I am extremely grateful to Asset Management Company Kanpur .

I take this opportunity to express my profound since of gratitude and respect to all those who helped me . I sincerely thanks MR. ESHAN PATHAK (Branch Business Manager), Mohd. Faizan Abassi and all the other whose cooperation and help has been vital to make the project work successful. A report of this nature is a product of ideas and experience of several persons, accumulated over sears, though I am unable to mention them all, my debt of gratitude to them is no less. However, I am responsible for all my shortcomings.

ARTI GAUTAM

DECLARATION

hereby declare that the summer training report entitled A STUDY PATTERN ICICI OF MUTUAL WITH FUND IN KANPUR

OPURCHASING CONSIDERING

RELATED

ASSET

MANAGEMENT

COMPANY KANPUR Submitted by me in partial fulfillment of the requirement for the MASTER OF BUSINESS ADMINISTRATION (MBA) is my original work and that it has not previously formed the basis for the award for any other degree, diploma, fellowship or other similar titles.

Place: Date:

(ARTI GAUTAM)

TABLE OF CONTENTS

SR.NO .

SUBJECT

PAGE NO.

1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11.

INTRODUCTION & HISTORY COMPANY PROFILE CONCEPT OF MUTUAL FUNDS RESEARCH & METHODOLOGY LEGAL FRAMEWORK DATA ANALYSIS FINDINGS RECOMMENDATION LIMITATIONS BIBLIOGRAPHY ANNEXURE

04 10 14 30 51 60 71 73 74 75 76

INTRODUCTION & HISTORY OF THE INDIAN MUTUAL FUND INDUSTRY

INTRODUCT
Mutual funds are a significant source of investment in both government and corporate securities .The largest mutual fund in the country is managed by unit trust of India (U T I)which was set up the government in 1964 to encourage small investors to invest in the equity market .

UTI has an extensive marketing network of over 40000 lump sum agents spread throughout the country .In 1995 the RBI permitted private sector institutions to set up money market mutual funds (M M M Fs).They can invest in treasury bills ,call and notice money commercial paper, commercial bills ,accepted/co _accepted by banks Certificates of deposit dated government securities having unexpired maturity up to one year .

Today numerous mutual funds exist, including private and foreign companies. A variety of schemes exist both open end closed- end all M F s are allowed to apply for firm allotment in public issues. The functioning of mutual funds is regulated by SEBI. SEBI regulations require that all MFs should be established as trusts under the Indian trust Act, while the actual fund management activity is conducted form a separate asset management company (AMC). The manager in any other fund .MFs can be penalized for default including non registration and failure to observe rules set by their AMCs .MFs dealing exclusively with money market instruments have to be registered with the RBI .All other schemes floated by MFs are required to be registered with SEBI

INDUSTRY PROFILE

General Information and guidelines

1. Please read carefully the offer document of the scheme containing the terms the offer before investing. Prospective investors should not treat the contents of the offer document of the scheme as advice relating to legal, taxation, investment or any other matter and are recommended to consult their own professional advisors concerning the acquisitions, holding or disposal of the units. It must be understood clearly that all applicants are deemed to have accepted the terms subject to which this offer is being made and bind themselves to the terms upon signing the application form and tendering payment. The offer document/ key information memorandum of the scheme is available with the ISCs/ISDs of, brokers/ distributors and also available for download. 2. Please complete the application form legibly in black ink or any dark colored ink, in the English language only, in BLOCK CAPITALS. Please strike out with a line across any section that is not applicable. 3. Submission of application forms- Application forms complete in all respects with the necessary remittances may be submitted before the closure of the new funds offer MF corporate office, MF investor service centers/ MF investor service desks, the designated office of the registrar or such other collection centers as may be designated by the AMC. The list of collection centers is printed overleaf. 4. Application by post- Applications can be sent by post to the office of the registrar to the scheme and should be accompanied by demand draft payable at head office. Applications received by post will be deemed to have been submitted on date of receipt at the registrars end. 5. Investors are advised to retain the acknowledgement slip signed / stamped by the collection centre where they submit the application.

6. Allotment of unit- Allotment is assured to all applicants provided the applications are complete in all respects and are in order. Applications not complete in any respect are liable for rejection.

7. Systematic Investment Plan, Systematic Transfer Plan and Systematic Withdrawal Plan facilities are not available. Switch in is permitted during the new fund offer. Switch out from the scheme will be allowed only after the lock in period. 8. Prevention of Money Laundering- In terms of the Prevention of Money Laundering Act 2002, the rules issued there under and the guidelines/ circulars issued by SEBI regarding the Anti Money Laundering (AML Laws) , all SEBI registered intermediaries, including MF, are required to formulate and implement a client identification programme, verify and maintain the record of identity and address(s) of the investors. In this regard , investors who wish to make an investment in the units of mutual fund will be required to produce prescribed documents to any such offices as may be notified by industry MF or AMFI from time to time in order to comply with KYC norms of MF. 9. Brokerage [For Agents Only]:- Brokerage will be paid to company MF agent / Collecting Branch/ Stock Exchange Broker whose stamp appears in relevant boxes on the application form. Only AMFI registered agents empanelled with MF and possessing valid AMFI registration number (ARN) would be eligible for brokerage payment under existing SEBI guidelines. 10. SEBI has banned rebating in any form. Investors should not be guided by considerations other than the schemes objective for investment.

INVESTORS RIGHTS AND OBLIGATIONS

INVESTOR RIGH the document of a scheme lays down the investors right. Investor are the owners of the schemes assets, and it is therefore imperative that they are aware of their right with respect to the schemes assets , its management, recourse to the trustees, the AMC and other constituents. The important rights of the unit- holders are outlined below. Unit- holders have a proportionate right in beneficial ownership of the schemes assets otherwise held in trust for them by the trustees of the fund. They also have the proportionate right to any dividend or income declared under the scheme. Unit- holders have the right to obtain from the trustees any information that may have an adverse bearing on their investment. Unit- holders are entitled to receive dividend warrants with 42 days of the date of dividend declaration. The appointment of an AMC of a fund can be terminated by 75% of the unit- holders of the scheme present and voting at a special meeting that can be called for the purpose with the prior approval of SEBI. Unit holder have the right to inspect major documents of the fund i.e. material contracts (the trust deed, the investment management agreement, the custodian services agreement and the registrar and transfer agency agreement) , memorandum and articles of association of the AMC, recent audited financial statements, the texts of SEBI(MF) Regulations, Indian Trusts Act and the offer document of the scheme. Investors have the right to approve any changes in the fundamental attributes of a closedend scheme (type of scheme, investment objective and terms of issue), provided the consent of 75% of unit- holders has been obtained. In case of open end schemes they have the right to be adequately informed of such changes, so they can exercise the option of redeeming their holdings in the fund. Each unit- holder has the right to receive a copy of the annual financial statements, and periodic statements regarding his transactions (purchase, redemption, and transfer), distributions and reinvestments.

LEGAL LIMITATIONS TO INVESTORS RIGHTS Investors need to note that while they enjoy several rights as outlined above, they are also subject to certain limitations in their capacity as unit- holders. Unit holders are not distinct from the trust and therefore cannot sue the trust i. e. they do not have legal recourse to the trust as, under Indian law, the Trust is not a distinct or separate legal entity. However, an investor can initiate legal proceedings against the trustees who are the protectors of the investors interest, if they feel aggrieved by any action of the trustees that is seen not to be in their interest.

Also the fundamental concept of a mutual fund is that the investors invest at their own risk and cannot force the AMC to assure a specified level of return. In other countries, mutual funds do not offer assured return schemes, as any profits or losses on fund investments in any case belong to the investors. In India, in the initial stages of development of the fund industry, some of the fund sponsors have, however, offered such assured returns to investors. But, the investors need to understand that except in certain circumstances the sponsors of a mutual fund do not have any legal obligation to meet the shortfall in case the assured return is not achieved.

Since assured return schemes do exist in India, an exception has been made by SEBI in case of scheme where such assurance is provided in the offer document, with a guarantee from the sponsor to meet any shortfall. Only if the offer document has specifically provided such guarantee by a named sponsor , the investors will have the right to sue the sponsors to make good any shortfall in promised returns.

A prospective investor does not enjoy any standing or rights with respect to fund ,the AMC or any other constituent . It is only after he has invested in a scheme that he becomes entitled to the rights discussed earlier . The courts have also upheld this view in relevant cases in India .In case a unit holder is aggrieved by any actions of the Fund or AMC ,the appropriate forum for him to approach is SEBI as mentioned below.

INVESTORS OBLIGATIONS It is the investors duty to carefully study the offer document before investing in units of a scheme .He must appreciate the fundamental attributes of the scheme ,the risk factors, his rights and the funds and the sponsors track record . Failures to effectively study the offer document dose not entitle him later to have recourse to the fund, the trustees or the AMC. sThe investor must also monitor his investment in a scheme by carefully studying the schemes financial statements its portfolio composition and research reports published by mutual fund tracking agencies. He can certainly exercise in a reasonable way his right to ask the trustees for information that he requires. But, the monitoring is entirely the investors own responsibility.

INVESTOR COMPLAINTS REDRESSAL MECHANISM SEBI dose entertain receipt of complaints against mutual funds and intervenes with fund managements to help the investor resolve his complaints. Another manner in which SEBI helps the investors in a new scheme is by requiring the sponsors of a new scheme to appoint a Compliance Officer who must issue a Due Diligence Certificate to the effect that all relevant SEBI and other regulations have been complied with by the fund managers and sponsors. In rare cases involving frauds by the Directors of an Assets Management Company, investors may have the recourse to the regulators under the companies Act such as Department of company Affairs or even the company Law Board. These regulators have helped with the cases of investors who did not receive the refunds of company deposits. However, the fund investors are neither shareholders in the AMC nor depositors. Hence, their investments cannot be protected by any of these Companies Act regulators. Investors can at best remove the AMC with 75% vote to this effect. And they may be able to get the fraudulent directors of AMCs prosecuted but, clearly, such recourse would be very rare. In any case, SEBI and all other regulators take great care to ensure that only persons of integrity serve as AMC Directors or Fund Trustees ., and only companies with track record in investment management are given recognition to manage funds .

