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Basics of mutual funds
The article mentioned below, is for the investors who have not yet started investing in mutual funds, but willing to
explore the opportunity and also for those who want to clear their basics for what is mutual fund and how best it
can serve as an investment tool.
Getting Started
Before we move to explain what is mutual fund, its very important to know the area in which mutual funds works,
the basic understanding of stocks and bonds.
Stocks
Stocks represent shares of ownership in a public company. Examples of public companies include Reliance,
ONGC and Infosys. Stocks are considered to be the most common owned investment traded on the market.
Bonds
Bonds are basically the money which you lend to the government or a company, and in return you can receive
interest on your invested amount, which is back over predetermined amounts of time. Bonds are considered to
be the most common lending investment traded on the market.
There are many other types of investments other than stocks and bonds (including annuities, real estate, and
precious metals), but the majority of mutual funds invest in stocks and/or bonds.
Mutul Fund
Defnation
An open-ended fund operated by an investment company which raises money from
shareholders and invests in a group of assets, in accordance with a stated set of
objectives. mutual funds raise money by selling shares of the fund to the public, much
like any other type of company can sell stock in itself to the public. Mutual funds then
take the money they receive from the sale of their shares (along with any money made
from previous investments) and use it to purchase various investment vehicles, such as
stocks, bonds and money market instruments. In return for the money they give to the
fund when purchasing shares, shareholders receive an equity position in the fund and,
in effect, in each of its underlying securities. For most mutual funds, shareholders arefree to sell their shares at any time, although the price of a share in a mutual fund will
fluctuate daily, depending upon the performance of the securities held by the fund.
Benefits of mutual funds include diversification and professional money management.
Mutual funds offer choice, liquidity, and convenience, but charge fees and often require
a minimum investment. A closed-end fund is often incorrectly referred to as a mutual
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fund, but is actually an investment trust. There are many types of mutual funds,
including aggressive growth fund, asset allocation fund, balanced fund, blend fund,
bond fund, capital appreciation fund, clone fund, closed fund, crossover fund, equity
fund, fund of funds, global fund, growth fund, growth and income fund, hedge fund,
income fund, index fund, international fund, money market fund, municipal bond fund,
prime rate fund, regional fund, sector fund, specialty fund, stock fund, and tax-free
bond fund.
Mutual fundMutual funds are pools ofmoney that are managed by an investment company. They offerinvestors avariety of goals, depending on the fund and its investment charter. Some funds, for example, seek togenerate income on a regularbasis. Others seek to preserve an investor'smoney. Still others seek toinvest in companies that are growing at a rapid pace. Funds can impose a sales charge, orload, on
investors when they buy or sell shares. Many funds these days are no load and impose no sales charge.Mutual funds are investment companies regulated by the Investment Company Act of 1940. Related:open-end fund,closed-end fund.
Mutual Fund
A pool ofliquidity that an investment company places in various securities and/orderivatives with the goalof producing a certain return. Mutual funds may carry greater or lesserrisk, depending on their particularinvestment goals. Mutual funds are actively managed by the company to maintain the investment goals.The company issuesshares that represent a portion ofownership in each of the securitiesunderlying the
fund. Mutual funds are designed forinvestors who wish to take advantage of a highly diversifiedportfoliowithout a large amount ofcapital. See also: Open-end, Close-end.
Farlex Financial Dictionary. 2009 Farlex, Inc. All Rights Reserved
mutual fundAn investment company that continually offers new shares and stands ready to redeem existing sharesfrom the owners. Because the shares are purchased directly from and are sold directly to the mutual fund,there is no secondary market in these companies' stock. Individual mutual funds vary substantially interms of the types of investments, their sales charges (many have none), and their management fees.
Also called fund, open-end investment company. Compare closed-end investment company. See alsoclone fund, family of funds, load fund, regulated investment company.Case StudyMost research indicates a mutual fund's short-term performance is not an accurate indicatorof long-term performance. In other words, it is generally a mistake to choose a mutual fund based on thefund's investment performance during the past quarter or the past year. Even consistent long-termperformance may not be a fool-proof guide to selecting a fund. Fidelity's Magellan is considered theoutstanding success story among the thousands of mutual funds that have been formed. Peter Lynch, themanager of Magellan for 13 years, became an almost mystical figure among institutional investors beforevoluntarily stepping down as manager in 1990. A reputation for excellent investment performance over
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many years caused the fund to grow to the point where, by mid-1996, it had 4.4 million shareholders andmanaged $56 billion in assets. Jeff Vinik, who took over the fund's reins following the departure of Lynchalso produced some excellent results. In early 1996, however, Vinik turned bearish and placed nearly30% of Magellan's assets in cash and long-term U.S. Treasury bonds. The conservative portfolio causedthe fund to underperform in a market that exploded in initial public offerings and technology stocks. InMay 1996, Fidelity announced Vinik would be leaving Magellan. His replacement was the manager of one
of Fidelity's other mutual funds. Although Vinik apparently erred in becoming too conservative, manymarket watchers thought the real problem was that Magellan had become so large it was impossible tomanage effectively.
Wall Street Words: An A to Z Guide to Investment Terms for Today's Investor by David L. Scott. Copyright 2003 by Houghton MifflinCompany. Published by Houghton Mifflin Company. All rights reserved.
Mutual fund. A mutual fund is a professionally managed investment product that sells shares toinvestors and pools the capital it raises to purchase investments.
A fund typically buys a diversified portfolio of stock, bonds, and money market securities, or acombination of stock and bonds, depending on the investment objectives of the fund. Mutual funds mayalso hold other investments, such as derivatives.
A fund that makes a continuous offering of its shares to the public and will buy any shares an investorwishes to redeem, or sell back, is known as an open-end fund. An open-end fund trades at net assetvalue (NAV).
The NAV is the value of the fund's portfolio plus money waiting to be invested, minus operating expenses,divided by the number of outstanding shares.
Load funds -- those that charge upfront or back-end sales fees -- are sold through brokers or financialadvisers. No-load funds are sold directly to investors by the investment company offering the fund. Thesefunds, which don't charge sales fees, may use 12b-1 fees to pass on the cost of providing shareholderservices.
All mutual funds charge management fees, though at different rates, and they may also levy other feesand charges, which are reported as the fund's expense ratio. These costs plus the trading costs, whicharen't included in the expense ratio, reduce the return you realize from investing in the fund.
A fund that sells its shares to the public only until sales reach a predetermined level is known as a closed-end fund. The shares of a closed-end fund trade in the marketplace the way common stock does.
What Are Mutual Funds?
A mutual fund is a managed group of owned securities of several corporations. These corporations receive dividends
on the shares that they hold and realize capital gains or losses on their securities traded. Investors purchase sharesin the mutual fund as if it was an individual security. After paying operating costs, the earnings (dividends, capital
gains or loses) of the mutual fund are distributed to the investors, in proportion to the amount of money invested.
Investors hope that a loss on one holding will be made up by a gain on another. Heeding the adage "Don't put all your
eggs in one basket" the holders of mutual fund shares are able collectively to gain the advantage by diversifying their
investments, which might be beyond their financial means individually.
A mutual fund may be either an open-end or a closed-end fund. An open-end mutual fund does not have a set
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number of shares; it may be considered as a fluid capital stock. The number of shares changes as investors buys or
sell their shares. Investors are able to buy and sell their shares of the company at any time for a market price.
