A

PROJECT REPORT
ON
“Study of Consumer Awareness,
Perception and Practice Regarding
of Mutual Fund Investment”

SUBMITTED TOWARDS THE PARTIAL FULFILLMENT

FOR THE AWARD THE DEGREE OF
MASTER OF BUSINESS ADMINISTRATION
RTU, KOTA
ACCADEMIC SESSION
(2009-2011)

Submitted To:- Submitted by:-

Miss Shipra Sharma Saini Ram Niranjan

Assistant Professor MBA 4th sem

Sri Balaji College of Engineering & Technology, Jaipur

 ACKNOWLEDGEMENMT

To test the student’s academic knowledge in practical conditions of industry, two

weeks training has been included in the MBA course. I express my gratitude of ……..
for allowing me to undergo training in SBI Funds Management Pvt. Ltd.

I have the honour to express my sincere thanks to the management of SBI Funds
Management for providing me the opportunity to pursue my training in their
esteemed organization. I place on record my thanks to faculty for giving me every
sort of help and guidance.

My final training has added to my practical knowledge and build up my confidence. I

thank once again all the staff members of SBI Funds Management with the active
support ot whom I was able to complete my project report successfully. I am also
greatful to …………. sikar and the faculty who have supported a lot and given me
the permission of final Training in SBI Funds Management Pvt. Ltd.
Also I would like to give regards to my Parents, seniors, friends who have helped a
lot in completing this project.
 191, Maker Tower 'E', Cuffe Parade,
Mumbai - 400 005.
partnerforlife@sbimf.co
Email :
m
Tel: 22180221 Fax: 22189663

Date:

TO WHOM IT MAY CONCERN

This is to certify that Mr. Saini Ram Niranjan student of SBCET, Jaipur has done his
live training project under my guidance and supervision from
…. April 2011 to …. April 2011.

He has completed the project titled “Study of Consumer Awareness, Perception

and Practice Regarding of Mutual Fund Investment” At sikar .Towards the partial
fulfillment of MBA under my supervision.

During his project he was found to be very sincere and attentive to small details
whatsoever told to him.

I wish him luck and success in future.

Deputy Head- HR
 TABLE OF CONTENTS

CONTENT PAGE

ACKNOWLEDGEMENT 2

EXECUTIVE SUMMARY 8

INTRODUCTION TO MUTUAL FUND 10

 Structure consists of Sponsor

 Asset Management Company (AMC)

RISK-RETURN TRADE-OFF 17

 Return
 Risk

BENEFIT OF MUTUAL FUND INVESTMENT 25

 Recent trends in mutual fund industry

 Structure of the Indian mutual fund industry
 Mutual Fund Companies in India
 Major Mutual Fund Companies in India

ASSOCIATION OF MUTUAL FUND IN INDIA (AMFI) 35

 The objectives of AMFI

  Net Asset Value (NAV)

TYPES OF MUTUAL FUNDS SCHEMES 41

 Open-end Funds
 Closed-ended Funds

INVESTMENT OBJECTIVE 43

 Equity Oriented Schemes

 Debt Based Schemes
 Hybrid Schemes
Special Schemes

 Tax Saving schemes

Liquid Income Schemes
Money Market Schemes

SNAPSHOT OF MUTUAL FUND SCHEMES 49

THE OFFER DOCUMENT 50

What is an Offer Document? 50

 Contents
 Regulation and Investors' Rights
SEBI Guidelines

Where to Obtain the Updated Offer Documents? 55

Investor’s rights & Obligations

Rights - Legal Limitations
Obligations

CHOOSING A FUND 57

 Benchmark returns
 Time period
 Market conditions
 Final checklist

Compare funds that are similar 60

HISTORY OF INDIAN MUTUAL FUNDS INDUSTRY 62

 First Phase – 1964-87

 Second Phase – 1987-1993 (Entry of Public Sector Funds)
 Third Phase – 1993-2003 (Entry of Private Sector Funds)
 Fourth Phase – since February 2003

BROKERAGE 67

Asset Management Business: 67

 Broking
 Mutual Fund
 Trends
 Nothing Speaks like Money
 Larger than Life

When do you take a

this a Sales Call?

  Fund Manager
 Research
 Marketing
 Sales
 Dealing
 Operations
 Technology

SBI MUTUAL FUNDS 75

 Introduction
 Company Profile
 Product Profile
 Equity Schemes
 DEBT Schemes
 BALANCED SCHEMES

SBIMF WAS FOUNDED WITH A VISION 82

 Vision

METHODOLOGY 85

 Research Methodology

SOURCE OF DATA COLLECTION 86

 Primary data
 Secondary data
DATA ANALYSIS & INTERPRETATION 87
 Interpretation 101

People who invest in mutual fund 102

People who do not invest in mutual fund 104

LIMITATION 105

RECOMMENDATION 106

CONCLUSIONS 107

QUESTIONNIRE SURVEY 109

 EXECUTIVE SUMMARY

Individual saving means spending less on consumption than available from

one's disposable income. What an individual saves can be held in many ways. It
can be deposited in a bank, put into a pension fund, used to buy a business, pay
down debt, or kept under the mattress, for example. The common element is the
claim on assets that can be used to pay for future consumption. If there is a return
on the saving in the form of interest, dividend, rent, or capital gain, there can be a net
gain in individual saving, and thus in individual wealth. In current scenario, the
inflation rate is quite high and the interest rates are quite low so people don’t get
satisfactory returns on their investments. While opting for traditional tax saving
instruments like PPF and Fix Deposits the investor will get a return of 7% to 8% and
sacrifice superior returns given by stocks. So study concentrate on Equity linked
Saving Schemes offered by Mutual Funds. A mutual fund’s business is to invest the
funds thus collected, according to the wishes of the investors who created the pool.
In many markets these wishes are articulated as “Investment mandates”. Usually,
the investors appoint professional investment managers, to manage their funds. The
same objective is achieved when professional investment managers create a
“product”, and offer it for the investment to the investor. This product represents a
share in the pool, and pre-states investment objectives. For Example, a mutual fund,
which sells a “money market mutual fund,” is actually seeking investors willing to
invest in a pool that invest predominately in money market

This healthy growth of saving has been boosted by the household sector
which has contributed a substantially high percentage to total domestic savings.
Traditionally, GIC, banks, LIC, and PFs have been intermediaries to mobilise
domestic savings to the productive sectors of the economy. With the growth of
capital markets and the emergence of alternative savings instruments, investors are
tend to move towards liquid short term instruments as the units of the mutual funds
along with corporate equities and debentures

Mutual funds have been the latest growing institution during this period in the
household savings sector. Growing market complications and investment risk in the
stock market with high inflation have pushed households further towards mutual
funds.

INTRODUCTION TO MUTUAL FUND

Mutual Fund

A Mutual Fund is a trust that pools the savings of a number of investors who share a
common financial goal. The money thus collected is invested by the fund manager in
different types of securities depending upon the objective of the scheme. These
could range from shares to debentures to money market instruments. The income
earned through these investments and the capital appreciation realized by the
scheme is shared by its unit holders in proportion to the number of units owned by
them. 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 portfolio at a
relatively low cost. The small savings of all the investors are put together to increase
the buying power and hire a professional manager to invest and monitor the money.
Anybody with an i surplus of as little as a few thousand rupees can invest in Mutual
Funds

it pre specifies the investment objectives of the fund, the risk associated, the costs
involved in the process and the broad rules for entry into and exit from the fund and
other areas of operation. In India, as in most countries, these sponsors need
approval from a regulator, SEBI (Securities exchange Board of India) in our case.
SEBI looks at track records of the sponsor and its financial strength in granting
approval to the fund for commencing operations.

A sponsor then hires an asset management company to invest the funds according
to the investment objective. It also hires another entity to be the custodian of the
assets of the fund and perhaps a third one to handle registry work for the unit holders
(subscribers) of the fund.
In the Indian context, the sponsors promote the Asset Management Company also,
in which it holds a majority stake. In many cases a sponsor can hold a 100% stake in
the Asset Management Company (AMC).

Saving AMC
s
Trus Investment
t s
Unit
Unit s Return
holders s

Registrar

Trust
SEBI
Custodian AMC

The structure consists of Sponsor

Sponsor is the person who acting alone or in combination with another body
corporate establishes a mutual fund. Sponsor must contribute at least 40% of
the net worth of the Investment Managed and meet the eligibility criteria
prescribed under the Securities and Exchange Board of India (Mutual Funds)
Regulations, 1996.The Sponsor is not responsible or liable for any loss or
shortfall resulting from the operation of the Schemes beyond the initial
contribution made by it towards setting up of the Mutual Fund.

Trust

The Mutual Fund is constituted as a trust in accordance with the provisions of

the Indian Trusts Act, 1882 by the Sponsor. The trust deed is registered under
the Indian Registration Act, 1908.
The Fund Sponsor acts as the Settler of the Trust, contributing to its initial
capital and appoints a Trustee to hold the assets of the Trust for the benefit of
the unit-holders, who are the beneficiaries of the Trust. The fund then invites
investors to contribute their money in the common pool, by subscribing to
"units" issued by various schemes established by the trust, units being the
evidence of their beneficial interest in the fund.

It should be understood that a mutual fund is just "a pass-through" vehicle.

Under the Indian Trusts Act. The Trust or the Fund has no independent legal
capacity itself, rather it is the Trustee or Trustees who have the legal capacity
and therefore all acts in relation to the trust are taken on its behalf by the
Trustees. The Trustees hold the unit-holders' money in a fiduciary capacity i.e.
the money belongs to the unit-holders and is entrusted to the fund for the
purpose of investment. In legal parlance, the investors or the unit holders are
the "beneficial owners" of the investments held by the Trust, even as these
investments are held in the name of the trustees on a day-to-day basis. Being
Public Trusts, mutual funds can invite any number of investors as beneficial
owners in their investment schemes.

Trustee
Trustee is usually a company (corporate body) or a Board of Trustees (body of
individuals). The main responsibility of the Trustee is to safeguard the interest
of the unit holders and inter-alia ensure that the AMC functions in the interest
of investors and in accordance with the Securities and Exchange Board of
India (Mutual Funds) Regulations, 1996, the provisions of the Trust Deed and
the Offer Documents of the respective Schemes. At least 2/3rd directors of the
Trustee are independent directors who are not associated with the Sponsor in
any manner.

The Board or the Trustee Company, as an independent body, acts as

protector of the unit-holders' interests. The Trustees do not directly manage
the portfolio of securities. For this specialist function, they appoint an Asset
Management Company. They ensure that the fund is managed by the AMC as
per the defined objectives and in accordance with the Trust Deed and SEBI
Regulations.

The trust is created through a document called the Trust Deed that is
executed by the Fund Sponsor in favour of the Trustees. The Trust Deed is
required to be stamped as registered under the provisions of the Indian
Registration Act and registered with SEB!. Clauses in the Trust Deed, inter
alia, deal with the establishment of the Trust, the appointment of Trustees,
their powers and duties, and the obligations of the Trustees towards the unit-
holders and the AMC. These clauses also specify activities that the fund/AMC
cannot undertake. The Third Schedule of the SEBI (MF) Regulations, 1996
specifies the contents of the Trust Deed.

The Trustees being the primary guardians of the unit-holders' funds and
assets, a Trustee has to be a person of high repute and integrity. SEBI has
laid down a set of conditions to be fulfilled by the individuals being proposed
as trustees of mutual funds - both independent and non-independent. Besides
specifying the "disqualifications", SEBI has also set down the Rights and
Obligations of the Trustees. Broadly, the Trustees must ensure that the
investors' interests are safeguarded and that the AMCs operations are along
professional lines. They must also ensure that the management of the fund is
in accordance with SEBI Regulations. Some important rights and obligations
are listed below.