COMPANY PROFILE
ICICI Prudential Asset Management Company Ltd. is a joint venture between ICICI Bank ,Indias second largest commercial bank & well-known and trusted name in the financial service in India and Prudential Plc one of the United Kingdoms largest players in the financial services sectors. In span of 12 years the company has forged a position of preeminence as one of the largest Asset Management Company in the country , contributing significantly towards the growth of the Indian Mutual Industry. Our average Assets under Management( AAUM) AS ON March 2011 Month end in Mutual fund schemes stood at rupees 73557.95 Cores . This is in addition to our portfolio Management Services, inclusive of EPFO ,and International Advisory Mandates for clients across

international markets in asset classes like Debt, Equity and Real Estate with primary focus on risk adjusted returns. As an Asset Management Company , we have over 15 years of experience and are currently managing and comprehensive range of schemes of more than 46 Mutual funds and a wide PMS products of over investors , spread across the country .We service this investor based with our own branch network of our 160 branches and a distribution reach of over 42000 channel partners

SHISTORY OF THE INDIAN MUTUAL FUND INDUSTRY

The mutual fund industry in India started in 1963 with the formation of unit trust of India at the initiative of the Reserve Bank and the Government of India .The history of mutual funds in India can be broadly divided into.

10

FIRST PHASE-1964-87(Unit Trust of India)

UTI was established on 1963 by an Act of parliament .It was set up the Reserve Bank of I India and functioned under the regulatory and administrative contort of the reserve bank of India in 1987 UTI was deli ked from the RBI and the industrial development bank of India (IDBI) took over the regulatory and administrative control in place RBI. The first scheme launched by UTI was unit scheme 1964 at the end of 1988 UTI had Rs6700 cores of assets under management.

SECOND PHASE-1987-93 ENTRY OF PUBLIC SECTOR FUNDS

1987 Marked the entry of non-UTI public sector mutual funds .Set up by public bank and Life Insurance Corporation of India (LIC) and General Insurance Corporation of India (GIC) . SBI mutual funds was the first non- UTI mutual funds established in June 1987 followed by Can Bank mutual fund (Dec 87) Punjab National Bank mutual fund (Aug89 ) Indian Bank mutual fund (Nov89) Bank of India (Jun90)Bank of Baroda mutual fund (Oct92)LIC mutual fund in June1989 while GIC had set up its mutual fund in December 1990 .

THIRDPHASE-1993-2003(ENTR

OF

PRIVATE

SECTORFUNDS

entry of private sector funds in 1993 a new era started in the Indian mutual fund industry giving the Indian investors a wider choice of fund families .Also 1993 was the year in which the first mutual fund regulations come into being under which all mutual fund except UTI were to be registered and governed .The erstwhile Kothari pioneer (now merged with franking temple ton) was the first private sector mutual fund registered in July 1993. The 1993 SEBI (mutual fund) Regulations were substituted by a more comprehensive and revised mutual fund regulation in 1996.The industry now functions under the SEBI (mutual fund) regulations 1996. The number of mutual fund houses went on increasing, with many foreign mutual funds setting up funds in India and also the industry has witnessed several mergers and acquisitions.

FOURTH PHASE- (Since February 2003)

In Feb.2003 following the repeal of the unit trust of India Act 1963 UTI was bifurcated into specified undertaking of the unit trust of India with assets under management of Rs. 29835 crores as at the end of January 2003 representing broadly, the assets of US 64 Scheme assured return 11

and certain other scheme. The specified undertaking of unit trust of India functioning under an administrator and under the rules framed by government of India and dose not come under the purview of the mutual fund regulations. The second is the UTI mutual fund Ltd. Sponsored by SBI,PNB,BOB,and LIC.It is registered with SIBE and functions under the mutual fund regulations . With the bifurcation of the erstwhile UTI which had in March 2000 More than Rs.76000 cores of assets under management and with the setting up of a UTI mutual fund conforming to the SEBI mutual fund regulation and with recent mergers taking place among different private sector funds , the mutual fund industry has entered its current phase of consolidation and growth . The graph indicates the growth of assets over the year.

12

GROWTH IN ASSETS UNDER MANAGEMENT

Note: Erstwhile UTI was bifurcated into UTI Mutual Fund and the Specified Undertaking of the Unit Trust of India effective from February 2003. The Assets under management of the Specified Undertaking of the Unit Trust of India has therefore been excluded from the total assets of the industry as a whole from February 2003 onwards.

13

CONCEPT OF MUTUAL FUNDS

A mutual fund is company that pools the money of many investors .Its shareholders to invest in a variety of different securities investment may be in stocks, bonds, money market securities or some combination of these .These securities are professionally managed on behalf of the shareholders, and each investor holders a pro rata share of the portfolio-entitled to any profits when the securities are sold .but subject to any losses in value as well In simple terms, mutual funds are holders of vast pools of money mostly collected from retail investors like individual savers, just like banks they are intermediary between savers and users of capital .They are usually permitted to in vest in financial assets and not in physical assets like gold and real estate Thus a mutual fund is the most suitable investment for the common man as it offers an opportunity to invest in a diversified, professionally managed basket of securities at a relatively low cost Fund are managed by experts known as portfolio managers and are constituted as a trust fund managers investment decisions are based on the basis of intensive research and are backed by informed judgment and experience .Beyond that ,there are many different types of mutual fund with different objectives and levels of growth potential furthering your chance to diversify . A mutual fund concept is based upon the rationalistic choice of investment portfolio minimization of risks .Maximization of yields and liquidity are the objectives of investment. A individual investor may have problems in dealing with a large number of companies, and making the right choice of securities for overall portfolio whereas ,by investing in mutual funds he get the benefit of maximum return ,minimum risk and capital appreciation thus ,benefiting from the choice of portfolio made by the mutual funds intermediary

14

What is mutual fund?

As you probably know mutual fund have become extremely popular over the last 20 year .What was once just another obscure financial instrument is now a part of our daily lives .In fact, to many people investing means buying. Mutual fund after all, it `s common knowledge that investing in mutual funds is (or at last should be) better than simply living your cash waste away in a saving account

THE DEFINITION
A mutual fund is a financial service organization that receives money from shareholders ,invests it , earns returns on it , attempts to make it grow and agrees to pay the shareholder cash on demand for the current value of his investment A vehicle for investing in stocks and bonds

15

16

CONSTITUTION OF A MUTUAL FUND

A mutual fund comprises four separate entities namely sponsor, mutual fund trust, AMC and custodian. The sponsor established the mutual fund and gets it registered with SEBI. The mutual fund needs to be constituted in the form of a trust and the instrument of the trust should be in the form of a dead registered under the provisions of the Indian registration Act 1908 The sponsor is required to contribute at last 40%of the minimum net worth ( Rs. 10 cores) of the asset management company .The board of trustees manages the MF and the sponsor executes the trust deeds in favor of the trustees . It is the job of the MF trustees to see that schemes floated and managed by the AMC appointed by the trustees are in accordance with the trust deed and SEBI guidelines.

UNIT HOLDER
Unit holders are the actual investors is mutual fund. They decide about their objective of investing in mutual funds and then select the scheme accordingly. They can be a retail investor, traders, big business house NRI and FII etc.

SPONSORS
Sponsor is the promoter of the fund .sponsors creates the AMC and the trustee company and appoints the boards of these companies, with SEBI approval .The AMCs capital is contributed by the sponsor. Sponsor should have at least a 5-year track record in the financial service business and should have made profit an at last 3 out of the 5-year

TRUSTEE
A trust, which held investors money is considered as trustee company. The trustee make sure that the funds are managed accordingly to the investors mandate .The sponsor with SEBI approval appoints trustees.

17

ASSETS MANAGEMENT COMPANY (AMC)

AMC of the mutual fund create mutual fund and manages its operation and functioning in most cases. AMCs at as investment advisor .The actual fund management activity is conducted by AMC. The minimum net worth of an AMC must be Rs.10 corer at all time .An AMC cannot engage in any business other then portfolio advisory and management. An AMC should be registered with SEBI .AMC is very critical to the performance of a mutual fund as it decides on the style of functioning, people who are going to manage the funds the commitment to service quality and overall supervision.

CUSTODIAN
Custodian of a MF safeguard the funds money other physical assets. This party is usually a bank. In addition to ensuring that assets are safe keeping the custodian takes care of bookkeeping and other clerical tasks. The custodian may also calculate the net assets value of the funds shares at the end of each day. To make sure that there is no conflict of interest or illegal activity, the fund chooses an independent party to be the custodian .This party takes no part in funds investment decisions

THE TRANSFER AGENT

The transfer agent has several duties related to the issuing and canceling of mutual fund shares. It is responsible for the following duties. 1-Maintaining shareholder records 2-Issuing new shares 3-Receiving and canceling redeemed share changing the registration of share that has been transferred. The transfer agent also sends out dividend and capital gains distributions. Further, it issues proxy ballots and periodic reports to shareholders

18

19

1.7-ADVANTAGES OF FUNDS MUTUAL

There are numerous benefits of investing in mutual funds and one of the key reasons for its phenomenal success in the developed markets like US and UK us the range of benefits they offer, which are unmatched by most other investment avenues in this section

PORTFOLIO DIVERSIFICATIONEach investor in a fund is a part owner of all of the funds assets, thus enabling him to hold a small amount of investment that would otherwise require big capital

PROFESSIONAL MANAGEMENTEven if an investor has a big amount of capital available to him he benefits from the professional management skills brought in by the fund in the management of the investors portfolio. The investment management skills, along with the needed research into available investment options, ensure a much better return than what an investor can manage on his own; few investors have the skills a resource of their own to succeed in todays fast moving, global and sophisticated markets.

REDUCTION /DIVERSIFICATION OF RISK

When an invests directly, all the risk of potential loss his own whether he places a deposit with a company or a bank, or buys a share or debenture on his own or in any other form. While investing in the pool of fund with other investors, the potential losses are also shared with other investors. This risk reduction is one of the most important benefits of a collective investment vehicle like the mutual fund.