However the open-end market price is influenced greatly by the fund managers. On the other hand, closed-end
mutual fund has a fixed number of shares and the value of the shares fluctuates with the market. But with close-end
funds, the fund manager has less influence because the price of the underlining owned securities has greater
influence
History of mutual funds
The modern mutual fund was first introduced in Belgium in 1822. This form of investment soon spread to Great
Britain and France. Mutual funds became popular in the United States in the 1920s and continue to be popular since
the 1930s, especially open-end mutual funds. Mutual funds experienced a period of tremendous growth after World
War II, especially in the 1980s and 1990s
How mutual funds earn money
A mutual fund is a means of investing that enables individuals to share the risks of investing with other investors. All
contributors to the fund experience an equal share of gains and losses for each dollar invested. A mutual fund owns
the securities of several corporations. A mutual fund pools money from hundreds and thousands of investors to
construct a portfolio of stocks, bonds, real estate, or other securities, according to the kind of investments the mutual
fund trades. Investors purchase shares in the mutual fund as if it was an individual security. Fund managers hired by
the mutual fund company are paid to invest the money that the investors have placed in the fund. Heeding the adage
"Don't put all your eggs in one basket" the holders of mutual fund shares are able to gain the advantage of
diversification which might be beyond their financial means individually
Professional management of mutual funds
Mutual funds use professional managers to make the decisions regarding which companies' securities should be
bought and sold. The managers of the mutual fund decide how the pooled funds will be invested. Investment
opportunities are abundant and complex. Fund managers are expected to know what is available, the risks and gains
possible, the cost of acquiring and selling the investments, and the laws and regulations in the industry. The ability ofthe managers to select profitable investments and to sell those likely to decline in value is a key factor for the mutual
fund to earn money for the investors
Mutual fund ranking
Funds are ranked based upon their performance as a whole and performance against their peers by such companies
as MorningStar which has an industry recognized rating system for mutual funds. They have a one-to-five star system
in which five stars is the best. Usually the higher the rank, the higher the quality of the fund. For example MorningStar
rates mutual funds from 1 to 5 stars based on how well they've performed (after adjusting for risk and accounting for
sales charges) in comparison to similar funds. Within each MorningStar Category, the top 10% of funds receive 5
stars and the bottom 10% receive 1 star. Funds are rated for up to three time periods: three-, five- and 10- years and
these ratings are combined to produce an overall rating. Funds with less than three years of history are not rated.
Ratings are objective, based entirely on a mathematical evaluation of past performance. The ratings are a useful toolfor identifying funds worthy of further research, but should not be considered signals to buy or sell
Mutual fund share classes
MorningStar is a generally accepted authority on divides most stocks into classes or types. The use eight type
designations: Distressed, Hard Asset, Cyclical, Speculative Growth, Aggressive Growth, Classic Growth, Slow
Growth and High Yield. Each designation defines a broad category of investment characteristics. Stocks are assigned
to a type based on objective financial criteria and MorningStar's proprietary algorithm, so stocks of the same type
have similar economic fundamentals. Every stock has individual idiosyncrasies, but in general, when evaluating
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investments, many of the same concerns and evaluation methods will apply across the stocks in one type. By
establishing stock types one has an easy way to narrow down the stock universe to those best filling specific
investment needs. Stock Types also help you quickly determine the diversification level of portfolios. For instance,
you might discover that most of your holdings are categorized as Speculative Growth. If you want to lessen the
portfolio's risk, you could invest in other types of stocks.
MorningStar's classes/types are:
Distressed
These companies are having serious operating problems. This could mean declining cash flow, negative
earnings, high debt, or some combination of these. Such "turnaround" stocks tend to be highly risky but also
harbor some intriguing investments.
Hard Asset
These companies' main businesses revolve around the ownership or exploitation of hard assets like real estate,
metals, timber, etc. Such companies typically sport a low correlation with the overall stock market and investors havetraditionally looked to them for inflation hedges.
Cyclical
Cyclical companies core businesses can be expected to fluctuate in line with the overall economy. In a
booming economy such companies will look excellent; in a recession, their growth stalls, and they might
even lose money.
SpeculativeGrowth
Don't expect consistency from speculative growth-companies. At best their profits are spotty. At worst they
lose money. In fact, many companies never make it beyond speculative growth, going instead to bankruptcy
court. That's why they're speculative. But current profitability isn't what makes speculative-growth companies
interesting. It's future profits. Hopefully, a speculative-growth company will eventually blossom into a world-
class company.
AggressiveGrowth
Aggressive-growth companies show a bit more maturity than their speculative-growth counterparts: They
post rapid growth in profits, not just in sales-a sign of more staying power. At this point, it's time to make
some money.
Classic Growth
These firms are in their prime and have little left to prove. The best classic growers have blossomed into
money machines, churning out steady growth, high returns on capital, positive free cash flows, and rising
dividends. The catch is, their growth is nowhere near that of the aggressive-growth group.
Slow Growth and High Yield
The growth of these companies is a fading memory. Having run out of attractive investment opportunities,
most of them pay out the bulk of their earnings in dividends expect - high payout ratios - rather than plow the
profits back into their businesses
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Mutual fund prospectus
The prospectus is a legal document that includes information about the mutual
fund. In this document you will find information about the terms of the offer, the
issuer, and its objectives. In the aftermath of the 1929 stock market crash the
federal government in the Securities Act of 1933 required security companies
to publish a prospectus. At first glance a prospectus may seem overwhelming.
The information in the prospectus is usually lengthy, packed with tables and
graphs, and written in technical and legal language. This document is provided
to help you make an informed investment decision before you invest in a
mutual fund.
To gain the essential information you need, pay close attention the following
key sections:
Investment Objective
A short statement of the fund's investment objectives. Some funds intend to achieve short-term growth while
others might focus on long-term stability.
Investment Strategy
Exactly how the fund plans to accomplish the objectives. This section describes the types of assets that the
fund purchases.
Fees and Expenses
Although mutual funds aim to make money for their investors, their ultimate goal, just like any other
business, is to make money for themselves. In order to do so, funds charge their shareholders a variety of
fees and expenses, all of which must be documented in the prospectus. A table at the front of every
prospectus contains a breakdown of the different fees and expenses, along with a hypothetical projection of
how the fees would impact a $10,000 investment over a 10-year period. This enables you to compare fees
and expenses across mutual funds.
Account Information
This section contains very basic information about how to buy and sell shares and other account-related
information. In addition to telling you how to get your money into the fund, the prospectus will also tell you
how to take it out of the fund. The prospectus will inform you which redemption methods are available to
you.
Risks
The level of risk that the fund takes and the risks that are associated with the specific investments made by
the fund are one of the most important sections in the prospectus.
Performance
Information about the fund's performance over the last 10 years is included. Investors should be aware that
past performance is not necessarily an indicator of future results. As important is how well the fund has
traditionally performed compared to an index, such as the S&P 500. A fund's performance is also related to
the fund's volatility, dividend payments, and turnover.
Management
What are mutual funds?
History of mutual funds
How mutual funds earn money
Professional management
Mutual funds ranking
Mutual fund share classes
Mutual fund prospectus
Mutual fund annual report
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The names the managers and some additional information about their experience and qualifications is
reported. It can be helpful to know whether or not they have managed other funds in the past and their
success or failure in order to get a sense of their past strategies and results.
Statement of Additional Information
Mutual funds split their prospectuses into two parts -- the "prospectus" (described above) and the Statementof Additional Information (SAI). In 1983, the Securities and Exchange Commission required mutual funds to
supply much more detailed information about the fund. These are included in the SAI. For legal purposes it
is assumed that you have read it. If you don't receive the SAI with the prospectus, you should request one. It
provides great detail about the fund's board of directors, any limitations on the fund's investments, and the
fees and expenses that are mentioned in the prospectus.