Asset Management Company (AMC)

The Trustee as the Investment Manager of the Mutual Fund appoints the AMC.
The AMC is required to be approved by the Securities and Exchange Board of
India (SEBI) to act as an asset management company of the Mutual Fund. At
least 50% of the directors of the AMC are independent directors who are not
associated with the Sponsor in any manner. The AMC must have a net worth
of at least 10 crores at all times.

The role of an AMC is to act as the Investment Manager of the Trust. The
sponsors, or the Trustees, if so authorized by the Trust Deed, appoint the
AMC. The AMC so appointed is required to be approved by SEBI. Once
approved, the AMC functions under the supervision of its own Board of
Directors, and also under the direction of the Trustees and SEBI. The
Trustees are empowered to terminate the appointment of the AMC by majority
and appoint a new AMC with the prior approval of SEBI and unit-holders. The
AMC would, in the name of the Trust, float and then manage the different
investment "schemes" as per SEBI Regulations and as per the Investment
Management Agreement it signs with the Trustees. Chapter IV of SEBI (MF)
Regulations, 1996 describes the issues relevant to appointment, eligibility
criteria, and restrictions on business activities and obligations of the AMC.

The AMC of a mutual fund must have a net worth of at least Rs. 10 crores at
all times. Directors of the AMC, both independent and non-independent,
should have adequate professional experience in financial services and should
be individuals of high moral standing, a condition also applicable to other key
personnel of the AMC. The AMC cannot act as a trustee of any other mutual
fund. Besides its role as the fund manager, it may undertake specified
activities such as advisory services and financial consulting, provided these
activities are run independently of one another and the AMCs resources (such
as personnel, systems, etc.) are properly segregated by activity. The AMC
must always act in the interest of the unit-holders and report to the trustees
with respect to its activities.

RISKS ASSOCIATED WITH MUTUAL FUNDS

Risk & Return

The performance of a fund depends upon two things must be considered-

 Return, and
 Risk

Return

All investments are characterized by the expectation of a return in the future.

In fact, investments are made with the primary objective of deriving a return.
The return may be received in the form of yield plus capital appreciation. The
difference between the sale price and the purchase price is capital
appreciation. The dividend or interest received from the investment is the
yield. The return from an investment depends upon the nature of the
investment, the maturity period and a host of other factors.

But important thing is that the future is uncertain, so is the future expected
return. The expected return is the uncertain future return that an investor
expects to get from his investment. The realized return on the contrary, is the
certain return that an investor has actually obtained from his investment at the
end of the holding period. The investor makes the investment decision based
on the expected return from the investment.

There are three types of returns that can be calculated

 Absolute return
 Simple annualized return
 Compounded annualized return

The formulae for each of the above mentioned returns are as follows:

ABSOLUTE RETURN

Rn = (N2a-N1)* 100 / N1

SIMPLE ANNUALIZED RETURN

Rn = (N2a-N1)* 100*365 / (N1*n)

COMPOUNDED ANNUALIZED RETURN

Rn=[{(N2a/N1)^(365/n)}-1]*100
Risk

In general, it refers to the possibility of incurring a loss in a financial

transaction. “Risk” is the potential for variability in returns.” Risk arises where
there is a possibility of variation between expectations and realizations with
regard to an investment.

The variation in returns is caused by a number of factors. These, factors which

produce variations in the returns from an investment constitute the elements of
risk.

The elements of risk may be broadly classified into two groups. The first,
group

Comprises factors that are external to a company and affect a large number of
securities simultaneously. These are mostly uncontrollable in nature. The
second, group includes those factors which are internal to the companies and
affect only those particular companies. These are controllable to a great
extent.

Risk produced by the first group of factors is known as systematic risk, and
that produced by the second group is known as unsystematic risk.

The total variability in returns of a security represents the total risk of that
security. Where,

Total risk = systematic risk + unsystematic risk

Systematic risk

As the society is dynamic, changes occur in the economic, political and social
systems constantly. These changes have an influence on the performance of
companies and thereby on their stock prices but these changes affect all
companies and all securities in varying degrees.
Thus the impact of economic and political and social changes is system wide
and that portion of total variability in security returns caused by such system-
wide factors is referred as systematic risk. systematic risk is further subdivided
into

 Interest rate risk

 Price risk
 Reinvestment risk
 Market risk and
 Purchasing power risk (inflation risk)

Interest Rate Risk

In a free market economy interest rates are difficult if not impossible to

predict. Changes in interest rates affect the prices of bonds as well as
equities. If interest rates rise the prices of bonds fall and vice versa. Equity
might be negatively affected as well in a rising interest rate environment.

Market Risk

Sometimes prices and yields of all securities rise and fall. Broad, outside
influences affecting the market in general lead to this. This is true, may it be
big corporations or smaller mid-sized companies. This is known as Market
Risk.

Purchasing power risk

The root cause, “Inflation” is the loss of purchasing power over time. A lot of
times people make conservative investment decisions to protect their capital
but end up with a sum of money that can buy less than what the principal
could at the time of the investment. This happens when inflation grows faster
than the return on your investment.
Unsystematic risk

The returns from a security may sometimes vary because of certain factors
affecting only the company issuing such security. When variability of returns
occurs because of such firm – specific factors, it is known as unsystematic
risk.

The unsystematic risk affecting specific securities arises from two sources:

 The operating environment of the company, and

 The financing pattern adopted by the company.

These two types of unsystematic risk are referred to as business risk and
financial risk respectively.

Business risk is a function of the operating conditions faced by a company and

is the variability in operating income caused by the operating conditions of the
company.

Financial risk is the variability in EPS (earning per share) due to the presence
of debt in the capital structure of a company.

Measurement of risk

Risk or variability in returns can be measured and can be analyzed in two

ways

 on portfolio basis, where the asset is held as one of a number of assets

in a portfolio, and
 On stand alone basis, where the asset is considered in isolation.

Measuring stand alone risk- The Standard Deviation

Variance is a measure of fluctuation in returns. And like variance standard

deviation is a comprehensive risk measure that considers both market return
and company return, a higher valuation of standard deviation higher is the
risk.
The variance and the standard deviation measure the extent to which returns
are expected to vary around an average over time. They measure the
riskiness of a

Measuring systematic risk

Beta

One of the most popular indicators of risk is a statistical measure called beta.
Stock analysts use this measure all the time to get a sense of stocks' risk
profiles.

Beta is a measure of a stock's volatility in relation to the market.

Beta is the only relevant measure of a stock's risk. It measures a stock's

relative volatility - that is, it shows how much the price of a particular stock
jumps up and down compared with how much the stock market as a whole
jumps up and down.

The Beta coefficient, or financial elasticity is a sensitivity of the asset returns

to market returns, relative volatility. Beta can also be defined as the risk of the
stock to a diversified portfolio. Therefore the beta of a stock will be much
lower than its (the stock's) standard deviation. The formula for the Beta of an
asset is

The β coefficient measures the asset's non-diversifiable risk, also called

systematic risk or market risk, where,

rm measures the rate of return of the market and

ra measures the rate of return of the asset.

On an individual asset level, measuring beta can give clues to volatility and
liquidity in the marketplace. On a portfolio level, measuring beta is thought to
separate a manager's skill from his willingness to take risk.
Disadvantages of Beta

 However, if you are investing in a stock's fundamentals, beta has plenty

of shortcomings. Like,
 Beta doesn't incorporate new information.
 At the same time, many new stocks are so new to the market that they
have insufficient price history to establish a reliable beta.
 Another troubling factor is that past price movements are very poor
predictors of the future. Betas are merely rear-view mirrors, reflecting
very little of what lies ahead.

Lastly, the beta measure on a single stock tends to flip around over time,
which makes it unreliable. Granted, for traders looking to buy and sell stocks
within short time periods, beta is a fairly good risk metric. But for investors
with long-term horizons, it's less useful.

Benefits of Mutual Fund investment

Professional Management
Mutual Funds provide the services of experienced and skilled professionals,
backed by a dedicated investment research team that analyses the
performance and prospects of companies and selects suitable investments to
achieve the objectives of the scheme.

Diversification

Mutual Funds invest in a number of companies across a broad cross-section

of industries and sectors. This diversification reduces the risk because seldom
do all stocks decline at the same time and in the same proportion. You
achieve this diversification through a Mutual Fund with far less money than
you can do on your own.

Convenient Administration

Investing in a Mutual Fund reduces paperwork and helps you avoid many
problems such as bad deliveries, delayed payments and follow up with brokers
and companies. Mutual Funds save your time and make investing easy and
convenient.

Return Potential

Over a medium to long-term, Mutual Funds have the potential to provide a

higher return as they invest in a diversified basket of selected securities.

Low Costs

Mutual Funds are a relatively less expensive way to invest compared to

directly investing in the capital markets because the benefits of scale in
brokerage, custodial and other fees translate into lower costs for investors.

Liquidity
In open-end schemes, the investor gets the money back promptly at net asset
value related prices from the Mutual Fund. In closed-end schemes, the units
can be sold on a stock exchange at the prevailing market price or the investor
can avail of the facility of direct repurchase at NAV related prices by the
Mutual Fund.

Transparency

You get regular information on the value of your investment in addition to

disclosure on the specific investments made by your scheme, the proportion
invested in each class of assets and the fund manager's investment strategy
and outlook.

Flexibility

Through features such as regular investment plans, regular withdrawal plans

and dividend reinvestment plans, you can systematically invest or withdraw
funds according to your needs and convenience.

Affordability

Investors individually may lack sufficient funds to invest in high-grade stocks.

A mutual fund because of its large corpus allows even a small investor to take
the benefit of its investment strategy.

Well Regulated

All Mutual Funds are registered with SEBI and they function within the
provisions of strict regulations designed to protect the interests of investors.
The operations of Mutual Funds are regularly monitored by SEBI.
 Recent trends in mutual fund industry

The most important trend in the mutual fund industry is the aggressive
expansion of the foreign owned mutual fund companies and the decline of the
companies floated by nationalized banks and smaller private sector players.

Many nationalized banks got into the mutual fund business in the early
nineties and got off to a good start due to the stock market boom prevailing
then. These banks did not really understand the mutual fund business and
they just viewed it as another kind of banking activity. Few hired specialized
staff and generally chose to transfer staff from the parent organizations. The
performance of most of the schemes floated by these funds was not good.
Some schemes had offered guaranteed returns and their parent organizations
had to bail out these AMCs by paying large amounts of money as the
difference between the guaranteed and actual returns. The service levels were
also very bad. Most of these AMCs have not been able to retain staff, float
new schemes etc. and it is doubtful whether, barring a few exceptions, they
have serious plans of continuing the activity in a major way.

The experience of some of the AMCs floated by private sector Indian

companies was also very similar. They quickly realized that the AMC business
is a business, which makes money in the long term and requires deep-
pocketed support in the intermediate years. Some have sold out to foreign
owned companies, some have merged with others and there is general
restructuring going on.

The foreign owned companies have deep pockets and have come in here with
the expectation of a long haul. They can be credited with introducing many
new practices such as new product innovation, sharp improvement in service
standards and disclosure, usage of technology, broker education and support
etc. In fact, they have forced the industry to upgrade itself and service levels
of organizations like UTI have improved dramatically in the last few years in
response to the competition provided

Structure of the Indian mutual fund industry

The origin of mutual fund industry in India is with the introduction of the
concept of mutual fund by UTI in the year 1963. Though the growth was slow,
but it accelerated from the year 1987 when non-UTI players entered the
industry.

The Unit Trust of India dominates the Indian mutual fund industry, which has a
total corpus of more than Rs700bn collected from more than 20 million
investors. The UTI has many funds/schemes in all categories i.e. equity,
balanced, income etc with some being open-ended and some being closed-
ended. The Unit Scheme 1964 commonly referred to as US 64, which is a
balanced fund, is the biggest scheme with a corpus of about Rs200bn. UTI
was floated by financial institutions and is governed by a special act of
Parliament. Most of its investors believe that the UTI is government owned
and controlled, which, while legally incorrect, is true for all practical purposes.