20

VARIETY
Mutual fund offers a tremendous variety of schemes. This variety is beneficial in two ways, first, it offers different types of schemes to investors with different needs and risk appetites .Secondly it offers an opportunity to an investor to invest sums across a variety of schemes, both debt and equity for example, an investor can invest his money in a growth fund (equity scheme) and income fund (debt scheme) depending on his risk polities and thus create a balanced portfolio easily or simply just buy a balanced scheme.

TAX BENEFITS
Under clause (XIII) of sub section (2) of section 80 C of income tax Act 1961. Investment made up to Rs. One lakh by eligible invest ors in the equity linked schemes will qualify for deduction.

Q. WHO IS AN ELIGIBLE INVESTOR?

Individuals Hindu Undivided Family (H U F)

REGULATION
Securities Exchange Board of India (SEBI), the mutual fund regulator has clearly defined rules which govern mutual funds. These rules relate to the formation, administration and management of mutual funds and also prescribe disclosure and accounting regulation such a high level of regulation seeks to protectthe interest of investors.

21

DISADVANTAGE OF INVESTING THROUGH MUTUAL FUND

While the benefits of investing through mutual funds for outweigh the disadvantages, an investor and his advisor will do will to be aware of a few shortcomings of using the mutual funds as investment vehicles.

NO CONTROL OVER COSTSAn investor in a mutual fund has any control over the overall cost of investing. He pays investment management fees as long as he remains with the fund, albeit in return for the professional management an research fees are payable even while the value of his investments may be declining. A mutual fund Investor pays fund distribution costs. Which he would not incur in direct investing. However, this shortcoming only means that there is a cost to obtain the benefits of MF Service.

NO TAILOR-MADE PORTFOLIOS
Investors who invest on there own can build their own portfolios of shares and bonds and others securities. Investing through funds means he delegates this to the fund manager. The very highnet worth individuals or large corporate investors may find this to be a constraint in achieving their objectives. However , most mutual fund manager help investors over come this constraint by offering families of funds a large number of different schemes-with their own management company . An investor can choose from different investment plans and construct a portfolio of his choice.

22

MANAGING A PORTFOLIO OF FUNDS

Availability of a large number of funds can actually mean too much choice for the investor. He may again need advice on ho to select a fund to achieve his objectives, quite similar to the to the situation when he has to select individual shares or bonds to invest in

CLASIFICATION OF MUTUAL FUNDS SCHEMES

There are wide varieties of mutual fund schemes that cater to investor needs whatever the age financial position, risk tolerance and return expectation. The mutual fund scheme can be classified the two groups (1) operational classification (2) portfolio classification. Operational classifications highlights the two main types of schemes i.e., open ended and close ended which are offered by mutual fund portfolio classification projects the combination of investment and investment avenues available to mutual funds to manage their funds. Any portfolio scheme can be either open ended or close ended

[A] OPERATIONAL CLASSIFICATION Open Ended Schemes

These funds are sold at the NAV based prices generally calculated on every business day. These scheme have unlimited capitalization, open ended schemes do not have a fixed maturity. i.e., there is no cap on the amount you can buy from the fund and the unit capital can keep growing. These funds are generally listed on any exchange. Open ended fund are bringing in a revived of the mutual fund industry owing to increased liquidity transparency and performance in the new open-ended funds promoted by the private sector and foreign players open-ended fund score over close ended ones on several counts some of these are listed below

Any times exit optionThe issuing company directly take the responsibility of providing an entry and an exit. This provides ready liquidity to the investors and avoids reliance on transfer deeds. Signature verifications and bad deliveries.

23

(a)Tax advantage
Long Term Capital Gain Tax- Nil Short Term Capital Gain Tax- 10% Tax Free Dividends Investment made up to Rs one lakh by investor in equity linked saving schemes (ELSS) will qualify for deduction.

(b)Any time entry option

An open ended fund allows one to entry the fund at any time and even to internals (a systematic investment plan)

(1)Close Ended Schemes

Schemes that have a stipulated maturity period, limited capitalization and the unit are listed on the stock exchange are called close ended schemes. These schemes have historically seen a lot of subscription. This popularity is estimated to be

on account of firstly, public sector MFs having floated a lot of close ended income schemes with guaranteed returns and secondly easy liquidity on account of listing on the stock exchange.

24

[B] PORTFOLIO CLASSIFICATION OF FUNDS

25

(a)Return Based classification

accordingly, basically all investments are made to enjoy a good return. Returns expected are in form of regular dividends or capital appreciation or a combination of these two.

Income fundsFor investor who are more curious for returns. Income funds are floated .Their object is to maximize current income. Such funds distribute periodically the income earned by them .These funds can further be splinted up into categories ,these that stress constant income at relatively low risk and these that attempt to achieve the maximum income possible ,even with the use of leverage . Obviously the higher the expected return, the higher the potential risk of the investment

Growth Funds
Such funds aim to achieve increase in the value of the under lying investment through capital appreciation .Such funds invest in growth oriented securities which can appreciate through the expansion of productions facilities in long run growth funds are also known as Nest eggs or long haul investment .

Conservative Fund
The funds with a philosophy of all things to all issue offer document announcing objectives as (1)To provide a reasonable rate of return (2)To protect the value of investment and (3) To achieve capital appreciation consistent with The fulfillment of the first two objectives such funds which offer a blend of immediate average return and reasonable capital appreciation are known as conservation fund. These are also known as Middle of the road fund

26

Investment Based classification

Mutual fund may also classify on the basis of securities in which they invest basically, it is renaming the sub categories of return base classification.

Equity Fund
Such funds, as the name implies invest most of their inventible funds in equity shares of companies and undertake the risk associated with the investment in equity share there are equity funds that can be designed to give the investor a high level of current income along with some steady capital appreciation investing mainly in share of companies with high dividend yields. A special type of equity fund is known as Index Fund or never beat market fund.

Bond Fund / Liquid Funds Such fund have their portfolio consisted of bonds,
debentures etc. This type of fund is expected to be very secure with a steady income and little or no chance of capital appreciation. Obviously risk is low in such funds. In this category we may come across the funds called: Liquid Fund which specialize in investing short term money market instrument.

Balanced Fund
These funds are invested in fixed income securities and low risk common specify industry.

27

[C] SECTOR- BASED FUNDS

These funds invest in securities of a specific industry or sector of the economy such as health care, technology, leisure utilities or precious metal. The funds enable investors to diversify holdings among many companies within an industry a more conservation approach than investing directly in one particular company. Sector funds offer the opportunity for sharp capital gains in cases where the funds industry is in fever but also entail the risk of capital losses when the industry is out of favor. While sector funds restrict holdings to a particular industry other specialty funds such as index funds give investors a broadly diversified portfolio and attempt to mirror the performance of various market averages. Index funds generally buy shares in all the companies composing the BSE sensex or NES Nifty or other broad stock market indices. They are not suitable for investor. Who must conserve their principal or maximum current income?

[D] LEVERAGE BASED

Some mutual fund broad base their inventible fund by borrowings from the market and then make investments there by making leverage benefits available to the mutual fund investors. Such fund is known as leveraged fund. It depend on the regulating provisions in a country whether borrowings are allowed or not. Normally leverage funds use the short sale, which allows the management of the fund to avail the advantage of declining markets in order to realize gains in the portfolio. Leverage fund also use option specifically call option. The funds which do not borrow and purposes are non-leverage funds. Such funds have comparatively more unit capital as compared to leveraged fund.

28

29

RESEARCH METHODOLOGY
2.1 RESEARCH OBJECTIVE

1-Mutual Fund are significant source of investment in both government and corporate securities 2-To spread out the general information of Mutual fund in Kanpur city between people

SAMPLE SIZE The sample size chosen was 50 . I took only one member of the family

SAMPLE UNIT
The location for sampling was the major areas of city of Kanpur SAMPLING TECHNIQUE:-To Random sampling method of Question are survey method.

SAMPLING DESIGN
The location for sampling was the major areas of the city of Kanpur. I took only one member of the family. The sample size chosen was 50. The data has been generated through extensive survey method. Sufficient time was given for extracting the desired information.

DATA DESCRIPTION
Around 500 kilometers far the capital of India, Kanpur is the biggest city of the stat of Uttar Pradesh and is main center of commercial and industrial activities. Formerly known as Manchester of the country is now also called the commercial capital of the state. It is situated on the most important national highways no. 2&25 and state highway. It is also situated on the main Dheli-Howrah railway trunk line .It is situated on bank of holy river Gang and is about 126 meters above the sea level .It is very populated city of Uttar Pradesh .Around 50 Laky is the 30

population of Kanpur City .It is well connected City from Uttar Pradesh . Because it is situated between the famous cities of Uttar Pradesh like Agra, Luck now, Allahabad, and Varanasi & Gorakhpur. Kanpur is famous for its Leather & Jute Industries and late emerged as major financial sector in the state of Uttar Pradesh with the proud possession of stock exchange. The Govt. employed with 20% private employed with 28% response, self employee emerged as a leader for getting mutual fund with 40%, followed by house wife with 12% respondents The annual gross income group is concern 28% were in the bracket of Rs. up to 1lakh, 36% were in Rs. 1 laky - 2 laky, 18% in Rs. 2 laky - 3 laky, 8% were in Rs. 3 laky - 4 laky and 10% in more than 4 laky Rs., others were distributed evenly in the annual gross income bracket of up to Rs. 1 laky and above Rs. 4 laky respectively. The encoring factor is the age group 16% were in less than 20 year, 28% & 30% respondents were from 21-30 years and 31-40 years i.e., quite a young breed ready for mutual fund were as 18% respondents where 41-50 years and 8% above 51 years age group respectively. The 70% people are mutual fund knowledge and 30% people are unknown. Over serve report of questioner is 52% buy the mutual fund some respondent are 48% is not interested to buy the mutual fund. The 66% is planning to buy mutual fund and its may be maximum respondent are self employee & private employee. There are not interested buyer 34% respondent invest in other factor. Because want a mutual fund buy :(a) 40% respondent is high interest growth attracted in mutual fund 41-50 age group are high response (b) 32% are facility based invest 31-40 age group are response (c) 28% are variety based invest in all people There by it may be inferred that Kanpur is having great scope for the mutual fund .As far as the size of the invest in mutual fund is concerned predominantly it is in the bracket of Rs. up to 5 thousand with 54% responses followed by 34% in Rs. 5-10 thousand, 6% in 10-20 thousand and 6% in more than Rs. 20 thousand of mutual fund.