Mutual fund annual report
Every year mutual funds send each investor an Annual Report. The Annual Report includes a list of the fund's
financial statements, a list of the fund's securities, and explanations from the fund's management as to why the fund
performed as it did for the previous year.
Mutual funds vs. other investments
From an investors' viewpoint mutual funds have several advantages such as:
y Professional management and research to select quality securities
y Spreading risk over a larger quantity of stock whereas the investor has limited to buy only a hand full of
stocks. The investor is not putting all his eggs in one basket
y Ability to add funds at set amounts and smaller quantities such as $100 per month
y Ability to take advantage of the stock market which has generally out performed other investment in the long
run
y Fund manager are able to buy securities in large quantities thus reducing brokerage fees
However there are some disadvantages with mutual funds such as:
y The investor must rely on the integrity of the professional fund manager
y Fund management fees may be unreasonable for the services rendered
y The fund manager may not pass transaction savings to the investor
y The fund manager is not liable for poor judgment when the investor's fund loses value
y There may be too many transactions in the fund resulting in higher fee/cost to the investor - This is
sometimes call "Churn and Earn"
y Prospectus and Annual report are hard to understand
y Investor may feel a lost of control of his investment dollars
y There may be restrictions on when and how an investor sells/redeems his mutual fund shares
Types of mutual funds
Most funds have a particular strategy they focus on when investing. For instance, some invest only in Blue Chip
companies that are more established and are relatively low risk. On the other hand, some focus on high-risk start up
companies that have the potential for double and triple digit growth. Finding a mutual fund that fits your investment
criteria and style is important.
Types of mutual funds are:
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Value stocks
Stocks from firms with relative low Price to Earning (P/E) Ratio, usually pay good dividends. The investor is
looking for income rather than capital gains.
Growth stock
Stocks from firms with higher low Price to Earning (P/E) Ratio, usually pay small dividends. The investor is
looking for capital gains rather than income.
Based on company size, large,mid, and small cap
Stocks from firms with various asset levels such as over $2 Billion for large; in between $2 and $1 Billion for
mid and below $1 Billion for small.
Income stock
The investor is looking for income which usually come from dividends or interest. These stocks are from
firms which pay relative high dividends. This fund may include bonds which pay high dividends. This fund is
much like the value stock fund, but accepts a little more risk and is not limited to stocks.
Index funds
The securities in this fund are the same as in an Index fund such as the Dow Jones Average or Standard
and Poor's. The number and ratios or securities are maintained by the fund manager to mimic the Index fund
it is following.
Enhanced index
This is an index fund which has been modified by either adding value or reducing volatility through selective
stock-picking.
Stock market sector
The securities in this fund are chosen from a particular marked sector such as Aerospace, retail, utilities, etc.
Defensive stock
The securities in this fund are chosen from a stock which usually is not impacted by economic down turns.
International
Stocks from international firms.
Real estate
Stocks from firms involved in real estate such as builder, supplier, architects and engineers, financial
lenders, etc.
Socially responsible
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This fund would invests according to non-economic guidelines. Funds may make investments based on
such issues as environmental responsibility, human rights, or religious views. For example, socially
responsible funds may take a proactive stance by selectively investing in environmentally-friendly
companies or firms with good employee relations. Therefore the fund would avoid securities from firms who
profit from alcohol, tobacco, gambling, pornography etc.
Balanced funds
The investor may wish to balance his risk between various sectors such as asset size, income or growth.
Therefore the fund is a balance between various attributes desired.
Tax efficient
Aims to minimize tax bills, such as keeping turnover levels low or shying away from companies that provide
dividends, which are regular payouts in cash or stock that are taxable in the year that they are received.
These funds still shoot for solid returns; they just want less of them showing up on the tax returns.
Convertible
Bonds or Preferred stock which may be converted into common stock.
Junk bond
Bonds which pay higher that market interest, but carry higher risk for failure and are rated below AAA.
Mutual funds of mutual funds
This funds that specializes in buying shares in other mutual funds rather than individual securities.
Closed end
This fund has a fixed number of shares. The value of the shares fluctuates with the market, but fund
manager has less influence because the price of the underlining owned securities has greater influence.
Exchange traded funds (ETFs)
Baskets of securities (stocks or bonds) that track highly recognized indexes. Similar to mutual funds, except
that they trade the same way that a stock trades, on a stock exchange
Mutual fund expenses
There are many expenses associated with mutual funds. Explore this section to learn more
Load vs. no-load funds
Load funds are mutual funds that have sales charges. When an investor purchases shares of a mutual fund the
investor pays a fee for the sale (transaction) of the shares. Sales charges are required by law to be no more than
8.5% of the price of the shares bought. A load fund is where the broker receives all his commission with the first
funds received from the investor. Therefore the investor must pay the brokers commission completely before any of
his funds go toward the purchase of shares.
No-load funds do not charge an upfront fee for the sale transaction. In a no-load fund the broker receives his
commission as he receives the investor's funds and shares are purchased with the investor's initial funds
Mutual fund fees
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In order to cover their expenses mutual funds charge fees to the investors. Although these fees are only a few
percentage points a year and seem like a minor expense, they create a serious drain on the performance over a
period of years.
Some fees to consider are:
Redemption fees
A mutual fund may charge fees when the investor sells shares back to the mutual fund.
Contingent deferred sales charge
A mutual fund may charge sales charges that are reduced at certain time intervals. For example, the fund
may charge 6% of the sale price the first year after the shares are bought. Each year thereafter the fee
would be reduced by 1% until no fee would be charged. This is an incentive for investors to leave their
money in the fund.
Management fees
Mutual funds may charge fees to cover expenses such as advertising, brokers' costs and toll-free telephone
lines. These are 12b-1 fees, regulated by law.
Transfer fees
A fee is charged each time the investor transfers money within the company.
Distribution of capital gains and dividends
After paying operating costs, the earnings and losses of the mutual fund are distributed to the investors in proportion
to the amount of money invested. An investor may chose to receive dividends as cash, or he can reinvest them into
the fund. Many funds will automatically reinvest dividends with the investor authorization
Mutual fund taxation
The mutual fund manager must send the investor a tax information statement so the investor can declare taxes. Theinvestor must account for all capital gains or loses and dividends even if the dividends and capital gains are
reinvested into the mutual fund. When mutual funds shares are sold/redeemed the mutual fund manager should aid
the investor in determining the purchase bases for the shares sold/redeemed. Recent federal tax codes have
modified the treatment of dividends and capital gains depending on the investor's income level and tax bracket.
Dangers of mutual funds
There are many dangers associated with mutual funds. Explore this section to learn more.
What to look out for
Repeating some of the concerns expressed in the mutual fund disadvantages.
y Performance below other mutual funds in the same sector or against a recognized index.
y There may be too many transactions in the fund resulting in higher fee/cost to the investor - This is
sometimes call "Churn and Earn".
y Prospectus, Annual report and Statement of Additional Information are hard to understand.
y There are restrictions on when and how an investor sells/redeems his mutual fund shares
Recent scandals
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Unfortunately there have been incidences in which mutual fund managers have traded stocks at prices other than
reported to the investor. An example is the use of closing share price for reported trades for the day the investor
request an execution of his shares. Whereas the mutual fund manager may have received a more advantageous
share price before the closing share price is set. The mutual fund manager retains the additional gain for himself or
his firm. Since there are usually large volume trades the gain may be substantial even with a fraction of a share price.
Working ofMutual Fund
Regulatory Authorities
To protect the interest of the investors, SEBI formulates policies and regulates the mutual funds. It notified
regulations in 1993 (fully revised in 1996) and issues guidelines from time to time. MF either promoted by public
or by private sector entities including one promoted by foreign entities is governed by these Regulations.
