SUBMITTED FOR THE FULLFILLMENT OF MASTERS IN BUSINESS ADMINISTRATION

(2008-2009)

SUBMITTED TO:
MR. SAURABH JOSHI FINANCE FACULTY UIM, DEHRADUN

SUBMITTED BY:
DEVENDER KR SINGH MBA, FINANCE

Uttaranchal Institute of Management

03

CERTIFICATE OF ORIGINALITY

This is to certify that the dissertation report, ON MUTUAL FUND is an authentic work carried out by me under guidance and supervision of MR. SACHINDRA KUMAR PANDAY(RELATIONSHIP MANAGER, MARKETING ) at RELIGARE SECURITIES LIMITED. The dissertation is being submitted in partial fulfillment of the requirements for the award of the degree of MASTERS IN BUSINESS ADMINISTRATION from UTTARANCHAL INSTITUTE OF MANAGEMENT, DEHRADUN.

SACHINDRA KUMAR PANDAY (RELATIONSHIP MANAGER)

03

CONTENTS
Page Acknowledgement 2 Declaration Abstract Objective of study Corporate Overview 6-38 Introduction to mutual fund 39-40 Mutual fund in India Usage and expenses of mutual fund Types of mutual fund Fund management Risk in investment Classes of fund 65 Load and expanses Investment philosophy Tips on mutual fund investing 73-78 Advantages and disadvantages Comparative Study 84- 87

3 4 5

41-46 47-51 52-60 61-62 63-64 66-69 70-72 79-83

03

Criticism of Mutual fund 87- 89 Mutual fund conclusion Methodology 91-94 Recommendation 95 Glossary 96-100 Bibliography 101

90

03

Acknowledgement
My research for the dissertation at RELIGARE SECURITY LIMITED has been a quantum leap in terms of familiarization of management concepts, hands on experience, acclimatization to the corporate culture, sincerity, diligence, responsibility & above all self-confidence. I deem privilege to express my profound sense of gratitude to

Mr.SACHINDRA KUMAR PANDAY, (Relationship Manager) & faculty guide Mr. SAURABH JOSHI for providing me an opportunity to peep into the functioning of RELIGARE SECURITY LIMITED. I thank him for his cooperation & continuous guidance. He not only guided me but also was a source of inspiration for me. I am proud of my family because of whose support and co-operation i was able to meet all the challenges that came during this duration.
Finally I thank everyone at RELIGARE SECURITY LIMITED, who is putting in their earnest & humble efforts to hone the gung ho elements like us

DEVENDER KR SINGH MBA, FINANCE UIM, DEHRADUN

INTERNAL GUIDE: MR.SAURABH JOSHI (FINANCE FACULTY)

03

Abstract

The dissertation report enumerates the steps undertaken by RELIGARE SECURITES LIMITED for enhancing its relation with its potential customers. Marketing focuses on communicating with the customers and focuses on creating a long term bonding with all the public of the organization. These publics of the organization include customers of the company, its employees, financer & all other persons who in one way or the other are the integral part of the organization. The content of the dissertation has a clear sequence which defines the present background of the mutual fund at RELIGARE SECURITY LIMITEDS contribution in the upward trend. As RELIGARE SECURITY LIMITED is the leading broking house in India, it is imperative to clearly define the role of marketing. The dissertation documents the complete set of activities of MARKETING in RELIGARE SECURITY LIMITED. The main focus of the study was on MUTUAL FUND. This is because it is the important tool of promoting the brand image of the company.

03

OBJECTIVE OF THE STUDY

This project is aimed at studying the marketing practices of RELIGARE SECURITIES LIMITED Changes in marketing techniques, servicing methods, and shifts in customer preferences are all factors that add to the challenges of maintaining a competitive position. An ideal tool used to meet this challenge is benchmarking, which involves improving by finding better ways to do what the organization is doing. Such factors when identified and assessed in an unbiased and factual manner can provide vital inputs which can have tremendous impact on the performance of an organization. Through marketing environment, it would be possible to set new marketing approaches and adapt the best practice to set new marketing approaches and adapt the best practice to RELIGARE SECURITIES LIMITED. which in turn, will help the marketing department to set programmers for the targeted customers, give the best service and make it efficient in such manner that their performance reflects the RELIGARES success story.

03

RELIGARE SECURITIES LIMITED

(A RANBXY promoter group company)

Religare is driven by ethical and dynamic process for wealth creation. Based on this, the company started its endeavor in the financial market. Religare Enterprises Limited (A Ranbaxy Promoter Group Company) through Religare Securities Limited, Religare Finvest Limited, Religare Commodities Limited and Religare Insurance Broking Limited provides integrated financial solutions to its corporate, retail and wealth management clients. Today, we provide various financial services which include Investment Banking, Corporate Finance, Portfolio Management Services, Equity & Commodity Broking, Insurance and Mutual Funds. Plus, theres a lot more to come your way. Religare is proud of being a truly professional financial service provider managed by a highly skilled team, who have proven track record in their respective domains. Religare operations are managed by more than 3000 highly skilled professionals who subscribe to Religare philosophy and are spread across its country wide branches. Today, we have a growing network of more than 300 branches and more than 580 business partners spread across more than 300 cities/towns in India and a fully operational international office at London. Unlike a traditional broking firm, Religare group works on the philosophy of partnering for wealth creation. We not only execute trades for our clients but also provide them critical and timely investment advice. The growing list of financial institutions with which Religare is empanelled as an approved broker is a reflection of the high level service standard maintained by the company. RSL is one of the leading broking houses of India and are dealing into Equity Broking, Depository Services, Portfolio Management Services, Internet Trading, Institutional Equity Brokerage & Research, Investment Banking, Merchant Banking and Corporate Finance.

03

To facilitate free and fare trading process Religare is a member of major financial institutions like, National Stock Exchange of India, Bombay Stock Exchange of India, Depository Participant with National Securities Depository Limited and Central Depository Services (I) Limited, and a SEBI approved Portfolio Manager. RSL serves a platform to all segments of investors to avail the opportunities offered by investing in Indian equities either on their own or through managed funds in Portfolio Management. Religare Enterprises Limited (A Ranbaxy Promoter Group Company) through Religare Securities Limited, Religare Finvest Limited, Religare Commodities Limited and Religare Insurance Advisory Services Limited provides integrated financial solutions to its corporate, retail and wealth management clients. Today, Religare provides various financial services which include Investment Banking, Corporate Finance, Portfolio Management Services, Equity & Commodity Broking, Insurance and Mutual Funds. Plus, there's a lot more to come your way. Religare is proud of being a truly professional financial service provider managed by a highly skilled team, who have proven track record in their respective domains. Religare operations are managed by more than 2000 highly skilled professionals who subscribe to Religare philosophy and are spread across its country wide branches. Religare has a growing network of more than150 branches and more than 300 business partners spread across more than180 cities in India and a fully operational international office at London. However, the target is to have 350 branches and 1000 business partners in 300 cities of India and more than 7 International offices by the end of 2006. Unlike a traditional broking firm, Religare group works on the philosophy of partnering for wealth creation. Not only trades are executed for its clients but also they are provided with critical and timely investment advice. The growing list of financial institutions with which Religare is empanelled as an approved broker is a reflection of the high level service standard maintained by the company.

03

Religare Securities Limited (RSL) is a leading equity and securities firm in India. The company currently handles almost 4-5% of the total volumes traded on NSE and in the realm of online trading and investments it currently holds a share of close to 8% of the market, as per some recent published reports.The major activities and offerings of the company today are Equity broking, Depository participant services, Portfolio Management Services, Institutional Brokerage & Research, Investment Banking and Corporate Finance. To broaden the gamut of services offered to its investors, the company has also recently unveiled a new avatar of it's online investment portal armed with a host of revolutionary features

RSL is a member of the National Stock Exchange of India, Bombay Stock Exchange of India, Depository Participant with National Securities Depository Limited and Central Depository Services (I) Limited, and SEBI approved Portfolio Manager Religare has been constantly innovating in terms of product and services and to offer such incisive services to specific user segments it has also started the NRI, FII, HNI and Corporate Servicing groups. These groups take all the portfolio investment decisions depending upon a clients risk / return parameter. Religare has a very credible research and analysis division, which not only caters to the need of our institutional clientele but also gives their valuable inputs to investment dealers. Religare is also giving in house depository services to its clientele and is one of the leading depository service providers in the country. In a span of less than five years of its retail operations, RSL has recorded a healthy growth rate both in business volumes and

03

profitability which is clearly significant from the growth of its foot prints across India.