31

Over survey report say the 54% of with RMF and other respondents with UTI and better scheme depend on the invest to investor. Over survey report the Govt. mutual fund prefer to 60% LIC & 40% Mainly respondent are prefer to privet mutual fund and Govt. mutual fund deferent 8% 36% are satisfied in mutual fund and other respondent are not satisfied

2.4 HYPOTHESIS

Satisfied Govt.employees Self employees Pvt. Employees House wife 4 8 8 3

Dissatisfied 6 12 6 3

Total 10 20 14 6

Total

23

27

50

Null-Hypotheses (Ho):-Investors are satisfied with the investment in mutual fund. Alternative Hypotheses (Ha):-Investors are dissatisfied with the investment in mutual fund. Correction factor: - (50)2 8 Total sum of square:=(4)2 +(8)2 +(8)2 +(3)2+(6)2 +(12)2 +(6)2 +(3) 2 -312.5 =16+64+64+9+36+144+36+9-312.5 =378-312.5 =65.5 Sum of square between:2 =(23) + = 312.5

(27)2 4

- 312.5

4 =529 4
+

729 4

- 312.5

32

=132.25+182.25-312.5 =314.5-312.5 =2 Sum of square with in:=378-314.5 =63.5

Source of variation

S.S

d.f.

M.S

F-ratio

5%F-limit (from the F-table)

Between sample With in sample Total

2 63.5 65.5

2-1=1 8-2=6 8-1=7

2/1=2 63.5/6=10.58

2/10.58 =.189

F(1,6)=5.99

The above table shows that the calculated value of F is .189 which is greater than the table of 5.99 at 5% level with d.f being v1 = 1 and v2 = 6. Null hypothesis is rejected. There fore indicates that investor are dissatisfied with the investment in the MF. ANSWER:-The tabulated value is more than tabulated value so null hypothesis is rejected So people are not satisfied for purchasing Mutual Funds

33

REVIEW OF DATA COLLECTION

DATA COLLECTION PRIMARY DATA - Use a Magazine , Newspaper Company .
The mutual fund are extremely important for a people The city of Kanpur which being the biggest Industrial and business city of Uttar Pradesh, it is also being considered as a metro city in this part having representatives of all the demographic segments of economy. Therefore the city is considered most appropriate to conduct the study. Respondents were found extremely busy with their daily work at most of the places; however it was indeed very thoughtful and cooperative of a few of them who gave me adequate information to accomplish the study.

SECONDARY DATA
were queried, were information about mutual funds. All the prospective segments of the society who can go for mutual funds are purchasing pattern method. Here the data collection by the way of Questionnaire was done. In total 50 respondents were visited and it was considered appropriate sample size for the purpose of study. The various parameters, on which respondents

DATA ANALYSIS:
Data until analyzed is no good. The raw data collect is analyzed to get the results on the basis of which the inferences could be given for further proceedings. The analysis was done on the basis of the data collected through the questionnaire, which gave the consumers viewpoint and analysis was done according to Govt employee, Privet employee, Self employee, House wife class respondents and then consolidated analysis was done.

34

DATA INTERPRETATION
The raw data collected and analyzed was interpreted and inferences were drawn thus to transform it into usable information so that the findings and suggestions could be given. United States General Accounting Office This letter responds to your request that we comment on the findings and recommendations in the December 2000 Report on Mutual Fund Fees and Expenses by the Securities and Exchange Commission's (SEC) Division of Investment Management. In this report, the SEC staff presents the results of its own analysis of the trend in mutual fund fees, including the results of its statistical analyses that identified how various fund characteristics affect fee levels. In addition, the report describes the approaches the SEC staff proposes be taken in response to the recommendation in our report Mutual Fund Fees: Additional Disclosure Could Improve Price Competition (GAO/GGD-00-126, June 7, 2000). In this letter, we discuss the findings of the SEC staff's report and compare them to those of our report. We also comment on the SEC staff's proposed response to our recommendation calling for additional disclosure of fee information to mutual fund investors. Results in Brief The results of the SEC staff's comprehensive statistical analyses and other findings generally corroborate the findings of our own report and provide considerable additional information regarding the trend in mutual fund fees. The SEC staff's report also contains several staff recommendations to the agency's Commissioners, and Commission approval has already been granted to recommendations relating to after-tax return disclosure and fund governance. In response to our recommendation that mutual fund investors' quarterly account statements disclose the specific dollar amount of fees they paid, SEC staff recommends that investors receive additional fee information in funds' annual and semiannual reports. The SEC staff's proposal would provide investors with additional information regarding fees in a form that facilitates comparison among funds. However, it will not provide information specific to each investor, nor will it be provided in the most frequent and relevant source the quarterly statement. Therefore, it may be less likely to increase investor awareness 35

and spur additional price competition among mutual funds to the same degree as our recommendation sought to do.

BACKGROUND We undertook our June 2000 report on mutual fund fees as the result of Congressional concerns that fees charged by mutual funds had not declined despite the growth in mutual fund assets. Our report presented information on how the growth in assets could produce cost efficiencies for funds; however, because comprehensive cost data for mutual fund companies was not available, we were unable to determine whether fund companies had experienced the type of efficiencies that would have allowed them to reduce their fees. Our report also showed that the fees charged by 77 of the largest mutual funds1 had generally declined but that not all had reduced their fees . Our report also discussed various factors that are expected to ensure that mutual fund fees are set competitively. One such factor was direct competition among mutual funds, which we found occurs primarily on the basis of service and other fund characteristics rather than on price. In addition, our report found that, although mutual fund companies make extensive disclosures of the fees they charge, these disclosures do not include the specific dollar amount of fees each investor paid Finally, our report noted that funds' boards of directors are tasked with overseeing the fees their funds charge but that opinions as to the effectiveness of these directors' oversight were mixed. Because of the limitations in the various factors that are relied on to produce price competition among mutual funds, we recommended that investors receive additional information to heighten their awareness and understanding of the fees they pay, which could serve to spur additional price competition in the industry Specifically, our report recommended that SEC require that the account statements that are provided to mutual fund investors on a quarterly basis include the dollar amount of each investor's share of the operating expense fees deducted from their funds. Because such calculations could be made in various ways, we also recommended that SEC consider alternative 36

means of making such disclosures, taking into account the cost and burden on investors and the industry. One alternative means of disclosing such information was by having mutual funds produce an estimate of an investor's individual expenses using an average of the total value of fund shares owned multiplied by the fund's expense ratio for the period covered by the account statement. Alternatively, mutual funds could report to investors the dollar amount of expenses paid by fund shareholders for preset investment amounts, such as $1,000 which could be used by investors to estimate the amount of fees deducted from their own mutual fund shares. 1 These 77 funds included all of the largest stock, bond, and hybrid funds in existence from 1990 to 1998. Specifically, this included the 41 stock funds with assets over $8 billion, 31 bond funds with assets of $3 billion, and 5 hybrid funds with assets over $8 billion. Collectively, these 77 funds had combined assets of $1,157 billion in 1998 and represented nearly 28 percent of the $4,177 billion in total industry assets invested in these three types of funds. The SEC staff report's findings on the trend in mutual fund fees were generally comparable to ours. Using data for all stock and bond mutual funds in existence at the end of 7 selected years from 1979 to 1999, the staff's report finds that the average asset-weighted expense ratio2 of these funds has increased from 0.73 percent in 1979 to 0.94 percent in 1999. However, the SEC staff attributed this increase generally to funds' shift over time from charging loads, which are not included in the expense ratio, to charging 12b-1 fees,3 which are included in the ratio. Although finding that fees had increased since the late 1970s, the SEC staff also found that the 1999 weighted average expense ratio of 0.94 percent represented a decline from its 1995 level of 0.99 percent. This was comparable to the finding in our report that the average asset-weighted expense ratio of the top 46 largest stock funds,4 which peak in 1994 at 0.81 percent, declined to 0.65 by 1998. SEC's report also presented additional analyses on the level of fees across different fund types and how fund characteristics affect fee levels. The SEC staff found that various fund characteristics generally correlate with fund expense ratios, including finding that older funds had lower ratios than newer funds5 and that larger funds had lower ratios than smaller funds. The staff's report also presented the results of an econometric model that showed how various fund characteristics affect fund expense ratios. Using this model, the SEC staff found that funds 37

in families6 withmore assets tended to have lower expense ratios than did funds in families with fewer assets. SEC also found that many large funds were already past the breakpoints in their fee structures and, as a result, may not automatically reduce fees as the assets in these funds grow. Such breakpoints result in lower fees being charged as total fund assets reach various predetermined levels.8 However, after analyzing information for the 100 largest funds from 1997, 1998, and 1999, the SEC staff found The expense ratio for a mutual fund is the cumulative total of various fees and expenses charged to the fund during a particular period shown as a percentage of the funds average net assets. Rule 12b-1 allows mutual funds to pay marketing and distribution expenses from fund assets. These fees are used to compensate sales professionals and others for selling fund shares as well as for fundadvertising and promotion These 46 funds included all of the largest stock funds in existence from 1990 to 1998, which comprised all such stock funds with assets over $8 billion. Also included in the 46 funds were 5 hybrid funds that also invest in bonds and other debt securities. However, SECs econometric model that attempted to identify the factors affecting funds expense ratios found that as funds get older, their expense ratios increase. However, their report notes that this result was largely attributed to four older funds with higher expense ratios than their peers. A fund family is a group of individual mutual funds that frequently includes one or more funds that invest in stocks, bonds, money market instruments, or combinations thereof, managed by the same firm. Such economies are operational efficiencies that arise as fund assets grow. For example, such an economy occurs when a funds assets increase by 100 percent but the fund operator must increase its staffing costs by only 10 percent to accommodate this growth For example, a funds management fee could be 0.35 percent on assets up to $5 billion, 0.30 percent on assets between $5 billion and 10 billion, and 0.27 percent on assets above $10 billion. that many of these funds' assets are already greater than the last breakpoints in their fee structures. As a result, if the assets in these funds grow, their investors will not receive further automatic fee reductions. This lack of breakpoints may result because the funds have already achieved whatever economies of scale exist so that fees may remain stable as assets grow. 38