The second largest categories of mutual funds are the ones floated by
nationalized banks. Canbank Asset Management floated by Canara Bank and
SBI Funds Management floated by the State Bank of India are the largest of
these. GIC AMC floated by General Insurance Corporation and Jeevan Bima
Sahayog AMC floated by the LIC are some of the other prominent ones.

The third largest category of mutual funds is the ones floated by the private
sector and by foreign asset management companies. The largest of these are
Prudential ICICI AMC and Franklin Templeton AMC and HDFC AMC. The
aggregate corpus of assets managed by this category of AMCs is in excess of
Rs 300 bn.
In the past decade, Indian mutual fund industry had seen dramatic
improvements, both quality wise as well as quantity wise. Before, the
monopoly of the market had seen an ending phase; the Assets under
Management (AUM) were Rs. 67bn. The private sector entry to the fund family
raised the AUM to Rs. 470 bn in March 1993 and till April 2005; it reached the
Height of 1,640 bn.

Putting the AUM of the Indian Mutual Funds Industry into comparison, the total
of it is less than the deposits of SBI alone, constitute less than 11% of the
total deposits held by the Indian banking industry.

The main reason of its poor growth is that the mutual fund industry in India is
new in the country but perception changing very fast now days. Large sections
of Indian investors are yet to be educated with the concept. Hence, it is the
prime responsibility of all mutual fund companies, to market the product
correctly abreast of selling. The mutual fund industry can be broadly put into
four phases according to the development of the sector. Each phase is briefly
described as under.

Mutual Fund Companies in India

The concept of mutual funds in India dates back to the year 1963. The era
between 1963 and 1987 marked the existence of only one mutual fund
company in India with Rs. 67bn assets under management (AUM), by the end
of its monopoly era, the Unit Trust of India (UTI). By the end of the 80s
decade, few other mutual fund companies in India took their position in
mutual fund.

The new entries of mutual fund companies in India were SBI Mutual Fund,
Canbank Mutual Fund, Punjab National Bank Mutual Fund, Indian Bank Mutual
Fund, Bank of India Mutual Fund.
The succeeding decade showed a new horizon in Indian mutual fund industry.
By the end of 1993, the total AUM of the industry was Rs. 470.04 bn. The
private sector funds started penetrating the fund families. In the same year the
first Mutual Fund Regulations came into existence with re-registering all
mutual funds except UTI.

Kothari Pioneer was the first private sector mutual fund company in India
which has now merged with Franklin Templeton. Just after ten years with
private sector player’s penetration, the total assets rose up to Rs. 1218.05 bn.
Today there are 33 mutual fund companies in India.

Major Mutual Fund Companies in India

RELINACE

Reliance Mutual Fund (RMF) is one of India’s leading Mutual Funds, with Average
Assets Under Management (AAUM) of Rs. 84563.92 Crs (AAUM for June 30th 08 )
and an investor base of over 68.38 Lakhs. Reliance Mutual Fund, a part of the
Reliance - Anil Dhirubhai Ambani Group, is one of the fastest growing mutual funds
in the country. RMF offers investors a well-rounded portfolio of products to meet
varying investor requirements and has presence in 118 cities across the country.
Reliance Mutual Fund constantly endeavors to launch innovative products and
customer service initiatives to increase value to investors. .

"Reliance Mutual Fund schemes are managed by Reliance Capital Asset

Management Limited., a subsidiary of Reliance Capital Limited, which holds 93.37%
of the paid-up capital of RCAM, the balance paid up capital being held by minority
shareholders

ICICI-Pru to unveil first FMP for retail investors

Mumbai: India's second largest mutual fund house ICICI-Prudential is offering a fixed
maturity plan for retail investors. ICICI Prudential's equity-linked Fixed Maturity Plan
(FMP) endeavors to couple the best features of equity and FMP. The most attaining
feature of equity is its growth potential and the most salient feature of 'FMP' is its
structure of downside protection. We hope to achieve the twin objective through the
product. ICICI's product was India's first equity-linked FMP. Conventional investors
fear a loss of money when the equity markets go down. This product will have ideally
protected investors from wealth erosion in the recent crash. The equity-linked FMP
brings an investment solution that offers risk-managed returns. This kind of product
is popular among HNI clients of foreign banks. The minimum ticket size for the
product being offered by foreign banks is Rs 10 lakh and above. The investors profit
when the Nifty goes up. If the Nifty goes down, the fund is designed such that
investors do not lose their initial corpus

HDFC MUTUAL FUND

HDFC Asset Management Company (AMC) is the first AMC in India to have been
assigned the ‘CRISIL Fund House Level – 1’ rating. This is its highest Fund
Governance and Process Quality Rating which reflects the highest governance
levels and fund management practices at HDFC AMC It is the only fund house to
have been assigned this rating for two years in succession. Over the past, we have
won a number of awards and accolades for our performance. Average Assets under
Management for April 2008 : Rs. 51,770.82 crore, No. of investors : 2,865,557 , No.
of ARN certified distributors : 26061
UTI

UTI Asset Management Company presently manages a corpus of over Rs. 46, 120
Crores * as on 31st July 2008 UTI Mutual Fund has a track record of managing a
variety of schemes catering to the needs of every class of citizenry. It has a
nationwide network consisting 98 UTI Financial Centres (UFCs) and UTI
International offices in London, Dubai and Bahrain. With a view to reach to common
investors at district level, 3 satellite offices have also been opened in select towns
and districts.

We have a well-qualified, professional fund management team, who have been

highly empowered to manage funds with greater efficiency and accountability in the
sole interest of unit holders. The fund managers are also ably supported with a
strong in-house securities research department. To ensure better management of
funds, a risk management department is also in operation

SBI MUTUAL FUND

SBI Mutual Fund is India’s largest bank sponsored mutual fund and has an
enviable track record in judicious investments and consistent wealth creation.
In twenty years of operation, the fund has launched 38 schemes and
successfully redeemed fifteen of them. In the process it has rewarded it’s
investors handsomely with consistently high returns. A total of over 5.4 million
investors have reposed their faith in the wealth generation expertise of the
Mutual Fund. Schemes of the Mutual fund have consistently outperformed
benchmark indices and have emerged as the preferred investment for millions
of investors and HNI’s. Today, the fund manages over Rs. 31,794 crores of
assets and has a diverse profile of investors actively parking their investments
across 36 active schemes. The fund serves this vast family of investors by
reaching out to them through network of over 130 points of acceptance, 28
investor service centers, 46 investor service desks and 56 district organisers.

Association of Mutual Funds in India(AMFI)

With the increase in mutual fund players in India, a need for mutual fund
association in India was generated to function as a non-profit organization.
Association of Mutual Funds in India (AMFI) was
incorporated on 22end august 1995.
AMFI is an apex body of all Asset Management Companies (AMC) which has
been registered with SEBI. Till date all the AMCs are that have launched
mutual fund schemes are its members. It functions under the supervision and
guidelines of its Board of Directors.

Association of Mutual Funds India has brought down the Indian Mutual Fund
Industry to a professional and healthy market with ethical lines enhancing and
maintaining standards. It follows the principle of both protecting and promoting
the interests of mutual funds as well as their unit holders.

The objectives of Association of Mutual Funds in India

The Association of Mutual Funds of India works with 30 registered AMCs of

the country. It has certain defined objectives which juxtaposes the guidelines
of its Board of Directors. The objectives are as follows: This mutual fund
association of India maintains a high professional and ethical standard in all
areas of operation of the industry.

It also recommends and promotes the top class business practices and code
of conduct which is followed by members and related people engaged in the
activities of mutual fund and asset management.

The agencies who are by any means connected or involved in the field of
capital markets and financial services also involved in this code of conduct of
the association.

AMFI interacts with SEBI and works according to SEBIs guidelines in the
mutual fund industry.]

Association of Mutual Fund of India do represent the Government of India, the

Reserve Bank of India and other related bodies on matters relating to the
Mutual Fund Industry.
It develops a team of well qualified and trained Agent distributors. It
implements a program of training and certification for all intermediaries and
other engaged in the mutual fund industry.

AMFI undertakes all India awareness programme for investors in order to

promote proper understanding of the concept and working of mutual funds.

At last but not the least association of mutual fund of India also disseminate
information’s on Mutual Fund Industry and undertakes studies and research
either directly or in association with other bodies.

Net Asset Value (NAV)

The net asset value of the fund is the cumulative market value of the assets
fund net of its liabilities. In other words, if the fund is dissolved or liquidated,
by selling off all the assets in the fund, this is the amount that the
shareholders would collectively own. This gives rise to the concept of net
asset value per unit, which is the value, represented by the ownership of one
unit in the fund. It is calculated simply by dividing the net asset value of the
fund by the number of units. However, most people refer loosely to the NAV
per unit as NAV, ignoring the "per unit". We also abide by the same
convention.

For the purpose of the NAV calculation, the day on which NAV is calculated by
a fund is known as the valuation date.

Calculation of NAV

The most important part of the calculation is the valuation of the assets owned
by the fund. Once it is calculated, the NAV is simply the net value of assets
divided by the number of units outstanding. The detailed methodology for the
calculation of the asset value is given below.

Asset value is equal to

Sum of market value of shares/debentures

+ Liquid assets/cash held, if any

+ Dividends/interest accrued

- Amount due on unpaid assets

- Expenses accrued but not paid

Details on the above items for liquid shares/debentures, valuation is done on

the basis of the last or closing market price on the principal exchange where
the security is traded.

For illiquid and unlisted and/or thinly traded shares/debentures, the value has
to be estimated. For shares, this could be the book value per share or an
estimated market price if suitable benchmarks are available. For debentures
and bonds, value is estimated on the basis of yields of comparable liquid
securities after adjusting for liquidity. The value of fixed interest bearing
securities moves in a direction opposite to interest rate changes Valuation of
debentures and bonds is a big problem since most of them are unlisted and
thinly traded. This gives considerable leeway to the AMCs on valuation and
some of the AMCs are believed to take advantage of this and adopt flexible
valuation policies depending on the situation.

Interest is payable on debentures/bonds on a periodic basis say every 6

months. But, with every passing day, interest is said to be accrued, at the
daily interest rate, which is calculated by dividing the periodic interest
payment with the number of days in each period. Thus, accrued interest on a
particular day is equal to the daily interest rate multiplied by the number of
days since the last interest payment date.

NAV of all schemes must be calculated and published at least weekly for
closed end schemes and daily for open-end schemes. NAV's for a day must
also be posted on AMFI's website by 8.00 p.m. on that day. This applies to
both the open-end and closed-end funds. One exception is those closed end
schemes which are not mandatory required to be listed in any stock exchange-
these funds may publish NAV at monthly or quarterly intervals as permitted by
SEBI. An example of such permitted schemes is the Monthly Income Schemes
that are not listed on a stock exchange.

A fund's NAV is affected by four sets of factors:

 Purchase and sale of investment securities

 Valuation of all investment securities held
 Other assets and liabilities, and
 Units sold or redeemed

Nowadays, many funds calculate and announce their NAVs even daily. Such
frequent computations of asset values involve valuation of all investment
securities at their market prices and inclusion of other assets and liabilities.
"Valuation" of securities is covered in the following Section Two.