Fortis Group
Fortis Healthcare and SRL-Ranbaxy are healthcare companies, established by the promoters of Ranbaxy Laboratories, the largest Indian pharmaceutical company with over $1.2 billion in revenues and a product line in over a 100 countries with a ground presence in 44. Fortis Healthcare Ltd. Fortis has a vision to set up a network of world - class super specialist hospitals linked with a larger network of multi-specialty hospitals to provide high quality healthcare to the people of India, through a hub and spoke model. In line with its growth strategy and with the recent acquisition of the Escorts Healthcare System, Fortis has brought within its fold an additional set of 4 hospitals in the North of India (Escorts Hospital-Amritsar, New Delhi, Faridabad and Raipur) taking its total operational hospital strength to 12 hospitals. The Fortis Group has progressive plans to change the healthcare delivery landscape in India by being the premier healthcare provider in the region driven by quality and most importantly "patient-centricity".

03

RANBAXY
SRL-Ranbaxy Limited (SRL) was set up in 1997 and established India's First Central Clinical Reference Lab in Mumbai. It was established with the objective of providing cost effective, diagnostically incisive, world-class medical laboratory services in India. Today, SRL-Ranbaxy is South East Asia's largest Clinical Reference Laboratory, and has successfully conducted over 25 million tests for patients in India, South Asia and the UAE. It has recently commenced servicing a large private hospital group in the UK through outsourced pathology services. Samples are flown out from the UK and post testing in India, the results are electronically communicated over a USFDA compliant IT network. In India, SRL-Ranbaxy has established a network comprising of one central clinical reference laboratory, 18 satellite laboratories and 550 collection centers. Through this network, it supports over 25,000 doctors, 650 hospitals and close to 1,000 smaller Pathology Labs in 350 towns, across the country. With the use of over 95 technologies, including the latest cutting-edge inventions and processes, SRL-Ranbaxy offers complete range of over 3,000 clinical laboratory tests for the screening, diagnosis and monitoring of every conceivable disease or metabolic disorder. Having successfully rendered services for Phase II and III Clinical Trials, there has been a constant demand for SRL to cover other components of the Drug Development process, primarily PhaseI studies and Bioequivalence work, including Bioanalysis and Pharmacokinetic samples. SRL Ranbaxy's commitment to quality assurance is endorsed by the fact that it is India's first CAP (College of American Pathologists) and NABL (National Accreditation Board for Testing and Calibration Laboratories) accredited laboratory and also follows ISO/IEC 17025 standards. The QA/QC and technical standard operating procedures and guidelines meet the benchmarks set by:

NCCLS (National Committee for Clinical Laboratory Standards, USA) CLIA

03

GCP and GLP WHO and CDC

Our Envisaged Group Structure

Religare Enterprise Limited

Religare Securities Ltd. Religare Finevest Ltd. Religare Wealth Management Ltd Religare Finance Ltd. Religare Commodities Ltd. Religare Broking Ltd. Religare Insurance Holding Company Ltd. Religare Realty Ltd. Religare Venture Capital Ltd. Religare Capital Market Ltd.

03

Vision -

To build Religare as a globally trusted brand in the financial services domain and present it as the Investment Gateway of India

Mission
Providing financial care driven by the core values of diligence and transparency.

Brand Essence

Religare is driven by ethical and dynamic processes for wealth creation.

03

Our Top Management Team

Mr. Sunil Godhwani - CEO & Managing Director, Religare Enterprises Limited Mr. Sunil Godhwani is the CEO& MD of Religare Enterprises Limited and MD of Religare Securities Ltd. Mr. Godhwani is also a Director in subsidiary businesses including Religare Commodities Ltd., Religare Finevest Ltd. and Religare Insurance Broking Limited. Mr. Godhwani, who has a rich business experience of more than 2 decades, holds a B. Sc. Degree in Chemical Engineering and M.Sc. in Industrial Engineering & Finance from New York. In a span of less than five years, The Religare Group under his astute leadership has achieved tremendous growth and is working constantly on the philosophy of ethical and dynamic processes for Wealth Creation. After successfully Establishing a foothold across the length & breadth of the country, his main focus now is to build Religare a truly Multi-National Financial Power House. Mr. Godhwani is a man of simple tastes and expresses confidence in his abilities to lead the Company to even greater heights as he profoundly states Having an aggressive team working on a conservative approach with systems in place, processes automatically give desired results. Mr Godhwani pursues an active interest in sporting activities such as Cricket, Table Tennis and Golf. Mr. Shachindra Nath - Group Chief Operating Officer, Religare Enterprises Limited Mr. Shachindra Nath is responsible for the business growth of the entire Religare group, its strategy, operations and expansion. Mr. Nath along with

03

other members of the central leadership team at Religare is on the march of taking Religare to the next level of growth and to make it as one of the top integrated financial services providers in India. Mr. Nath, armed with a Law degree, a Company Secretary and a Post Graduate Diploma in International Trade laws and Intellectual Property Rights, has good knowledge and hands on understanding of the intricacies of the financial services industry in India. Mr. Nath comes from a very rich and diverse background wherein he has been involved in business advisory, legal advisory and strategic initiatives for various corporate. Mr. Anil Saxena - Group Chief Financial Officer, Religare Enterprises Limited Mr. Anil Saxena is the Group Chief Finance Officer (Group CFO) of Religare Enterprises Limited and looks at the Finance & Accounts, Risk Management, Operations, Legal & Compliance functions of all Religare divisions and companies. As a qualified Chartered Accountant and ICWA, Mr. Saxena brings to the table Close to 2 decades of relevant and rich work experience.

Board of Directors - Religare Enterprises Limited

Mr. Malvinder Mohan Singh - Chairman (Non Executive) Mr. Sunil Godhwani - CEO & Managing Director Mr. Shivinder Mohan Singh - Non Executive Director Mr. Harpal Singh - Non Executive Director Mr. Deepak Ramchand Sabnani - Independent Director Mr.Padam Bahl - Independent Director Mr.J.W. Balani - Independent Director Mr. R. K. Shetty - Alternate to Mr. J. W. Balani Capt.G.P.S.Bhalla - Alternate to Mr. Deepak Sabnani

03

Clientele
Financial Institutions Mutual Funds Banks (Nationalised, Scheduled, Public Sector, Private Sector,Cooperative, Foreign) Insurance Companies Foreign Institutional Investors Corporates Venture Capital Companies Foreign Venture Capital Companies PF Trusts

03

Retail Spectrum

Equity Trading Commodities Trading Online Investment Portal Personal Financial Services Personal Credit

03

Equity Trading
Trading in Equities with Religare truly empowers you for your investment needs. A highly process driven, diligent approach backed by powerful Research & Analytics and one of the best in class dealing rooms ensures that you have a superlative experience. Further, Religare also has one of the largest retail networks, with its presence in more than 900 locations across more than 320 towns & cities. This means, you can walk into any of these branches and connect to our highly skilled and dedicated relationship managers to get the best services. You could also choose to enjoy the freedom to execute your own trades through our online mechanism.

Commodities Trading
Religare Commodities Limited (RCL) was initiated to spearhead Exchange based Commodity Trading. As a member of NCDEX, MCX and NMCE, RCL is a trade facilitator providing the platform to trade in commodities. Grounded in the Religare philosophy, highly skilled and dedicated professionals strive to offer the clients "best-fit" investment solutions in the country.