Alternatively, if economies of scale do exist, the lack of breakpoints could be a symptom that competitive forces are not sufficient to force funds to pass on savings to investor The SEC staff's report included recommendations regarding after-tax returns, fund governance, and 12b-1 fees. It also made a recommendation for additional fee disclosure that responds to the recommendation in our report. In its report, the SEC staff recommended that investors receive information showing standardized after-tax mutual fund returns and, on January 18, 2001, the Commission approved rule amendments requiring funds to provide such disclosures. SEC officials told us that they viewed this as an important new disclosure because taxes affect investor returns to a greater degree than do fees. In their report, the SEC staff also recommended various changes to the fund governance provisions, including changes that would likely increase the percentage of independent directors that must be part of a fund's board of directors. The Commission approved these changes on January 2, 2001. The SEC staff's report also recommends that the Commission consider reviewing the requirements of the 12b-1 rule in light of changes in fund marketing and distribution since the rule's adoption in 1980. We believe that these actions should help provide important information to investors and could enhance oversight in the mutual fund industry. After considering the costs and benefits of the recommendation in our June 2000 report, the SEC staff's report recommends a variation of one of the alternatives we discussed. In its report, the staff proposes that mutual fund investors be provided with information on the dollar amount of fees paid using preset investment amounts. In addition, the SEC staff proposed that this information be presented to investors in the annual and semiannual reports prepared by mutual funds. Specifically, the SEC staff proposed requiring funds' annual reports to present a table showing the cost in dollars associated with an investment of a standardized amount (such as $10,000) that earned the fund's actual return and incurred the fund's actual expenses paid during the period. In addition, the SEC staff suggested that the Commission could require that this table also present the cost in dollars, based on the fund's actual expenses, of a standardized investment amount that earned a standardized return(such as 5 percent). This would result in investors receiving additional information regarding fees However, the staff's proposed disclosures would not be specific to each investor, nor would they be provided in the most relevant and frequent source as our report recommended and, as a result,

39

may be less likely to increase investor awareness and improve price competition as effectively as the disclosures we recommended. SEC Staff's Proposed Additional Fee Disclosure Will Not Provide Investors With AccountSpecific Information The additional disclosures the SEC staff proposed should provide mutual fund investors with more information about the expenses associated with owning mutual fund shares in a form that will allow investors to compare fees across funds as they can with the current information disclosed about fees However, the proposed disclosures will not provide investors with information showing, either precisely or approximately, the dollar amount of the fees they paid on their own fund shares. It is our view that receiving this account-specific fee information would be more likely to increase investors' awareness of the fees they pay and could encourage them to evaluate the relative value of the returns and service they receive from their mutual funds. As noted in our June 2000 report, financial products and services that report their charges directly in dollar terms to their users often have providers that attempt to compete more explicitly on the basis of price. Examples of these include the discount brokerage industry that developed to offer reduced charges for commissions or banks that offer no-fee checking accounts. Such competition is not totally absent from the mutual fund industry, as SEC officials noted that several lowfeemutual fund families receive a significant portion of the total of dollars invested in mutual funds. In its report, the SEC staff noted that placing dollar amounts of fees paid in investors' account statements entails various administrative difficulties and additional costs to the industry and ultimately to investors. In discussing their report with us, one of the primary difficulties the SEC officials cited was that the quarterly statements are often prepared by thirdparty broker-dealers and not the mutual funds themselves. In many cases, only these brokerdealer firms maintain the account-specific information for each investor They said it would be difficult for each mutual fund to provide these broker-dealers with fee information that could be used to determine the specific fee paid by each investor. In a letter to SEC, a representative of a committee working under the auspices of the Securities Industry Association listed the various steps believed to be needed to implement our original recommendation

40

For example, the letter noted that firms' systems would not only have to calculate the fee applicable to each investor, but also allow such amounts to be recalculated if errors were discovered in the expense information The committee representative's letter also stated that firms in the industry were concerned that the added complexity of preparing statements with such fee information could result in firms' failing to mail such statements to investors within the 5-day time period currently required. Our report also discussed the costs of providing such information to investors.

Comprehensive data on the exact costs of fully implementing our recommendation were not available. However, the preliminary estimates provided by industry participants and presented in our report did not appear to be prohibitive.9 In discussing their report's recommendations with us, SEC officials acknowledged that they were unable to assess whether the industry's estimates of the administrative effort required to implement fee disclosure specific to each investor were realistic or 9 For example, we determined that the cost for one broker-dealer based on the total amounts its officials estimated they would incur to produce such statements were less than a dollar per account for initial development costs and less than a dollar per account each year thereafter. Such disclosures would still serve to make investors more aware of the fees they paid. The SEC staff also noted that the disclosures they are proposing will allow investors to compare fees across funds because the information will be for comparable time periods and a standardized dollar amount invested. In contrast, the staff said that including specific dollar amounts in quarterly statements would generally not allow investors to compare across funds because of likely differences in performance, type of fund, holding periods, and the dollar amounts invested. However, for comparability purposes, investors could use the useful fee information already provided by the existing disclosures, which presents fees in terms of percentages of funds' net asset value .In addition, any additional disclosures that present investors' fees in dollar amounts could be accompanied by comparable disclosures showing such fees in percentage terms, which would facilitate comparison across funds. SEC's Proposed Additional Fee Disclosure May Not Be Provided to Investors in the Most Relevant Source Although the SEC staff's recommendation will improve fee disclosures, we believe that it may be less effective in increasing investor 41

awareness and spurring additional price competition among funds because it would be provided to investors less frequently and in reports that may receive less investor attention than account statements. The SEC staff's report recommends that additional fee information be included in funds' annual and semiannual reports rather than in investors' account statements, which are provided at least quarterly. However, this less frequent distribution will likely reduce the immediacy of the information to investors. Furthermore, as part of conducting work on this letter, we contacted officials of three industry research organizations to discuss the SEC staff's report and its recommendations These officials told us that investors generally pay more attention to the quarterly statements than they do to other information pertaining to their mutual fund investments, such as the annual and semiannual reports, because the quarterly statements report the specific value of the investors' account. One of the officials said that his firm's research has shown that, when investors receive statements that specifically show the dollar amount of the fees they are charged for other financial services, it generally triggers actions on the part of both the investor and the financial institution. According to this official, investors receiving such information frequently engage in discussions regarding the services they have received in exchange for the fees paid. Similarly, financial institution representatives tend to be more active in contacting the investors to review the activity in the account and how progress is being made toward the investors' financial plans . He said that the type of presentation that we have advocated would likely have this same beneficial effect. SEC officials explained that they are suggesting that this information be included in the annual and semiannual reports because these documents contain more information than the quarterly statements and thus will allow investors to better understand the fee information in an appropriate context. Although the SEC staffs rationale has merit, its impact on investor awareness of fees may be reduced because such disclosures will not be in the documents that investors likely pay most attention to-the quarterly statements. The SEC staff could expand on its proposal, even without providing account-specific fee information, by requiring that the broker dealers that prepare investors' quarterly statements periodically include in them the additional disclosures that the SEC staff's report recommends be included in funds'

42

annual and semiannual reports. In doing so, SEC would increase investors' general awareness of the fees they paid. In addition to their proposal for increased fee disclosure, the SEC staff's report indicated that they intend to continue to assist investors in becoming more educated about fees and to encourage the industry to be more active in this area as well. The SEC officials we spoke with noted that any additional fee disclosures would have to be accompanied by an extensive and ongoing investor education effort to ensure that investors understand and make effective use of the new disclosures One example noted by the staff of their efforts to educate investors was the mutual fund cost calculator found on the SEC Web site. The staff also pointed out that such calculators has subsequently been added to the Web sites of several mutual fund companies.

Agency Comments We provided a draft of this letter to the Chairman, SEC. In his letter (reproduced in the enclosure), the Director of SEC's Division of Investment Management noted that both the SEC staffs and GAOs reports had concluded that mutual fund investors could benefit from additional information about fees as a way of heightening investor awareness and understanding of the fees and their effects. However, the SEC staff disagreed with several aspects of our draft letter. First, the SEC staff took exception to our statement that its proposal to include fund fee information in annual and semiannual reports would not provide investors with either precise or approximate dollar amounts of the fees paid on their mutual fund shares. We agree that the staff's Proposed disclosures, which would provide investors with the dollar amount of fees that would have been paid on a $10,000 investment in the previous period, could be used by investors to estimate the amount of fees they likely incurred on their own shares. However, we believe that providing account-specific dollar amounts of fees paid-either precisely or approximately calculated for investors-would be the most Effective means of increasing investor awareness of fees and of potentially increasing price competition among funds. Short of that, we suggested that providing preset fee disclosures as part of, or along with, the quarterly statements would allow investors to calculate for themselves the fees they paid. Although the SEC staff's proposed disclosures would also allow investors to 43

estimate their fees, their proposal would impose a larger burden on investors to collect and use two separate documents to calculate the fees they paid. The Director's letter also discusses the SEC staff's decision to recommend that the additional fee disclosures be placed in funds' annual and semiannual shareholder reports rather than the quarterly statements. Although they acknowledge that the quarterly statements are an important source of information and are provided more frequently, they state that the proposed fee disclosures are more appropriately placed in the shareholder reports alongside the information about the fund's operating.

