Mutual Fund Concept and working

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 then invested in capital market instruments such as shares, debentures and other securities. The income earned through these investments and the capital appreciations realized are shared by its unit holders in proportion to the number of units owned by them. The flow chart below describes broadly the working of mutual fund:

Mutual Fund Operation Flow Chart

Advantages of Mutual Funds

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Portfolio Diversification

Mutual Funds invest in a well diversified portfolio of securities. Each investor is part owner of all the funds assets. This enables him/her to hold a diversified portfolio even with small investment, which would otherwise not be possible. Professional Management

The investor avails of the services of experienced and skilled professionals who are backed by a dedicated investment research team which analyses the performance and prospects of companies and selects suitable investments to achieve the objectives of the scheme. Reduction/Diversification of Risk

An investor in mutual funds acquires a diversified portfolio no matter how small his/her investments are. Diversification reduces the risk of loss. This risk reduction is the most important benefit of investing in collective vehicle like the mutual fund. Liquidity

In open-ended schemes, you can get your money back promptly at net asset value related prices from the Mutual Fund itself. With close-ended schemes, you can sell or buy units on a stock exchange at the prevailing market price. Convenience and 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. Safety

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.

Drawback of Mutual Funds

Costs

Mutual funds provide investors with professional management, but it comes at a cost. In mutual funds, the fees are classified into two categories: shareholder fees and annual operating fees. The shareholder fees, in the forms of loads are paid directly by shareholder while purchasing or selling the units of the funds. The annual fund operating fees are charged as an annual percentage on the assets. These fees are assessed to mutual fund investors regardless of the performance of the fund.

Evaluating Funds

Another disadvantage of mutual funds is the difficulty they pose for investors interested in researching and evaluating the different funds. Unlike stocks, mutual funds do not offer investors the opportunity to compare the P/E Ratio, sales growth, earning per portfolio, etc. A mutual fund's net asset value gives investors the total value of the fund's portfolio less liabilities, but how do you know if one fund is better than another? Furthermore, advertisements, rankings and ratings issued by fund companies only describe past performance. No tailor Made portfolio

Investors who invest on their own can build their own portfolios of shares, bonds and other securities. Investing through mutual funds means he delegates this decision to the fund managers. Over diversification

At times fund managers in need of achieving diversification in their portfolio tends to do over diversification which might generate less returns.

Stages in Mutual Fund Industry in India

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Phase 1: Growth of Unit Trust of India 1964-1987 In 1963 Unit Trust of India was established as an Act of Parliament. It was set up by Reserve Bank of India and functioned under administrative and regulatory control of Reserve Bank of India. The first scheme launched was Unit Scheme-64, it was the first open ended mutual fund. Phase 2: Entry of Public Sector Funds 1987-1993 1987 marked the entry of non UTI, public sector funds established by public sector Banks, Life Insurance Corporation of India (LIC), General Insurance Corporation of India (GIC).SBI Mutual fund was the first non UTI mutual fund established in June 1987. Phase 3: Emergence of Private funds 1993-1996 Kothari Pioneer (now merged with Franklin Templeton) was the first private sector mutual fund registered in July 1993. 1993-1994 five new players came into existence 1994-1995 six new players came into existence.

Phase 4: Growth and SEBI regulations 1996-1999 In 1996 SEBI Mutual Fund regulations were adopted. The industry now functions under SEBI (Mutual Fund) Regulations 1996. UTI also adopted SEBI regulations. Budget of 1999 exempted income tax at the hands of investors. Phase 5: Emergence of a large and uniform industry 1999-2004 In February 2003, the UTI Act was repealed, thus creating UTI MF, and it adopted the same structure as any other Mutual Fund, that of Trust and Asset Management Company. All the schemes were now SEBI approved. Phase 6: Consolidation and Growth 2004 onwards From 2004 onwards, industry witnessed several mergers and acquisitions.

Types of Mutual Funds

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I) In accordance with the Structure 1) Open and Close Ended Schemes Open Ended Schemes Open ended schemes are the ones that sells and repurchase units at all times. The asset under management keeps fluctuating depending on investors buying or selling units. In practice open ended funds is not obliged to keep selling units at all times, though it has the obligation to repurchase the units tendered by the investors. An Asset Management Company might stop selling units if the fund size becomes too large to manage. Close Ended Schemes Close ended schemes are the ones that make a onetime sell of units. They have a pre-specified maturity period. After the offer closes CESs do not let investors buy directly from the fund. To provide liquidity to investors the funds are traded in stock markets. The fund house also offers buy back at regular intervals. SEBI regulations state that all fund houses should give one of the 2 exit options to the investors. 2) Load and NO Load Schemes SEBI has defined load as a onetime fee payable by investor to allow the fund to meet the initial expenses including brokers/agents/distributors commissions, advertising and marketing expenses. Expenses such as SEBI filling fees, or printing of offer documents and other forms, or even bank charges related to new issue of a scheme would be considered initial issue expenses. There are three ways to charge a customer to recover the marketing expenses of new fund: At the time of entry, by deducting a certain amount for the contribution.(Entry Load) By charging the fund a fixed amount during the tenure of the fund, for specified period. (Deferred load) At the time, the investor is leaving the fund, by deducting specific amount from the proceeds payable to him. (Exit Load) Funds that charge any of the above are termed as load funds or else No load Funds. 3) Interval Schemes

Interval Schemes are that ones that combine the feature of both open ended and close ended Schemes. The unit may be traded on the stock exchange or may be open for sale or redemption during pre-determined intervals at NAV related prices. II) By Investment Objective
1) Growth Funds invests for medium to long term appreciation.

2) Income Funds invest to generate regular income, rather than capital appreciation.

3) Value Funds invest in equities that are currently undervalued, and whose value might be

unlocked in future. III) By Nature of Risk Profile 1) Equity schemes It invests for medium to long term appreciation. This scheme invests major part of their corpus in equity holdings. They have greater risk than debt funds, as well as offer higher potential for growth. The equity funds are sub-classified on the basis of their investment objective as

Aggressive Growth Funds are the ones where fund managers aspire for maximum capital appreciation and invest in less researched shares of speculative nature. Because of these speculative investments Aggressive Growth Funds become more volatile and thus, are prone to higher risk than other equity funds.

Growth Funds also invest for capital appreciation (with time horizon of 3 to 5 years) but they are different from Aggressive Growth Funds in the sense that they invest in companies that are expected to outperform the market in the future. Without entirely adopting speculative strategies, Growth Funds invest in those companies that are expected to post above average earnings in the future.

Speciality Funds have stated criteria for investments and their portfolio comprises of only those companies that meet their criteria. Criteria for some speciality funds could be to invest/not to invest in particular regions/companies. Speciality funds are concentrated and thus, are comparatively riskier than diversified funds. There are following types of speciality funds:

1. Sector Funds are the ones that invest in a particular sector/industry of the market. The

exposure of these funds is limited to a particular sector (say Information Technology, Auto, Banking, Pharmaceuticals or Fast Moving Consumer Goods) which is why they are more risky than equity funds that invest in multiple sectors.
2. Foreign Securities Funds have the option to invest in one or more foreign companies.

Foreign securities funds achieve international diversification and hence they are less risky than sector funds. However, foreign securities funds are exposed to foreign exchange rate risk and country risk.
3. Mid-Cap or Small-Cap Funds are ones that invest in companies having lower market

capitalization than large capitalization compared to blue chip companies. More volatile as scripts are not traded freely.
4. Commodity Funds invest in different commodities directly or indirectly through shares

of commodity companies or through commodity futures contract. They may invest in single commodity or group of commodities like edible oils, while diversified commodity will spread their assets over many commodities.

Diversified Equity Funds - Except for a small portion of investment in liquid money market, diversified equity funds invest mainly in equities without any concentration on a particular sector(s). These funds are well diversified and reduce sector-specific or company-specific risk. However, like all other funds diversified equity funds too are exposed to equity market risk.

Equity Linked Savings Schemes (ELSS) has a minimum of 90% of investments in equities at all times. ELSS investors are eligible to claim deduction from taxable income (up to Rs 1 lakh) at the time of filing the income tax return. ELSS usually has a lock-in period and in case of any redemption by the investor before the expiry of the lock-in period makes him liable to pay income tax on such income(s) for which he may have received any tax exemption(s) in the past.