Online Investment Portal

Investing online will never be the same again with our 360 degree portal www.religareonline.com Now you can not just invest online in Equities, IPOs, Mutual Funds, Commodities and much more but, also get TRADE REWARDS each time you invest. Besides this, we also offer you a host of other revolutionary features such as Zero Percent Brokerage; Interest on cash margin, exposure upto 20 times your cash margin etc... on our select product schemes available through our highly

03

sophisticated and customized platform R-ACE (Religare Advanced Client Engine). So get empowered, enrich your experience of investing online and open yourself to a whole new world of possibilities.

Personal Financial Services

Religare has recently entered into personal financial advisory services. It caters to the financial needs of individuals by advising them on various financial plans. Religares Personal financial advisors, also called financial planners or financial consultants, use their knowledge of investments, tax laws, and insurance to recommend financial options to individuals in accordance with the individuals short-term and long-term goals. Some of the issues that planners address are general investments, retirement and tax planning. Advantage - Financial Planning Provides direction and meaning to your financial decisions Helps understanding how each financial decision you make affects other areas of your finances Helps assessing the level of risk you are willing to take with your investments You can also adapt more easily to life changes and feel more secure that your goals are on track. Product offerings Mutual Funds Insurance - Life & Non - Life Bonds Deposits IPOs Small Savings Instruments

Religare as part of its NBFC business being operated through Religare Finvest Ltd. offers Personal Credit to cater to the growing wave of consumerism in India .

03

Through our Loan against Shares (LAS) and Personal Lending Services (PLS) offerings, we have entered into consumer lending business activities. Our PLS service offering is marketed as Personal Credit services and developed by leveraging our branch network to generate opportunities from existing equity customers. Our PLS business consists of unsecured consumer loans to our retail customers. Our LAS business consists of loans secured by shares held by our retail customers and helps them leverage their equity increased exposure.

Personal Credit
Religare as part of its NBFC business being operated through Religare Finvest Ltd. offers Personal Credit to cater to the growing wave of consumerism in India . Through our Loan against Shares (LAS) and Personal Lending Services (PLS) offerings, we have entered into consumer lending business activities. Our PLS service offering is marketed as Personal Credit services and developed by leveraging our branch network to generate opportunities from existing equity customers. Our PLS business consists of unsecured consumer loans to our retail customers. Our LAS business consists of loans secured by shares held by our retail customers and helps them leverage their equity market positions to take increased exposure.

03

Wealth Spectrum

Wealth Advisory Portfolio Management Services Arts Initiative Priority Equity Client Services

03

Wealth Advisory
"At Religare, we are always at It, partnering with you relentlessly.. We would want you to sleep in peace, but never would we want your wealth to sleep or go into a slumberEthical, dynamic and diligent processes are what we are truly about Wealth Management at Religare To provide investment advisory and execution services To work hand in hand with clients to identify and analyze their long-term goals, risk tolerance and existing asset base To Utilise our full-suite platform with an open architecture along with a fully focussed client centric approach to offer customized solutions for clients Supported by dedicated team of highly skilled and qualified wealth managers and research professionals.

Our Value Proposition

Strong lineage and pedigree Young, professional, innovative and fully client centric human capital Full suite platter of services from the Religare umbrella National and International Foot print An open architecture and client centric philosophy Not just lip service

Product Recommendations

Equities (Including International)

03

Debts Commodities Structured Products Emerging Investment Classes.

Critical Steps in our Client Centric Operating Process

Risk Profiling Research & Asset Allocation Product Recommendations Review & Rebalancing

International Advisory Fund Management Services (AFMS) - A new horizon for international investments We provide our wealth clients an opportunity to invest in international financial instruments (currently limited to the US). Equities, Mutual Funds and Debts are some the key instruments available and the clients have the option to choose from various asset allocation modules. Why Invest Overseas? Avenues for enhancing returns, minimizing risk and portfolio diversification Global outreach of opportunities Pre approved route for resident individuals to invest (Healthy Govt. Patronage and favorable regulatory developments)

Portfolio Management Services

Portfolio Management Services provides the benefits of diversification across assets, sectors, and funds. Experts in Fund Management with years of investment experience combine best of breed investment avenues as they aim to achieve optimal returns at managed levels of risk.

03

What's the idea behind PMS?

Portfolio Management Service is a magnum opus banquet laid by Religare to address the varying investment preferences. A focused service, PMS pays attention to details, and portfolios are customised to suit the unique requirements of investors. Religare PMS currently operates four portfolio management schemes, viz Panther, Tortoise, Elephant, and Caterpillar. Each scheme is designed keeping in mind the varying tastes, objectives and risk tolerance of our investors Investment Philosophy- We believe that our investors are better served by a disciplined investment approach, which combines an understanding of the goals and objectives of the investor with a fine tuned strategy backed by research. Stock specific selection procedure based on fundamental research for making sound investment decisions. Focus on minimizing investment risk by following rigorous valuation disciplines. Capital preservation. Selling discipline and use of derivatives to control volatility.

Overall to enhance absolute return for investors.

Portfolio Management Services

Constant monitoring of your portfolios asset mix to ensure it will always be effectively positioned to meet your long-term objectives. Our portfolio managers will adjust the asset mix to reflect the current economic climate and to benefit from opportunities

03

 Performance-linked fees Constant disclosure of the portfolio on daily and monthly basis It defines the customized risk and return Great flexibility of deploying and exposing the initial investment to the market. High water mark level for profit sharing No transaction and custodian charges Diversification across asset classes and investment styles Investment objectives and goals presented clearly through a personalized profile Encourages a disciplined approach to investing over a longer time horizon

Our Schemes
Panther The Panther portfolio aims to achieve higher returns by taking aggressive positions across sectors and market capitalizations. It is suitable for the High risk high return investor with a strategy to invest across sectors and take advantage of various market conditions. Tortoise The Tortoise portfolio aims to achieve growth in the portfolio value over a period of time by way of careful and judicious investment in fundamentally sound companies having good prospects. The scheme is suitable for the Medium Risk Medium Return investor with a strategy to invest in companies which have consistency in earnings, growth and financial performance.

03

Elephant The Elephant portfolio aims to generate steady returns over a longer period by investing in securities selected only from BSE 100 and NSE 100 index. This plan is suitable for the Low Risk Low Return investor with a strategy to invest in blue chip companies, as these companies have steady performance and reduce liquidity risk in the market. Caterpillar The Caterpillar portfolio aims to achieve capital appreciation over a long period of time by investing in a diversified portfolio. This scheme is suitable for investors with a high risk appetite. The investment strategy would be to invest in scrips which are poised to get a re-rating either because of change in business, potential fancy for a particular sector in the coming years/months, business diversification leading to a better operating performance, stocks in their early stages of an upturn or for those which are in sectors currently ignored by the market.

Priority Client Group Services (PCG) At Religare we strongly beleive in not just providing you with incisive investment advice but we are equally focussed to ensure timely execution of your important trades. With this as our driving philosophy we have created a unique client centric business model that revolves around optimum service delivery. Further, our investment advisory is underpinned by comprehensive fundamental and technical research helping you to time your investment decisions perfectly. Invest smart Our goal is to cut through the labyrinth of potential investment avenues and bring you only the most rewarding investment ideas. As our compass, we have a team of highly qualified research professionals with collectively close to 100 man-years of equity research experience and a keen market perception. We dont simply focus on recognised companies, but also strive to unearth "hidden gems" companies where value is waiting to be unlocked. Our fresh insights

03

come from a vast business network and a research approach that emphasises fundamentals over sentiments.