GAO-01-655R SEC's Report on Mutual Fund Fees Results and fund management's discussion of fund performance. This will allow, the letter notes, investors to evaluate the costs they pay against the services they receive. We agree that presenting investors with any new fee disclosures in a way that explains the information and provides a context for evaluating it is most likely to ensure that investors understand and appropriately use it, and our report noted that explanatory and contextual information could also be provided in quarterly statements. As previously stated, we believe that providing the fee information in separate documents provided at different times from the account-specific information places more burden on investors and may reduce its impact on awareness and price competition. Finally, the Director's letter indicates that implementing the original recommendation in our June 2000 report could be costly. Noting that our report stated that the cost could be "a few dollars or less per investor," the SEC staff calculated that this could produce a cost of $480 million if providing such disclosures costs $2 for each of the estimated 240 million investor accounts. As we have stated, our original report acknowledged that SEC should attempt to balance the cost and burden on the industry, the burden placed on investors to calculate and estimate the fees they are charged, and the benefits of the additional information to investors. Although neither we nor SEC developed definitive cost estimates, we recognize that the proposals that would likely most benefit investors may be the most costly, nor informed judgements will be needed in making decisions about the trade-offs. The proposal advocated by the SEC staff is probably the lowest cost option, but it may not provide as much benefit as similarly low cost alternatives due to the placement in annual and semiannual reports. Furthermore, we believe that factors in addition to implementation costs are also important in determining the most appropriate disclosures. For example, if providing account-specific fee 44

information increases investor awareness and encourages additional price competition in the industry, fees for investors could be reduced overall. To complete our work, we analyzed the SEC staff's report and compared its findings with those of our June 2000 report. To determine the rationale for SEC's recommendations, we interviewed SEC officials. We also discussed SEC's report and recommendation with selected industry research organization officials. We conducted our work in Washington, D.C., from February to March 2001 in accordance With generally accepted government auditing standards. As agreed with you, unless you publicly release its contents earlier, we plan no further distribution of this letter until 30 days from its issuance date. At that time, we will send copies to the Honorable Laura S. Unger, Acting Chairman, and SEC. We will also make copies available to others upon request This study analyzes regulatory capital requirements of banks, thrifts and securities firms. Regulatory capital has traditionally guarded against credit risk and has been set on an assetbyasset basis. Regulators now recognize the need to guard against a wider range of risks and to measure risk in a portfolio context rather than on an assetbyasset basis. However, the measurement of portfolio risk in the presence of a wide variety of financial instruments and the complexity of financial institutions requires a level of sophistication that regulators are unlikely to possess. Consequently, it is important to reassess the purpose of regulatory capital. Regulatory capital now guards against the failure of the entire financial institution, while regulatory responsibility extends only to the insurance fund that guarantees bank deposits or brokerage accounts .

45

UTI INFRASTRUCTURE FUND SUMMARY TYPE- Open ended diversified equity scheme MINIMUM INVESTMENT AMOUNT- Rs5000/FACE VALUE-Rs 10/LAUNCH DATA- 9th march 2004 FUND SIZE- Rs 1687.14 cores HIGH/ LOW OF NAV IN THE MONTOPTION- Growth NO OF UNIT HOLDING ACCOUNT- 3,55,993 REGISTRAR- M/S Kirby computer share Ltd % in August, 2005(15th September 2005) 0% in July 2006(3rd July 2006) 35% in June 2007(22nd June 2007)

Load Structure Investment value Entry load Holding period <Rs2crores >Rs 2crores 2.25% Nil <=180 days <=180 days Exit load 1% 0.50%

Funds Performance as on 29, 2008 Performance Comparison with Benchmark Index Compounded annualized return 1year 3year Since inception NAV(%) 55.23 48.68 46.37 BSE100(%) 44.09 37.54 33.02

46

Assuming that all payout during the period have been reinvested in the units of the scheme at the immediate ex-div NAV Past performance may not be sustained in the future.

SIP Returns (Systematic Investment Plan)

Systematic Investment Plan (SIP) returns are worked out assuming investment of Rs 1000/every month at NAV per unit of the scheme as on the first working day for the respective time period . The loads have not been taken into account

1year(Rs) Investment amount Investment value Yield(%) 12000 13419 22.36

3year(Rs) 36000 64110 41.17

Investment Objective
An open ended equity fund with the objective to provide capital appreciation through investing in the stock of the companies engaged in the sectors like metals, building , materials , oil and gas power , chemicals, engineering etc .The fund will invest in the stock of the companies which form part of Infrastructure Industries.

Fund PositioningUTI Infrastructure fund as positioned to follow a top down approach keeping in mind the economic scenario. The funds endeavor is to pick sector. Which are expected to perform better and select fundamentally strong companies in these sectors? The schemes performance is highly linked with the overall economic growth of the country as the sectors in which the scheme invests are directly linked to the GDP growth of India

47

Performance of NAV (30-1-08 TO 29-5-08)

NAV 41.05 40.33 35.61 36.98 33.88

Repurchase price 41.05 40.33 35.61 36.98 33.88

Sale price 41.97 41.24 36.41 37.81 34.64

Date 30-1-08 29-2-08 31-3-08 30-4-08 29-5-08

MUTUAL FUNDS DEMYSTIFIED

As a recipient of this information , it would be safe to assume that you have made an initial investment into a mutual fund and are hence are broadly aware of the benefits of this investment Unless of course, you have never invested in mutual funds and are sitting in your friends drawing room and reading this information while waiting for him to appear in which case this article would all the more make sense to you!!!Even if you have invested in mutual funds, this article may help reinforce that wise decision. This article is the first of a series that attempt to give the layman a brief introduction to mutual funds and in the process simplify some of the jargon associated with the industry. Let us start with the very basic of basics-

48

INVESTMENT.
An investment is nothing but a postponement of your natural desire to spend every bit of money you have earned or inherited, that is

CONSUMPTION
Why would someone postpone this beautiful consumption opportunity (because by spending your money appropriately one could enjoy that quality of life TODAY)? 1- One is not satisfied with the current possible quality of life that consumption could generate and hopes that by investing the money , he could aspire for a BETTER quality of life in the future, or 2- One knows that there is a specific need for money at a future date, or 3-One is aware that his earning capacity is limited for a specific period of time whereas the expectancy could that timeframe or 4- All of the above!!

So the basic premise behind investing is that the investment action would result in your money growing at a rate at least faster than the rise in cost of living (otherwise known as inflation) to fulfill your goals.

Now , just because you have decided to invest your money , it does not mean that there is another person or company willing to accept the same and give you your expected or desired rate of return or better . This will be possible only if that other person/ company has the avenue to invest the money and expect to earn, not only at the rate assured to you but at least slightly more .Only than he would also have achieved a similar objective to yours (one of the three outlined above as the rationale for your investment decision)!!! This is also true for the next person who takes the money from your recipient and so an . The process however, would have to stop at one point where the recipient dose not find any one willing to accept the money at an acceptable rate; he is unable deploy the money profitably . The only way this cycle can continue is due to the existence of the glorious word called

49

UNCERTAINTY -The removal of the assured nature of the return or even the assurance of the return of original capital that is invested!!! Because of the uncertainty associated with some investments, it is possible for the investor and the borrower to have a different evaluation of consequences of the various uncertain outcomes and hence come to mutually acceptable rate of return that leaves both happy!!

This is where a MUTUAL FUND steps in

A Mutual Fund is nothing but the pooling together of individual investments of hundreds (or even thousands) of people. It operates in that wonderful space known as the equity market as well as fixed- income market and obtains the best possible return commensurate with the risk taken with your investment!!! How dose a mutual fund do this?

1- BARGAINING POWER:
By pooling together all the moneys invested by several hundreds of people, it gets a sizeable corpus to bring the power of SIZE to the table.

2-RESERCH AND ANALYSIS:

The pooled resources also enable the fund to buy the best possible resources (research, analysts, and fund managers) to analyze, evaluate and decide the appropriate price for the risk and the opportune moment to take advantage. The mutual fund distributes the gains from the pooled resources equally to all the investors in proportion to their original investment. Thus effectively the resources of each individual investor have been combined together for the mutual benefit of all of them Hence the name MUTUAL FUND!

50

Legal Framework
ROLE OF REGULATORS IN INDIA
(1)Regulators in India [A]SEBI- the Capital Markets Regulator The government of India constituted securities and Exchange Board of India, by an Act of parliament in 1992, as the apex regulator of all entities that either raise funds in the capital markets or invest in capital market securities such as shares and debentures listed on stock exchanges . Mutual funds have emerged as an important institutional investor in capital market securities . Hence they come under the purview of SEBI. SEBI requires all mutual funds to be registered with them. It issues guidelines for all mutual fund operations including where they can invest , what investment limits and restrictions must be complied with , how they should account for income and expenses , how they should make disclosures of information to the investors and generally acts in the interest of investor protection. Other entities that SEBI also regulates are companies when they issue equity or debt , share registrars, custodians , bankers in the primary markets, stock exchanges and brokers in the secondary markets , and foreign and institutional investors such as FIIs, offshore mutual funds with dedicated Indian mutual funds or venture capital investor.

[B] RBI- the Money Markets Regulator

(b)RBI as Supervisor of Bank-Owned Mutual Funds:

The first non- UTI mutual funds were started by public sector banks come under the regulatory jurisdiction of the RBI. Therefore, the operations of bank- owned mutual funds are governed by guidelines issued by the Reserve Bank of India. Subsequently, it has been clarified that all mutual funds, being primarily capital market players , come under the regulatory umbrella of SEBI. Thus , the bank- owned funds continue to be under the joint supervision of both RBI and the SEBI . It is generally understood that all market related and investor related activities of the funds are to be supervised by SEBI, while any issues concerning the ownership of the AMCs by 51

banks fall under the regulatory ambit of the RBI. For example, if banks as fund sponsors have offered assured return schemes, RBI would have to review the capital adequacy and financial implications of the guaranteeing bank. Any fund mergers of bank- sponsored funds with others will also involve RBI approvals. However, the RBI guidelines on bank funds with avoid issuing instructions on investment and market operations that may conflict with SEBI instruction.

(a)RBI as Supervisor of Money Markets Mutual Funds :

Reserve bank of India is the only government agency that is charged with the sole responsibility to control the money supply in the country. They also, therefore, have the sole supervisory responsibility over all entities that operate in the money markets, are it banks and companies that issue securities such as certificates of deposit or commercial paper, or banks and mutual funds who are allowed borrow from or lend in the call money market . For this reason, if a mutual fund manager offers a Money Market Mutual Fund scheme; such MMMF has to abide by the policies laid down by the RBI. Money Market Mutual Funds are regulated by RBI guidelines dated 23-11-1995 specially issued for the purpose. The following are the salient features of these guidelines Banks , institutions and the private sector are allowed to set up MMMFs there are no restrictions on fund size . Private sector MMMFs must however obtain clearance from SEBI to ensure that they do not infringe SEBI Guidelines on money market investments. MMMFs can invest in treasury bills, government securities with a un- expired maturity up to one year, call and notice money, commercial paper, commercial bills accepted by banks and certificates of deposit. MMMFs can be set up as Money Market Deposit Account (MMDAs) or MMMFs Units of MMMFs can only be issued to individuals. Resources raised under MMMFs set up by banks are not subject to reserve requirements. Setting up of MMMFs requires the prior approval of RBI Recently, it has been decided that MMMFs of registered mutual funds will be regulated by SEBI, and SEBI is to frame guidelines for such funds.