 "Other Assets" include any income due to the fund but not received as
on the valuation date (for example, dividend announced by a company
yet to be received). "Other Liabilities" have to include expenses payable
by the fund, for example custodian fees or even the management fees
payable to the AMC. These income and expense items have to be
"accrued" and included in the computation of the NAY. SEBI requires,
therefore, that all expenses and incomes are accrued up to the
valuation date and considered for NAV computation. Major expenses
such as management fees should be accrued on a day-to-day basis,
while others need not be so accrued, if non-accrual does not affect NAV
by more than 1 %.
  It can be seen from the NAV definition that additions to and sales from
the portfolio of securities, and changes in the number of units
outstanding will both affect the per unit asset value. Such changes in
securities and number of units must be recorded by the next valuation
date. If frequency of NAV declaration does not permit this, recording
may be done within 7 days of the transaction, provided that the non-
recording does not affect NAV calculations by more than 2%. For
example, if a fund declares NAV every week, with the next declaration
date being January 15, then all sales/purchases/ redemptions up to
January 14 have to be reflected in the NAV as of January 15, except for
transactions whose value does not affect the NAV by more than 2%.
Such unrecorded transactions have to be included in the next week's
NAV calculation. If a fund calculates NAV daily, it will include all
transactions concluded up to today, except for small-value transactions,
which can be reflected in the next day's NAV subject to the 2%
restriction. Open-end funds are required to declare their NAVs daily.

Types of Mutual Fund Scheme

Mutual fund schemes may be classified on the basis of its structure and its
investment objective.

By Structure

Open-end Funds

An open-end fund is one that is available for subscription all through the year.
These do not have a fixed maturity. Investors can conveniently buy and sell
units at Net Asset Value ("NAV") related prices. The key feature of open-end
schemes is liquidity.

Benefits of Open-ended Schemes

Liquidity

In open-ended mutual funds, you can redeem all or part of your units any time
you wish. Some schemes do have a lock-in period where an investor cannot
return the units until the completion of such a lock-in period.

Convenience

An investor can purchase or sell fund units directly from a fund, through a
broker or a financial planner. The investor may opt for a Systematic
Investment Plan (“SIP”) or a Systematic Withdrawal Advantage Plan
(“SWAP”). In addition to this an investor receives account statements and
portfolios of the schemes.

Flexibility

Mutual Funds offering multiple schemes allow investors to switch easily

between various schemes. This flexibility gives the investor a convenient way
to change the mix of his portfolio over time.

Transparency
Open-ended mutual funds disclose their Net Asset Value (“NAV”) daily and the
entire portfolio monthly. This level of transparency, where the investor himself
sees the underlying assets bought with his money, is unmatched by any other
financial instrument. Thus the investor is in the know of the quality of the
portfolio and can invest further or redeem depending on the kind of the
portfolio that has been constructed by the investment manager.

Closed-ended Funds

A closed-end fund has a stipulated maturity period which generally ranging

from 3 to 15 years. The fund is open for subscription only during a specified
period. Investors can invest in the scheme at the time of the initial public issue
and thereafter they can buy or sell the units of the scheme on the stock
exchanges where they are listed. In order to provide an exit route to the
investors, some close-ended funds give an option of selling back the units to
the Mutual Fund through periodic repurchase at NAV related prices. SEBI
Regulations stipulate that at least one of the two exit routes is provided to the
investor.

 Fixed Maturity
 Fixed Corpus
 Generally Listed
 Buy and sell in the Stock Exchanges
 Entry/Exit at the market prices

Investment Objective

Equity Oriented Schemes

These schemes, also commonly called Growth Schemes, seek to invest a

majority of their funds in equities and a small portion in money market
instruments. Such schemes have the potential to deliver superior returns over
the long term. However, because they invest in equities, these schemes are
exposed to fluctuations in value especially in the short term.

Equity schemes are hence not suitable for investors seeking regular income or
needing to use their investments in the short-term. They are ideal for investors
who have a long-term investment horizon. The NAV prices of equity fund
fluctuates with market value of the underlying stock which are influenced by
external factors such as social, political as well as economic.

Debt Based Schemes

These schemes, also commonly called Income Schemes, invest in debt

securities such as corporate bonds, debentures and government securities.
The prices of these schemes tend to be more stable compared with equity
schemes and most of the returns to the investors are generated through
dividends or steady capital appreciation. These schemes are ideal for
conservative investors or those not in a position to take higher equity risks,
such as retired individuals. However, as compared to the money market
schemes they do have a higher price fluctuation risk and compared to a Gilt
fund they have a higher credit risk.

Hybrid Schemes

These schemes are commonly known as balanced schemes. These schemes

invest in both equities as well as debt. By investing in a mix of this nature,
balanced schemes seek to attain the objective of income and moderate capital
appreciation and are ideal for investors with a conservative, long-term
orientation.

General Purpose
The investment objectives of general-purpose equity schemes do not restrict
them to invest in specific industries or sectors. They thus have a diversified
portfolio of companies across a large spectrum of industries. While they are
exposed to equity price risks, diversified general-purpose equity funds seek to
reduce the sector or stock specific risks through diversification. They mainly
have market risk exposure.

Sector Specific

These schemes restrict their investing to one or more pre-defined sectors, e.g.
technology sector. Since they depend upon the performance of select sectors
only, these schemes are inherently more risky than general-purpose schemes.
They are suited for informed investors who wish to take a view and risk on the
concerned sector.

Special Schemes

Index schemes

The primary purpose of an Index is to serve as a measure of the performance

of the market as a whole, or a specific sector of the market. An Index also
serves as a relevant benchmark to evaluate the performance of mutual funds.
Some investors are interested in investing in the market in general rather than
investing in any specific fund. Such investors are happy to receive the returns
posted by the markets. As it is not practical to invest in each and every stock
in the market in proportion to its size, these investors are comfortable
investing in a fund that they believe is a good representative of the entire
market. Index Funds are launched and managed for such investors
Tax Saving schemes

Investors (individuals and Hindu Undivided Families (“HUFs”)) are being

encouraged to invest in equity markets through Equity Linked Savings Scheme
(“ELSS”) by offering them a tax rebate. Units purchased cannot be assigned /
transferred/ pledged / redeemed / switched – out until completion of 3 years
from the date of allotment of the respective Units.

The Scheme is subject to Securities & Exchange Board of India (Mutual

Funds) Regulations, 1996 and the notifications issued by the Ministry of
Finance (Department of Economic Affairs), Government of India regarding
ELSS.Subject to such conditions and limitations, as prescribed under Section
88 of the Income-tax Act, 1961, subscriptions to the Units not exceeding
Rs.10, 000 would be eligible to a deduction, from income tax, of an amount
equal to 20% of the amount subscribed.

Real Estate Funds

Specialized real estate funds would invest in real estates directly, or may fund
real estate developers or lend to them directly or buy shares of housing
finance companies or may even buy their securitized assets.

Liquid Income Schemes

Similar to the Income scheme but with a shorter maturity than Income
schemes.

Money Market Schemes

These schemes invest in short term instruments such as commercial paper
(“CP”), certificates of deposit (“CD”), treasury bills (“T-Bill”) and overnight
money (“Call”). The schemes are the least volatile of all the types of schemes
because of their investments in money market instrument with short-term
maturities. These schemes have become popular with institutional investors
and high networth individuals having short-term surplus funds.

Gilt Funds
This scheme primarily invests in Government Debt. Hence the investor usually
does not have to worry about credit risk since Government Debt is generally
credit risk free

Balanced Funds

The aim of balanced funds is to provide both growth and regular income. Such
schemes periodically distribute a part of their earning and invest both in
equities and fixed income securities in the proportion indicated in their offer
documents. In a rising stock market, the NAV of these schemes may not
normally keep pace, or fall equally when the market falls. These are ideal for
investors looking for a combination of income and moderate growth.

Load Funds

A Load Fund is one that charges a commission for entry or exit. That is, each
time you buy or sell units in the fund, a commission will be payable. Typically
entry and exit loads range from 1% to 2%. It could be worth paying the load, if
the fund has a good performance history.

No-Load Funds

A No-Load Fund is one that does not charge a commission for entry or exit.
That is, no commission is payable on purchase or sale of units in the fund.
The advantage of a no load fund is that the entire corpus is put to work.

Snapshot of Mutual Fund Schemes

Mutual Fund Objective Risk type Investment Who shouldInvestment
Type Portfolio invest horizon
Money market Liquidity +Negligible Treasury Bills,Those who2 days - 3
moderate income Certificate ofpark theirweeks
+ reservation of Deposits, funds in
capital Commercial current
papers, callaccount or
money short term
bank deposit
Short term fundsLiquidity +Little interestCall money,Those with3 weeks - 3
(Floating ShortModerate Income rate commercial surplus shortmonths
term) papers. Treasuryterm funds
bills, CD’s, Short
Term G- secs.

Bond funds Regular Income Credit risk &Predominantly Salaried &More than 9 -
(Floating Long- Interest rateDebentures, conservative 12 months
term) risk Government investors
securities,
corporate Bonds

Gilt funds Security& income Interest rateGovernment Salaried and12 months &
risk securities conservative more
Equity funds Long term capitalHigh risk Stocks Aggressive 3 years plus
appreciation investors with
long term out
look.

Index funds To generateNav, vary withPortfolio indexAggressive 3 years plus

returns which areindex like BSE NIFTYinvestors.
commensurate performance etc
with returns of
respective index
Balanced funds Growth & regularCapital marketBalanced ratio ofModerate &2 year plus
income risk andequity and debtAggressive
interest risk funds to ensure
igher returns at
lower risk

OFFER DOCUMENT
INTRODUCTION

What is an Offer Document?

When an Asset Management Company or a Fund Sponsor wishes to launch a

new scheme of a mutual fund, they are required to formulate the details of the
scheme and register it with SEBI before announcing the scheme and inviting
the investors to subscribe to the fund. The document containing the details of
a new scheme that the AMC or Sponsor prepares for and circulates to the
prospective investor is called the Prospectus or the Offer Document.

Many investors are familiar with the prospectuses for new issues of shares in
the primary markets. The Offer Documents issued by mutual funds serve the
same purpose of inviting investors and giving them the information about the
new issue.

The prospectus of a closed-end fund is issued only once at the time of issue,
as the units are normally not re-purchasable from investors. In fact,
investment in a closed-end fund is like investing in a company issuer's new
shares. However, it should be understood that the open-end mutual funds
could issue and repurchase units on an ongoing basis. This means that the
offer document of the open-end funds is valid for all the time, until amended,
though it will be first issued at the time of the launch of the scheme. SEBI
requires the offer document of an open-end fund to be revised every two years

Importance for the Investor

The offer document is one of the most important sources of information from
the perspective of the prospective investor considering investment in a new
mutual fund. Apart from the scheme details, the Offer Document also gives
much valuable information that is relevant for the investor's decision making
on whether he should consider subscribing to the new scheme being
proposed. It is imperative that the investor carefully studies the information
contained in the offer document before committing his investment.

In particular, the investor must understand the fundamental attributes of the

scheme, before he makes his investment decision. Fundamental attributes are
the essence of the scheme and include key information such as the objectives
and the terms of the scheme. Any change in the scheme attributes can only be
made with the investors' approval or knowledge.

The offer document is the operating document and describes the product i.e.
the scheme on offer. For the investor to understand what he is buying, he
needs to study the offer document carefully. As in the case of physical goods,
the principle of 'BUYER BEWARE" applies here i.e. an investor who invests in
units of a mutual fund without studying the information contained in the offer
document cannot subsequently hold the fund responsible for loss. The
investor must appreciate that he is buying units at his risk subject to
information contained in the offer document.

The offer document contains all of the important "disclosures" that the mutual
fund has to make, by regulation. The fund's obligation to give the relevant
information to the investor ends with the disclosures in the prospectus. The
investor must base his decision on these disclosures. His right to ask for more
information generally is not tenable later on. The offer document is, therefore,
the primary vehicle for the investment decision, a legal document that protects
and governs the right of the investor to information before he takes his
decision, and a reference document for the investor to look for the relevant
information at any time. The investor and his advisor must, therefore, read and
acquaint themselves thoroughly with this document. The offer document
contains a statement that SEBI does not approve. or disapprove anything
contained in the offer document; however, the trustees must vet the document
before it is issued.

The Contents
Broadly, the offer documents issued by mutual funds in India are required by
SEBI to include the following information:

 Details of the Sponsor and the AMC

 Description of the Scheme and the investment objective/strategy
 Terms of Issue
 Historical statistics
 Investors' Rights and Services

In addition, an abridged version of the offer document is usually distributed

with the application form. This is called the Key Information Memorandum.