SEBI approved Asset Management Company (AMC) manages the funds by making investments in various types
of securities. Custodian, registered with SEBI, holds the securities of various schemes of the fund in its custody.
According to SEBI Regulations, two thirds of the directors of Trustee Company or board of trustees must be
independent.
The Association of Mutual Funds in India (AMFI) reassures the investors in units of mutual funds that the mutual
funds function within the strict regulatory framework. Its objective is to increase public awareness of the mutual
fund industry.
AMFI also is engaged in upgrading professional standards and in promoting best industry practices in diverse
areas such as valuation, disclosure, transparency etc.
Overview ofexisting schemes existed in mutual fund category: BY NATURE
1. Equity fund:
These funds invest a maximum part of their corpus into equities holdings. The structure of the fund may vary
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different for different schemes and the fund managers outlook on different stocks. The Equity Funds are
sub-classified depending upon their investment objective, as follows:
y Diversified Equity Funds
y Mid-Cap Funds
y Sector Specific Funds
y Tax Savings Funds (ELSS)
Equity investments are meant for a longer time horizon, thus Equity funds rank high on the risk-return
matrix.
2. Debt funds:
The objective of these Funds is to invest in debt papers. Government authorities, private companies, banks
and financial institutions are some of the major issuers of debt papers. By investing in debt instruments,
these funds ensure low risk and provide stable income to the investors. Debt funds are further classified as:
y Gilt Funds: Invest their corpus in securities issued by Government, popularly known asGovernment of India debt papers. These Funds carry zero Default risk but are associated with
Interest Rate risk. These schemes are safer as they invest in papers backed by Government.
y Income Funds: Invest a major portion into various debt instruments such as bonds, corporate
debentures and Government securities.
y MIPs: Invests maximum of their total corpus in debt instruments while they take minimum exposure
in equities. It gets benefit of both equity and debt market. These scheme ranks slightly high on the
risk-return matrix when compared with other debt schemes.
y Short Term Plans (STPs): Meant for investment horizon for three to six months. These funds
primarily invest in short term papers like Certificate of Deposits (CDs) and Commercial Papers
(CPs). Some portion of the corpus is also invested in corporate debentures.
y Liquid Funds: Also known as Money Market Schemes, These funds provides easy liquidity and
preservation of capital. These schemes invest in short-term instruments like Treasury Bills, inter-
bank call money market, CPs and CDs. These funds are meant for short-term cash management of
corporate houses and are meant for an investment horizon of 1day to 3 months. These schemes
rank low on risk-return matrix and are considered to be the safest amongst all categories of mutual
funds.
3. Balanced funds:
As the name suggest they, are a mix of both equity and debt funds. They invest in both equities and fixed
income securities, which are in line with pre-defined investment objective of the scheme. These schemes
aim to provide investors with the best of both the worlds. Equity part provides growth and the debt part
provides stability in returns.
Further the mutual funds can be broadly classified on the basis of investment parameter viz,
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Each category of funds is backed by an investment philosophy, which is pre-defined in the objectives of the
fund. The investor can align his own investment needs with the funds objective and invest accordingly.
By investment objective:
y Growth Schemes: Growth Schemes are also known as equity schemes. The aim of these
schemes is to provide capital appreciation over medium to long term. These schemes normally
invest a major part of their fund in equities and are willing to bear short-term decline in value for
possible future appreciation.
y Income Schemes:Income Schemes are also known as debt schemes. The aim of these schemes
is to provide regular and steady income to investors. These schemes generally invest in fixed
income securities such as bonds and corporate debentures. Capital appreciation in such schemes
may be limited.
y Balanced Schemes: Balanced Schemes aim to provide both growth and income by periodically
distributing a part of the income and capital gains they earn. These schemes invest in both sharesand fixed income securities, in the proportion indicated in their offer documents (normally 50:50).
y Money Market Schemes: Money Market Schemes aim to provide easy liquidity, preservation of
capital and moderate income. These schemes generally invest in safer, short-term instruments,
such as treasury bills, certificates of deposit, commercial paper and inter-bank call money.
Other schemes
y Tax Saving Schemes:
Tax-saving schemes offer tax rebates to the investors under tax laws prescribed from time to time.
Under Sec.88 of the Income Tax Act, contributions made to any Equity Linked Savings Scheme
(ELSS) are eligible for rebate.
y Index Schemes:
Index schemes attempt to replicate the performance of a particular index such as the BSE Sensex
or the NSE 50. The portfolio of these schemes will consist of only those stocks that constitute the
index. The percentage of each stock to the total holding will be identical to the stocks index
weightage. And hence, the returns from such schemes would be more or less equivalent to those of
the Index.
y
Sector Specific 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.
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The risk return trade-off indicates that if investor is willing to take higher risk then correspondingly he can expect
higher returns and vise versa if he pertains to lower risk instruments, which would be satisfied by lower returns. For
example, if an investors opt for bank FD, which provide moderate return with minimal risk. But as he moves ahead to
invest in capital protected funds and the profit-bonds that give out more return which is slightly higher as compared to
the bank deposits but the risk involved also increases in the same proportion.
Thus investors choose mutual funds as their primary means of investing, as Mutual funds provide professional
management, diversification, convenience and liquidity. That doesnt mean mutual fund investments risk free. This is
because the money that is pooled in are not invested only in debts funds which are less riskier but are also invested
in the stock markets which involves a higher risk but can expect higher returns. Hedge fund nvolves a very high risk
since it is mostly traded in the derivatives market which is considered very volatile.
Pros & cons of investing in mutual funds:
For investments in mutual fund, one must keep in mind about the Pros and cons of investments in mutual fund.
Advantages ofInvesting Mutual Funds:
1. Professional Management - The basic advantage of funds is that, they are professional managed, by well
qualified professional. Investors purchase funds because they do not have the time or the expertise to manage their
own portfolio. A mutual fund is considered to be relatively less expensive way to make and monitor their investments.
2. Diversification - Purchasing units in a mutual fund instead of buying individual stocks or bonds, the investors risk
is spread out and minimized up to certain extent. The idea behind diversification is to invest in a large number of
assets so that a loss in any particular investment is minimized by gains in others.
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3. Economies of Scale - Mutual fund buy and sell large amounts of securities at a time, thus help to reducing
transaction costs, and help to bring down the average cost of the unit for their investors.
4. Liquidity - Just like an individual stock, mutual fund also allows investors to liquidate their holdings as and when
they want.
5. Simplicity - Investments in mutual fund is considered to be easy, compare to other available instruments in the
market, and the minimum investment is small. Most AMC also have automatic purchase plans whereby as little as
Rs. 2000, where SIP start with just Rs.50 per month basis.
Disadvantages ofInvesting Mutual Funds:
1. Professional Management- Some funds doesnt perform in neither the market, as their management is not
dynamic enough to explore the available opportunity in the market, thus many investors debate over whether or not
the so-called professionals are any better than mutual fund or investor him self, for picking up stocks.
2. Costs The biggest source of AMC income, is generally from the entry & exit load which they charge from an
investors, at the time of purchase. The mutual fund industries are thus charging extra cost under layers of jargon.3. Dilution - Because funds have small holdings across different companies, high returns from a few investments
often don't make much difference on the overall return. Dilution is also the result of a successful fund getting too big.
When money pours into funds that have had strong success, the manager often has trouble finding a good
investment for all the new money.
4. Taxes - when making decisions about your money, fund managers don't consider your personal tax situation. For
example, when a fund manager sells a security, a capital-gain tax is triggered, which affects how profitable the
individual is from the sale. It might have been more advantageous for the individual to defer the capital gains liability.