Incisive research the hallmark of our services As a part of our Priority Client Group, you get exclusive access to our research reports. We bring you fundamental analysis covering a wide spectrum of companies across sectors, supported by the latest and most reliable research inputs. Religares team of fundamental research analysts specialise in specific industry sectors and monitor sectoral developments keenly, while tracking individual companies so you never lose sight of the bigger picture. Moreover, our comprehensive derivatives trading reports, intra-day technical calls and technical strategies keep you abreast of the latest market trends. Professional team of dealers Our experienced team of dealers maintain a close watch on the market to ensure that information reaches clients at the earliest. Moreover, our state-of-the-art infrastructure and superior execution systems help us serve you more efficiently. Avail of personalised services Personalised services form the hallmark of the Religare PCG offerings. We examine the risk profile and financial objective of every client, so as to chart out highly purposeful, result-oriented plans. A dedicated back office team complements our services to ensure that all your transactions are concluded in a prompt and efficient manner. A comprehensive service bouquet Thus, at Religare PCG, we offer you a complete bouquet of services from the latest market information and regular research-based recommendations on which stocks to buy, sell and hold, to the rapid execution of trades. Perhaps thats why our client base has grown from strength to strength, doubling over the past couple of years.

03

Institutional Spectrum

Institutional Broking Services Investment Banking Corporate Finance Insurance Advisory

03

Institutional Broking Services

The mission of this division is to institutionalize and implement a process driven approach to cater to the needs of leading corporate houses and institutions. The division would like to be seen as a one stop investment gateway and knowledge repository for its clients servicing their unique and sophisticated needs. The division is structured as a separate SBU and is housed out of Mumbai, manned by a small yet fleet footed and extremely skilled group of top notch professionals drawn from the best in the industry. The key highlights of our service platter are: Highly skilled, dedicated dealing, research and sales teams Dealing capabilities on the NSE, BSE and in the cash and derivatives segment In-depth, detailed and insightful coverage of more than 60 stocks across diverse sectors. The sectors covered are FMCG, Hotels, Media, Pharma, Auto, Cement, Steel pipes, Logistics, Telecom, Construction and much more.

Our Current clientele includes some major domestic mutual funds, insurance companies, banks and FIIs

Investment Banking
We provide innovative, integrated and best-fit solutions to our corporate customers. It is our continuous endeavor to provide value enhancement through diverse financial solutions on an on-going basis, through offerings like corporate debt, private equity, IPO, ECB, FCCB, GDR/ADR etc.

03

Religare's Investment Banking Division offers the following services:

We specialize in structured financing and in providing advisory services related to financial planning, modeling and advising on financial requirements. Placement of Debt

Syndication of Domestic Loan / Foreign Currency Loan Securitisation Debt Swap & Loan Restructuring Short Term Corporate Debt Working Capital (Cash Credit & Short term Loan) Capital Market Instruments Overseas Acquisition

Placement of Equity (Private Equity) Both for listed and unlisted companies Merchant Banking IPO/FPO/RIGHTS Mergers & Acquisitions Corporate Advisory Services ADR/GDR/FCCB Buy Back Of Shares

03

Corporate Finance
We focus on finding right and relevant partners for our clients, who not only help in adding value but also improve the future valuation of the organization. We specialize in structured financing and providing advisory services related to financial planning, modeling and advising on financial requirements. Corporate finance products offered by us: Placement of Debt Syndication of Domestic Loan / Foreign Currency Loan Securitisation Debt Swap & Loan Restructuring Short Term Corporate Debt Working Capital (Cash Credit & Short term Loan) Capital Market Instruments Overseas Acquisition

Insurance Advisory
Religare Insurance Broking, a Religare Enterprises Limited venture, is one of India 's leading insurance broking firms, with one of the largest retail networks in the country. The company holds a composite broking license operating in the Life, Non-Life and Reinsurance domains. The company not only services and provides customized solutions to individual retail households / clients but also to some leading corporate houses and institutions across the country. True to the spirit of its existence, the company proactively represents and champions the interests of its clients tirelessly to principal insurance companies. Within a short span it has inked MoUs with all the leading insurance companies in the country and is backed by passionate professionals, a robust IT infrastructure and strong risk analysis teams adept at identifying and analyzing

03

risks to offer tailor-made solutions. The team across the country is driven by the core philosophy of creating and delivering value to its customers.

Research
We at Religare believe in providing independent research for clients to make investment decisions, with strict emphasis on self-regulation, avoiding possible conflict of interest in objectivity.

Varied research reports are prepared on different categories of Equities like Fundamental research Technical research Daily reports Intraday trading tech calls Intraday Derivative call Directional F&O calls Structured products Index Arbitrage

Arbitraging between Index (NIFTY) Futures and its constituents (Underlying Stock Futures). Volatility Trading

Arbitrage between volatilities i.e. between implied volatility of options and forecasted volatility of underlying stock futures.

03

Varied research reports are also prepared on different categories of commodities like Research on Metals Daily Market Commentary on exchange turnover along with turnover of top traded commodities; national and international news update on commodities. Daily Research Reports on metals and energy. Evening Capsule on LME stocks, Support, Resistance and market outlook, Daily Economic releases. Weekly Economic Calendar Reports on Agri Daily Spot Market Overview on spot market price trends, top traders outlook and important news with regard to particular commodities. Daily Report on agri-commodities

03

New Initiatives

Religare is on the fast and ambitious growth trajectory with some intresting plans in the pipeline

Religare Aegon Life Insurance - Life Insurance Company, a Joint Venture with Aegon

Religare Aegon AMC - Asset Management Company, a Joint Venture with Aegon

Religare Finance - Personal Loans / Credit Cards / Loan against Property / Mortgage & Reverse Mortgage

03

List of Mutual Funds The following is the list of Mutual Funds we distribute.

Bank Sponsored

SBI Fund Management Ltd. BOB Asset Management Co. Ltd. Canbank Investment Management Services Ltd. UTI Asset Management Company Pvt. Ltd.

Institutions

GIC Asset Management Co. Ltd. Jeevan Bima Sahayog Asset Management Co. Ltd.

Private Sector Indian:

BenchMark Asset Management Co. Pvt. Ltd. Cholamandalam Asset Management Co. Ltd. Credit Capital Asset Management Co. Ltd. Escorts Asset Management Ltd. JM Financial Mutual Fund Kotak Mahindra Asset Management Co. Ltd. Reliance Capital Asset Management Ltd.

03

Sahara Asset Management Co. Pvt. Ltd Sundaram Asset Management Company Ltd. Tata Asset Management Private Ltd.

Predominantly India Joint Ventures:

Birla Sun Life Asset Management Co. Ltd. DSP Merrill Lynch Fund Managers Limited HDFC Asset Management Company Ltd.

Predominantly Foreign Joint Ventures:ABN AMRO Asset Management (I) Ltd. Alliance Capital Asset Management ( India ) Pvt. Ltd. Deutsche Asset Management ( India ) Pvt. Ltd. Fidelity Fund Management Private Limited Franklin Templeton Asset Mgmt. ( India ) Pvt. Ltd. HSBC Asset Management ( India ) Private Ltd. ING Investment Management ( India ) Pvt. Ltd. Morgan Stanley Investment Management Pvt. Ltd. Principal Asset Management Co. Pvt. Ltd. Prudential ICICI Asset Management Co. Ltd. Standard Chartered Asset Mgmt Co. Pvt. Ltd

03

The Religare Edge:

We serve you with a diligent, transparent & process driven approach and ensure that your money gets the care it deserves. No experts, only expertise. Religare PMS comes to you from Religare, a Ranbaxy promoter group company with a solid reputation for an ethical and scientific approach to financial management. While we offer you the services of a Dedicated Relationship Manager who is at your service 24x7, we do not depend on individual expertise alone. For you, this means lower risk, higher dependability and unhindered continuity. Moreover, you are not limited by a particular individuals investment style. No hidden profits. We ensure that a part of the broking at Religare portfolio management services is through external broking houses. This means that your portfolio is not churned needlessly. Using more broking firms gives us access to a larger number of reports and analysis, enabling us to make better, more informed decisions. Furhtermore, your portfolio is customised to suit your investment objectives. Daily disclosures. Religare Portfolio Management Services gives you daily updates on your investment. You can pinpoint where your money is being invested, 24x7, instead of waiting till the end of the month to keep track. No charge till you profit*, so sure are we of our approach to portfolio management that we do not charge you for our services, until your investments start showing profit. Customized investment options Religare Portfolio Management Services invites you to invest across four broad portfolios to suit your investment needs. * Except fixed administrative charges.

