By Anuj Dudeja Business School of Delhi 28/1 Knowledge Park-III Greater Noida

By Anuj Dudeja
B.Com(Hons),PGDM(Finance)
Business School Of Delhi

28/1 Knowledge Park- III
Greater Noida.
02/25/09 www.businessschoolofdelhi.com 1
What is Mutual Fund?
It pools the savings of investors for collective
investment in a diversified portfolio of securities.
SEBI(Mutual Fund) Regulation,1996 define a
mutual fund as
“a fund established in the form of a trust to raise
money through the sale of units to the public or a
section of the public under one or more schemes
foe investing in securities, including money
market instruments”.
Growth of Mutual Fund in India
 Phase I(1964-87)
The Unit Trust of India (UTI) was first mutual fund set up under
the UTI Act,1963 and become operational in 1964. UTI
investible fund at market value of Rs49cr to RS5,068cr .
 Phase II(1987-1992)
In this phase mutual fund companies is sponsored by

nationalized banks and insurance companies as a trust under the
Indian Trust Act,1882.
 Phase III (1992-1997)
SEBI issued the Mutual fund regulation in January 1993.

Private and foreign Players were allowed entry in the mutual
fund industry.
Continue…..
 Phase IV (1997 onwards)
In this phase the flow of funds into the kitty of funds
sharply increasing. Investible funds at market value of
the industry rose by June 2000 to over Rs1,10,000.
Benefits….
Professional Management.
Average investor doesn’t have the good
knowledge of the capital market to reap the
benefits of investment. Expert are required to
fetch the profit from the capital market.
Portfolio Diversification.
Lowers the risk because, regardless of the size of
your investment, each unit purchased is made up
of many different investments
Liquidity.
Mutual funds can be sold anytime, and easily.
Convenience.
Less paperwork, reduce time and easy to invest.
Continue….
Flexibility:
Mutual funds allow you to purchase as much or as
little as you want, and offer a variety of purchase
plans.
Tax Benefits.
All dividends declared by debt-based mutual funds
are tax-free in the hands of the investor, investors in
ELSS (equity-linked savings schemes) can avail
rebate under Section 88 of the Income Tax Act,
1961 on investment up to Rs 10,000 subject to the
various conditions laid down in the said Section.
Transparency.
Well Regulated by SEBI.
TYPES OF MUTUAL FUNDS
Functional Mutual Fund Scheme
Open-Ended Schemes :
Investor can sell and repurchase its unit at NAV
or NAV-related price.
Need not to be listed on the stock exchange
Investor can enter and exit any time during the
life of the fund.
No fixed redemption period.
It is very liquid.
Close-end Scheme:
Fixed maturity period ranging from two to five
year.
Investor can spend when scheme is launched and
scheme remain open for period not exceeding 45
days.
Investor can buy units only from the market, when
subscription is over thereafter units are listed on the
stock exchange where they are bought and sold.
Interval Scheme:
It is the combination of open-ended & close-ended
scheme. They are open for sale or redemption
during predetermined interval @ NAV-related
prices.
Investment Objective Scheme
Growth Fund:
Objective is to give capital appreciation from
medium term to long term.
Investment done mostly in equity shares with
significant growth potential & offer high return
to the investor in long term.
Risk is high because no guarantee or assurance
of return.
It is usually close ended and listed on stock
exchange.
Income Fund
Aim to provide safety of investments &
regular income to investor.
Instrument is used for investment purpose are
gilt scheme, commercial papers, debentures,
bonds.
Risk and return is low in income fund as
compare to growth fund.
Balanced Fund
It provide capital appreciation and regular
income as the investment in balanced in equity
and dept instrument.
Money Market Funds
Investment is done in the short term
money market instruments like T-bills
and Certificate of deposits.
Highly liquid with low rate of return.
Corporate invest in these funds to park
their short term surplus funds.
Other
Load Fund
Schemes which charge s load i.e.
brokerage exp, communication exp.
Index Funds
It replicated the portfolio of a particular
index such as BSE & NSE Sensex.
Investing Checklist
 Draw up your asset allocation
Financial goals & Time frame (Are you investing for retirement? A child’s
education? Or for current income? )
Risk Taking Capacity
 Identify funds that fall into your Buy List
 Obtainand read the offer documents

 Match your objectives
In terms of equity share and bond weightings, downside risk protection, tax
benefits offered, dividend payout policy, sector focus
 Check out past performance

Performance of various funds with similar objectives for at least 3-5 years
(managed well and provides consistent returns)
RIGHTS AS A MUTUAL FUND
UNITHOLDER
• Receive statement of accounts within 6 weeks from
the date your request is received by the Mutual
Fund.
• Receive information about the investment policies,

objectives, financial position and general affairs of
the scheme.
• Receive dividend within 30 days of their

declaration, receive redemption proceeds within 10
days from the date of the valid redemption.
Frequently used terms
NAV (Net Asset Value)
Net Asset Value is the market value of the
assets of the scheme minus its liabilities. The
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 units under open-ended
schemes are repurchased by the Mutual Fund.
Such prices areNAV related.
 Redemption price
Is the price at which close-ended schemes
redeem their units on maturity. Such prices are
NAV related.

 Sales Load
Is a charge collected by a scheme when it sells
the units. Also called, ‘Front-end’ load. Schemes
that do not charge a load are called ‘No Load’
schemes.