What is Net Asset Value (NAV)Net Asset Value is the market value of the assets of the scheme minus its liabilities. Per unit NAV is the net asset
value of the scheme divided by the number of units outstanding on the Valuation Date.
Sale Price
Is the price you pay when you invest in a scheme. Also called Offer Price. It may include a sales load.
Repurchase Price
Is the price at which a close-ended scheme repurchases its units and it may include a back-end load. This is alsocalled Bid Price.
Redemption Price
Is the price at which open-ended schemes repurchase their units and close-ended schemes redeem theirunits on
maturity. Such prices are NAV related.
Sales LoadIs a charge collected by a scheme when it sells the units. Also called, 'Front-end' load. Schemes that do not charge a
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load are called 'No Load' schemes.
Repurchase or 'Back-end' Load
Is a charge collected by a scheme when it buys back the units from the unitholders
Why should you invest in mutual funds ?
The advantages of investing in a Mutual Fund are:
1. Professional Management: You avail of the services of experienced and skilled professionals who are backed by
a dedicated investment research team which analyses the performance and prospects of companies and selects
suitable investments to achieve the objectives of the scheme.
2. Diversification: Mutual Funds invest in a number of companies across a broad cross-section of industries and
sectors. This diversification reduces the risk because seldom do all stocks declare at the same time and in the same
proportion. You achieve this diversification through a Mutual Fund with far less money than you can do on your
own.
3. Convenient Administration: Investing in a Mutual Fund reduces paperwork and helps you avoid many problems
such as bad deliveries, delayed payments and unnecessary follow up with brokers and companies. Mutual Fundssave your time and make investing easy and convenient.
4. Return Potential: Over a medium to long-term, Mutual Funds have the potential to provide a higher return as
they invest in a diversified basket of selected securities.
5. Low Costs: Mutual Funds are a relatively less expensive way to invest compared to directly investing in the
capital markets because the benefits of scale in brokerage, custodial and other fees translate into lower costs for
investors.
6.Liquidity: In open-ended schemes, you can get your money back promptly at net asset value related prices fromthe Mutual Fund itself. With close-ended schemes, you can sell your units on a stock exchange at the prevailingmarket price or avail of the facility ofdirect repurchase at NAV related prices which some close-ended and interval
schemes offer you periodically.
7.Transparency: You get regular information on the value of your investment in addition to disclosure on the
specific investments made by your scheme, the proportion invested in each class of assets and the fund manager's
investment strategy and outlook.
8.Flexibility: Through features such as regular investment plans, regular withdrawal plans and dividend
reinvestment plans, you can systematically invest or withdraw funds according to your needs and convenience.
9. Choice of Schemes: Mutual Funds offer a family of schemes to suit your varying needs over a lifetime.
10.Well Regulated: All Mutual Funds are registered with SEBI and they function within the provisions of strict
regulations designed to protect the interests of investors. The operations of Mutual Funds are regularly monitored bySEBI.
UNDERSTANDING AND MANAGING RISK
All investments whether in shares, debentures or deposits involve risk: share value may go down depending uponthe performance of the company, the industry, state of capital markets and the economy; generally, however, longer
the term, lesser the risk; companies may default in payment of interest/ principal on their debentures/bonds/deposits;
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the rate of interest on an investment may fall short of the rate of inflation reducing the purchasing power.
While risk cannot be eliminated, skillful management can minimise risk. Mutual Funds help to reduce risk through
diversification and professional management. The experience and expertise of Mutual Fund managers in selecting
fundamentally sound securities and timing their purchases and sales, help them to build a diversified portfolio that
minimises risk and maximises returns.
How to invest in mutual funds?
Step one - Identify your investment needs.
Your financial goals will vary, based on your age, lifestyle, financial independence, family commitments, and level
of income and expenses among many other factors. Therefore, the first step is to assess your needs. Begin by asking
yourself these questions:
1.What are my investment objectives and needs? Probable Answers: I need regular income or need to buy a home or
finance a wedding or educate my children or a combination of all these needs.
2.How much risk am I willing to take? Probable Answers: I can only take a minimum amount of risk or I am willing
to accept the fact that my investment value may fluctuate or that there may be a short-term loss in order to achieve along-term potential gain.
3.What are my cash flow requirements? Probable Answers: I need a regular cash flow or I need a lump sum amount
to meet a specific need after a certain period or I don't require a current cash flow but I want to build my assets for
the future.
By going through such an exercise, you will know what you want out of your investment and can set the foundation
for a sound Mutual Fund investment strategy.
Step two - Choose the right Mutual Fund.
Once you have a clear strategy in mind, you now have to choose which Mutual Fund and scheme you want to investin. The offer document of the scheme tells you its objectives and provides supplementary details like the track
record of other schemes managed by the same Fund Manager. Some factors to evaluate before choosing a particularMutual Fund are:
y The track record of performance over the last few years in relation to the appropriate yardstick and similarfunds in the same category.
y How well the Mutual Fund is organised to provide efficient, prompt and personalised service.y Degree of transparency as reflected in frequency and quality of their communications.
Step three - Select the ideal mix of Schemes.Investing in just one Mutual Fund scheme may not meet all your investment needs. You may consider investing in a
combination of schemes to achieve your specific goals.
The following charts could prove useful in selecting a combination of schemes that satisfy your needs.
Step four - Invest regularlyFor most of us, the approach that works best is to invest a fixed amount at specific intervals, say every month. By
investing a fixed sum each month, you buy fewer units when the price is higher and more units when the price is
low, thus bringing down your average cost per unit. This is called rupee cost averaging and is a disciplined
investment strategy followed by investors all over the world. With many open-ended schemes offering systematic
investment plans, this regular investing habit is made easy for you.
Step five - Keep your taxes in mind
If you are in a high tax bracket and have utilised fully the exemptions under Section 80L of the Income Tax Act,
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investing in growth funds that do not pay dividends might be more tax efficient and improve your post-tax return.
If you are in a low tax bracket and have not utilised fully the exemption available under Section 80L, selecting funds
paying regular income could be more tax efficient. Further, there are other benefits available for investment in
Mutual Funds under the provisions of the prevailing tax laws.
You may therefore consult your tax advisor or Chartered Accountant for specific advice.
Step six - Start early
It is desirable to start investing early and stick to a regular investment plan. If you start now, you will make more
than if you wait and invest later. The power of compounding lets you earn income on income and your money
multiplies at a compounded rate of return.
Step seven - The final step
All you need to do now is to get in touch with a Mutual Fund or your agent/broker and start investing. Reap therewards in the years to come. Mutual Funds are suitable for every kind of investor-whether starting a career or
retiring, conservative or risk taking, growth oriented or income seeking
What are your rights as a mutual fund unit holder?As a unit holder in a Mutual Fund scheme coming under the SEBI (Mutual Funds) Regulations, ("Regulations") you
are entitled to:
1. Receive unit certificates or statements of accounts confirming your title within 6 weeks from the date of closure
of the subscription or within 6 weeks from the date your request for a unit certificate is received by the Mutual Fund;
2. Receive information about the investment policies, investment objectives, financial position and general affairs of
the scheme;
3. Receive dividend within 42 days of their declaration and receive the redemption or repurchase proceeds within 10days from the date of redemption or repurchase;
4. Vote in accordance with the Regulations to:
a. Either approve or disapprove any change in the fundamental investment policies of the scheme which are likely tomodify the scheme or affect your interest in the Mutual Fund; (as a dissenting unitholder, you would have a right to
redeem your investments);b. change the asset management company;
c. wind up the schemes.