Equity Index Funds have the objective to match the performance of a specific stock market index. The portfolio of these funds comprises of the same companies that form the index and is constituted in the same proportion as the index. Equity index funds that follow broad indices (like S&P CNX Nifty, Sensex) are less risky than equity index funds that follow narrow sectoral indices (like BSEBANKEX or CNX Bank Index etc). Narrow indices are less diversified and therefore, are more risky.

Value Funds invest in those companies that have sound fundamentals and whose share prices are currently under-valued. The portfolio of these funds comprises of shares that are trading at a low Price to Earning Ratio (Market Price per Share / Earning per Share) and a low Market to Book Value (Fundamental Value) Ratio. Value Funds may select companies from diversified sectors and are exposed to lower risk level as compared to growth funds or speciality funds. Value stocks are generally from cyclical industries (such as cement, steel, sugar etc.) which make them volatile in the short-term.

Equity Income or Dividend Yield Funds - The objective of Equity Income or Dividend Yield Equity Funds is to generate high recurring income and steady capital appreciation for investors by investing in those companies which issue high dividends (such as Power or Utility companies whose share prices fluctuate comparatively lesser than other companies' share prices). Equity Income or Dividend Yield Equity Funds are generally exposed to the low risk level as compared to other equity funds.

Exchange Traded Funds are the ones that trade like single stock on stock exchange

Fund of Funds invest in other mutual fund schemes. Fund of funds are not allowed to invest in other fund of fund.

2) Debt schemes Invests in debt instrument issued by the government, private companies, banks, financial instruments and other entities like infrastructure companies and utilities etc. They carry less risk and provide stable income. Invest in long term securities. Debt Funds are further classified as follows:

Gilt Funds: Invest their corpus in securities issued by Government, popularly known as Government of India debt papers. These Funds carry zero Default risk but are associated with Interest Rate risk. These schemes are safer as they invest in papers backed by Government. Income Funds: Invest a major portion into various debt instruments such as bonds, corporate debentures and Government securities. Monthly Income Plans (MIPs): Invests maximum of their total corpus in debt instruments while they take minimum exposure in equities. It gets benefit of both equity and debt market. These scheme ranks slightly high on the risk-return matrix when compared with other debt schemes. Short Term Plans (STPs): Meant for investment horizon for three to six months. These funds primarily invest in short term papers like Certificate of Deposits (CDs) and Commercial Papers (CPs). Some portion of the corpus is also invested in corporate debentures.

Liquid Funds: Also known as Money Market Schemes, These funds provides easy liquidity and preservation of capital. These schemes invest in short-term instruments like Treasury Bills, inter-bank call money market, CPs and CDs. These funds are meant for short-term cash management of corporate houses and are meant for an investment horizon of 1day to 3 months. These schemes rank low on risk-return

matrix and are considered to be the safest amongst all categories of mutual funds 3) Balanced Schemes

As the name suggest they are mix of equity and debt. They invest in both equities and securities which are in line with the predefined objectives of the scheme. These schemes aim to provide investors with best of both the world. Equity part provides growth and Debt part provides stability in returns.

Structure of Mutual Fund in India

Mutual fund companies have unique structure that is distinct from the other entities such as companies and firms. It consists of following participants: Sponsor Trustees Asset management company
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Custodian Registrar and Transfer Agent

Sponsor Sponsor is a person who acting alone or in combination with another corporate establishes a mutual fund. He is like a promoter of a company as he gets fund registered with SEBI. Sponsor will form trust and appoint board of trustees. Sponsor will also appoint an Asset management company as fund managers. Sponsor directly or acting through the trustees will also appoint a Custodian to hold the fund assets. Trustees Trustees appoint the Asset Management Company (AMC) with prior approval of SEBI. All Schemes floated by AMC must be approved by trustees.

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Right to remedial action, if they believe the conduct of the AMC is not accordance with SEBI regulations. Right to dismiss the AMC with approval of SEBI.

Minimum of 2/3 of the trustees are independent directors, based on SEBI guidelines.

Asset Management Company (AMC) Acts as an investment manager of the trust. In the name of trust, floats and manages different investment schemes. AMC need to have net worth of Rs 10 crores at all the times. 50% of directors of AMC board are independent. AMC must act in the interest of unit holders and report to the trustees w.r.t its activities.

Custodian Custodian is appointed by the board of the trustees, which will have physical possession of securities purchased by mutual fund. Registrar and Transfer Agent A Registrar and transfer agent accepts and processes unitholders' applications, carries out communications with them, resolves their grievances and dispatches Account Statements to them. In addition, the registrar also receives and processes redemption, repurchase and switch requests. The Registrar and transfer agent also maintains an updated and accurate register of unitholders of the Fund and other records as required by SEBI Regulations and the laws of India. An investor can get all the above facilities at the Investor Service Centers of the Registrar.

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Frequently Used Terms

Net Asset Value (NAV) NAV is the market value of the assets of the scheme minus its liabilities. The per unit NAV is the net asset value of the scheme divided by the number of units outstanding on the valuation date.

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Sale Price It is the price investors pay when they invest in a scheme. It is also called as offer price. It may include sales load. Repurchase Price It is the price at which units under open-ended schemes are repurchased by the mutual fund. Such prices are NAV related. Redemption Price It is the price at which close-ended schemes redeem their units on maturity. Such prices are NAV related. Sales Load It is a charge collected by scheme when it sells the units, also called as Front-end load. Repurchase or Back-end load It is a charge collected by scheme when it buys back the unit from the unitholders.

Reliance Mutual Fund

Reliance Mutual Fund (RMF), a part of the Reliance - Anil Dhirubhai Ambani Group, is one of the fastest growing mutual funds company in the country. RMF offers investors a well-rounded portfolio of products to meet varying investor requirements and has

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presence in 159 cities across the country. Reliance Mutual Fund constantly endeavors to launch innovative products and customer service initiatives to increase value to investors.

Reliance Mutual Fund has been established as a trust under the Indian Trusts Act, 1882. RMF was registered with the Securities & Exchange Board of India (SEBI) on 30th June, 1995.

The name of Reliance Capital Mutual Fund was changed to Reliance Mutual Fund effective 11th March 2004. Reliance Mutual Fund was formed to launch various schemes under which units are issued to the public with a view to contribute to the capital market and to provide investors the opportunities to make investments in diversified securities.

Reliance Mutual Fund is one of Indias leading Mutual Funds, with Average Assets Under Management (AAUM) of Rs. 1,01,320 Crores and an investor count of over 74 Lakh folios. (AAUM and investor count as of June 2010)

The main objectives of the Trust are:

To carry on the activity of a Mutual Fund as may be permitted at law and formulate and devise various collective schemes of savings and investments for people in India and abroad and also ensure liquidity of investments for the unit holders.

To deploy funds thus raised so as to help the unit holders earn reasonable returns on their savings. To take such steps as may be necessary from time to time to realize the effects without any limitation.

Vision Statement To be a globally respected wealth creator with an emphasis on customer care and culture of good corporate governance. Mission Statement
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To create and nurture a world-class, high performance environment aimed at delighting our customers. Corporate Governance Policy Reliance Capital Asset Management Ltd. has a vision of being a leading player in the mutual fund business and has achieved significant success and visibility in the market. However, an imperative part of growth and visibility is adherence to good conduct in the marketplace. At Reliance Capital Asset Management Ltd., the implementation and observance of ethical processes and policies has helped us in standing up to the scrutiny of our domestic and international Management The management at Reliance Capital Asset Management Ltd. is committed to good Corporate Governance, which includes transparency and timely dissemination of information to its investors and unit holders. The Board of Directors of RCAM is a professional body, including well-experienced and knowledgeable independent members. Regular Audit Committee meetings are conducted to review the operations and performance of the company. Sponsor: Reliance Capital Ltd "Reliance Mutual Fund schemes are managed by Reliance Capital Asset Management Limited., a subsidiary of Reliance Capital Limited, which holds 93.37% of the paid-up capital of RCAM, the balance paid up capital being held by minority shareholders." Reliance Mutual Fund (RMF) has been sponsored by Reliance Capital Ltd (RCL). Reliance Capital Ltd. is one of Indias leading and fastest growing private sector financial services companies, and ranks among the top 3 private sector financial services and banking companies, in terms of net worth. Reliance Capital Ltd. has interests in asset investors.