SEBI Regulations lay down the format for a standard Offer Document and Key
Information Memorandum. Mutual funds in India are required to follow this
format. They may also include other disclosures, which are considered
material by the Trustees from the investors' perspective.

Section Two, which follows, outlines the specific items that must be included
in the Offer Document. However, before we get into the specifics, we need to
develop an appreciation of some of the practical aspects of the Offer
Document.

Regulation and Investors' Rights

Investors' Right to Information on Material Changes in Schemes

SEBI does not permit a scheme to be launched unless the Offer Document is
filed with it. The Offer Document must contain all of the essential information
about the scheme. Hence, the Offer Document remains valid as long as the
information it contains remains valid. In other words, the offer document will
remain effective until a material change in any of its contents occurs. In any
mutual fund scheme, material changes do occur over a period of time, thereby
creating the need to revise the Offer Document.

 Examples of such major changes include:

  reconstitution of the AMC
 imposing or enhancing of entry or exit loads
 change in the key personnel of the AMC especially the fund manager
 addition of new plans in the existing scheme
 change in management/controlling interest of the AMC
 fresh litigation cases or adjudication proceedings referred by SEBI
against sponsors or any company associated with the sponsors,
penalties imposed, etc.

SEBI Guidelines
SEBI wants to ensure the investors' basic right to information about the funds.
The information source is primarily the Offer Document. Hence, SEBI has
framed certain guidelines, with the objective being to help the investors to get
all the material information about their schemes at all times, not just before
they take investment decisions. These SEBI guidelines include:

Periodic Revisions required in Offer Document

 The offer document and the memorandum (i.e. abridged offer document)
have to be fully revised and updated at least once in two years.
 After completion of one year by any open ended scheme, its condensed
financial information has to be included in the offer document and the
memorandum. This information also has to be updated in the
subsequent years in the form of addendum to the offer document till the
time new revised offer document is printed.

Distribution of Revised Documents Specified

 Till the time the offer document is revised and reprinted, an addendum
giving details of each of the changes has to be attached to offer
documents and the memorandum. The addendum has to be circulated
to all the distributors/brokers, so that the same can be attached to all
offer documents and abridged offer documents already in stock. The
addendum has also to be sent to the existing unit holders.
  The date of the revised offer document/latest addendum has to be given
in the offer document. It may be mentioned in the offer document that
the investors may also like to ascertain any further changes, after the
date of the offer document, from the mutual funds its investor service
centers/ distributors or brokers.
 The mutual funds have to make arrangements to display the
modifications in the offer document in the form of a notice in all the
investor service centers and in the offices of their distributors/brokers.
The mutual funds may also give an advertisement or may issue a press
release about new changes and these can also be displayed on the
websites of mutual funds.
 A copy of all changes has to be filed with SEB!.

Where to Obtain the Updated Offer Documents?

In view of the fact that the Offer Document is the only source of
comprehensive, authentic. information about the scheme on offer and the fund
itself, it is imperative that the investor secures a copy and studies it carefully.
It is the investors' legal right to ask for a detailed offer document; the investor
may obtain a copy of the Offer Document directly from the AMC/fund office or
through an agent. The Key Information Memorandum is a concise version of
the Offer Document, and it would be easier for the investor to obtain a copy
with the application form at various distribution points such as the banks, the
agents and brokers.

Investor’s rights & Obligations

Rights - Legal Limitations

 Unit holders are not distinct from trust, they cannot sue trust.

 Sponsors do not have any legal obligations (Limited to initial

contribution)
  No rights to prospective investors

Obligations

 Must read offer doc & AOD

 Beware of risk factors
 Must monitor investments regularly

Investor’s complaint redressal mechanism

 Client Servicing
 Compliance Officer
 Companies Act cannot protect investors.

Choosing a Fund

Choosing a mutual fund seems to have become a very complex affair lately.
There is no dearth of funds in the market and they all clamor for attention.
The most crucial factor in determining which one is better than the rest is to
look at returns. Returns are the easiest to measure and compare across
funds.

At the most trivial level, the return that a fund gives over a given period is just
the percentage difference between the starting Net Asset Value (price of unit
of a fund) and the ending Net Asset Value. Returns by themselves don't serve
much purpose. The purpose of calculating returns is to make a comparison.
Either between different funds or time periods.

Absolute returns
Absolute returns measure how much a fund has gained over a certain period.
So you look at the NAV on one day and look at it, say, six months or one year
or two years later. The percentage difference will tell you the return over this
time frame.

But when using this parameter to compare one fund with another, make sure
that you compare the right fund. So the returns of a diversified equity fund
(one that invests in different companies of various sectors), should be
compare with other diversified equity funds. Don't compare it with a sector
fund, which invests only in companies of a particular sector. Don't even
compare it with a balanced fund (one that invests in equity and fixed return
instruments).

Benchmark returns

This will give a standard to make the comparison. It basically indicates what
the fund has earned as against what it should have earned.

A fund's benchmark is an index that is chosen by a fund company to serve as

a standard for its returns. The market watchdog, the Securities and Exchange
Board of India, has made it mandatory for funds to declare a benchmark index.
In effect, the fund is saying that the benchmark's returns are its target and a
fund should be deemed to have done well if it manages to beat the
benchmark.

Let's say the fund is a diversified equity fund that has benchmarked itself
against the Sensex. So the returns of this fund will be compared vis-a-vis the
Sensex. Now if the markets are doing fabulously well and the Sensex keeps
climbing upwards steadily, then anything less than fabulous returns from the
fund would actually be a disappointment.

If the Sensex rises by 10% over two months and the fund's NAV rises by 12%,
it is said to have outperformed its benchmark. If the NAV rose by just 8%, it is
said to have under performed the benchmark. But if the Sensex drops by 10%
over a period of two months and during that time, the fund's NAV drops by
only 6%, then the fund is said to have outperformed the benchmark.

A fund's returns compared to its benchmark are called its benchmark returns.

At the current high point in the stock market, almost every equity fund has
done extremely well but many of them have negative benchmark returns,
indicating that their performance is just a side-effect of the markets' rise rather
than some brilliant work by the fund manager.

Time period

The most important thing while measuring or comparing returns is to choose

an appropriate time period. The time period over which returns should be
compared and evaluated has to be the same over which that fund type is
meant to be invested in.

If you are comparing equity funds then you must use three to five year returns.
But this is not the case of every other fund. For instance, cash funds are
known as ultra short-term bond funds or liquid funds that invest in fixed return
instruments of very short maturities. Their main aim is to preserve the
principal and earn a modest return. So the money you invest will eventually be
returned to you with a little something added.

Investors invest in these funds for a very short time frame of around a few
months. So it is all right to compare these funds on the basis of their six-
month returns.

Market conditions
It is also important to see whether a fund's return history is long enough for it
to have seen all kinds of market conditions.

For example, at this point of time, there are equity funds that were launched
one to two years ago and have done very well. However, such funds have
never seen a sustained declining market (bear market). So it is a little
misleading to look at their rate of return since launch and compare that to
other funds that have had to face bad markets.

If a fund has proved its mettle in a bear market and has not dipped as much
as its benchmark, then the fund manager deserves a pat on the back.

Final checklist

Compare funds that are similar

Compare a fund with it's own stated benchmark, not another. For instance,
Fidelity Equity, Escorts Growth and BoB Growth are all diversified equity funds
with different benchmarks.

While there are other factors that have to be considered when investing in a
mutual fund, return is the most important. So make sure you do your
homework right on this count.

The rational choice is to choose an option where the tax liability is the lowest.
Of course, the choice may be superceded by some specific requirements. You
will consider dividend payout if you need a regular income. Or, if you want
your investment to grow over the years, you should opt for the growth option.

 If you want to invest in an equity fund for less than a year, it is better to
go for dividend payout or re-investment option as it reduces your tax
liability.
 Debt funds are not so simple, as you have to balance out between the
capital gains tax and the dividend distribution tax.
 For a person whose total income falls below the minimum taxable limits,
it is advisable to go for a growth or a bonus option. This will save the
investor from dividend distribution tax and nor will he be subject to
capital gains tax.
 If you are a taxpayer and plan to hold a debt fund for less than one year
and fall under the 10% tax slab, then go for the growth option or the
bonus option, as this will save you from the 12.5% dividend distribution
tax, while your capital gains tax will be at the lower rate of 10%.
 However, if you fall in a higher tax slab of 20% or 30%, then it would
make more sense to go for the dividend payout or re-investment option,
which will save you more on the capital gains tax, even after factoring in
the dividend distribution tax in most of the cases.
 As regards the long-term investment in a debt-oriented fund, it would be
advisable to go for growth or bonus option. This is because the capital
gains tax liability on such an investment cannot be more than 10% and
you will not shell out the 12.5% dividend distribution tax.
 While evaluating the performance of a portfolio, the return earned on the
portfolio has to be evaluated in the context of the risk associated with
that of portfolio.

HISTORY OF INDIAN MUTUAL FUNDS INDUSTRY

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
the. The history of mutual funds in India can be broadly divided into four
distinct phases.

First Phase – 1964-87

Unit Trust of India (UTI) was established on 1963 by an Act of Parliament. It
was set up by the Reserve Bank of India and functioned under the Regulatory
and administrative control of the Reserve Bank of India. In 1978 UTI was de-
linked from the RBI and the Industrial Development Bank of India (IDBI) took
over the regulatory and administrative control in place of RBI. The first
scheme launched by UTI was Unit Scheme 1964. At the end of 1988 UTI had
Rs.6,700 Crores of assets under management.

Second Phase – 1987-1993 (Entry of Public Sector Funds)

1987 marked the entry of non- UTI, public sector mutual funds set up by public
sector banks and Life Insurance Corporation of India (LIC) and General
Insurance Corporation of India (GIC). SBI Mutual Fund was the first non- UTI
Mutual Fund established in June 1987 followed by Canbank Mutual Fund (Dec
87), Punjab National Bank Mutual Fund (Aug 89), Indian Bank Mutual Fund
(Nov 89), Bank of India (Jun 90), Bank of Baroda Mutual Fund (Oct 92). LIC
established its mutual fund in June 1989 while GIC had set up its mutual fund
in December 1990.
At the end of 1993, the mutual fund industry had assets under management of
Rs.47,004 Crores.

Third Phase – 1993-2003 (Entry of Private Sector Funds)

With the 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
came into being, under which all mutual funds, except UTI were to be
registered and governed. The erstwhile Kothari Pioneer (now merged with
Franklin Templeton) 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 Regulations 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. As at the end of January 2003, there were
33 mutual funds with total assets of Rs. 1,21,805 Crores. The Unit Trust of
India with Rs.44, 541 Crores of assets under management was way ahead of
other mutual funds.

Fourth Phase – since February 2003

In February 2003, following the repeal of the Unit Trust of India Act 1963 UTI
was bifurcated into two separate entities. One is the Specified Undertaking of
the Unit Trust of India with assets under management of Rs.29, 835 crores as
at the end of January 2003, representing broadly, the assets of US 64
scheme, assured return and certain other schemes. The Specified
Undertaking of Unit Trust of India, functioning under an administrator and
under the rules framed by Government of India and does 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 SEBI and functions under the Mutual Fund
Regulations. With the bifurcation of the erstwhile UTI which had in March 2000
more than Rs.76, 000 Crores of assets under management and with the
setting up of a UTI Mutual Fund, conforming to the SEBI Mutual Fund
Regulations, and with recent mergers taking place among different private
sector funds, the mutual fund industry has entered its current phase of
consolidation and growth. As at the end of September, 2004, there were 29
funds, which manage assets of Rs.153108 Crores under 421 schemes.
The graph indicates the growth of assets over the years.