5. Inspect the documents of the Mutual Funds specified in the scheme's offer document.
In addition to your rights, you can expect the following from Mutual Funds:
y To publish their NAV, in accordance with the regulations: daily, in case of most open ended schemes andperiodically, in case of close-ended schemes;
y To disclose your schemes' portfolio holdings, expenses, policy on asset allocation, the Report of theTrustees on the operations of your schemes and their future outlook through periodic newsletters, half-
yearly and annual accounts;
y To adhere to a Code of Ethics which require that investment decisions be taken in the best interests of theunit holders.
Reliance Mutual Fund ('RMF'/ 'Mutual Fund') is one of Indias leading Mutual Funds, with Average Assets UnderManagement (AAUM) of Rs. 90,661 Crores and an investor count of over 73.04 Lakh folios. (AAUM and investor count as ofJuly-Sep'11 ) Source : http://www.amfiindia.com/Reliance Mutual Fund, a part of the Reliance Group, is one of the fastest growing mutual funds in India. RMF offersinvestors a well-rounded portfolio of products to meet varying investor requirements and has presence in 179 cities acrossthe country. Reliance Mutual Fund constantly endeavors to launch innovative products and customer service initiatives toincrease value to investors. Reliance Capital Asset Management Limited (RCAM) is the asset manager of Reliance MutualFund. RCAM a subsidiary of Reliance Capital Limited, which holds 92.93% of the paid-up capital of RCAM, the balance
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paid up capital being held by minority shareholders.
Reliance Capital Ltd. is one of Indias leading and fastest growing private sector financial services companies, and ranksamong the top 3 private sector financial services and banking companies, in terms of net worth. Reliance Capital Ltd. hasinterests in asset management, life and general insurance, private equity and proprietary investments, stock broking andother financial services.
Sponsor : Reliance Capital Limited
Trustee : Reliance Capital Trustee Co. Limited
Investment Manager / AMC : Reliance Capital Asset Management Limited
Statutory Details : The Sponsor, the Trustee and the Investment Manager are incorporated under the Companies Act
1956.
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 our customers
Our CorporateGovernance Policy:
Reliance Capital Asset Management Limited has a vision of being a leading player in the mutual fund business and hasachieved significant success and visibility in the market.
However, an imperative part of growth and visibility is adherence to good conduct in the marketplace. At Reliance CapitalAsset Management Limited, the implementation and observance of ethical processes and policies has helped us in standingup to the scrutiny of our domestic and international investors.
Management:
The management at Reliance Capital Asset Management Limited is committed to good corporate governance, which
includes transparency and timely dissemination of information to its investors and unit holders. The Board of Directors ofRCAM is a professional body constituting inter-alia of, well-experienced and knowledgeable independent members. Regularaudit committee meetings are conducted to review the operations and performance of the company.
Employees: Reliance Capital Asset Management Limited has at present, a code of conduct for all its officers. It has aclearly defined prohibition on insider trading policy and regulations. The management believes in the principles of proprietyand utmost care is taken while handling public money, making proper and adequate disclosures.
All personnel at RCAM are made aware of their rights, obligations and duties as part of the Dealing Policy laid down in termsof SEBI guidelines. They are taken through a well-designed HR program, conducted to impart work ethics, the Code ofConduct, information security, Internet and e-mail usage and a host of other issues.
One of the core objectives of RCAM is to identify issues considered sensitive by global corporate standards, and implementpolicies/guidelines in conformity with the best practices as an ongoing process.
RCAM gives top priority to compliance in true letter and spirit, fully understanding its fiduciary responsibilities.Reliance Capital Limited:
Corporate & Registered Office:Reliance Capital Ltd. H Block, 1st Floor, Dhirubhai Ambani Knowledge City, Koparkhairne, Navi Mumbai - 400 710.Tel. 022 30327000, Fax. 022 3
RelianceMutual Fund schemes are managed by Reliance Capital Asset Management Limited, a subsidiary of RelianceCapital Limited, which holds 92.93% of the paid-up capital of Reliance Capital Asset Management Limited, the balance paidup 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.
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Reliance Capital Limited is a Non Banking Finance Company and is one of the Indias leading and fastest growing financialservices companies, and ranks among the top three private sector financial services and banking companies in India, interms of networth.
Reliance Capital Limited has interests in asset management and mutual funds, life and non-life insurance, private equity andproprietary investments, stock broking and other activities in the financial services sector. The net worth of RCL is asfollows:
Particulars
(Rs.in crores)2009-10 2008-09 2007-08
Net Worth 6885.70 6687.30 5927.5
Total Income 2366.62 2974.85 2079.79
Profit After Tax 339.42 968.02 1025.45
Reliance Capital Limited has contributed Rupees One Lac as the initial contribution to the corpus for the setting up of theReliance Mutual Fund. Reliance Capital Limited is responsible for discharging its functions and responsibilities towards the
Fund in accordance with the Securities and Exchange Board of India (SEBI) Regulations
The Sponsor is not responsible or liable for any loss resulting from the operation of the Scheme beyond the contribution ofan amount of Rupees one Lac made by them towards the initial corpus for setting up the Fund and such other accretionsand additions to the corpus
About Reliance Capital Asset Management Limited.
Reliance Capital Asset Management Limited (RCAM) is an unlisted Public Limited Company incorporated under theCompanies Act, 1956 on February 24, 1995, having its registered office at
'H' Block,1st Floor, Dhirubhai Ambani Knowledge City,Koparkhairne, Navi Mumbai - 400 710 Maharashtra
and its Corporate Office at
One Indiabulls Centre, Tower 1, 11-12 Floors, Jupiter Mills Compound,841, Senapati Bapat Marg, Elphinstone Road, Mumbai - 400 013
RCAM has been appointed as the Asset Management company of Reliance Mutual Fund by the Trustees of RelianceMutual Fund vide Investment Management Agreement (IMA) dated May 12, 1995 and executed between Reliance CapitalTrustee Co. Limited and Reliance Capital Asset Management Limited and amended on August 12, 1997 and amended on August 12, 1997, January 20, 2004 and February 17, 2011 in line with SEBI (Mutual Funds) Regulations, 1996.