52

[C] Ministry of Finance

The Ministry of Finance , which is charged with implementing the government policies , ultimately supervises both the RBI and the SEBI . Besides being the ultimate policy making and supervising entity , the MOF has also been playing the role of an Appellate Authority for any major disputes over SEBI guidelines on certain specific capital market related guidelines- in particular any cases of insider trading or mergers and acquisitions.

[D] Company Law Board, Department of Company Affairs and Registrar of Companies
Mutual fund Asset Management Companies and corporate trustees are companies registered under the companies Act, 1956 and therefore answerable to regulatory authorities empowered by the companies Act. The primary legal interface for all companies is the Registrar of Companies (Rock).Rocs in turn is supervised by the Department of Company Affairs. The DCA forms part of the Company Law Board, Which is part of the Ministry of Law and Justice of the Govt. of India. The Rock ensures that the AMC or the Trustee Company as the case may be is in compliance with all Companies Act provisions. All AMC accounts and records are filed with the Rock , who may demand additional information and documents form the company . The RoC , plays the role of a wa The overall responsibility for formulating and modifying regulation relating companies lies with the Department of Company Affairs (DCA). The DCA has legal powers to prosecute company Directors for failure to comply with any of companies Law provisions, as also for nonrepayment of deposits or frauds and other offences. The Company Law Board (CLB) is the apex regulatory authority under the Companies Act. While the CLB guide the DCA, another arm of the CLB called the Company Law Bench is the Appellate Authority for corporate offences. the Company Law Board is a body specially constituted by the Central Government for carrying out judicial proceedings with respect to company affairs. Since mutual fund AMCs are companies, the CLBS role assumes importance. Members of a company who feel that the company is being managed in a manner which is oppressive to any member or which is against public interest or the companys interests can appeal to the CLB for redressed. The CLB, in such 53

cases, may regulate the conduct of the companys affairs, have the shares of the aggrieved members purchased by other members and /or terminate/ modify the companys arrangement with the, managing director, other director(s) or senior officials. The CLB has the legal standing of a civil court, and may call for inspection of documents, enforce attendance and examine witnesses on oath and pass judgments in the same manner as a civil court. Any person aggrieved by a decision of the CLB may appeal to the High Court. As the members of AMC or Trustee companies will usually be the sponsors and their joint venture partners or associates, it is unlikely that mutual fund investors will have anything to do with any of these regulators. The authorities would generally regulate the AMCs whose shareholders may have recourse to them in specific cases.

[E] Stock Exchanges

Stock exchanges are self- regulatory organizations supervised by SEBI. Many closed- end schemes of mutual funds are listed on one or more stock exchanges. Such schemes are subject to regulation by the concerned stock exchange(s) though a listing agreement between the fund and the stock exchange. Exchange Rules and the Companies Act provisions would generally decide on trading, clearing, transfer and settlement of the buying and selling of mutual fund units on the markets. Funds or AMCs do not get directly involved with purchases and sales of units of such listed closed- end schemes , as the registrars handle all such transfers as in case of shares.

[F] Office of the Public Trustee

Mutual funds, being Public Trusts are governed by the Indian Trust Act, 1882. The Board of Trustees or the Trustee Company is accountable to the office of the Public Trustee, which in turn reports to the Charity Commissioner. These regulators enforce provisions of Indian Trusts Act to be complied with by the fund trustees.

54

(1)Unit Trust of India

The Unit trust of India (UTI) initiated the entry of mutual funds in the Indian capital market. UTI was set up by a special statute called the UTI Act, 1963. Until recently, all of UTIs schemes and its overall functioning were completely governed by the UTI Act. Now, however, schemes launched after a specified date fall under SEBIs purview. Among the major schemes from UTI, only US-64 remains outside the purview of SEBI (US-64 is governed by UTI Regulations), though it is conceivable that it will be governed by SEBI in future.

[A] Unit Trust of India Act, 1963

Despite the emergence of several of bank owned and private sector mutual funds, UTI retains the largest corpus of invisible funds in India. Its functioning is gradually moving under the purview of SEBI. However, it is important to understand the salient features of the UTI Act, 1963 as it applies to UTI. The management of the Trust is under a Board of Trustees which has nominees of RBI, IDBI, LIC, SBI, with the Chairman appointed by the Central Government in consultation with IDBI. Unlike other mutual funds, UTI can besides investing in various securities, grant loans against security, enter into bills discounting activities , launch savings cum insurance schemes , acquire immovable property , provide leasing/ hire purchase finance and merchant banking services, provide portfolio management services to non- residents and deal in foreign exchange to the extent required for the discharge of its functions. In case of default by any entity in terms of its obligations towards the Trust, the Trust can initiate legal proceedings for sale of security, taking over the management of the defaulting entity or an injunction on movement of property owned by the entity. Again unlike other funds, UTI may borrow, in India or abroad, from any person, on terms which are agreed upon. If the borrowing is form the RBI, it will be repayable on demand and for a period not exceeding 90 days. If borrowings are against the security of bonds issued by the Trust with Central Government approval, it will be repayable on demand and for a period not exceeding 18 months. Borrowing in the last two cases should not exceed Rs. 5 crores for each scheme and Rs. 10 crores in the aggregate for all schemes. 55

 For any scheme, its capital comprises unit capital, reserves created, borrowing, gifts and donations and any other capital allocated to the scheme by the Board of Trustees. The first unit scheme also has the initial capital contributed by its sponsors. Income of a scheme is the sum of: income arising out of its capital, gifts and donation to the scheme treated as income and any other income allocated to the scheme by the Board. Income and expense of the first unit scheme in any year is allocated to initial capital and unit capital of the scheme in the ratio of the balance in the two capital accounts at the end of the relevant year. Expenses (other than interest allocated to the unit capital of the first unit scheme) charged in a year to the unit capital of the first unit scheme will be limited to 5% of income allocated to that scheme in the year. Expenses in excess of this ceiling will be charged to initial capital. For subsequent schemes, expenses will be charged to the respective schemes unit capital in a manner determined by the Board with prior approval from IDBI. In any year, surplus of income over expenses allocated to initial capital may be distributed among contributing institutions. At least 90% of surplus of income over expenses allocated to unit capital for the first unit scheme must be distributed, unless a dividend of at least 10% on unit capital is declared by the Trust For other schemes, surplus allocated to the respective unit capital may be distributed at the Boards discretion or reinvested in accordance with the provisions of the scheme. IDBI, along with the Central Government, holds substantial control over the functioning of the UTI.

1.Non- UTI Funds

As discussed earlier, all MMMFs and bank- owned funds are also regulated by the RBI, besides SEBI. All private and public sector mutual funds other than UTI are regulated solely by SEBI. Some specific and all new schemes of UTI are also regulated by SEBI and / or RBI, besides the UTI Act. Wherever SEBI is the regulating authority, the relevant regulatory policies are contained in SEBI (Mutual Fund) Regulations, 1996 that govern the functioning of these funds. These have been

56

discussed in subsequent chapters as relevant, as the regulations are numerous and touch upon all aspects of mutual fund management.

SEBI GUIDELINE 16 APRIL 2007

Mutual fund cannot invest more than 10%of the total net assets of a scheme in the sort term deposits of a single bank. The Securities and Exchange Board of India said on Monday Accounting guidelines for parking of funds in sort term deposits of scheduled commercial banks (SCBS) by mutual fund, the regulator said that investment cap would also take into account deposit schemes of the banks subsidiaries. The SEBI has also defined sort term for fund. Investment purposes as a period not exceeding a days. Besides the parking of funds in short term deposits of all SCBs has been capped at 15 % of the (NAV) of a scheme. This can be raised to 20% with prior approaches of the trustees. The parking of funds in short term deposits of associate and sponsor (SCBs) together could not exceed 20% of total deployment by the mutual fund in short term deposit, it added The SEBI said that these guidelines are aimed at ensuring that funds collected in a scheme are invested as per the investment objective stated in the offer document of a mutual fund scheme The new guidelines would be applicable to all fresh investments whether in a new scheme or an existing one. In cases of an existing scheme. Where the scheme has already parked funds in short term deposits the assets management company have been given three months time to conform to the new guidelines The SEBI has also asked the trustee of a fund to ensure that no funds are parked by a scheme in short term deposit of a bank which has invested in that particular scheme The SEBI guidelines say that asset management companies (AMCs) shall not be permitted to charge any. Investment and advisory fees for parking of funds in short term deposits of banks in case of liquid and debt oriented scheme

57

 It has also asked the trustees to disclose details of all such funds parked in short term deposit in half yearly portfolio statement under a separate heading and has said that AMCs should also certify the same in its bi- monthly compliance test report All the short term deposits by mutual funds should be held in the name of the scheme concerned only it added

NEW SEBI GUIDELINES JULY 2ND 2007

All investments waft July 2ND 2007 will require submission of PAN with proof for more details , please contact your distributor / nearest Investor service center.

CONCLUSION & RECOMENDATIONS

6.1 CONCLUSION
Although both private as well as Govt sector mutual fund are doing well in mutual fund scheme but stall there is a need to create more awareness regarding mutual fund around of the people gave preference to privet & Govt mutual fund .The choice of the privet mutual fund but not higher level deferent in Govt mutual fund. 10 reasons to invest in mutual fund

Expert opinion
When you invest in a mutual fund, you buy into the experience and skills of a fund manager and an army of professional analysis

Limited risk
Mutual funds are diversify in action and hence do not rely on the performance of a single entity

58

More for lessFor the price of one blue chip stock of instance you could get yourself a number of units across a number of companies and industries when you invest in a fund

Easy investing
You can invest in a mutual fund with as littlie as Rs 5000 salaried individuals also have the option of investing in a monthly savings plan.