03

MUTUAL FUND

Introduction
A mutual fund is a form of collective investment that pools money from many investors and invests their money in stocks, bonds, short-term money market instruments, and/or other securities. In a mutual fund, the fund manager trades the fund's underlying securities, realizing capital gains or losses, and collects the dividend or interest income. The investment proceeds are then passed along to the individual investors. The value of a share of the mutual fund, known as the net asset value per share (NAV), is calculated daily based on the total value of the fund divided by the number of shares currently issued and outstanding. Legally known as an "open-end company" under the Investment Company Act of 1940 (the primary regulatory statute governing investment companies), a mutual fund is one of three basic types of investment companies available in the United States. Outside of the United States (with the exception of Canada, which follows the U.S. model), mutual fund is a generic term for various types of collective investment vehicle. In the United Kingdom and Western Europe (including offshore jurisdictions), other forms of collective investment vehicle are prevalent, including unit trusts, open-ended investment companies (OEICs), SICAVs and unitized insurance funds. In Australia the term "mutual fund" is generally not used; the name "managed fund" is used instead. However, "managed fund" is somewhat generic as the definition of a managed fund in Australia is any vehicle in which investors' money is managed by a third party (NB: usually an investment professional or organization). Most managed funds are open-ended (i.e., there is no established maximum number of shares that can be issued); however, this need not be the case. Additionally the Australian government introduced a compulsory superannuation/pension scheme which, although strictly speaking a managed fund, is rarely identified by this term and is instead called a "superannuation fund" because of its special tax concessions and restrictions on when money invested in it can be accessed.

03

History
Massachusetts Investors Trust was founded on March 21, 1924, and, after one year, had 200 shareholders and $392,000 in assets. The entire industry, which included a few closed-end funds, represented less than $10 million in 1924. The stock market crash of 1929 slowed the growth of mutual funds. In response to the stock market crash, Congress passed the Securities Act of 1933 and the Securities Exchange Act of 1934. These laws require that a fund be registered with the Securities and Exchange Commission (SEC) and provide prospective investors with a prospectus that contains required disclosures about the fund, the securities themselves, and fund manager. The SEC helped draft the Investment Company Act of 1940, which sets forth the guidelines with which all SECregistered funds today must comply. With renewed confidence in the stock market, mutual funds began to blossom. By the end of the 1960s, there were approximately 270 funds with $48 billion in assets. The first retail index fund, the First Index Investment Trust, was formed in 1976 and headed by John Bogle, who conceptualized many of the key tenets of the industry in his 1951 senior thesis at Princeton University. It is now called the Vanguard 500 Index Fund and is one of the largest mutual funds ever with in excess of $100 billion in assets. One of the largest contributors of mutual fund growth was individual retirement account (IRA) provisions added to the Internal Revenue Code in 1975, allowing individuals (including those already in corporate pension plans) to contribute $2,000 a year. Mutual funds are now popular in employer-sponsored defined contribution retirement plans (401(k) s), IRAs and Roth IRAs.

As of April 2006, there are 8,606 mutual funds that belong to the Investment Company Institute (ICI), the national association of investment companies in the United States, with combined assets of $9.207 trillion.

03

Mutual Funds in India

Mutual Fund is an instrument of investing money. Nowadays, bank rates have fallen down and are generally below the inflation rate. Therefore, keeping large amounts of money in bank is not a wise option, as in real terms the value of money decreases over a period of time. One of the options is to invest the money in stock market. But a common investor is not informed and competent enough to understand the intricacies of stock market. This is where mutual funds come to the rescue. A mutual fund is a group of investors operating through a fund manager to purchase a diverse portfolio of stocks or bonds. Mutual funds are highly cost efficient and very easy to invest in. By pooling money together in a mutual fund, investors can purchase stocks or bonds with much lower trading costs than if they tried to do it on their own. Also, one doesn't have to figure out which stocks or bonds to buy. But the biggest advantage of mutual funds is diversification. Diversification means spreading out money across many different types of investments. When one investment is down another might be up. Diversification of investment holdings reduces the risk tremendously.

Mutual Funds Industry in India

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

03

industry. In the past decade, Indian mutual fund industry had seen a dramatic imporvements, both qualitywise as well as quantitywise. Before, the monopoly of the market had seen an ending phase, the Assets Under Management (AUM) was Rs. 67bn. The private sector entry to the fund family rose the AUM to Rs. 470 bn in March 1993 and till April 2004, it reached the height of 1,540 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. Large sections of Indian investors are yet to be intellectuated with the concept. Hence, it is the prime responsibility ofall 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. 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 delinked 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) Entry of non-UTI mutual funds. SBI Mutual Fund was the first followed by

03

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 in 1989 and GIC in 1990. The end of 1993 marked Rs.47,004 as assets under management. 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 This phase had bitter experience for UTI. It was bifurcated into two separate entities. One is the Specified Undertaking of the Unit Trust of India with AUM of Rs.29,835 crores (as on January 2003). 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.

Association of Mutual Funds in India (AMFI)

03

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 organisation. Association of Mutual Funds in India (AMFI) was incorporated on 22nd 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 standards 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 programme of training and certification for all intermediaries and other engaged in the mutual fund industry.

03

AMFI undertakes all India awarness programme for investors inorder 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 informations on Mutual Fund Industry and undertakes studies and research either directly or in association with other bodies. The sponsorers of Association of Mutual Funds in India

Future of Mutual Funds in India

By December 2004, Indian mutual fund industry reached Rs 1,50,537 crore. It is estimated that by 2010 March-end, the total assets of all scheduled commercial banks should be Rs 40,90,000 crore banks should be Rs 40,90,000 crore. The annual composite rate of growth is expected 13.4% during the rest of the decade. In the last 5 years we have seen annual growth rate of 9%. According to the current growth rate, by year 2010, mutual fund assets will be double. Let us discuss with the following table: Aggregate deposits of Scheduled Com Banks in India (Rs.Crore) Month/Year Mar-00 Mar-01 Mar-02 Mar-03 Mar-04 Deposits Change in % over last yr Source - RBI Mutual Fund AUMs Growth Month/Year MF AUM's Mar-00Mar-01Mar-02Mar-03Mar-04Mar-05 Sep-04 4-Dec 68984 93717 83131 94017 75306 137626 151141 149300 MarSep-04 05 4-Dec

605410 851593 989141 1131188 1280853 15 14 13 12 -

1567251 1622579 18 3

03

Change in % over last yr Source

26

13

12 -

25

45

1 AMFI

Some facts for the growth of mutual funds in India

100% growth in the last 6 years.

Number of foreign AMC's are in the que to enter the Indian markets like Fidelity Investments, US based, with over US$1trillion assets under management worldwide. Our saving rate is over 23%, highest in the world. Only channelizing these savings in mutual funds sector is required. We have approximately 29 mutual funds which is much less than US having more than 800. There is a big scope for expansion. 'B' and 'C' class cities are growing rapidly. Today most of the mutual funds are concentrating on the 'A' class cities. Soon they will find scope in the growing cities. Mutual fund can penetrate rurals like the Indian insurance industry with simple and limited products. SEBI allowing the MF's to launch commodity mutual funds. Emphasis on better corporate governance. Trying to curb the late trading practices. Introduction of Financial Planners who can provide need based advice.