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management, life and general insurance, private equity and proprietary investments, stock broking and other financial services. Trustee: Reliance Capital Trustee CO. Ltd Reliance Capital Trustee Co. Limited (RCTC), a company incorporated under the Companies Act, 1956, has been appointed as the Trustee to the Fund vide the Trust Deed dated April 25, 1995 executed between the Sponsor and the Trustee. Asset Management Company: Reliance Capital Asset Management Reliance Capital Asset Management has been appointed as the Asset Management Company of Reliance Mutual Fund by The Trustee vide Investment Management Agreement (IMA) executed between Reliance Capital Trustee Co. Limited and Reliance Capital Asset Management Ltd. in line with SEBI (Mutual Funds) Regulations, 1996. Custodian: Deutsche Bank The Trustee has appointed Deutsche Bank, as the Custodian of the securities that are bought and sold under the Scheme. A Custody Agreement has been entered with Deutsche Bank in accordance with SEBI Regulations. Deutsche Bank has been approved by SEBI to act as Custodian for the Fund. Registrar and Transfer Agent: M/s. Karvy Computershare Pvt Ltd Reliance Capital Asset Management Limited has appointed M/s. Karvy Computershare Pvt. Ltd to act as the Registrar and Transfer Agent to the Schemes of Reliance Mutual Fund. Investment manager: Reliance Capital Asset Management Ltd.

Awards and Achievements

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Reliance Capital Asset Management Limited has won the prestigious US based, 2010 CIO 100 award. The 2010 CIO 100 Awards is presented by the CIO magazine & honors 100 companies worldwide that are creating new business value by innovating with technology. RCAM Limited has been awarded this honor for implementation of the CRMnext System that integrates sales force automation, lead management, customer service and other sales and analysis applications. Reliance Capital Asset Management Limited is the only Indian Company to receive 2010 CIO 100 award.

CRISIL rated Reliance Capital Asset Management with Level 1. This rating denotes that RCAM possesses HIGHEST LEVEL OF PROCESS QUALITY AND RISK MANAGEMENT CAPABILITY IN FUND MANAGEMENT PRACTICES.

Reliance Mutual Fund won the CNBC TV18 - CRISIL Mutual Fund of the Year Award in the Category Mutual Fund House of the Year (Awarded by CRISIL Fund Services, CRISIL Limited). The award is based on consistency of fund houses performance across various scheme categories in the four quarterly CRISIL Composite Performance Rankings (CPRs) released during the calendar year 2009.

Schemes of Reliance Mutual Fund

Schemes Reliance Primary Objective of the Scheme Equity To seek to generate capital appreciation & provide long-term growth opportunities by investing in a portfolio predominately of equity & equity related instruments with investments generally in S & P CNX Nifty stocks and the secondary objective is to Reliance generate consistent returns by investing in debt and money market securities. NRI To generate optimal returns by investing in equity and equity related instruments

Advantage Fund

Equity Fund primarily drawn from the Companies in the BSE 200 Index. Reliance Vision To achieve long-term growth of capital by investment in equity and equity related Fund Reliance Plus Fund securities through a research based investment approach. Quant To generate capital appreciation through investment in equity and equity related instruments. The Scheme will seek to generate capital appreciation by investing in an active portfolio of stocks selected from S & P CNX Nifty on the basis of a mathematical model.

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Reliance Fund

Equity To seek to generate capital appreciation & provide long-term growth opportunities by investing in a portfolio constituted of equity & equity related securities of top 100 companies by market capitalization & of companies which are available in the derivatives segment from time to time and the secondary objective is to generate consistent returns by investing in debt and money market securities. Growth To achieve long term growth of capital by investing in equity and equity related securities through a research based investment approach. Long To seek to generate long term capital appreciation & provide long-term growth opportunities by investing in a portfolio constituted of equity & equity related securities and Derivatives and the secondary objective is to generate consistent

Reliance Fund Reliance

Term Equity Fund

Reliance

returns by investing in debt and money market securities. Equity To seek to generate capital appreciation & provide long-term growth opportunities by investing in a portfolio constituted of equity securities & equity related securities and the secondary objective is to generate consistent returns by investing in debt and

Opportunities Fund

Reliance Savings Fund Reliance Savings Fund Reliance

money market securities. Regular To seek capital appreciation and/or to generate consistent returns by actively Equity investing in equity / equity related securities. Regular To generate consistent return and appreciation of capital by investing in mix of Balanced securities comprising of Equity, Equity related Instruments & Fixed income instruments To generate long term capital appreciation by investing predominantly in equity and equity related instruments of companies engaged in infrastructure and infrastructure related sectors and which are incorporated or have their area of primary activity, in India and the secondary objective is to generate consistent returns by investing in debt and money market securities. Natural To seek to generate capital appreciation & provide long-term growth opportunities by investing in companies principally engaged in the discovery, development, production, or distribution of natural resources and the secondary objective is to

Infrastructure Fund

Reliance

Resources Fund

Reliance Fund

generate consistent returns by investing in debt and money market securities. Banking To generate continuous returns by actively investing in equity and equity related or fixed income securities of Banks.

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Reliance Diversified

To seek to generate continuous returns by actively investing in equity and equity Power related or fixed income securities of Power and other associated companies.

Sector Fund Reliance Media and To generate continuous returns by investing in equity and equity related or fixed Entertainment Fund income securities of Media & Entertainment and other associated companies. Reliance Pharma To seek to generate consistent returns by investing in equity and equity related Fund securities or fixed income securities of Pharma and other associated companies. Reliance Tax Saver To generate long-term capital appreciation from a portfolio that is invested Fund Reliance Linked predominantly in equity and equity related instruments. Equity To generate long-term capital appreciation from a portfolio that is invested Savings predominantly in equities along with income tax benefit.

Funds Series 1 Reliance Money To generate optimal returns consistent with moderate levels of risk and liquidity by Manager Fund investing in debt securities and money market securities Reliance Medium To generate regular income in order to make regular dividend payments to Term Fund unitholders and the secondary objective is growth of capital Reliance Liquidity To generate optimal returns consistent with moderate levels of risk and high liquidity. Fund, Liquid Treasury Reliance Reliance Accordingly, investments shall predominantly be made in Debt and Money Market Fund Instruments. Plan, Liquid

Fund Cash Plan Reliance Floating To generate regular income through investment in a portfolio comprising Rate Fund substantially of Floating Rate Debt Securities (including floating rate securitized debt, Money Market Instruments and Fixed Rate Debt Instruments swapped for floating rate returns). The scheme shall also invest in Fixed Rate Debt Securities (including fixed rate securitized debt, Money Market Instruments and Fixed Rate Reliance Debt Instruments swapped for fixed returns. Short To generate stable returns for investors with a short term investment horizon by

Term Fund investing in fixed income securities of a short term maturity. Reliance Regular To generate optimal returns consistent with moderate level of risk. This income may Savings Fund- Debt be complemented by capital appreciation of the portfolio. Accordingly investments shall predominantly be made in Debt & Money Market Instruments.

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Reliance

Income To generate optimal returns consistent with moderate level of risk. This income may

Fund and Reliance be complemented by capital appreciation of the portfolio. Accordingly, investments NRI Income Fund shall predominantly be made in Debt & Money Market Instruments. Reliance Gilt To generate optimal credit risk-free returns by investing in a portfolio of securities Securities Fund issued and guaranteed by the Central Government and State Government Reliance Monthly To generate regular income in order to make regular dividend payments to Income Plan unitholders and the secondary objective is growth of capital. Reliance Banking To provide returns that, before expenses, closely corresponds to the total returns of Exchange Fund Reliance Exchange Fund Traded the securities as represented by the CNX Bank Index. However, the performance of Scheme may differ from that of the underlying index due to tracking error. Gold To provide returns that closely correspond to returns provided by price of gold Traded through investment in physical Gold (and Gold related securities as permitted by Regulators from time to time). However, the performance of the scheme may differ from that of the domestic prices of Gold due to expenses and or other related factors.