 Back-end load.
Is a charge collected by a scheme when it buys
back the units from the unit holders.
Organization Flow of Mutual
Fund
STRUCTURAL ISSUES (MUTUAL
FUNDS)
BY A SPONSOR
◦ BODY CORPORATE WHO ACTING ALONE OR IN
COMBINATION WITH ANOTHER BODY
CORPORATE
◦ FLOATS THE IDEA OF SETTING UP OF MUTUAL
FUND
◦ ESTABLISHES MUTUAL FUND IN FORM OF TRUST
◦ TRUST DEED EXECUTED WITH BOARD OF
TRUSTEES
◦ REGISTERS IT WITH SEBI
◦ 40% CONTRIBUTION TO AMC
Continue…….
TO RAISE MONIES BY TRUSTEES
◦ HOLDG PROPERTY OF MF IN TRUST FOR BENEFIT OF UNIT
HOLDERS
THROUGH THE SALE OF UNITS

◦ REPRESENTING ONE UNDIVIDED SHARE IN THE ASSETS OF
A SCHEME
 FOR INVESTING IN SECURITIES

◦ APPLICATION FEES:5000;
◦ REGISTRATION FEES:10 LACS;
◦ ANNUAL FEES : 1 LAC
STRUCTURAL ISSUES(MUTUAL FUND
TRUST)
MF TO BE CONSTITUTED IN FORM OF MF
TRUST
MANAGED BY A BOARD OF TRUSTES IN
WHOSE FAVOUR TRUST DEED IS EXECUTED
BY SPONSORS
50% MEMBERS NOT AFFILIATED WITH
SPONSORS
CONTROLS ALL CAPITAL PROPERTY OF MF
SCHEMES/ HOLDS THEM IN TRUST FOR
HOLDERS
Continue…….
APPOINTS AMCs
ENSURES SCHEMES FLOATED & MANAGED
BY AMC ARE IN ACCORDANCE WITH TRUST
DEED
POWER TO OBTAIN REPORT/DISMISS AMC
AN AMC NOT TO ACT AS TRUSTEE OF ANY
MF
APPOINT CUSTODIAN &SUPERVISE ITS
ACTIVITIES 02/25/09 www.businessschoolofdelhi.com 22
Continue…….
MUTUAL FUND TRUST LIST
ALLIANZ CAPITAL & MGT SERVICES LTD
ANZ GRINDLAYS BANK
TIMES MUTUAL FUNDS
UNIT TRUST OF INDIA
VLS FINANCE LTD.
KOTAK MAHINDRA FINANCE LTD
PRUDENTIAL CAPITAL MARKETS LTD.
SBI FUNDS MANAGEMENT LTD
CEAT MF & ASSET MANAGEMENT
COMPANY LTD
Continue…….
ASSET MANAGEMENT COMPANIES
 MFs OPERATED BY AMCs -Continue…….
 APPTD BY TRUSTEES
 AMCs & TRUSTEES TWO SEPARATE LEGAL ENTITIES & ARM’S

LENGTH RELATIONSHIP MNTD
 AMCs TO APPROVE MOA & AOA FROM SEBI

 AMCs MIN NW 5 CR (40% CONTRIB BY SPOSORS)
 50% MEMBERS FROM OUTSIDE
 CAN’T ACQUIRE OUTSIDE THE SCHEME PROPERTY
 DISCLOSE REPURCHASE PRICE/NAV OF SCHEMES
Continue…….
AMC(LIST)
20TH CENTURY AMC LTD
APPLE ASSET MGT LTD.
BOI AMC LTD.
CREDIT CAPITAL AMC LTD.
GIC AMC LTD.
ICICI AMC LTD.
ITC PIONEER AMC LTD.
MORGAN STANLY AM INDIA LTD.
PNB AMC LTD.
Continue…….
INVESTMENT MIX
 EQUITY SHARES/EQUITY RELATED INSTRTS (CDs)/
DEBT INSTRUMENTS (NCDs, PSBONDS,GOVT
SECT)/MONEY MARKET INSTRTS(TBs, CPs & BILLS)
TYPICAL ASSET MIX

SCHEME EQUITY DEBT MONEY MKT
GROWTH 70-90% 5-20% 0-10%
INCOME 20-30% 60-70% 0-15%
BALANCED 40-60% 40-50% 0-10%
FINANCIAL KEY’S
NAV= M.V OF FUND’S INVESTS+REC+ACCRUED
INCOME- LIABILITIES-ACCRUED EXP
NO. OF SHARES OR UNITS OUTSTANDING
RATE OF RETURN= NAV AT END-NAV AT

BEGINNING + DIVIDEND
PAID
NAV AT BEGINNING
INITIAL EXPENSES: CEILING OF 6%
RECURRING EXPENSES: MAX 3% OF A

NET ASSETS
IN A YEAR
Growth of assets over the years
http://www.amfiindia.com/showhtml.asp?page=mfindustry
No of Schemes in Mutual
Fund

By Anuj Dudeja Business School of Delhi 28/1 Knowledge Park-III Greater Noida

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By Anuj Dudeja Business School of Delhi 28/1 Knowledge Park-III Greater Noida

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By Anuj Dudeja

Business School Of Delhi

In this phase mutual fund companies is sponsored by

SEBI issued the Mutual fund regulation in January 1993.

 Identify funds that fall into your Buy List

 Obtainand read the offer documents

 Check out past performance

• Receive information about the investment policies,

• Receive dividend within 30 days of their

THROUGH THE SALE OF UNITS

 FOR INVESTING IN SECURITIES

 MFs OPERATED BY AMCs -Continue…….

 AMCs & TRUSTEES TWO SEPARATE LEGAL ENTITIES & ARM’S

 AMCs TO APPROVE MOA & AOA FROM SEBI

TYPICAL ASSET MIX

RATE OF RETURN= NAV AT END-NAV AT

INITIAL EXPENSES: CEILING OF 6%

RECURRING EXPENSES: MAX 3% OF A

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