03

Usage

Mutual funds can invest in many different kinds of securities. The most common are cash, stock, and bonds, but there are hundreds of sub-categories. Stock funds, for instance, can invest primarily in the shares of a particular industry, such as technology or utilities. These are known as sector funds. Bond funds can vary according to risk (e.g., high-yield or junk bonds, investmentgrade corporate bonds), type of issuers (e.g., government agencies, corporations, or municipalities), or maturity of the bonds (short- or long-term). Both stock and bond funds can invest in primarily U.S. securities (domestic funds), both U.S. and foreign securities (global funds), or primarily foreign securities (international funds). Most mutual funds' investment portfolios are continually adjusted under the supervision of a professional manager, who forecasts the future performance of investments appropriate for the fund and chooses those which he or she believes will most closely match the fund's stated investment objective. A mutual fund is administered through a parent management company, which may hire or fire fund managers. Mutual funds are liable to a special set of regulatory, accounting, and tax rules. Unlike most other types of business entities, they are not taxed on their income as long as they distribute substantially all of it to their shareholders. Also, the type of income they earn is often unchanged as it passes through to the shareholders. Mutual fund distributions of tax-free municipal bond income are also tax-free to the shareholder. Taxable distributions can be either ordinary income or capital gains, depending on how the fund earned those distributions.

Net assets value (NAV)

03

The net asset value, or NAV, is the current market value of a fund's holdings, usually expressed as a per-share amount. For most funds, the NAV is determined daily, after the close of trading on some specified financial exchange, but some funds update their NAV multiple times during the trading day. Open-end funds sell and redeem their shares at the NAV, and so a process order only after the NAV is determined. Closed-end funds (the shares of which are traded by investors) may trade at a higher or lower price than their NAV; this is known as a premium or discount, respectively. If a fund is divided into multiple classes of shares, each class will typically have its own NAV, reflecting differences in fees and expenses paid by the different classes. Some mutual funds own securities which are not regularly traded on any formal exchange. These may be shares in very small or bankrupt companies; they may be derivatives; or they may be private investments in unregistered financial instruments (such as stock in a non-public company). In the absence of a public market for these securities, it is the responsibility of the fund manager to form an estimate of their value when computing the NAV. How much of a fund's assets may be invested in such securities is stated in the fund's prospectus.

Turnover
Turnover is a measure of the fund's securities transactions, usually calculated over a year's time, and usually expressed as a percentage of net asset value. This value is usually calculated as the value of all transactions (buying, selling) divided by 2 divided by the fund's total holdings; i.e., the fund counts one security sold and another one bought as one "turnover". Thus turnover measures the replacement of holdings. In Canada, under NI 81-106 (required disclosure for investment funds) turnover ratio is calculated based on the lesser of purchases or sales divided by the average size of the portfolio (including cash).

03

Turnover generally has tax consequences for a fund, which are passed through to investors. In particular, when selling an investment from its portfolio, a fund may realize a capital gain, which will ultimately be distributed to investors as taxable income. The process of buying and selling securities also has its own costs, such as brokerage commissions, which are borne by the fund's shareholders.

Expense and TERs

Mutual funds bear expenses similar to other companies. The fee structure of a mutual fund can be divided into two or three main components: management fee, non management expense, and 12b-1/non-12b-1 fees. All expenses are expressed as a percentage of the average daily net assets of the fund.

Management Fees
The management fee for the fund is usually synonymous with the contractual investment advisory fee charged for the management of a fund's investments. However, as many fund companies include administrative fees in the advisory fee component, when attempting to compare the total management expenses of different funds, it is helpful to define management fee as equal to the contractual advisory fee + the contractual administrator fee. This "levels the playing field" when comparing management fee components across multiple funds. Contractual advisory fees may be structured as "flat-rate" fees, i.e., a single fee charged to the fund, regardless of the asset size of the fund. However, many funds have contractual fees which include breakpoints, so that as the value of a fund's assets increases, the advisory fee paid decreases. Another way in which the advisory fees remain competitive is by structuring the fee so that it is based on the value of all of the assets of a group or a complex of funds rather than those of a single fund.

03

Non-management Expenses
Apart from the management fee, there are certain non-management expenses which most funds must pay. Some of the more significant (in terms of amount) non-management expenses are: transfer agent expenses (this is usually the person you get on the other end of the phone line when you want to purchase/sell shares of a fund), custodian expense (the fund's assets are kept in custody by a bank which charges a custody fee), legal/audit expense, fund accounting expense, registration expense (the SEC charges a registration fee when funds file registration statements with it), board of directors/trustees expense (the disinterested members of the board who oversee the fund are usually paid a fee for their time spent at board meetings), and printing and postage expense (incurred when printing and delivering shareholder reports).

12b-1/Non-12b-1 Service Fees

12b-1 service fees/shareholder servicing fees are contractual fees which a fund may charge to cover the marketing expenses of the fund. Non-12b-1 service fees are marketing/shareholder servicing fees which do not fall under SEC rule 12b-1. While funds do not have to charge the full contractual 12b-1 fee, they often do. When investing in a front-end load or no-load fund, the 12b-1 fees for the fund are usually .250% (or 25 basis points). The 12b-1 fees for back-end and level-load share classes are usually between 50 and 75 basis points but may be as much as 100 basis points. While funds are often marketed as "no-load" funds, this does not mean they do not charge a distribution expense through a different mechanism. It is expected that a fund listed on an online brokerage site will be paying for the "shelf-space" in a different manner even if not directly through a 12b-1 fee.

03

Fees and Expenses Borne by the Investor (not the Fund)

Fees and expenses borne by the investor vary based on the arrangement made with the investor's broker. Sales loads (or contingent deferred sales loads (CDSL)) are not included in the fund's total expense ratio (TER) because they do not pass through the statement of operations for the fund. Additionally, funds may charge early redemption fees to discourage investors from swapping money into and out of the fund quickly, which may force the fund to make bad trades to obtain the necessary liquidity. For example, Fidelity Diversified International Fund (FDIVX) charges a 1 percent fee on money removed from the fund in less than 30 days.

Brokerage Commissions
An additional expense which does not pass through the statement of operations and cannot be controlled by the investor is brokerage commissions. Brokerage commissions are incorporated into the price of the fund and are reported usually 3 months after the fund's annual report in the statement of additional information. Brokerage commissions are directly related to portfolio turnover (portfolio turnover refers to the number of times the fund's assets are bought and sold over the course of a year). Usually the higher the rate of the portfolio turnover, the higher the brokerage commissions. The advisors of mutual fund companies are required to achieve "best execution" through brokerage arrangements so that the commissions charged to the fund will not be excessive.

03

TYPES OF MUTUAL FUNDS

On the basis of their structure and objective, mutual funds can be classified into following major types:

By Structure Open - Ended Schemes Close - Ended Schemes Interval Schemes

By Investment Objective Growth Schemes Income Schemes Balanced Schemes Money Market Schemes

Other Schemes Tax Saving Schemes Special Schemes Index Schemes Sector Specfic Schemes

03

Closed-End Mutual Funds

A closed-end mutual fund has a set number of shares issued to the public through an initial public offering. These funds have a stipulated maturity period 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. Once underwritten, closed-end funds trade on stock exchanges like stocks or bonds. The market price of closed-end funds is determined by supply and demand and not by net-asset value (NAV), as is the case in open-end funds. Usually closed mutual funds trade at discounts to their underlying asset value.

Open End Mutual Fund

An open-end mutual fund is a fund that does not have a set number of shares. It continues to sell shares to investors and will buy back shares when investors wish to sell. Units are bought and sold at their current net asset value. Open-end funds keep some portion of their assets in short-term and money market securities to provide available funds for redemptions. A large portion of most open mutual funds is invested in highly liquid securities, which enables the fund to raise money by selling securities at prices very close to those used for valuations. The term mutual fund is the common name for an open-end investment company. Being open-ended means that, at the end of every day, the fund issues new shares to investors and buys back shares from investors wishing to leave the fund. Mutual funds may be legally structured as corporations or business trusts but in either instance are classed as open-end investment companies by the SEC.