Services provided by Reliance Mutual Fund

Systematic Investment Plan

This is an investment technique where investor deposits a fixed, small amount regularly into the mutual fund scheme (every month or quarter as per his/her convenience) at the then prevailing NAV (Net Asset Value), subject to applicable load. Systematic Withdrawal Plan

The unitholder may set up a Systematic Withdrawal Plan on a monthly, quarterly or semiannual or annual basis to redeem a fixed number of units. Systematic Transfer Plan

The unitholder may transfer certain amount from one scheme to another within the same fund house on a monthly, quarterly or semi-annual or annual basis.

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Mutual Fund Industry in India

Indian Mutual Fund Industry Profile
The Indian mutual fund industry is one of the fast growing industry in the Indian capital and financial markets. The mutual fund industry in India has seen dramatic improvements in quantity as well as quality of product and service offerings in recent years. Mutual funds assets under management grew by 96% between the end of 1997 and June 2003. The mutual fund is structured around a fairly simple concept, the mitigation of risk through the spreading of investments across multiple entities, which is achieved by the pooling of a number of small investments into a large bucket. Yet it has been the subject of perhaps the most elaborate and prolonged regulatory effort in the history of the country. Mutual fund companies in India have started using technology and professional dexterity in handling clients capital nationally and internationally.

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Total Asset Under Management (AUM): The industry has grown in size and manages assets of more than Rs 6,75,864 Crores (30th June 2010). Total number of Mutual fund Companies in India: is 38 (30th June 2010). Indian mutual fund industry serves institutional and retail clients. The institutional clients refers to Pension funds companies, Insurance Companies, Banks and other institutions. Regulatory Body: Association of Mutual fund of India (AMFI)

Practices in Indian Mutual Fund Industry

1.0 Integrity 1.1 Asset Management Companies and their key personnel, in the conduct of their business observe high standards of integrity and fairness in all dealings with investors, issuers, market intermediaries, other members and regulatory and other government authorities. 1.2 Mutual Fund Schemes are organized, operated and manage their portfolios of securities selected, in the interest of all classes of unit holders and not in the interest of

Sponsors. Directors of Members. Members of Board of Trustees or Directors of the Trustee company. Brokers and other market intermediaries. Associates of the Members. A special class selected from unitholders.

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2.0 Due Diligence 2.1 Asset Management Companies in the conduct of their Asset Management business at all times 2.2 Render high standards of service. Exercise due diligence. Exercise independent professional judgment.

Asset Management Companies employ effective and adequate resources and procedures which are needed for the conduct of Asset Management activities.

3.0 Disclosure 3.1 Asset Management Companies ensure timely dissemination to all unitholders of adequate, accurate, and explicit information presented in a simple language about the investment objectives, investment policies, financial position and general affairs of the scheme. 3.2 Asset Management Companies discloses to unitholders investment pattern, portfolio details, ratios of expenses to net assets and total income and portfolio turnover wherever applicable in respect of schemes on annual basis. 3.1 Asset Management Companies in respect of transactions of purchase and sale of securities entered into with any of their associates or any significant unitholder disclose to the unitholders details of the transaction in brief through annual and half yearly reports. 3.4 All transactions of purchase and sale of securities by key personnel who are directly involved in investment operations are disclosed to the compliance officer of the AMCs at least on half yearly basis and subsequently reported to the Board of Trustees if found having conflict of interest with the transactions of the fund.

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4.0 Professional Selling Practices 4.1 Asset Management Companies does not use any unethical means to sell, market or induce any investor to buy their products and schemes. 4.2 Asset Management Companies does not make any exaggerated statement regarding performance of any product or scheme. 4.3 Asset Management Companies endeavors to ensure that at all times Investors are provided with true and adequate information without any misleading or exaggerated claims to investors about their capability to render certain services or their achievements in regard to services rendered to other clients. Investors are made aware of attendant risks in members schemes before any investment decision is made by the investors. Copies of prospectus, memoranda and related literature are made available to investors on request. Adequate steps are taken for fair allotment of mutual fund units and refund of application moneys without delay and within the prescribed time limits. Complaints from investors are fairly and expeditiously dealt with.

5.0 Investment Practices 5.1 Asset Management Companies manages all the schemes in accordance with the fundamental investment objectives and investment policies stated in the offer documents and takes investment decisions solely in the interest of the unitholders.

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6.0 Operations 6.1 Asset Management Companies are not, in respect of any securities, party to Creating a false market. Price rigging or manipulation. Passing of price sensitive information to brokers, Members of stock exchanges and other players in the capital markets or take action which is unethical or unfair to investors. 6.2 Asset Management Companies does not make any change in the fundamental attributes of a scheme, without the prior approval of unitholders except when such change is consequent on changes in the regulations. 7.0 Reporting Practices 7.1 Asset Management Companies follow comparable and standardized valuation policies in accordance with the SEBI Mutual Fund Regulations. 7.2 Asset Management Companies follow uniform performance reporting on the basis of total return. 7.3 Asset Management Companies ensure schemewise segregation of cash and securities accounts. 8.0 ENFORCEMENT Asset Management Companies:

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Establishes internal controls and compliance mechanisms, including assigning supervisory responsibility.

Designate one person with primary responsibility for exercising compliance with power to fully investigate all possible violations and report to competent authority.

File regular reports to the Trustees on a half yearly and annual basis regarding the observance of the code and special reports as circumstances require.

Maintain records of all activities and transactions for at least three years, which can be subject to review by the Trustees.

Challenges Facing Indian Mutual Fund Industry

First and foremost challenge is investors education about mutual fund market and cost effectiveness. It has been observed that more and more people are investing directly in stock market i.e. by buying scripts. But less number of people are investing money through mutual funds in spite of being less risky as compared to owning stocks. Mutual funds needs to become a conscious choice of the large untapped investor community through investors education undertaking through the model of PPP to make mutual fund investment reach to the households in the tier II and III cities. Mutual funds insight should be on developing institutional market like pension/insurance funds and sustaining growth in a maturing market.

The Indian mutual fund industry needs to widen its range of products with affordable and competitive schemes to tap the semi-urban and rural markets in order to attract more investors. The industry has still not been able to penetrate among retail investors. Mutual fund companies need to introduce products for the semi-urban and rural markets that are

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affordable and yet competitive against low-risk assured returns of government sponsored saving schemes such as post office saving deposits.

Mutual Fund Industry in United Kingdom

Mutual fund companies in United Kingdom are referred to as asset management companies.

Asset management Industry Profile

UK asset management industry is well established and has made tremendous improvements in last few years in terms of the services and products made available to the investors. UK asset management industry provides investor with wide variety of products which includes the opportunities for investors to invest in foreign markets. UK asset management industry forms more than 30% of the total assets managed in entire Europe. Total asset under management in Europe at the end of 2009 was about EUR 12.8 trillion. The AUM/GDP ratio in UK in 2008 was 209%, which was a decrease of 32% as compared to 2007. This means there is lot of potential in this industry. UK asset management industry has adopted best practices and is well regulated. Total funds under management of 492.6 bn (30th June 2010)

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Total Number of Asset Management Companies in UK are 179 (End of 2009).

Mutual Fund Structure in UK

Two Alternative Structures are available:

Open Ended Funds are in form of UNIT Trust and are regulated by Securities and Investment Board.

Unit Trust is a type of pooled investment. A fund manager buys shares in range of different companies and pools these in fund. Investors then buy units in this fund. Because the fund contains a range of shares the risk is spread. The number of units rise and falls as investor buy and sell units.

Close Ended Funds are in form of corporate entities although called investment trust.

Investment Trust invests in the share of different companies, allowing investors to spread their risk. The main difference from unit trust is that investment trust are themselves are companies in which you buy shares. So you are investing directly, rather than indirectly through an open-ended fund. Because investment trust share prices are affected in part by supply and demand, their value can fluctuate more than often than units in unit trust.