Pursuant to this IMA, RCAM is acting as the Investment Manager of the Mutual Fund. The net worth of the AssetManagement Company based unautdited financials statements as on September 30, 2011 is Rs. 1,228.89 Crore. TheMutual Fund has launched following Schemes till date, namely:
Reliance Growth Fund (September 1995)Reliance Income Fund (December 1997)Reliance Medium Term Fund (August 2000)
Reliance Fixed Term Scheme (March 2003)
Reliance Gilt Securities Fund (July 2003)Reliance Monthly Income Plan (December 2003)
Reliance Pharma Fund ( May 2004)
Reliance Media & Entertainment Fund (September 2004)
Reliance NRI Income Fund (October 2004)Reliance Equity Opportunities Fund (February 2005)
Reliance Fixed Maturity Fund Series II (April 2005)
Reliance Vision Fund (September 1995)Reliance Liquid Fund (March 1998)Reliance Short Term Fund (December 2002)
Reliance Banking Fund (May 2003)
Reliance Diversified Power Sector Fund (March 2004)Reliance Floating Rate Fund (August 2004)
Reliance NRI Equity Fund (October 2004)
Reliance Index Fund (February 2005)*
Reliance Fixed Maturity Fund Series I (March 2005)Reliance Regular Savings Fund (May 2005)
Reliance Tax Saver (ELSS) Fund (July 2005)
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Reliance Liquidity Fund (June 2005)Reliance Fixed Tenor Fund (November 2005)
Reliance Fixed Horizon Fund I (August 2006)
Reliance Fixed Horizon Fund III (March 2007)
Reliance Interval Fund (March 2007)Reliance Equity Advantage Fund (June 2007)
Reliance Fixed Horizon Fund V (September 2007)
Reliance Equity Linked Saving Fund - Series I (December 2007)Reliance Natural Resources Fund (January 2008)Reliance Fixed Horizon Fund VIII (March 2008)
Reliance Banking Exchange Traded Fund (May 2008)
Reliance Fixed Horizon Fund XI (October 2008)Reliance Fixed Horizon Fund X (August 2008)
Reliance Fixed Horizon Fund XII (November 2008)
Reliance Infrastructure Fund (June 2009)
Reliance Fixed Horizon Fund XIII (September 2009)Reliance Fixed Horizon Fund XIV (Februrary 2010)
Reliance Fixed Horizon Fund XV (April 2010)
Reliance Small Cap Fund(September 2010)
Reliance Index Fund - Nifty Plan (October 2010)Reliance Index Fund - Sensex Plan (October 2010)
Reliance Arbitrage Advantage Fund (October 2010)
Reliance Dual Advantage Fixed Tenure Fund (May 2010)
Reliance Equity Fund (February 2006)Reliance Fixed Horizon Fund (April 2006)
Reliance Fixed Horizon Fund II ( November 2006)
Reliance Long Term Equity Fund (November 2006)
Reliance Money Manager Fund (March 2007)Reliance Fixed Horizon Fund IV (August 2007)
Reliance Gold Exchange Traded Fund (October 2007)
Reliance Fixed Horizon Fund VI (December 2007)Reliance Fixed Horizon Fund VII (January 2008)Reliance Fixed Horizon Fund IX (March 2008)
Reliance Fixed Horizon Fund XVI (September 2010)
Other Activities of RCAM
RCAM is also registered as a Portfolio Manager vide SEBI Registration Number PM/INP000000423 and renewed with effectfrom August1, 2009.
The AMC is also rendering advisory services in respect of Emergent India Investment Limited, an offshore fund forinvestment in India.
Subsidiary of RCAM - Indian
RCAM - has also incorporated a wholly owned subsidiary in India named Reliance Capital Pension Fund Limited formanaging the funds of New Pension System introduced by Pension Fund Regulatory and Development Authority
Subsidiary of RCAM - Foreign
(1) Singapore, viz., Reliance Asset Management (Singapore) Pte. Ltd(2) Mauritius, viz., Reliance Asset Management (Mauritius) Limited(3) United Kingdom viz., Reliance Asset Management (UK) Limited(4) Malaysia, viz Reliance Asset Management (Malaysia) Sdn. Bhd
RCAM has ensured that key personnel of the AMC, the systems, back office, bank and securities accounts are segregatedactivity wise and there exists systems to prohibit access to inside information of various activities. As per SEBI Regulations,it will further ensure that AMC meets the capital adequacy requirements, if any, separately for each such activity.
However, there is no conflict of interest between various business activities carried on by RCAM.
The details of Directors of RCAM are as under:
Name and Address Other Directorships
Mr. Soumen Ghosh *
Kalpataru Horizon, Flat No. 264,
Tower A, S.K. Ahire Marg,Worli, Mumbai 400 025
B.Sc (Hons) Mechanical Engineering from University of London.
ACA Institute of Chartered
Reliance General Insurance Co. Ltd
Reliance Life Insurance Company Limited
Reliance Asset Management (Mauritius) LtdReliance Home Finance Pvt Ltd
Reliance Commercial Finance Pvt Ltd
Reliance Capital (Singapore) Pte Ltd
Reliance Asset Management (Malaysia)Sdn Bhd
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Accountants England & Wales Reliance Capital Pension Fund Ltd.Reliance Exchangenext Pvt. Ltd.
Reliance Securities Limited
Mr. Kanu Doshi102, Shivala, Khatau Road,
Cuffe Parade, Mumbai - 400 005.
Chartered Accountant
Chairman :
Matrix Advisors (India) Private Ltd.
Director :
Motilal Oswal Asset Management LimitedPeoples Financial Services Ltd.Dalton Capital Advisors (India) Private Ltd.
Edelweiss Asset Management Ltd.
Mr. Manu Chadha *
C-35, Malcha Marg,
Chankyapuri, New Delhi - 110 021.
Chartered Accountant
Director :TRC Corporate Consulting (P) Ltd.
GIC Housing Finance Ltd.
M/s TRC Securities Pvt Ltd.
Reliance Asset Management (Singapore) Pte Ltd.Genesis Capital Catalyst Advisors Private Limited
Reliance Securities Ltd
Partner : M/s T.R.Chadha & Co.,Chartered Accountants
Mr. Sushil C. Tripathi, I. A. S. (Retd.) 27, Sector 15A,
NOIDA - 201 301(UP)
(Former Secretary to Government of India,
Ministry of Petroleum & Natural Gas /
Ministry of Education)
Director :
IL&FS Infrastructure DevelopmentCorporation Ltd.Indusind Bank Ltd.
ILFS Energy Development Corporation Ltd
Kailash Healthcare LtdGammon Infrastructure Projects Ltd.
Shipping Corporation of India Ltd
Samvardhana Motherson Finance Limited
About RelianceMutual Fund
Reliance Mutual Fund (RMF) has been established as a trust under the Indian Trusts Act, 1882 with Reliance CapitalLimited (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 datedJune 30, 1995. The name of Reliance Capital Mutual Fund was 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 variousschemes under which units are issued to the Public with a view to contribute to the capital market and to provide investorsthe opportunities to make investments in diversified securities.
The main objectives of the RelianceMutual Fund are:
To carry on the activity of a Mutual Fund as may be permitted at law and formulate and devise various collective Schemes ofsavings and investments for people in India and abroad and also ensure liquidity of investments for the Unit holders;
To deploy Funds thus raised so as to help the Unit holders earn reasonable returns on their savings and
To take such steps as may be necessary from time to time to realise the effects without any limitation.
Auditors
Statutory Auditor to the Schemes of Reliance Mutual Fund:
Haribhakti & Co.Chartered Accountants
Internal Auditor to the Schemes of Reliance Mutual Fund:Price Waterhouse Coopers.Chartered Accountants
Statutory Auditors to the Asset Management CompanyBSR & Co.Chartered Accountants
Statutory Auditors to the Trustee Company
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M/s. Malpani & AssociatesChartered Accountants
Reliance Capital Asset Management Limited has appointed M/s. Karvy Computershare Pvt. Limited to act as theRegistrar and Transfer Agent to the Schemes of Reliance Mutual Fund. M/s. Karvy Computershare Pvt. Limited (KCL)having their office at Madhura Estate, Muncipal No 1-9/13/C, Plot No 13 & 13C, Survey No 74 & 75,Madhapur Village,Serlingampally Mandal & Muncipality R R District, Hyderabad 500 081, is a Registrar and Transfer Agent registered with
SEBI under registration no. INR000000221.
Reliance Capital Asset Management Ltd. and the Trustee have satisfied themselves, after undertaking appropriate duediligence measures, that they can provide the services required and have adequate facilities, including systems facilities andback up, to do so.
Trustees
Reliance Capital Trustee Co. LimitedRegd. Office: 'H' Block,1st Floor, Dhirubhai Ambani Knowledge City,Koparkhairne, Navi Mumbai - 400 710 Maharashtra
Corporate Office: One Indiabulls Centre, Tower 1, Jupiter Mills Compound , 841, Senapati Bapat Marg, Elphinstone Road,Mumbai - 400 013. Boardline No.: 022 3099 4600.