ConvenienceYou can invest directly with a fund house or financial adviser or even over the internet

Investor protectionA mutual fund in India is registered SEBI which also monitors the operations of the fund to protect your interests

Quick access to your money

Its good to know that should you need your money at short notice you can usually get it in four working days .

TransparencyAs an investor you get updates on the value of your units information on specific investments made by the MF and the fund managers strategy and outlook.

Low transaction costs

A mutual fund by sheer scale of its investor is able to carry out cost effective brokerage transaction

Tax benefit
over the tax policies on mutual fund have been favorable to investors and continue to be so.

59

DATA ANALYSIS
The analysis is done on the basis of the response of respondents, which is collected through the questions present in questionnaire.
Q 1: In which Financial Instrument do you invest into?

Financial Instrument Investment in % Mutual Funds Bond Online Trading Derivatives 76 15 7 2

Investment Criteria in Financial Insrument

7 15 Mutual fund 76 Bond Online trading Derivatives 2

Interpretation: From above pie chart, I have analysed that 75% of investors invest in Mutual Funds. Rest of the investors invest in Bond (i.e. 16%), Online Trading (i.e. 7%) and Derivatives (i.e. 2%).

60

Q 2: By structure in which type of schemes have you invested?

Type of schemes on the Basis of Structure Investment in % Open-ended funds Close-ended funds Interval Funds 66 22 12

Type of schemes preferred on Basis of Structure

12 22 Open Ended Fund 66 Close Ended Fund Interval Fund

Interpretation: The above pie chart depicts that 66% investors invest in Open-ended funds, 22% in close-ended funds and 12% in interval funds.

61

SQ 3: By investment objective in which schemes have you invested?

Ans: Type of schemes on the Basis of Investment Objective Investment in % Growth Schemes Income Schemes Balanced Schemes 55 13 32

Type of schemes on the Basis of Investment Objective

32 55 13 Growth scheme Income scheme Balanced scheme

Interpretation: From above pie chart, I conclude that there are 55% investors who invest in Growth Schemes, 13% investors invest in Income Schemes and 32% investors invest in Balanced Schemes.

62

Q 4: In which type of fund you want to invest?

Types of Funds Investment in % Index Fund Tax saver Fund Sectorial Fund 41 15 44

Type of fund in Which Investor Invest

44

41 Index Fund Tax Saver 15 Sectorial Fund

Interpretation: The above chart depicts that the maximum no. of investors i.e.41% investors invest in Sectorial Funds, 44% in Index funds and 15% in Tax saver funds.

63

Q 5: Did you repeat your investment after the initial investments ?

Ans: Repeatition of Investment Investers In % Yes No 68 32

Repetition of Investment

32

68

Yes No

Interpretation: The above pie chart depicts that 68% of investors invest again after the initial investments.

64

Q 6: What percentage of your earnings do you invest in Mutual Funds?

Ans: % Of earnings invested in MF Up to 10% Up to 25% Up to 50% Above 50% Investors in % 43 32 15 10

50 45 40

Investor in %

35 30 25 20 15 10 5 0 Up to 10% Up to 25% Up to 50% Above 50% % of Earning invested in Mutual Fund

Interpretation: The above chart depicts that 43% investors invest up to 10% of their earnings in Mutual Funds.

65

Q 7: How many investors invested in SIP, Lump sum or Both?

Ans:
Investment in %

Type of Investment SIP Lump sum Both

55 10 35

Type of Investment in %

35 SIP Lumpsum 10 Both

55

Interpretation: From above chart I have analyzed that 55% investors have invested in Systematic Investment Plan, 10% in Lump sum and 35% in both the category.

66

Q 8: What is an allocation criterion of investor in SIP?

Allocation criteria (in Rs.)

Investment in %

Less than 1000 1000-3000 3000-5000 Above than 5000

9 45 36 10

50 45 40

Investment in %

35 30 25 20 15 10 5 0 Less than 1000 1000 - 3000 3000-5000 Above 5000 Alocation criteria in Rs

Interpretation: From above chart I have analyzed that the allocation criteria of investment is 45% in the range Rs.1000 to Rs.3000.

67

Q 9: What is time duration of investment? Ans.

Time Duration Investment in %

Less than equal to 5 years Less than equal to 4 years Less than equal to 3 years Less than equal to 2 years Less than equal to 1 years

25 8 34 25 8

40 35 Investment in % 30 25 20 15 10 5 0 Less than equal to 5 years Less than equal to 1 years Less than equal to 3 years Time Duration Less than equal to 2 years Less than equal to 1 years

Interpretation: The above bar chart depicts that most of the investors (i.e. 33.33%) invest in less than 3 years.

68

Q 10: Which has given more profit according to investors? Ans.

Investment in Profit in percentage

SIP Lumpsum

84 16

Comparison of SIP & Lumpsum in TERms of Profit

16

84

SIP Lumpsum

Interpretation: The above Pie chart depicts that 83.33% of investors have got more profit in Systematic Investment Plan.

69

Q 11: Are you satisfied with the facilities provided by AMC?

Ans:

Satisfaction Level with AMC Responses of Investors Yes No 65% 35%

Satisfaction Level with Facilites provided by AMC

35

65

Yes No

Interpretation: The above chart depicts that 65% investors are satisfied with the redemption facilities provided by KARVY.

70

FINDINGS
1. The respondents opting for mutual fund mainly belong to age group of 21-30yrs i,e,.28%, then 30% belong to 31-40yrs , 18% belong to 41-50yrs , 8% belong to above 51yrs and only 16% belong to less 20 yrs of age . 2. 28% of people belonging to annual income group of 1lakh ,36% belong to Rs 1lakh 2lakh ,18% belong 2lakh-3lakh ,8% belong to3 lakh-4 lakh and10% above to4 lakh. 3. Mostly the people who go far mutual fund self employee i,e,. 40% , private employee 28% ,Govt employee20% and 12%house wife only. 4. A Mutual fund is the most suitable investment for the Common man as it offers an opportunity to invest in a diversified , professionally managed basket of securities al a relatively low cost 5. Return alone should not be considered as basis measurement of the performance of a mutual fund scheme, it should also include the risk taken by the fund manager because different funds will have different levels of risk attached to them. Risk associated with a fund, in a general, can be defined as variability or fluctuations in the returns generated by it. The higher the fluctuations in the returns of a fund during a given period, higher will be the risk associated with it. 6. All MFs should be established as trusts under the Indian Trusts Act , while actual fund management activity is conducted by AMC. 7. 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. 8. From 1991 to 2002 the compound annual growth rate for the industrys assets under management averaged around 20% 9. The Indian mutual fund industry is still an evolutionary phase products are yet not commodities asset management firms have not yet consolidated , distribution is improving but still patchy , investors need to be educated and rarely invest with long term horizons .

71

10.Diversified

equity

fund

are

well

suited

for

retail

Investors who are keen on long term investing. 11.The major limitations for investing in mutual funds are as following. (i) Lack of investor awareness about the mutual funds in which amount is invested. (ii) Dependence on distributors and

72

RECOMMENDATIONS

1- For a small investor , it is better to enter in to stock market through the way of mutual funds 2- No investment in stock market is risk free, but we can say that mutual funds through diversification of risk and professionally management of fund. 3- For the growth of MF industry in India. I will recommend the introduction of on line trading which helped in reduction of transaction expenses as well as time of the investors. 4- On the basis of this study. I recommended that investors should adopt systematic approach of investing i.e., SIP(Systematic Investment Plan ) A SIP is nothing but a planned investment programmer which takes a small sum of money form you and invests in a mutual fund at regular intervals . The minimum amount can be as small as Rs 250 (sun dram select madcap fund) or Rs 500 and the frequency of investment is usually monthly or quarterly.

73

LIMITATIONS
The validity of findings is largely dependent on the information provided by the respondents on the basis of their subjective experience and perception. The response to the questionnaire may be affected by the grasping of the question which may vary on the basis of the interest and the perception of the respondents. Respondents may have shown some hesitation in divulging their personal information. Although the best attempts have been made to bring out relevant information however the possibility remains respondents might have concealed some of their private and personal information.

74

BIBLIOGRAPHY

BOOKS
1.Dr V. A. Avadhani , Investment and securities markets in India (Tried Revised Edition-1996), Himalaya publishing house.

2.LALIT K. BANSAL.,Mutual funds management & working, Deep Deep publications house new Delhi

3.Reddin. W. J. ,Successful spending saving and investing McGraw of Canada Ltd

4.Rose Jod Mutual funds Taking the worry out of investing prentice Hall

75

ANNEXURE
Questionnaire
Purchasing pattern of mutual fund (UTI Infrastructure) in Kanpur city.

The purpose of this study is solely academic and for fulfillment of academic curriculum of M .Phil (commerce) programmed conducted at C S J M University Kanpur.

This is further assured that the answer given will be kept completely confidential

(1) Name of Respondent

(2) Address/Locality

(3) the ideal ratio of 1:1 is considered to be satisfactory?

(a)Yes

(B) No

(4) Current ratio helps to measure the liquidity and solvency.

(a) Yes

(b) No

(5) Higher quick ratio indicates sound liquidity position or adequate liquidity position?

(A) Yes

(B) No

76

(6) Quick ratio helps to measure the liquidity position of the firm?

(a)Yes

(b) No

(7) Current ratio helps to measure the short term financil position of firm?

(a)Yes

(b) No

(8) The ideal thump of current ratio is:

(a)2:1

(b)1:1

(9) Idel standard for liquid ratio is:

(a) 1:1

(b) 2:3

(10)Current liabilities are payable in:

(A)More than 5 years

(B) Between 2 to 5 years

(C) Less than 1 year

(D) More than 2 years

(11) Which are the prefer private mutual fund?

(a)RMF

(b) UTI

77

(12) Which are the prefer Govt mutual fund?

(a) LIC

(b) SBIs

(14) Are you satisfied with mutual fund?

(a)Yes

(b) No

78