Investment Funds available in UK Asset management industry and not in India

1. Ethical Investment Funds Ethical investment funds use a screening process to ensure that the companies they invest in are the right ones to meet their ethical policy. The screening will remove companies considered to be negative and will encourage investment in positive companies. Companies considered to be of Negative Ethics are the ones involved in

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Animal Testing, Genetic Engineering, Healthy and Safety Breaches, have High Environmental Impact, violating Human Rights, Intensive Farming, Nuclear Power, Military , Pesticides, Pollution Convictions, making Pornography and Adult films, Sustainable timber, Third world concerns Companies considered to be of Positive Ethics are the ones who follow Environment, Corporate governance, Disclosure, Environmental, Equal

Communal

opportunities, Positive product and Services, Supply chain issues. 2. Individual Savings Account (ISAs) ISAs (Individual Savings Accounts) were introduced by the government to encourage people to save. They are often referred to as "tax wrappers". This simply means that when you save or invest within an ISA you pay no tax, or less tax than usual on the income you earn or on the profits you may make. TYPES OF ISAs:There are two types of ISA Cash ISAs Cash ISAs enables investors to save money in bank or building society deposit accounts, National Savings and Investment products, and any other products that aim to produce a cashlike return. Any interest earned is tax-free. Stocks and shares ISAs

Stocks and shares ISAs enables investor to invest in stocks and shares (including investment trusts), gilts and corporate bonds, either directly or indirectly via authorized funds (unit trusts and OEICS), and in life insurance products. By investing within a stocks and shares ISA, the tax investors pay will be less than if that held in the same investments outside an ISA. 3. Child Trust Funds

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Child Trust Fund (CTF) is a savings and investment account for children. Children born on or after 1 September 2002 will receive a 250 voucher to start their account. The account belongs to the child and can't be touched until they turn 18, so that children have some money behind them to start their adult life. 4. Strategic Bonds Funds The Fund invests in higher yielding assets including high yield bonds, investment grade bonds, government bonds, preference shares, convertible bonds and other bonds. The manager only enters into derivative transactions for the purpose of efficient management of the portfolio (including, but not limited to, forward currency transactions to hedge exposure in Euro denominated bonds back into Sterling) and not for investment.
5. Preference Shares Bonds:

To provide a high level of investment income with prospects for long term capital appreciation through investment principally in UK preference shares and sterling denominated fixed interest securities. In this, funds invest in any of the following financial instruments in order to achieve its investment objective: transferable securities, money market instruments, units in collective investment schemes, deposits and derivatives and forward transactions.

Type of Schemes Available in UK

Corporate Bond High Yield Strategic Bond Absolute Return Active Managed Asia Pacific Excluding Japan Asia Pacific Including Japan Balanced Managed Cautious Managed Europe Excluding UK Europe Including UK European Smaller Companies Global Bonds Money Market North America North America Smaller Companies Personal pensions Protected Specialist Property Technology and Telecommunications UK All Companies UK Equity and Bond Income UK Equity Income UK Equity Income and Growth UK Gilts
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Global Emerging Global Growth Japan Japan Smaller Companies

UK Index Linked Gilts UK Smaller Companies Unclassified Sectors

Best Practices of UK Asset management Industry:

In UK Fund managers have to be authorized by the FSA to practice and to qualify they need to pass exams. The main UK qualification they take is the Investment Management Certificate (IMC) run by the CFA Society of the UK CFA UK.

Investment Analysts who work with fund managers in deciding how to invest a funds assets in the various markets also take the Investment Management Certificate or Certified Financial Analyst.

In UK Overseers (those who supervise an administration function) have to be authorized by the FSA in order to practice and so have the Investment Administration Qualification. This is taken in three stages and at the final stage the exam taken will reflect the individuals specialist area. Administration Roles : People who are involved in performance measurement, dealing and settlement, custody, fund accounting and administering private clients as well as the servicing of products such as unit trusts, OEICs; and ISAs/PEPs which are investment wrappers.

Asset Management Companies provide description of the Risk management system they follow for investment into various schemes, so as to mitigate the risk which arises while making investment into securities.

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Asset Management Companies ensure timely dissemination to all unitholders of adequate, accurate, and explicit information which is presented in a simple language about the investment objectives, investment policies, financial position and general affairs of the scheme, investment pattern, portfolio details, ratios of expenses and total income and portfolio turnover wherever applicable in respect of schemes.

Best Customer Services Provided in UK Market:

Fidelity Investment company of UK, records calls by customers to the customer care center, as this would help the company to understand the clients expectations and find out whether they were able to resolve customers query, which would help them to improve the services for future purposes. This has worked well and customer satisfaction has gone up.

Legal and General Unit Trust conducts survey about their products and services and the ones provided by industry as a whole. It then compares both the results and publishes the final report, thus giving an idea to the company and the investors where it stands w.r.t customer satisfaction.

Invesco Perpetual AMC (UK) allows investors to order by post following articles:Application packs, Children's Fund literature, Education series, Fund literature, Fund updates, ICVC factsheets, ICVC literature, ICVC manager's reports, ICVC Simplified Prospectuses, ISA literature, Market insights, Miscellaneous forms, Promotional literature.

Some Companies in UK also help investors understand their account statement better by providing a statement guide which describes what a particular entry in the account statement means.

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Product Communication
Video Webcast

Some of the top Fund Management Companies uploads the Video Webcasts featuring exchange between Fund House Manager and companies Relationship Manager which is presented in Qand-A format. Questions cover market and fund performance over the past quarter, as well as questions received via e-mail from investors. E weekly

Many Fund management companies sends a weekly magazine on the email ids of the investors, which covers the market updates and a view of single fund managers of any scheme managed by him. It is a good way of communicating with customers as fund manager gives updates about performance of their scheme. Schemewise PDFs

Many fund Management companies in UK uploads the schemewise PDFs on their website, which include the performance of scheme, market commentary and view of fund manager about market, latest undertakings in the schemes.

Challenges facing UK Asset management Industry

Foremost challenge facing UK mutual fund industry is the European crisis. It is important for fund managers to select the securities which will have good prospect in near future.

In Retail Distribution, there remains a significant challenge to improve the way in which the UK fund management industry, is meeting the needs of consumers.

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The appeal of a wider range of investment funds to the retail consumer raises significant challenges for fund managers in explaining the performance characteristics and risks of investments. It is important to distinguish between explaining how complex products work at a structural level and explaining how they are intended to behave and the range of performance risks that attach to them. There is an obvious difference between the two, the most important aspect of which is that the latter focuses on explaining outcomes to consumers. That explanation requires the fund manager to have carried out robust analysis of the performance of the particular product, and the range of outcomes that might reasonably be expected. The crucial point is to try to ensure that the product outcome matches the outcome that the consumer is expecting. It is also essential to explain the range of possible outcomes so as to try to match, as closely as possible, the range of outcomes that is consistent with the consumers risk appetite.

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Mutual Fund Industry in China

Mutual Fund Industry profile
Chinese mutual funds industry is one of the hottest industry around the globe today. The GDP growth rate of china is around 10% a year and is matched by the growth of Chinese mutual funds. One of the benefits of Chinas economic growth is the importance of its two stock exchanges (Shenzhen Stock Exchange and Shanghai Stock Exchange) which have a combination market value of a staggering $1 trillion dollars in the beginning of 2007. It is the third biggest stock market in Asia behind Hong Kong and Japan. Also, it is predicted that it will be the third largest in the world by 2016. It is in no doubt, China will be stronger and stronger in the future, therefore more money will flow in and out of China then there will ever be. The other positive feature of investing in mutual funds in China is that the domestic growth is unstoppable. Although China is an export orientated country, the domestic demand can cushion any outside problem by solely focusing on the domestic growth. The country has one of the largest foreign exchange reserves in the world, bigger than Japan. The size of the reserves will protect the Chinese economy from any excessive volatility and the monetary system from failure. Investing in China mutual funds is one of the best ways in ensuring the best returns in any market around the world. China's mutual fund industry is currently one-tenth of the size of the U.S. market, but it is expected to grow drastically as China opens its doors to international trading. And if the Chinese

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middle class continues to expand and increasingly invest in mutual funds, the local market has the potential to become one of the largest in the world. Total number of mutual fund companies in china is 60. (End of 2009) Total numbers of funds were 621. (End of 2009) Total asset under management was RMB 2.68 tr. (End of 2009).

Funds Available in China Mutual Fund Industry and not in India

QDII Funds The QDII funds are the one where the main regulatory body (the China Securities Regulatory Commission) may grant a limited avenue for funds management companies to invest in foreignbased securities. Companies need to meet certain qualifications for getting permission granted from Feeder Funds A feeder fund is one that conducts virtually all of its investing through another fund (called the master fund). This is similar to a fund-of-funds arrangement, except that the master fund manager is responsible for managing the underlying investments. Often, an onshore feeder fund will invest in an offshore master fund. This is done so that the foreign master fund can gain a tax advantage for the domestic investors the regulatory body.