GROWTH IN ASSETS UNDER MANAGEMENT

Note:
While 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.
The Assets under Management of UTI was Rs. 67bn. by the end of 1987. The
performance of mutual funds in India through figures is appreciable. From Rs.
67bn. the Assets under Management rose to Rs. 470 bn. in March 1993 and
the figure had a three times higher performance by April 2004. It rose as high
as Rs. 1,540bn.
The net asset value (NAV) of mutual funds in India declined when stock prices
started falling in the year 1992. Those days, the market regulations did not
allow portfolio shifts into alternative investments. There was rather no choice
apart from holding the cash or to further continue investing in shares. One
more thing to be noted, since only closed-end funds were floated in the
market, the investors disinvested by selling at a loss in the secondary market.
The performance of mutual funds in India suffered qualitatively. The 1992
stock market scandal, the losses by disinvestments and of course the lack of
transparent rules in the whereabouts rocked confidence among the investors.
Funds now have shifted their focus to the recession free sectors like
pharmaceuticals, FMCG and technology sector. Funds performances are
improving. Funds collection, which averaged at less than Rs100bn per annum
over five-year period spanning 1993-98 doubled to Rs210bn in 1998-99. In the
2000 mobilization had exceeded Rs300bn. Total collection for the financial
year ending March 2000 reached Rs450bn.
India had been at the first stage of a revolution that has already peaked in the
U.S. The U.S. boasts of an Asset base that is much higher than its bank
deposits. In India, mutual fund assets are not even 10% of the bank deposits,
but this trend is beginning to change. The figures indicate that in the first
quarter of the year 1999-2000 mutual fund assets went up by 115% whereas
bank deposits rose by only 17%. (Source: Think tank, The Financial Express
September, 99) This is forcing a large number of banks to adopt the concept
of narrow banking wherein the deposits are kept in Gilts and some other
assets which improves liquidity and reduces risk. The basic fact lies that
banks cannot be ignored and they will not close down completely. Their role
as intermediaries cannot be ignored. It is just that Mutual Funds are going to
change the way banks do business in the future.

Brokerage

Industry Overview

Asset Management Business:

What do you do if all you want to deal is in money and the people who make
money (at least in the bull run), want to meet CEOs of large listed companies
on a regular basis and thinking about becoming the next Peter Lynch out of
India: join the business of managing money i.e. Asset Management.

Asset Managers are the professionals who manage your portfolio investments
in mutual funds. Broadly, Asset Managers' role is to convert mass-savings in
to profitable investments. Typically asset management is used in a more
restrictive sense of investing in securities and instruments that are issued in
either Money Market or in Capital Market. In larger sense, it can also be used
for investments in currently non-tradable securities, however expected to
become tradable sometime in future, such as Venture Capital. The asset
manager's role is specified by the investment objectives which he or she
seeks to achieve by investing in a variety of instruments. Generic categories
invested in are obviously Debt and Equity. However based on two factors,
duration and uncertainty or risk, each of these could be segmented in to
several types such as call money, short-term debt, government debt,
corporate debt, defensive shares, aggressive shares, convertibles etc.

The industry consists of several participants such as investment bankis,

brokerages, mutual funds, insurance companies and commercial banks. These
different outfits provide different roles and opportunities to the interested
professionals. Mutual Funds are the firms that are of central importance in this
whole scheme, while Brokerages are the exchange-registered firms that are
authorised to buy and sell securities on the behalf of these funds. Investment
Banking is a profession in its own right, and is of peripheral interest in talking
about Asset Management. Investment Banks play a role in origination of fresh
securities, acting as intermediaries both, in private placements deals as well
as in IPOs. Banks and Insurance companies also invest in various asset
classes, as a part of asset-liability matching exercise.

The firms that play the most active roles in securities business are Brokerages
and Mutual Funds. Typical roles that exist in the business are in
Sales/Dealing, Research and Portfolio Management. The former two are found
in Broking, while all the three are found in a Mutual Fund.
Broking

The roles that are of interest to finance professionals in a Brokerage, related

to this business are in Sales/ Dealing and in Research. Sales is about
generating the buy/ sell orders from the clients as well as providing a variety
of services to these clients.

Dealing relates to execution of these orders. In some brokerages, the same

team does dealing in the market hours, while is selling is done in the after-
market hours. Research in brokerage is done as an advisory "free" service to
the clients. Research done in Brokerages houses is called sell -side research.
The focus is on generating brokerage business by providing buy-sell advice.
There is a high-degree of client focus in sell-side research. Some researchers
focus on just providing information, while others provide full-fledged research
reports on Companies, Industries and Economy.

Mutual Fund

Mutual Funds provide the most comprehensive roles in the asset management
business to the finance professionals. The roles exist in Research, Portfolio
Management and Dealing/ Trading.

Trends

Mutual funds in India are experiencing never before collections riding on the
bull run, slew of new products, improved customer service and huge
advertising campaigns. The industry, which was dominated earlier by public
sector (UTI and others), is shifting towards private sector domination with the
emergence of new layers like Birla, ICICI Prudential, Kothari Pioneer etc. The
lure of Indian markets has not left even the largest mutual fund in the world,
Fidelity untouched which is about to make its debut soon. The other new
player in the market is Principal Group of USA (in collaboration with IDBI).
Most of the foreign and private sector banks (Standard Chartered, ANZ, Amex,
HDFC) are thinking about mutual fund plans.

The hottest development in the industry is internet trading with SEBI allowing
individuals to put their buy and sell order thru the inernet. A lot of action (and
bloodbath) is expected in the sector in coming months.

Nothing Speaks like Money

The money in asset management probably can’ t match that in investment

banking, but it is becoming almost as good. Good fund managers and brokers
tend to earn as good money as anybody in investment banking and

if you like the game of stock investing and trading, then probably you could
end up making more bucks from your personal portfolio than you would care to
get in salary. And all this without the pressure packed work life of investment
banking.

Larger than Life

If Fidelity created a Peter Lynch in USA, the mutual fund industry in India is
creating many in the form of Sameer Arora, Bharat Shah and Ketan Parekh. If
you are successful in making more money from money, then nothing can beat
you. Whether you are a research analyst or a fund manager, a good
performance at work has the potential to catapult you into the big league
where you would be almost worshipped by people.

When do you take a Break?

After a period of time you won't be able to distinguish when you're working and
when you're not. When you are home after watching BSE sensex gyrate 300
points up and 250 points down, you would be tuned to CNBC to find out the
latest Infy price on NASDAQ (the premier technology exchange based in USA
for the uninitiated). That's not to say you won't be able to get away to the Goa
from time to time, but your mind will always be on stocks and the stock
market. You will be completely addicted to finding the next bit of news and
data on the stock you added to your portfolio recently. Your brain will take
over your apartment.

Is this a Sales Call?

If you happen to be part of the sales team at brokerage houses, prepare to be

hated, hung up on, abused, and ignored. Cold calling is the most ego-
battering, exhausting form of misery ever devised. But calling people regularly
who give you business and thus bonuses (read fund managers) is part of the
ritual everyday, if you plan to sell and sell well. You will soon forget this when
you get a glimpse of your year-end bonus. Good sales people are the most
wanted and highest paid professionals in the business

Employment Tips

Key Jobs

 Fund Manager
 Research
 Dealing
 Sales
 Marketing
 Ttechnology
 Operations (back office)

Fund Manager
This is the biggest of them all. If you are in fund management, that’s what you
aspire to be. But getting here is not easy. Most of the fund managers are
groomed internally, typically have research background and have to prove
themselves before they are promoted to the position.

As a fund manager, you would be involved in stock allocation, sector

allocation, putting buy and sell orders to trading room, portfolio review and
reporting. The operations in asset management companies are centered
around fund managers. With the advent of more opportunities and growth in
the sector, the demand for good fund manager is rising and you can expect to
become a fund manager with 4-5 year of research experience except in some
public sector funds (UTI) where you can expect much bigger responsibilities
much early in your career.

Research

This is where most of the fresh MBAs are absorbed. In a mutual fund this will
be called ‘buy side research’ where in you would be making internal research
for investment decisions and your research will not be published. While in
brokerages you will be part of ‘sell side research’ and your reports will go out
to fund managers and other people connected to the markets. Typically you
would be assisting a senior research analyst who could be handling research
in a number of industry sectors, securities markets or economy.

A research analyst values individual stocks by forecasting cash flows, profits

and other efficiency parameters. This job typically involves meeting company
management, tracking industry dynamics, quarterly results, daily news and
other corporate developments to arrive at forecasts. After putting in few years
of research work, you can expect to graduate to being a research head or an
assistant fund manager. Propelled by the demand being driven by surging
stock markets, you would probably find it easy to get a research job. But to
excel in research you need to have good analytical and communication skills
(at least writing skills) and a good understanding of theoretical concepts in
finance.
Marketing

If you aspire to be a marketing wizard, the growth of the mutual fund industry
by leaps and bound provides you plenty of opportunities to hone your skills
and put your creative energies to work.

The marketing budgets at most of the asset management companies are being
reworked to meet the increased demand and you will be able to work on
product launches, target markets, and entirely new marketing concepts like
internet distribution and financial supermarkets. Also a fair amount of your
time will be spent watching the rearview mirror so that you don't get beaten to
the punch with a hot new product from "Kothari Pioneer".

Sales

As a sales person, you could be involved in retail or institutional sales. In

mutual funds you would be selling the schemes. While in a broker house your
time will be used in soliciting business (i.e. buy and sell orders) from clients.
The key to success in a sales job is building of lasting client relationships.

Dealing

Did you watch your mom haggling over the price of vegetable during your
wonder years. Think you can do the same. Then you are (over) qualified for
being a dealer. Dealers are responsible for executing the buy and sell orders
given by fund managers. To excel in a dealer’s job you require a cool head (to
be able to take 300+ and 200 down movement of BSE within an hour), speed
of thinking (to get that lot of Wipro before someone else does), and great
people skills.

Operations
The role of back office is to handle post trade activities including settlement,
payments etc. In mutual funds, they would be also be involved in calculating
NAVs of the funds.

Technology

That’s where many challenging opportunities are coming. The convergence in

banking and mutual fund product offerings and new channels of distribution
(including internet) has created a lot of space for technology people within the
sector. You would be involved in automating the processes and integration of
various platform used for dealing, distribution.

SBI MUTUAL FUNDS

INTRODUCTION

SBI Mutual Fund is India’s largest bank sponsored mutual fund and has an
enviable track record in judicious investments and consistent wealth creation.
The fund traces its lineage to SBI - India’s largest banking enterprise. The
institution has grown immensely since its inception and today it is India's
largest bank, patronized by over 80% of the top corporate houses of the
country.
SBI Mutual Fund is a joint venture between the State Bank of India and Société
Générale Asset Management, one of the world’s leading fund management
companies that manages over US$ 500 Billion worldwide. SGAM was established in
the year 1996 and has presence in United States, Continental Europe, United
Kingdom and Asia SBI Mutual Funds is the first mutual fund set up by the public
sector bank.

Last year SBI Mutual Funds as one of the fastest growing AMCs (Assets
Managements Company) in the country registered a total Income at Rs.127.77 crs.
posted a YOY growth of 55% and Profit After Tax at Rs.47.77 crs. posted a YOY
growth of 81%. Its assets under management of Rs. 30,132 Crores as on June 2008.

The Board of Trustees of SBI MF has entrusted the management of the fund to SBI
Funds Management Pvt. Ltd., the AMC.
COMPANY PROFILE

SBI Funds Management Pvt. Ltd. (SBIMF) having it’s corporate office at 191, Maker
Tower “E”, 19th Floor, Cuffe Parade, Mumbai 400 005 is a joint venture between SBI
and SGAM. Today the Fund has an investor base of over 2.8 million spread over 23
schemes. Pursuant to the shareholder’s and Share Purchase Agreement dated
November 5, 2004 entered into amongst State Bank of India (SBI), Societe Generale
Asset Management (SGAM), Societe Generale S.A. and SBI Funds Management
Private Limited (SBIFM), 37% of the paid up share capital of the AMC (i.e. 18,50,000
equity shares of Rs. 100/- each) had been transferred by SBI to SGAM on December
21, 2004.

