5400 in Sep 2004.• Let’s see how the SIP investors fared in that scenario.

Investor 1 – Panic Investors

These investors had started their SIP of Rs. 2000 in Mar 2000 peak. With the decline in the

market they panicked & stopped their SIP in a span of 13 months

SIP Start Date Mar-00

SIP End Date Mar-01

No. of installments 13

Scheme Name Investment Value in Mar 01 Returns

Reliance Growth 26,000 18,846 -46.1%

HDFC Equity Fund 26,000 20,870 -33.9%

ICICI Technology Fund 26,000 14,944 -67.3%

Birla New Millennium 26,000 14,596 -69.0%

These investors actually made a loss on their SIPs by stopping it in the downturn…

Investor 2 – Smart Investors



These investors had started their SIP of Rs. 2000 in Mar 2000 peak. They continued their SIP

and kept on investing in the SIPs.



Scheme Name Investment Value in Sep 04 Returns

Reliance Growth 1,10,000 3,25,736 50.5%

HDFC Equity Fund 1,10,000 2,53,337 38.1%

ICICI Technology Fund 1,10,000 1,74,300 20.5%

Birla New Millennium 1,10,000 1,64,224 17.8%

These investors have made phenomenal returns even though market has delivered no

return (From 5400 level in Mar 00 to 5400 level in Sep 04)

Investor 3 – New Investor

These investors started their SIP of Rs. 2000 in Mar 2001, 1 year after the fall in the market





Scheme Name Investment Value in Sep 04 Returns

Reliance Growth 86,000 2,48,528 66.8%

HDFC Equity Fund 86,000 1,90,341 48.3%

ICICI Technology Fund 86,000 1,50,844 33.2%

Birla New Millennium 86,000 1,43,954 30.3%

Investors who have started SIP in lean period have made fantastic returns



• Investments of Rs.10000/- becomes Rs.276947/- even after several falls in the NAVduring the period of 13 Years.

• And finally, with the current correction, its NAV has fallen by 50% 3 times over the period of past 14 years.

• Even after the current fall, the fund is still delivering a CAGR of 29% widely beating theindex which has given 8.3% returns.

• The Absolute returns from the fund even after the current fall are staggering 3529.72%.• Equity investments through Mutual Funds deliver 15-20% of returns over Long term.• Bull and bear market cycles are nature of Equity markets and are going to continue in

future also.

Findings

• Financial advisors know very less about benefits of MF and its business. They have a perceptionthat there is no potential earning in MF business.



• Investors of younger age invest generally in equity funds whereas older age investors invest indebt funds.

• Investing through MF is best way for capital appreciation within protection in comparison toinvesting directly in equity market and other investment avenues.

• Some schemes of each AMC perform well which have a good Fund Manager and well designedPortfolio.

Documents

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