Type of Funds Available in China Equity Funds QDII Funds Feeder Funds
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Balanced Funds Bond Funds Guaranteed Funds Money market funds Index Funds ETF

Best Practices of China Mutual Fund Industry

China Asset Management Company during their launch of new ETF Chinese Nifty Fifty adopted the best practices of global fund industry by educating people about what are Exchange traded funds, as ETFs were complex and new products. They organized an ETF consortium for the same. They even partnered with Shanghai stock exchange and even promoted in Education events, to make investors understand ETFs.

Many Asset Management Companies in Chinese fund industry provide Account Statements that are verified as per Statement of Auditing Standard 70 certification and have received SAS70 internal review report. Voluntarily, the Companies also meet the standard of the GIPS (Global Investment Performance Standards) for their investment history and provide clients with GIPS-based performance report. Statement on Auditing Standards (SAS) No. 70, service organization, is a widely

recognized auditing standard developed by the American Institute of Certified Public Accountants (AICPA). A service auditor's examination performed in accordance with SAS No. 70 (also commonly referred to as a "SAS 70 Audit") is widely recognized, because it represents that a service organization has been through an in-depth audit of their control objectives and control activities, which often include controls over information technology and related

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processes. This demonstrates that they have adequate controls and safeguards data when they host or process data belonging to their customers. SAS No. 70 is the authoritative guidance that allows service organizations to disclose their control activities and processes to their customers and their customers' auditors in a uniform reporting format. The issuance of a service auditor's report prepared in accordance with SAS No. 70 signifies that a service organization has had its control objectives and control activities examined by an independent accounting and auditing firm. The service auditor's report, which includes the service auditor's opinion, is issued to the service organization at the conclusion of a SAS 70 examination. The Global Investment Performance Standards (GIPS) are voluntary and are based on the fundamental principles of full disclosure and fair representation of investment performance results. Global standardization of investment performance reporting gives investors around the world the additional transparency they need to compare and evaluate investment managers. GIPS mission is to build a level field of comparison by standardizing the way investment managers calculate and present performance to clients. The Standards evolve in response to investment industry changes; new guidance statements and are constantly being created to help all parties understand how to remain in compliance. The GIPS standards were created and are administered by CFA Institute. Minimum Requirements of GIPS compliance requires adherence to all applicable requirements of the GIPS standards, including any clarifications, updates, reports, guidance statements, questions and answers (Q&As), and the handbook.

Best Customer Services

China AMC investment advisory team provides a wide range of products designed for their institutional clients including weekly, monthly, quarterly and annual market and investment reports; specialized investment reports according to the specific needs of customers; and investment seminars led by their fund managers for their major clients.

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Huaan AMC uses its professional capability to conducts lectures on investment and financing philosophy at Huaan, and analyzing economic situations and policies both at home and abroad.

Yinhua Fund Management Company sends their portfolio managers and research analysts to their premier institutional clients regularly to provide more specialized services.

Product Communication
Product communication by asset management companies in China is provided in form of document uploaded on their respective websites which includes the basic information about the products.

Challenges facing China Fund Management Industry

For Asset Management Companies of china difficulties lie in improving the efficiency of distribution channels so that the ultimate product reaches the end customers and providing better education for retail investors so that the retail participation in asset management industry increases.

For both domestic and foreign-invested fund houses, most of the challenges lie in dealing with the regulator centre on the approval of new products.

Another important challenge is retaining best talent and finding the new one, as china asset management industry is recently developed and people dont have enough experience.

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Mutual Fund Industry in South Korea

Mutual Fund Industry Profile
Till recent time about 75% of the national wealth in Korea was held in Real estate as compared to same amount held in financial assets in advance countries. But this has changed slowly but surely as the amount of money invested by Korean citizens in stock markets has picked up, where individuals currently own 25 percent of the listed South Korean shares, up from about 15 percent four to five years ago. More than 50 percent of households now subscribe to the Tujashintak, the Korean version of mutual funds in South Korea, wherein a set amount of money is deducted monthly from a savings account and channeled into a stock fund. In just a few years, such regular savings programs, or RSPs, went from a trickle of money to a steady torrent as the number of accounts rose to 15.2 million in January 2008 from just 2.3 million in 2005. Assets rose to 64.4 trillion won, or $64.6 billion, from 38 trillion won last summer. Still, the growing "buy-and-hold" mentality taking root among individual investors in Korea will continue to buoy the KOSPI for a while to come. Institutional and foreign investors are also coming in Korean asset management market. That's because Korean stocks remain a relative bargain even after the big gains so far this year. Price-earnings ratios average 7.9 for KOSPI stocks, compared with 16 for U.S. companies, 15.9 in Japan, and 10.6 in China. Another favorable sign for the market: Korea's National Pension Fund, which manages $127 billon, has
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set a goal of increasing its exposure to stocks from the current 8% to 10.7% from 2009. And Korea is due to introduce a 401(k)-style corporate pension scheme that will probably drive up stock and asset investment.

As seen from the graph above the volume of assets under management (AUM) as a percentage of GDP in Korea (23.4 percent) compared to France (55.5 percent) and the United States (67.3 percent) as an indication of how much further the asset management (AM) industry can grow compared to the size of the economy. It has also been found that U.S. and Japanese households depend far less on non-financial assets (36 percent and 39 percent, respectively) than their Korean counterparts (80 percent) highlighting the prospect they will depend less upon real estate in the future. Total Number of Asset Management companies were approximately 70 (Apr 2010). Total Asset Under Management was Korean WON 81.4 tr (Apr 2010). Total Number of fund accounts were more than 21.8 million (Apr 2010).

Structure of Mutual Fund Industry in Korea

Investment trusts are divided into two categories based on the allowance of additional issues of units:
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Open End Funds Closed End Funds

The four main types of investment trusts are Equity investment trusts, which invest more than 60% of their total assets in equities or equity related securities such as KOSPI 200 index futures and options. Equity funds can further be classified as growth-type, growth income-type, and income-type based on their investment plan. The standard trust deed for equity-type trusts allows these kinds of trusts to invest in KOSPI 200 index futures and options up to an amount equal to the permitted level of stock investment of the trust. Classification Growth-type Income-type Growth Incometype Criteria An investment trust that is required under the terms of its trust deed or investment plan to invest more than 70% of its net assets in equities. Investment trusts that cannot under the terms of its trust deed or investment plan invest more than 30% of its net assets in equities. An investment trust that aims under the terms of its trust deed or investment plan to balance growth and income by restricting investment in equities to between 30% - 70% of net assets.

Bond investment trusts, which invest more than 60% of their assets in bonds or interest rate futures. MMFs, which mainly invest in short-term financial products such as CPs and CDs Hybrid investment trusts, which are not classified under any of the above categories.

Investment Trust with Special Structure

1) Umbrella fund

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A group of investment trusts that are distinct in character and established under the same arrangement that allow investors to switch between the funds according to the market conditions without 2) Fund of Funds This type of investment trust is part of an arrangement in which the trust assets of several sub-investment trusts invest in the beneficial certificates of one or more parent investment trusts that are distinct in character. Each of the sub-investment trusts purchases the beneficial certificates of the appropriate parent investment trusts in an appropriate amount, in accordance with the respective investment objectives of the trust. The actual management of assets of the sub-investment trusts is effected by the management of the parent investment trusts, which hold simplified portfolios; this arrangement allows for more efficient and cost-effective management than would be possible if a trust managed its own portfolio directly. Types of funds Equity investment trusts Bond investment trusts MMFs Hybrid investment trusts ETFs paying redemption or switching fees.

Best Practices of Korean Mutual Fund Industry

IMF's 2003 assessment found that Korean auditing standards were fully consistent with international standards, while Korean accounting standards were approaching compliance with best practices. The Asian Corporate Governance Association (ACGA) website stated

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that, South Korea scores relatively high in terms of accounting and auditing rules. The ACGA underlines that South Korea has brought its accounting rules in line with international accounting standards. International best practices on the independence of external auditors have also been considered.