03

Large Cap Funds

Large cap funds are those mutual funds, which seek capital appreciation by investing primarily in stocks of large blue chip companies with aboveaverage prospects for earnings growth. Different mutual funds have different criteria for classifying companies as large cap. Generally, companies with a market capitalization in excess of Rs 1000 crore are known large cap companies. Investing in large caps is a lower risk-lower return proposition (vis--vis mid cap stocks), because such companies are usually widely researched and information is widely available.

Mid Cap Funds

Mid cap funds are those mutual funds, which invest in small / medium sized companies. As there is no standard definition classifying companies as small or medium, each mutual fund has its own classification for small and medium sized companies. Generally, companies with a market capitalization of up to Rs 500 crore are classified as small. Those companies that have a market capitalization between Rs 500 crore and Rs 1,000 crore are classified as medium sized. Big investors like mutual funds and Foreign Institutional Investors are increasingly investing in mid caps nowadays because the price of large caps has increased substantially. Small / mid sized companies tend to be under researched thus they present an opportunity to invest in a company that is yet to be identified by the market. Such companies offer higher growth potential going forward and therefore an opportunity to benefit from higher than average valuations. But mid cap funds are very volatile and tend to fall like a pack of cards in bad times. So, caution should be exercised while investing in mid cap mutual funds.

03

Equity Mutual Funds

Equity mutual funds are also known as stock mutual funds. Equity mutual funds invest pooled amounts of money in the stocks of public companies. Stocks represent part ownership, or equity, in companies, and the aim of stock ownership is to see the value of the companies increase over time. Stocks are often categorized by their market capitalization (or caps), and can be classified in three basic sizes: small, medium, and large. Many mutual funds invest primarily in companies of one of these sizes and are thus classified as large-cap, mid-cap or small-cap funds. Equity fund managers employ different styles of stock picking when they make investment decisions for their portfolios. Some fund managers use a value approach to stocks, searching for stocks that are undervalued when compared to other, similar companies. Another approach to picking is to look primarily at growth, trying to find stocks that are growing faster than their competitors, or the market as a whole. Some managers buy both kinds of stocks, building a portfolio of both growth and value stocks.

Balanced Fund
Balanced fund is also known as hybrid fund. It is a type of mutual fund that buys a combination of common stock, preferred stock, bonds, and short-term bonds, to provide both income and capital appreciation while avoiding excessive risk. Balanced funds provide investor with an option of single mutual fund that combines both growth and income objectives, by investing in both stocks (for growth) and bonds (for income). Such diversified holdings ensure that these funds will manage downturns in the stock market without too much of a loss. But on the flip side, balanced funds will usually increase less than an all-stock fund during a bull market.

03

Growth Funds
Growth funds are those mutual funds that aim to achieve capital appreciation by investing in growth stocks. They focus on those companies, which are experiencing significant earnings or revenue growth, rather than companies that pay out dividends. Growth funds tend to look for the fastest-growing companies in the market. Growth managers are willing to take more risk and pay a premium for their stocks in an effort to build a portfolio of companies with above-average earnings momentum or price appreciation. In general, growth funds are more volatile than other types of funds, rising more than other funds in bull markets and falling more in bear markets. Only aggressive investors, or those with enough time to make up for short-term market losses, should buy these funds.

Exchange Traded Funds

Exchange Traded Funds (ETFs) represent a basket of securities that are traded on an exchange. An exchange traded fund is similar to an index fund in that it will primarily invest in the securities of companies that are included in a selected market index. An ETF will invest in either all of the securities or a representative sample of the securities included in the index. The investment objective of an ETF is to achieve the same return as a particular market index. Exchange traded funds rely on an arbitrage mechanism to keep the prices at which they trade roughly in line with the net asset values of their underlying portfolios.

03

Value Funds
Value funds are those mutual funds that tend to focus on safety rather than growth, and often choose investments providing dividends as well as capital appreciation. They invest in companies that the market has overlooked, and stocks that have fallen out of favour with mainstream investors, either due to changing investor preferences, a poor quarterly earnings report, or hard times in a particular industry. Value stocks are often mature companies that have stopped growing and that use their earnings to pay dividends. Thus value funds produce current income (from the dividends) as well as long-term growth (from capital appreciation once the stocks become popular again). They tend to have more conservative and less volatile returns than growth funds.

Money Market Mutual Funds

A money market fund is a mutual fund that invests solely in money market instruments. Money market instruments are forms of debt that mature in less than one year and are very liquid. Treasury bills make up the bulk of the money market instruments. Securities in the money market are relatively risk-free. Money market funds are generally the safest and most secure of mutual fund investments. The goal of a money-market fund is to preserve principal while yielding a modest return. Money-market mutual fund is akin to a high-yield bank account but is not entirely risk free. When investing in a money-market fund, attention should be paid to the interest rate that is being offered.

03

Sector Mutual Funds

Sector mutual funds are those mutual funds that restrict their investments to a particular segment or sector of the economy. These funds concentrate on one industry such as infrastructure, heath care, utilities, pharmaceuticals etc. The idea is to allow investors to place bets on specific industries or sectors, which have strong growth potential. These funds tend to be more volatile than funds holding a diversified portfolio of securities in many industries. Such concentrated portfolios can produce tremendous gains or losses, depending on whether the chosen sector is in or out of favor.

Index Funds
An index fund is a type of mutual fund that builds its portfolio by buying stock in all the companies of a particular index and thereby reproducing the performance of an entire section of the market. The most popular index of stock index funds is the Standard & Poor's 500. An S&P 500 stock index fund owns 500 stocks-all the companies that are included in the index. Investing in an index fund is a form of passive investing. Passive investing has two big advantages over active investing. First, a passive stock market mutual fund is much cheaper to run than an active fund. Second, a majority of mutual funds fail to beat broad indexes such as the S&P 500.

03

Funds of funds
Funds of funds (FoF) are mutual funds which invest in other underlying mutual funds (i.e., they are funds comprised of other funds). The funds at the underlying level are typically funds which an investor can invest in individually. A fund of funds will typically charge a management fee which is smaller than that of a normal fund because it is considered a fee charged for asset allocation services. The fees charged at the underlying fund level do not pass through the statement of operations, but are usually disclosed in the fund's annual report, prospectus, or statement of additional information. The fund should be evaluated on the combination of the fund-level expenses and underlying fund expenses, as these both reduce the return to the investor. Most FoFs invest in affiliated funds (i.e., mutual funds managed by the same advisor), although some invest in funds managed by other (unaffiliated) advisors. The cost associated with investing in an unaffiliated underlying fund is most often higher than investing in an affiliated underlying because of the investment management research involved in investing in fund advised by a different advisor. Recently, FoFs have been classified into those that are actively managed (in which the investment advisor reallocates frequently among the underlying funds in order to adjust to changing market conditions) and those that are passively managed (the investment advisor allocates assets on the basis of on an allocation model which is rebalanced on a regular basis). The design of FoFs is structured in such a way as to provide a ready mix of mutual funds for investors who are unable to or unwilling to determine their own asset allocation model. Fund companies such as TIAA-CREF, Vanguard, and Fidelity have also entered this market to provide investors with these options and take the "guess work" out of selecting funds. The allocation mixes usually vary by the time the investor would like to retire: 2020, 2030, 2050, etc. The more distant the target retirement date, the more aggressive the asset mix.

03

Bond funds
Bond funds account for 18% of mutual fund assets. Bond funds include term funds, which have a fixed set of time (short-, medium-, or long-term) before they mature. Municipal bond funds generally have lower returns, but have tax advantages and lower risk. High-yield bond funds invest in corporate bonds, including high-yield or junk bonds. With the potential for high yield, these bonds also come with greater risk.

Hedge funds
Hedge funds in the United States are pooled investment funds with loose SEC regulation and should not be confused with mutual funds. Certain hedge funds are required to register with SEC as investment advisers under the Investment Advisers Act. The Act does not require an adviser to follow or avoid any particular investment strategies, nor does it require or prohibit specific investments. Hedge funds typically charge a management fee of 1% or more, plus performance fee of 20% of the hedge funds profits. There may be a "lock-up" period, during which an investor cannot cash in shares.