Reliance Capital Trustee Co. Limited (RCTC), a company incorporated under the Companies Act, 1956, has beenappointed as the Trustee to the Fund vide the Trust Deed dated April 25, 1995 executed between the Sponsor and theTrustee and amended on March 15, 2011 in line with SEBI (Mutual Funds) Regulations, 1996.
The Directors of RCTC
Name and Address Other Directorships
Mr. S. SanthanakrishnanG 5, Block II, Prime Terrace,
150, L.B. Road,
Tiruvanmiyur, Chennai -41
M.Sc (Chemistry) from Madras
University; D.S.M (Bombay University),
C.A.I.I.B, Diploma in Training and Development from
IndianSociety for Training and Development
Non Executive ChairmanM/s. Easy Access Financial Services Private Ltd.
Independent Director:
Dhana lakshmi Bank Ltd.
ICICI Home Finance Ltd.
Sundaram Clayton Ltd.TVS Credit Services Ltd.
Axiom Cardages Limited
Mr. Rohan Shah
P-6, Godrej Glenelg, Damani House,Capt. Prakash Pethe Marg, 11,
Cuffe Parade, Mumbai 400005..
Solicitor
Director
J B Chemicals & Pharmaceuticals LtdGrauer & Weil (India) Ltd.
Diamond India Ltd
Premier Ltd.Bharat Serums & Vaccines Ltd
Partner
Economic Laws Practice.
Trust
The D L Shah Trust for Applied Sciences, Technology, Arts &
PhilosophyThe Steve Waugh Charitable Trust
Mr. A. N. Shanbhag*
96/11, Mohini Mansion,
2nd Floor, Near D.S. High School,Sion (W), Mumbai - 400022.
Tax & Investment Consultant
Proprietor : Wonderland Investments Consultants.
Member:UTI Vigilance Committee
AMFI - Investor Connect
SUUTI - Board of Advisors
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SUUTI - NPA Committee
UTI - TSL - Tender Evaluation and Awards Committee
Mr. P.P. Vora
503-504, Mount Everest,
A wing, Bhakti Park,
Near I-Max Adlab Theatre, Wadala,
Mumbai 400 037.
Non Executive Chairman
The Nilgiri Dairy Farm Pvt Ltd
Director National Securities Depository L
Omaxe Ltd.Halonix Ltd
Modern Transit Solutions Pvt Ltd
J Kumar Infraprojects Ltd.
Rama Cylinders Private Ltd.Reliance Home Finance Private Ltd.
Sterling Add Life India Limited
Nakoda
Sole Proprietor :
M/s P.P. Vora & Co.,
Chartered Accountants
Reliance Group
Looking back, looking forward
Reliance Group, an offshoot of the Group founded by Shri Dhirubhai H Ambani (1932-2002), ranks among Indias topthree private sector business houses in terms of net worth. The group has business interests that range fromtelecommunications (Reliance Communications Limited) to financial services (Reliance Capital Ltd) and thegeneration and distribution of power (Reliance Infrastructure Limited).
Reliance Groups flagship company, Reliance Communications, is India's largest private sector information andcommunications company, with over 150 million subscribers. It has established a pan-India, high-capacity, integrated(wireless and wireline), convergent (voice, data and video) digital network, to offer services spanning the entireinfocomm value chain.
Other major group companies Reliance Capital and Reliance Infrastructure are widely acknowledged as themarket leaders in their respective areas of operation.
About Sh. Dhirubhai Ambani
Few men in history have made as dramatic a contribution to their countrys economic fortunes as did the founderof Reliance, Sh. Dhirubhai H Ambani. Fewer still have left behind a legacy that is more enduring and timeless.
As with all great pioneers, there is more than one unique way of describing the true genius of Dhirubhai: thecorporate visionary, the unmatched strategist, the proud patriot, the leader of men, the architect of Indias capitalmarkets, the champion of shareholder interest.
But the role Dhirubhai cherished most was perhaps that of Indias greatest wealth creator. In one lifetime, hebuilt, starting from the proverbial scratch, Indias largest private sector enterprise.
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When Dhirubhai embarked on his first business venture, he had a seed capital of barely US$ 300 (around Rs14,000). Over the next three and a half decades, he converted this fledgling enterprise into a Rs 60,000 crorecolossusan achievement which earned Reliance a place on the global Fortune 500 list, the first ever Indian privatecompany to do so.
Dhirubhai is widely regarded as the father of Indias capital markets. In 1977, when Reliance Textile IndustriesLimited first went public, the Indian stock market was a place patronised by a small club of elite investors which
dabbled in a handful of stocks.
Undaunted, Dhirubhai managed to convince a large number of first-time retail investors to participate in the unfoldingReliance story and put their hard-earned money in the Reliance Textile IPO, promising them, in exchange for theirtrust, substantial return on their investments. It was to be the start of one of great stories of mutual respect andreciprocal gain in the Indian markets.
Under Dhirubhais extraordinary vision and leadership, Reliance scripted one of the greatest growth stories incorporate history anywhere in the world, and went on to become Indias largest private sector enterprise.
Through out this amazing journey, Dhirubhai always kept the interests of the ordinary shareholder uppermost in mind,in the process making millionaires out of many of the initial investors in the Reliance stock, and creating one of theworlds largest shareholder families
A dream come true
The late Dhirubhai Ambani dreamt of a digital India an India where the common man would have access to affordable meaninformation and communication. Dhirubhai, who single-handedly built Indias largest private sector company virtually from scrastated as early as 1999: Make the tools of information and communication available to people at an affordable cost. Thovercome the handicaps of illiteracy and lack of mobility.
It was with this belief in mind that Reliance Communications (formerly Reliance Infocomm) started laying 60,000 route kilometrepan-India fibre optic backbone. This backbone was commissioned on 28 December 2002, the auspicious occasion of Dhirubhabirthday, though sadly after his unexpected demise on 6 July 2002.
Reliance Communications has a reliable, high-capacity, integrated (both wireless and wireline) and convergent (voice, data anddigital network. It is capable of delivering a range of services spanning the entire infocomm (information and communication) va
chain, including infrastructure and services for enterprises as well as individuals, applications, and consulting.
Today, Reliance Communications is revolutionising the way India communicates and networks, truly bringing about a new way
Think big. Think different. Think ahead.
Dhirubhai preached and personally practised one mantra throughout his life: Dream with conviction.
He built the Reliance empire from scratch and, in a short span of 25 years, it catapulted to become one of the top Fortune 500corporations of the world an achievement unparalleled in history.
He was deeply rooted in traditional Indian values, and at the same time, Dhirubhai possessed a very modern outlook - truly tha21st century person. His corporate philosophy was short, simple and incredibly effective: Think big. Think different. Think fast.ahead. Aim for the best. This was clearly reflected in his passion for mega-sized projects, as well as his fascination for cutting-
technology and desire to always achieve the highest possible productivity. At Reliance, Dhirubhai was a pillar of inspiration for and all. By practicing what he preached, he inspired and encouraged everyone to surpass the best in the world.
Dhirubhai fully realised that true empowerment of the people is possible only through education. Being an effective communicacontinued to inspire, guide, educate and motivate everyone through his communications. He was a firm believer in the power oinformation and communication, and how it can be utilised and turned to the advantage of one and all, by making time and distirrelevant.
He would always say that if a telephone call could be made cheaper than a postcard, it would transform every home, empowerIndian, remove every obstacle to opportunity and growth, and tear apart every barrier that divides Indian society. He was convi
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infocom could energise enterprises, drive governance, and render learning an interesting experience, apart from making life ex
Keeping his conviction as our credo, Reliance Communications is committed to transform Dhirubhais dream into a reality