Korea Accounting Institute (KAI) which is responsible for setting accounting standards in Korea along with the Financial Supervisory Commission (FSC) in March 2007, announced the planned adoption of Korean equivalents of the International Financial Reporting Standards - K-IFRSs, a word-by word translation of International Financial Reporting Standards (IFRSs) into the Korean language. As of January 1, 2011, all listed companies will be required to prepare their annual financial statements in line with KIFRSs. Meanwhile, Korean listed and unlisted companies continue to apply the existing Statements of Korea Accounting Standards (SKASs) which, although based on IFRSs, differ in many respects from their international counterparts, will further mark the acceptance of best standards and practices of Korean mutual fund industry.

Product Communication
The product communication was through reports about different funds being uploaded on the websites which describes the performance of the funds over past year. This reports were also sent to customers on request.

Challenges facing Korean Asset Management Industry

The foremost challenge the Korean asset management industry faces is to build the industry on their own. As there are number of foreign players, domestic players will need to be competitive and there will be opportunities for the new asset management companies to chip in.

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Website Update
As an effort to make services provided on Reliance Mutual Fund Website competent with the services provided by other asset management companies, I explored through the services available on other Indian AMC websites. The lists of services which can be provided by Reliance Mutual Fund on their website are given below. 1. Retirement Planner/ Life Goal Planner/Save for Marriage/Save for child Education

This planner calculates the amount of money the individual will have at the end of stipulated period, and how much will be the shortfall or balance from the required amount the person needs to fulfill his/her future objective and thereby suggesting the Reliance Mutual Fund schemes where he/she can invest in order to meet his/her objectives. 2. Risk Analyzer/Asset Allocator/Fund Suggestor

This planner finds out the risk appetite of an individual and accordingly suggests how much should he/she invest in equity, debt, and based on this, the planner also suggests Reliance Mutual fund schemes which match his/her risk appetite. 3. Press Releases/News and Media

This section includes the articles about Reliance Mutual Fund schemes or services which has appeared in media (News papers or News Channels) and the videos of the interviews of fund managers or management team which has appeared on news channels. This informs our investors about historical and recent happenings associated with our company and the view of Reliance Mutual fund Management team about market or any product.

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4.

Suggestion and Feedback

With this we can find out what our customers think about our products and our services and on this basis we can improve our offerings. 5. Online Chat Facility with the our Customer Service centre

This is an additional facility as with these investors can resolve their queries with online customer service centre rather than resolving the queries through telephonic help or getting assistance in future. 6. Simulated AMFI Test

This helps our potential distributors get an idea about what kind of questions can be expected in NISM certification Exam for mutual funds to become a distributor. 7. Download SIP calculator on mobile

Potential/ Existing customers can download this application and with this they can find out how much money they get on maturity of the scheme by using Systematic Investment Plan. 8. Transact using Mobile (Mobile App Download)

Using this facility our Investors can Purchase, Redeem, Switch, View NAV, Request for account statements and view account details on mobile. 9. Performance Analyzer of any scheme in terms of returns till user specified

Existing/Potential investors can look at performance of our schemes till specified date (which will be in range of 3 months) 10. Portfolio Manager

Investor can find out what his current portfolio comprises of and what returns he is getting as on that date. 11. Download a Desktop Application (UTI Buddy)

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Using this application investor can check NAV, get latest news on financial happenings and news about Reliance Mutual Fund and use it as a private diary recording dates of important events.

My Suggestion:
With a view to enhance the services provided by Reliance Mutual Fund to their customers, I suggested the additions of few services which Reliance Mutual Fund and other AMCs are currently not offering: 1. Discussion Forum

Here investors can post their queries, investors can interact with other investors, share their views and the queries will be resolved by Reliance Mutual Funds fund managers. 2. Providing a facility to Reliance Mutual Funds potential/existing investors to download

Investor Education program on their mobile phones, email ids as a part of SEBI investor education program.

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Suggest a Scheme
After exploring the products and services provided by the asset management companies across globe, I designed the scheme which can be added to Reliance Mutual Fund products. This scheme was designed keeping in mind the future potentials of the sectors and returns investors can get by investing in it. The details of the schemes and investment motives for the investors are described below. Name of Fund: Future 5 Fund Investment Philosophy The idea behind this fund would be to invest in portfolio comprising of the 5 companies from the 5 emerging sectors which are expected to have good performance in future. 1. EDUCATION SECTOR: Amendments in this sector: The year 2009 saw landmark initiatives, both in the School Education and Literacy and the Higher Education Departments. The Right of Children to Free and Compulsory Education Act, 2009 had been enacted by Parliament and it got implemented in May 2010, which provides free and compulsory education to all children of the age of six to fourteen years. A new scheme of interest subsidy on educational loans taken for professional courses by the Economically Weaker Students was also launched.

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The Foreign Education Providers Bill, a bill that seeks regulating the entry and operations of foreign education in India, is likely to be placed soon.

Important points for investors are Indias Education and training market is $ 40 billion market for investors with schools and colleges capable of attracting around $28 billion. No wonder investments in the sector are likely to double in 2010 compared to 2009. The sector figures among the top three investment destinations among PE players. In 2009, PE investments in education saw a three-fold rise. According to data from PE investments in the sector went up from $35 million in 2008 to $108 million till October 2009. Vocational training, supplementary training, examination training and stationary business are also attracting investments. In 2009, around $121 million (around Rs 556 crore) was invested in eight companies, including TutorVista, Career Point, FIITJEE, ITM Group and Edutech. Franklin Templeton Indias private equity arm recently invested Rs 50 crore in Career Point Infosystems Ltd. This company which is based in Kota (Rajasthan) has been in the news recently for the high success rate of IIT aspirants that it trains. Other companies in the education business that have received private equity investment are Mahesh Tutorial, FIITJEE, Time, Career Launcher, Time, Hurix System, Wigan & Leigh, Tree House Play School.

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Top Companies in Education Sector: Educomp, NIIT, Everonn Systems India Ltd, Aptech and Edserv Softsystem Ltd.

2. RETAIL SECTOR Important points for investor are

The Indian retail industry is the fifth largest in the world. Comprising of organized and unorganized sectors. Indian retail industry is one of the fastest growing industries in India, especially over the last few years. Though initially, the retail industry in India was mostly unorganized, however with the change of tastes and preferences of the consumers, the industry is getting more popular these days and getting organized as well. With growing market demand, the industry is expected to grow at a pace of 25-30% annually.

According to the 8th Annual Global Retail Development Index (GRDI) of AT Kearney, India retail industry is the most promising emerging market for investment. In 2007, the retail trade in India had a share of 8-10% in the GDP (Gross Domestic Product) of the country. In 2009, it rose to 12%. It is also expected to reach 22% by end of 2010.

The BMI India Retail Report for the third-quarter of 2010 released in May 2010 forecasts that the total retail sales will grow from US$ 353.0 billion in 2010 to US$ 543.2 billion by 2014. Strong underlying economic growth, population expansion, the increasing wealth of individuals and the rapid construction of organized retail infrastructure are key factors behind the forecast growth. As well as an expanding middle and upper class consumer base, there will also be opportunities in India's second and third-tier cities. The greater availability of personal credit and a growing vehicle population to improve mobility also contribute to a trend towards annual retail sales growth of 11.4 per cent.

Recent News on Retail Industry:

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Wal-Mart and Bharti are planning to set up 10 to 12 stores in India by 2012. Lifestyle International, a division of Landmark Group, plans to have more than 50 stores across India by 201213.

Careerfour second largest company in retail plans to come up with 4-5 retail stores in India by end of 2010.

Shoppers Stop has plans to invest Rs 250 crore to open 15 new supermarkets in the coming three years.

Pantaloon Retail India (PRIL) plans to invest US$ 77.88 million this fiscal to add up to existing 2.4 million sq ft retail space. PRIL intends to set up 155 Big Bazaar stores by 2014, raising its total network to 275 stores.

Timex India will open another 52 stores by March 2011 at an investment of US$ 1.3 million taking its total store count to 120.

Australia's Retail Food Group is planning to enter the Indian market in 2010. It has plans to clock US$ 87 million revenue in five years. In 20 years they expect the India operations to be larger than the Australia operations.