SBIFM had entered into an Investment Management Agreement with the Trustees of
SBI Mutual Fund on 14th May, 1993 and also a supplemental thereto on 28 th April,
2003 and the same have been replaced by Restated and Amended Investment
Agreement entered into between SBIMFTCPL and SBIMF on December 29, 2004. in
terms of this Agreement, SBIMF has assumed the day to day investment
management of the fund and in that capacity makes investment decisions and
manages the SBI Mutual Fund Schemes in accordance with the scheme objectives,
Trust deed, provisions of Investment Management Agreement and SEBI Regulations
& Guidelines.

To date, SBIMF has successfully launched and managed 37 schemes (including 2

offshore funds) of SBI Mutual Funds of which 19 schemes have been redeemed. Of
the 18 schemes still being managed, 16 are open-ended schemes and the rest are
close-ended schemes, with total net assets of Rs. 30,132 Crores as on June 2008.

In addition to the Investment Management activity, SBI Funds Management Private

Limited has also been granted a certificate of

registration as a Portfolio Manager with registration code INP000000852. the

certificate of registration is valid for a period of three years up to 15th January 2007.
The AMC certifies that there would be no conflict between the Asset Management
activity and the Portfolio Management activity.
Sponsor

Sponsor is a person who sets up a Mutual Fund. Sponsor contributes to the initial
capital of the Trust. Sponsor appoints the Board of Trustees. Sponsor appoints Asset
Management Company. Sponsor contributes minimum 40% of net worth of AMC. For
SBI Mutual Fund the sponsor is State Bank of India

Board of Trustees

Trustees appointed by the Sponsor with SEBI approval. Trustees oversee the
functioning of AMC. The trustee company is SBI Mutual Fund Trustee Company
Private Limited

Registrar & Transfer Agent

The Registrar & Transfer Agent issues, redeems, transfers units of MF schemes and
Keeps Unit Holders A/c’s upto date. For SBI MF The Registrar is Computer Age
Management Services Pvt. Ltd., Computronics Financial Services India Ltd and
Datamatics Financial Software Services Ltd.

Custodian

A Custodian keep record & account of Securities / Investments and Collects benefits
under Securities. The custodian for SBI MF is Citi Bank, HDFC Bank Ltd. And Stock
Holding Corporation of India.
PRODUCT PROFILE
 SCHEMES OF SBI

1) EQUITY SCHEMS
2) DEBT SCHEMES
3) BALANCED SCHEMES

EQUITY

The investments of these schemes will predominantly be in the stock markets and
endeavor will be to provide investors the opportunity to benefit from the higher
returns which stock markets can provide. However they are also exposed to the
volatility and attendant risks of stock markets and hence should be chosen only by
such investors who have high risk taking capacities and are willing to think long term.
Equity Funds include diversified Equity Funds, Sectoral Funds and Index Funds.
Diversified Equity Funds invest in various stocks across different sectors while
sectoral funds which are specialized Equity Funds restrict their investments only to
shares of a particular sector and hence, are riskier than Diversified Equity Funds.
Index Funds invest passively only in the stocks of a particular index and the
performance of such funds move with the movements of the index.

 Magnum COMMA Fund

 Magnum Equity Fund
 Magnum Global Fund
 Magnum Index Fund
 Magnum MidCap Fund
 Magnum Multicap Fund
 Magnum Multiplier Plus 1993
 Magnum Sector Funds Umbrella
  MSFU - Emerging Businesses Fund
 MSFU - IT Fund
 MSFU - Pharma Fund
 MSFU - Contra Fund
 MSFU - FMCG Fund

 SBI Arbitrage Opportunities Fund

 SBI Blue chip Fund
 SBI Infrastructure Fund - Series I
 SBI Magnum Tax gain Scheme 1993
 SBI ONE India Fund
 SBI TAX ADVANTAGE FUND - SERIES I

DEBT
Debt Funds invest only in debt instruments such as Corporate Bonds, Government
Securities and Money Market instruments either completely avoiding any
investments in the stock markets as in Income Funds or Gilt Funds or having a small
exposure to equities as in Monthly Income Plans or Children's Plan. Hence they are
safer than equity funds. At the same time the expected returns from debt funds
would be lower. Such investments are advisable for the risk-averse investor and as a
part of the investment portfolio for other investors.

 Magnum Children`s Benefit Plan

 Magnum Gilt Fund

1. Magnum Gilt Fund (Long Term)

2. Magnum Gilt Fund (Short Term)
 Magnum Income Fund

 Magnum Income Plus Fund

1. Magnum Income Plus Fund (Saving Plan)
2. Magnum Income Plus Fund (Investment Plan)

 Magnum Insta Cash Fund

 Magnum InstaCash Fund -Liquid Floater Plan
 Magnum Institutional Income Fund
 Magnum Monthly Income Plan
 Magnum Monthly Income Plan Floater
 Magnum NRI Investment Fund
 SBI Capital Protection Oriented Fund - Series I
 SBI Debt Fund Series

1. SDFS 15 Months Fund

2. SDFS 90 Days Fund
3. SDFS 13 Months Fund
4. SDFS 18 Months Fund
5. SDFS 24 Months Fund
6. SDFS 30 DAYS
7. SDFS 30 DAYS
8. SDFS 60 Days Fund
9. SDFS 180 Days Fund
10. SDFS 30 DAYS

 SBI Premier Liquid Fund

 SBI Short Horizon Fund

1. SBI Short Horizon Fund - Liquid Plus Fund

2. SBI Short Horizon Fund - Short Term Fund
BALANCED

Magnum Balanced Fund invests in a mix of equity and debt investments. Hence they
are less risky than equity funds, but at the same time provide commensurately lower
returns. They provide a good investment opportunity to investors who do not wish to
be completely exposed to equity markets, but is looking for higher returns than those
provided by debt funds.

 Magnum Balanced Fund

 Magnum NRI Investment Fund - Flexi Asset Plan

SBI Mutual Fund was founded with a vision:

SBI MF draws its strength from India's Largest Bank State Bank of India and
Societe Generale Asset Management, France

SBI Mutual Fund is celebrating 20 years of rich experience in fund management. We

are a joint venture between State Bank of India—one of India's largest banking
enterprises—and Societe Generale Asset Management (France)—one of the world's
leading fund management companies.

vision:

“To reach out to the smallest of the small investor and provide them with alternate
investment options to help achieve their financial goals.”
It is our endeavour to be a globally respected organisation whose core values lie in
the integrity and consistency with which we provide expert investment solutions and
value to our investors.

In 1987, we took on the challenging task of establishing mutual funds as a viable

investment option to the masses in our country. For this, we developed innovative,
need specific products and educate them about the benefit of investing in capital
markets through mutual funds. Today, we offer our investment expertise not only in
domestic mutual funds but also offer an Offshore Fund, and Portfolio Management
Services for institutional clients through SBI Funds Management Pvt. Ltd.
Empowering dreams of investors has always been our singular focus.

At SBI MF, we devote considerable resources to gain, maintain and sustain our
profitable insights into market movements. We consistently push the envelope to
ensure our investors get value for their investments. The trust reposed on us by over
37 lac investors is a genuine tribute to our expertise in Fund Management and
dedication to our singular focus. This has also resulted in various awards and
accolades for us from the mutual fund industry. But naturally, this motivates us to do
better.

Today, SBI MF has created an identity of its own by proposing and practicing
customer care, financial inclusion and governance of the highest standards. We are
now synonymous with Innovation and Performance—our benchmarks of success
over the years. Our expertise and performance are frequently recognised by the
industry and are responsible for us becoming proud recipients of numerous awards

OBJECTIVES
Significance:
Significance of the project is to analyze various tax saving investment instrument.
This study will try to analyze various tools that help in judging the performance of
mutual funds. The study will try to find out that out of a number of tax saving funds
available in market how can an investor select a fund on the basis of its performance
and volatility measures with the help of certain statistical tools.
The study also provides various investment options available for the investors.
The study will compare various mutual funds that are eligible for deduction under
section 80 C.

Objectives:
To study the Mutual funds industry in detail
To study the Investment options available for investors
To study the deduction under section 80 C for investment in various instruments.
To do a comparative analysis of various Tax Saving Mutual Funds in Industry.
To compare various tax saving funds on the basis of Standard Deviation, Sharp
Ratio, Beta Ratio, R- Squared and Expense Ratio.

Scope of the Study:

In current scenario, the inflation rate is quite high and the interest rates are quite low
so people don’t get satisfactory returns on their investments. While opting for
traditional tax saving instruments like PPF and Fix Deposits the investor will get a
return of 7% to 8% and sacrifice superior returns given by stocks. So study will
concentrate on Equity linked Saving Schemes offered by Mutual Funds.
There is a large number of tax saving funds available in the market. The study will
concentrate on to do a comparative analysis of the funds on the basis of various
ratios and other statistical tools.

METHODOLOGY
RESEARCH METHODOLOGY

I decided to do the project in two parts. The first part of the project is comprised of
the study of Mutual Funds as a whole and the second part deals with the investor’s
perception regarding their investment preferences about investment in Mutual Funds.

The first part of the project i.e. descriptive study is comprising an overall study of
Mutual funds as what it is ,why to invest and where to invest, risk factor associated
with it ie, an overview of whole Mutual fund industry.

The second part of the project that is related to investors perception about
investment in Mutual funds available in market. Indian Stock market has undergone
tremendous changes over the years. Investment in Mutual Funds has become a
major alternative among Investors. The project has been carried out to understand
investor’s perception about Mutual Funds in the context of their trading preference
and explore investor’s risk perception.

The first part of the project relating the study of Mutual funds is collected through
secondary data obtained from internet & books whereas the second part relating the
Investors perception about investment in Mutual Funds is covered using primary
data.
 SOURCE OF DATA COLLECTION

Both Primary and Secondary data are required

Primary data is the first hand information collected directly from the respondents.
The tool used here is questionnaire. Primary Data is collected through survey among
existing clients along with the other investors

Secondary data is collected through internet, books. I had prepared a questionnaire

for collecting information about second part of the project.
 DATA ANALYS AND INTERPRETATION

Q1. Do you invest in mutual fund?

YES
2. NO

QUESTION RESPONDENTS

YES 50

NO 150

180

160
140
120
100
NUMBER
80
60
40
20
0
Yes No

(A) If yes than

Q2. What is your main objective of investing in mutual funds?

Objectives of investment Respondent

20
Growth
Liquidity 8
Safety 4
Tax-saving 16
Immediate gains 2
Any other 0

20
18
16
14
12
10
8 numbers
6
4
2
0
Growth Tax-
saving

Q3:- For how long have you been investing in mutual funds?
  Less than 1 year
 Between 1 to 2 years.
 Between 2 to 3 years.
 More than 3 years.

Period of Investment
Respondents
6
Less than one year
Between 1 to 2 year 10
Between 2 to 3 years 14
More than 3 years 20

20

15

10
numbers
5

0
less thanBetween Between More
1 yr. 1 & 2 yr. 2 & 3 yr. than 3
yr.

Q4:- Which type of mutual fund do you own?

 Sector wise
 • Public sector funds
• Private sector funds
 Nature wise
• Open ended funds
• Close ended funds
 Type wise
• Equity
• Debt
• Balanced
• Blue chip

Sector wise investment Respondent

Public sector funds 34

Private sector funds 16

Public Sector
Privae Sector

Nature wise investment Respondent

Open ended funds 38

Close ended funds 12
 40
35
30
25 Open ended funds
20
Close ended funds
15
10
5
0

Type wise investment Respondent

Equity 20
Debt 14
Balanced 6
Blue-chip 10

25

20

15
numbers
10

0
Equity Debt Balanced blue-chip

Q5:- Which information do you rely on?

 Prospectus/Self analysis
 News-paper
  Investment adviser
 TV.(CNBC,etc)
 Friends/Relatives

Information Rely Respondent

Prospectus/self analysis 14
News paper 8
Investment advisor 12
T.V(NDTV, etc) 10
Friends and relatives 6

14
12
10
8
6
Numbers
4
2
0
Prospectus Invest. Friends &
Advisor Relatives

Q6:- What is the most important criterion for you for selecting a
particular mutual fund?
 Past performance
 Service
 Promoter’s background
  Any other

Criterion for selection of fund Respondent

Past performance 30
Service 4
Promoter’s background 8
Any other 8

30
25
20
15
NUMBER
10
5
0
PAST PROMOTER
PERFORMANCE BACKGROUND

Q7:- What is your level of satisfaction from your mutual fund?

 Satisfied
 Dissatisfied
 Neither satisfied Nor dissatisfied
 Level of satisfaction Respondents

Satisfied 35
Dissatisfied 0

Neither satisfied nor dissatisfied 15

35
30
25
20
15 NUMBER

10
5
0
SATISFIED INDIFFERENT

Q8:- What deficiencies do you find in your mutual fund?

 Track record
 Transparency
 Service quality
 Any other
 Deficiencies in funds Respondent
Track records 6
Transparency 20
Service quality 14
Any other 10

20
18
16
14
12
10
8 NUMBER
6
4
2
0
TRACK SERVICE
RECORDS QUALITY

Q10:- If you are given an option to invest, in which mutual fund would you like
to invest In ?
 UTI mutual fund
 SBI mutual fund
 Prudential ICICI mutual fund
 HDFC mutual fund
  Franklin Templeton mutual fund
 HSBC mutual fund

Major Responses
UTI mutual fund 6
SBI mutual fund 14
Prudential ICICI mutual fund 8
HDFC mutual fund 4
Franklin Templeton mutual fund 14
HSBC mutual fund 6

14
12
10
8
6 NUMBER
4
2
0
UTIMF SBIMF ICICIMF HDFCMF FRTMF HSNCMF

Q11. Are you aware that mutual fund industry is regulated by SEBI?
 Yes
 No
Awareness about SEBI Regulation Respondent

Yes 40

No 10
 40
35
30
25
20
NUMBER
15
10
5
0
YES NO

Q12:-Do you think SEBI regulations regarding mutual fund are

appropriate?
 Yes
 No

Appropriation of SEBI regulation Respondent

Yes 35

No 15
 35
30
25
20
15 Numbers

10
5
0
Yes No

Q13:-What do you think about the future of mutual fund in India?

 Very bright
 Bright
 Very bleak
 Bleak
 Does not know

Future of mutual fund in India Respondent

Very bright 8
Bright 20
Very bleak 0
Bleak 6
Doesn’t know 16
 20

15

10
Numbers
5

0
Very Bright Bleak Very Dsnt
Bright Bleak Know

If no then

Q14:- Why you have not invested in mutual fund?

 Lack of information
 Past bad experience
 High risk
 Any other

Reason to not invest in mutual fund Respondent

Lack of information 80
Past bad experience 20
High risk 16
Any other 34
80
70
60
50
40
30 Num
20
10
0
Lack of Past bad High Risk Any Other
knowledge Experience
Q15:- Would you consider investing in mutual fund?
 Yes
 No

Will you invest in mutual funds Respondent

Yes 50

No 100

100

80

60
Numbers
40

20

0
Yes No
 Interpretation
 It was found that Bank deposits are still the most preferred investment
instruments among most of the investors. The second most preferred
investment instrument is the Insurance. Then comes the Bonds/Debentures,
any Other (PPf, GPF, Property), Equity Shares, Mutual fund.

 On the basis of survey conducted only 25% people invested in mutual fund,
and 75% people are not invested in mutual fund.
 People who invest in mutual fund

 The objective of investing in mutual fund is Growth, second main objective is

Tax saving.

 Generally people have more than 3 years’ experience of investing in mutual

fund. Some people have 2 to 3 years’ experience of investing in mutual fund.

 Also most of people own Public sector mutual funds. They preferred the
nature of mutual fund as an open-ended fund, and the type of mutual funds
they preferred are Debt funds. Then comes Balanced and Equity fund.

 People rely more on information supplied by friends,/relatives and by the

investment adviser.

 Mostly people are Satisfied with their mutual funds, some of them Neither
satisfied Nor dissatisfied.

 The main problem that the people find with mutual funds is Transparency in
both Public and Private sector funds.

 Regarding preference of mutual fund Prudential ICICI preferred by most of the

investors. Second preference some investor preferred UTI, SBI, HDFC.

 Above 80% of people aware that mutual fund industry is regulated by SEBI.

 70% people think that SEBI regulations regarding mutual fund are
appropriate.

 According to survey 32% people Do not know about the future of mutual fund
in India, 40% people think that the future of mutual fund is Bright.
 People who do not invest in mutual fund

 Also in India most of the people lack of awareness about mutual fund. They
don’t know any thing about what is mutual fund, how it works. How fund
managers invest people’s money in different portfolios and provide the better
returns to the customers.

 55% people were not considering to invest in mutual fund because they have
had bad experience or they simply don't have money to invest.
 SWOT ANALYSIS

Strengths:
• Brand Name
• Trust of the people
• Good employees
• Wide dealers & brokers network
• Good knowledge about Mutual Fund
• Fund managers are well aware of market trends

Weaknesses :
• Less staff.
• Customer Services is not as per the Industry benchmark.
• Lack of awareness in general public about the company's products.

Opportunities :
• People are getting more interested to invest in Mutual Funds
• Huge Market
• Presently few major players in the Industry
• Government is promoting the Mutual Fund by giving easy
investment loans.

Threats :
• Many new players are entering the Industry
• Government Tax Policy
• People's lack of faith in mutual funds due to the US-64 scandal.
• Other competitive investment schemes available in the market
 LIMITATIONS

There were certain limitations faced during the study.

 Some people were not willing to disclose the investment profile
 The biased ness was being taken care of.
 The area of sample was decided after taking into consideration the major
factors like
 Availability of investors
 Approachability,
 Time available with investor for interaction, etc.
 RECOMMENDATIONS

From my study I have found out that very less number of people are aware about
Mutual Funds so the various Asset Management Companies should try to
increase the Awareness level of the people collectively in the interest of both the
investors and the industry. The advertisements should be put more into Financial
Newspapers and on Business Channels as they are considered as highly
Reliable by the investors.

Various Asset Management Companies such as Fidelty, Franklin Templeton and

other who were not in the top 5 companies as perceived by the investors should
try to increase the awareness level of the people about their Brands.

To maintain the investor’s faith in a Brand name it must provide good services
and try to ensure the safety and profitability of their investment as they correlate a
Good Brand name with Good Service.
 CONCLUSION
Today large number of Mutual fund companies are there in the market.
Presently all the mutual fund companies are governed by the rules and regulation
framed by the (SEBI ) Securities and Exchange Board of India.
Thus realizing the necessity of the performance appraisal of various mutual fund
schemes in the present scenario comparative study of selected mutual fund
schemes (Equity and tax saving schemes ) with the SBI mutual fund schemes
has been undertaken. Comparison has been done taking into consideration the
Various parameter like standard deviation , sharpe ratio, R Squared ratio, Alpha
values , beta values etc.
In conducting the study secondary data has been used which was collected
from various books magazines, Newspapers , Internet, etc.and required
information was also collected from various Mutual fund houses by visiting their
offices.
The comparative analysis of the mutual fund schemes enables us to rank the
performance of various portfolios and evaluate the adequacy of their
performance. These are abundantally relied both by the portfolio managers and
investors in their investment decisions making process. It is shown in the study
that schemes have perform well in the long run There are variation of return in the
short run so investor may get benefit from a particular scheme and may earn loss
in the short run but when we see the long run return the results are
satisfactory . Schemes selected in the study ie. Equity schemes and Tax Saving
schemes give better return over three year period, tax saving schemes have
lock in period of three year so these schemes are better for long term investment
they save tax and give satisfactory return also. It is advisable for the investor to
invest money in the mutual fund for long period of time and not for a month or two
month , in the short run performance may or may not be satisfactory, in the long
run mutual fund give better return
 QUESTIONNIRE SURVEY

My Name is saini ram niranjan; I am from “SBI Funds Management Pvt. Ltd”. I
have been advised to conduct a survey concerning, “ To assess the Study of
Consumer Awareness, Perception and Practice Regarding of Mutual Fund
Investment and investors with various investment in mutual fund how to increase
the market potential of “SBI MUTUAL FUND”. The Objective of the study is to know
about the customer awareness, perception regarding of mutual fund, and market
potential of this organization and customers desire related to current situation for
improvement in quality of products and performance of services of this organization.
We will maintain full secrecy of data provided by you. I would be greatly obliged if
you will fill this questionnaire.
QUESTIONNIRE SAMPLE

Q-1:- Do you invest in mutual fund?

Yes No

(A) If yes than

Q2:- What is your main objective of investing in mutual funds ?

Growth Liquidity Safety
Tax-saving Immediate gains Any other

Q3:- For how long have you been investing in mutual funds?
Less than 1 year Between 1 to 2 years
Between 2 to 3 years More than 3 years

Q4:- Which type of mutual fund do you own?

a. Sector wise
Public sector funds Private sector funds
b. Nature wise
Open ended funds Close ended funds
c. Type wise
Equity Debt
Balanced Blue chip
Q5:- Which information do you rely on?
Prospectus/Self analysis News-paper
Investment adviser TV.(CNBC,etc)
Friends/Relatives

Q6:- What is the most important criterion for you for selecting a
particular mutual fund?
 Past performance Service
Promoter’s background Any other

Q7:- What is your level of satisfaction from your mutual fund?

Satisfied Dissatisfied
Neither satisfied Nor dissatisfied

Q8:- What deficiencies do you find in your mutual fund?

Track record Transparency
Service quality Any other

Q9:- If you are given an option to invest, in which mutual fund would you like
to invest in?
UTI mutual fund SBI mutual fund
Prudential ICICI mutual fund HDFC mutual fund
Franklin Templeton mutual fund HSBC mutual fund

Q10:- Are you aware that mutual fund industry is regulated by SEBI?
Yes No

Q11:-Do you think SEBI regulations regarding mutual fund are

appropriate?
Yes No

Q12:-What do you think about the future of mutual fund in India?

Very bright Bright
Very bleak Bleak
Does not know
If no then

Q13:- Why you have not invested in mutual fund?

Lack of information Past bad experience
High risk Any other

Q14:- Would you consider investing in mutual fund?

Yes No
NAME ______________________________________________________

SEX M F

AGE: <25 25-45

46-60 ABOVE 61

OCCUPATION:

SERVICE BUSINESS PROFESSIONAL

SELF EMPLOYED HOUSE WIFE

INCOME:

0-100000 100001-300000

300001-500000 500001 and above

ADDRESS--------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------

MOBILE-----------------------------------------

************************************THANKS*********************************
 BIBLIOGRAPHY
Websites
1. www.sbimf.co.in
2. www.mutualfundsindia.com
3. www.indiainfoline.com
4. www.amfiindia.com
5. www.sebi.gov.in
6. www.moneycontrol.com
7. www.valueresearchonlin.com
8. www.nseindia.com

Books Referred
Amfi Mutual funds

News Papers and Magazines

1. The Economic Times
2. Business Standard
3. Business World
Research Methodology
• Kothari C.R., Research Methodology , First Edition :2008, Garima
Publication , Jaipur
• Tapash , Ranjan , Shah, capital Market First Edition :2009 , Excel Bank , New
Delhi
• Agrawal M.R., Security Analysis & Portfolio management , First Edition :2009 ,
Garima publication , jaipur