Top Companies in Retail Sector: Shoppers Stop, West side (Trent), Pantaloon (Big Bazaar), Lifestyle, RPG Retail (Foodworld, Musicworld), Crossword, Wills Lifestyle, Globus, Piramals (Pyramid & Crosswords), Ebony Retail holdings. 3. FMCG SECTOR Important points for the investor are: FMCG in India has a strong and competitive MNC presence across the entire value chain. It has been predicted that the FMCG market will reach to US$ 33.4 billion in 2015. The middle class and the rural segments of the Indian population are the most promising market for FMCG, and give brand makers the opportunity to convert them to branded products.

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There is a huge growth potential for all the FMCG companies as the per capita consumption of almost all products in the country is amongst the lowest in the world. Earlier, Indian consumers were using non-branded apparel, but today, clothes of different brands are available and the same consumers are willing to pay more for branded quality clothes.

Indian FMCG sector is fourth largest sector in the economy. Over a period of time with growth in GDP, change in lifestyle and with established distribution system across the country this sector is also growing with new market horizons and also seize sustained growth in coming years. Indian FMCG market experienced 16% growth in FY 07-08 and around 20% in FY 08-09.

In the Industry all the major players are growing consistently. The companies are having almost negligible debt proportion in their balance-sheet. It makes very safe and strong case for anyone to invest.

Top Companies in FMCG sector: HUL, ITC, Colgate, Dabur, Marico, P&G, Britannia industries.

4 Metals Sector (Steel, Aluminum, Copper) STEEL: Important points for investors are: According to the Annual Report 2009-10 released by the Ministry of Steel

Domestic crude steel production grew at a compounded annual growth rate of 8.6% from 2004-05 to 2008-09. India has emerged as the fifth largest producer of steel in the world and is likely to become the second largest producer of crude steel by 2015-16. The crude steel production capacity in the country by 2011-12 will be nearly 124 MT.

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222 memorandum of understanding (MoUs) have been signed with various states for planned capacity of around 276 MT. Major investment plans are in Orissa, Jharkhand, Chattisgarh, West Bengal, Karnataka, Gujarat and Maharashtra.

The domestic steel sector has attracted a staggering investment of about US$ 238 billion.

Consumption: India's steel consumption rose 8 per cent in the year ended March 2010, on account of improved demand from sectors like automobile, infrastructure and housing. The countrys steel consumption increased to 56.3 MT in the 12 months to March 2010 from 52.3 MT in the previous year, as per the Ministry of Steel. Recent News on Steel

SAIL is planning to set up a 12-million ton plant in Jharkhand. In December, Indias largest engineering conglomerate Larsen & Toubro (L&T) and state-owned Nuclear Power Corporation of India Limited (NPCIL) formed a US$ 373.2 million joint venture for specialized steel and forging products.

Stainless steel manufacturer and exporter, Varun Industries, is setting up a US$ 171.8 million stainless steel-cum-alloy steel plant at Rohat, Jodhpur.

Tata Steel has entered into a joint venture with Japans Nippon Steel for production and sales of automotive cold-rolled flat products at Jamshedpur. The JV is expected to invest US$ 400 million to set up an automobile venture in India.

Steel major, JSW Steel has earmarked a capex of US$ 1.6 billion for 2010-11 and plans to increase capacity of its Bellary plant in Karnataka from 7 MT to 10 MT by end of 2010-11.

Top Steel Manufacturing Companies: SAIL, Tata Steel, JSW Steel.

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ALUMINIUM Important points for Investors are: India is among the top 10 producers of aluminium in the world. For eight months between April and November 2009, total aluminium produced was 0.98 million tons, a rise of 16.6 per cent over the corresponding period in the previous year. According to an Icra report, With sharp increase in capacity over 2010-13, India will start massive export of aluminium. The country could by 2013 be an annual exporter of 2 million tons of the metal, assuming the planned capacity expansions become operational as currently envisaged. Indias aluminum productions will more than treble to 4.4 million tons by mid-2012 with new capacities coming on stream, along with requisite captive power generation capacities, stated a Fitch Ratings report recently.

ALUMINIUM Production in lakh tones Company Hindalco Industries Nalco Vedanta Resources* Others Source : Ministry of mines 2009 4.88 4.03 6.38 2.00 2013 11.38 10.00 20.00 3.00

METRE

ICRA added that Indias per capita consumption of aluminium is 1 kg as against 30 kg in the developed world. The industry is exploring new application areas and untapped demand potential, which may result in greater preference for aluminium in the future. Top Aluminum Producing Companies: Vedanta, Hindalco and Nalco.

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COPPER Important points for investor According to ICRA management consultancy services, the consumption of copper in India in 2009 grew by 5.3% to 5.2 lakh tons.

Mr. Richard Xu regional director of Asia for International Copper Association (ICA) said that India is one of the fastest growing markets for copper consumption in Asia. Growth in India is driven by factors such as power and utilities, construction, appliances, industries, agriculture, transportation and infrastructure.

ICRA estimated that India has recoverable reserves of 53786 million tons of copper. Indian copper reserves constitute around 1% of global reserves. Indias mined production stands at 30000 million at 0.15% of global production and this will increase gradually.

Top companies in Copper Sector: Sterlite, Hindustan copper Ltd (HCL). 5. IT SECTOR: In last 5 to 7 years IT industry has grown up to 3 fold and captured the leadership position in the world market. India has become IT hub. IT sector also contributes significantly to the service sector of Indian economy. According to the Department of Information Technology (DIT)

The overall Indian software and services industry revenue is estimated to have grown from US$ 10.2 billion in 2001-02 to reach US$ 58.7 billion in 2008-09translating to a CAGR of about 26.9%. The industry grew at 12.9% in 2008-09.

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Exports continue to dominate the revenues earned by the Indian software and services industry. The export intensity (the share of IT-ITeS exports to total IT-ITeS revenue) of Indian software and services industry has grown from 74.5% in 2001-02 to 78.9% in 2008-09. Total software and services exports are estimated to have grown from US$ 7.6 billion to US$ 46.3 billion in 2008-09, a CAGR of 28.6%.

The National Association of Software and Service Companies (NASSCOM) of India said that IT software and services industry has earned a revenue of US$ 63.7 billion. Moreover, according to a study by Springboard Research published in February 2010, the Indian information technology (IT) market is expected to grow at around 15.5% in 2010, on the back of growing investor confidence and favorable initiatives taken by the government.

Recent News on IT Sector: HCL Technologies entered into a five-year deal with media conglomerate News Corp for managing its data centers and IT across British newspapers in December 2009. The deal is pegged to be in the range of US$ 200-US$ 250 million. In January 2010, HCL Technologies also received a contract worth US$ 50 million from UK-based defence equipment maker Meggitt for providing engineering services. Moreover, in December 2009, Walmart selected three IT vendors in India Infosys Technologies, Cognizant Technology Solutions and UST Global for multi-year contracts worth over US$ 600 million. Tata Consultancy Services (TCS), the country's largest software exporter by revenue, was awarded a contract in March 2010 to administer the UK's National Employee Savings Trust (NEST) scheme's administered services under a 10-year deal, worth around US$ 879.5 million.

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Further in March 2010, Mahindra Satyam signed a four-year offshore contract with KMD, a Denmark-based information technology company, for US$ 48 million.

In April 2010, software exporter Patni Computer Systems won a five-year IT and backoffice contract potentially worth around US$ 200 million from US-based health insurance provider Universal American.

Top Companies in IT Sector: TCS, Infosys, WIPRO, HCL, Patni Computer System, Tech Mahindra, Mahindra Satyam.

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Conclusion
The project Global practices in Mutual Fund Industry provided me an opportunity to understand the mutual fund industry in India and around the globe. It also helped me in understanding the working of Reliance Mutual Fund Company as a whole and the processes being followed in mutual fund market. It also enhanced my understanding on the customer services being provided by mutual fund companies and best practices being followed by asset management companies in world to attract investors and also make their investors understand the mutual fund market by investor education programmes. I got an opportunity to find out the mediums the mutual fund companies use for Product communication to their distributors and investors. It was a great learning experience in the leading Mutual Fund Company in India Reliance Mutual Fund.

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References and Bibliography

Association of Mutual Funds of India Handbook. Reliance Mutual Fund Handbook. www.reliancemf.com www.amfiindia.com www.investmentuk.org www.kofia.com www.amak.or.kr www.sac.net.cn www.investopedia.com www.moneycontrol.com

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