03

Fund management
As an investor in mutual funds, one should concern himself/herself with the investment style adopted by the fund manager. Becoming aware of the fund management style is of paramount important since it determines everything from risk assumed to returns generated. Styles are basically techniques adopted by the money managers it identify and pick stock/bonds to build the portfolio, taking calls while managing it and thus meet the designated investment mandate.

Following are the oft-followed investment dtyles:

Approach

Description of Investment Approach

Intrinsic value:

Buys when under priced by an absolute margin. Sell when overpriced by an absolute margin. Safety margin equals intrinsic value minus share price. Intrinsic or fair value is absolute DFC value per Share. Buy on relative price strength. Sell on relative price strength. Expect price-trend. Buy on relative price weakness. Sell on relative Price strength. Expect price-trend reversals.

Momentum: Contrarian:

03

Value-style:

Buy high value defined by relatively high BV/MV. Sell low value defined by relatively low BV/MV. Value is defined by a price ratio(BV/MV, E/P, D/P, etc.)With share price . in or part of the denominator Buy high growth defined by relative low BV/MV. Sell low growth defined by relatively low BV/MV. Value is defined by a price ratio (BV/MV, E/P, D/P, etc.) with share price in or part of the denominator.

Growth-Style:

How does each one work? Growth-style of investing results in higher returns during bullish phase. This style targets companies that are growing faster than the economy itself. Hence, higher the growth, larger the returns. During bull-run, one can also see investors adopting the momentum style which focuses mainly on the price trends visible at that moment. Bearish phase slows down the overall growth, resulting in the growth style delivering below par returns. At such time, value and constrarian style of investing project the portfolio value. Value investing is a long term strategy where the investor identifies fun damentally strong scrips whose price doesnt reflect the intrinsic value. Companies with lower price-to-book ratios and lower forecasted growth values fall in this category. The strategy is based on the belief that intrinsic value of a stock is ultimately recognized by the markets and the prices adjuct to reflect it. Constrarian approach, on the other hand, is comparatively a relatively shorter duration strategy where in the investor will isolate sectors which are temporarily out of favor with the investing community, even though they possess tremendous potential. The holding time period will be contingent on the trends reversing back in favor of that battered sector.

03

RISK:
It is quite difficult to compare a fund's risk adjusted return. But there are a couple of ways to do so. A fund's Sharpe ratio, named after its inventor, Nobel Prize winner William F. Sharpe, essentially shows you how much return the fund earned for each unit of risk that it took, and it's easy to compare different funds against each other this way. Lots of websites will display a fund's Sharpe ratio, usually under a category called "Modern Portfolio Statistics." There's also Morningstar risk, which is a variation of the Sharpe measure based on how often a fund underperformed Treasury bills. And there's beta, which shows how much the fund moves relative to the volatility of the market. But ultimately the real risk is you: If your fund goes down a lot, will you sell? If it goes up, will you buy more then? Most of the risk of investing isn't in your investments, it's in you.

Risk factor
Investments in securities are subject to market risk. There is no assurance or guarantee that the objectives of any of the schemes will be achieved. The investment may not be suited to all categories of investors. The named of the schemes do not in any manner indicate there prospectus returns. The performance in the equity schemes may be adversely affected by the performance of individual. The debt investments and other fixed income securities may be subject to interest rote risk liquidity risk, credit risk and investment risk. Liquidity in these investment may affected by trading volumes settlements periods and transfer process. Technology stocks and some of the investment in niche sectors run the risk of volatility, high valuation, obsolescence and low liquidity. The scheme may use derivative instrument like index features, stock features and option contract, warrants, convertible securities, swap agreements or any derivative instruments for the purpose of hedging and portfolio balancing, as permitted under the regulations and guidelines. The use of a derivative requires on understanding not only of the

03

underlying instruments but of the derivatives itself. Derivatives require the maintenance of adequate controls to monitor the transactions entered

Into, the ability to assess the risk that a derivative adds to the portfolio and the ability to forecast price or interest rate movement correctly. Schemes using derivative/ future and option. Some of the risk relate to mis pricing or the improper valuation of derivative/futures and options and the inability to correlate the positions with underlying assets, rates, and indices. Also the derivatives/ future and options markets are nascent in India.

In the case of stock lending, risk relate to the defaults from counter parties with regard to securities lent and the corporate benefits accruing thereon, inadequacy of the collateral and settlement risk. The portfolio manager is not responsible or liable for any loss resulting from the operations of the scheme.

The performance of the scheme may be affected by change in Government Policies. General levels of interest rates and risk associated with trading volumes, liquidity and settlement system in equity and debt markets.

The scheme may invest in non-publicity offered debt securities and unlisted equities. This may expose the scheme to liquidity risks.

Engaging in securities lending is subject to risks relayed to fluctuation in collateral value/settlement/liquidity/counter party.

03

Classes of Funds Many mutual funds offer more than one class of shares. For example, you may have seen a fund that offers "Class A" and "Class B" shares. Each class will invest in the same "pool" (or investment portfolio) of securities and will have the same investment objectives and policies. But each class will have different shareholder services and/or distribution arrangements with different fees and expenses. As a result, each class will likely have different performance results. A multi-class structure offers investors the ability to select a fee and expense structure that is most appropriate for their investment goals (including the time that they expect to remain invested in the fund). Here are some key characteristics of the most common mutual fund share classes offered to individual investors:

Class A Shares Class A shares typically impose a front-end sales load. They also tend to have a lower 12b-1 fee and lower annual expenses than other mutual fund share classes. Be aware that some mutual funds reduce the front-end load as the size of your investment increases. If you're considering Class A shares, be sure to inquire about breakpoints. Class B Shares Class B shares typically do not have a front-end sales load. Instead, they may impose a contingent deferred sales load and a 12b-1 fee (along with other annual expenses). Class B shares also might convert automatically to a class with a lower 12b-1 fee if the investor holds the shares long enough. Class C Shares Class C shares might have a 12b-1 fee, other annual expenses, and either a front- or back-end sales load. But the front- or back-end load for Class C shares tends to be lower than for Class A or Class B shares, respectively. Unlike Class B shares, Class C shares generally do not convert to another class. Class C shares tend to have higher annual expenses than either Class A or Class B shares.

03

Load and expenses

A front-end load or sales charge is a commission paid to a broker by a mutual fund when shares are purchased, taken as a percentage of funds invested. The value of the investment is reduced by the amount of the load. Some funds have a deferred sales charge or back-end load. In this type of fund an investor pays no sales charge when purchasing shares, but will pay a commission out of the proceeds when shares are redeemed depending on how long they are held. Another derivative structure is a level-load fund, in which no sales charge is paid when buying the fund, but a back-end load may be charged if the shares purchased are sold within a year. Load funds are sold through financial intermediaries such as brokers, financial planners, and other types of registered representatives who charge a commission for their services. Shares of front-end load funds are frequently eligible for breakpoints (i.e., a reduction in the commission paid) based on a number of variables. These include other accounts in the same fund family held by the investor or various family members, or committing to buy more of the fund within a set period of time in return for a lower commission "today". It is possible to buy many mutual funds without paying a sales charge. These are called no-load funds. In addition to being available from the fund company itself, no-load funds may be sold by some discount brokers for a flat transaction fee or even no fee at all. (This does not necessarily mean that the broker is not compensated for the transaction; in such cases, the fund may pay brokers' commissions out of "distribution and marketing" expenses rather than a specific sales charge. The purchaser is therefore paying the fee indirectly through the fund's expenses deducted from profits.) No-load funds include both index funds and actively managed funds. The largest mutual fund families selling no-load index funds are Vanguard and Fidelity, though there are a number of smaller mutual fund families with noload funds as well. Expense ratios in some no-load index funds are less than 0.2% per year versus the typical actively managed fund's expense ratio of about 1.5% per year. Load funds usually have even higher expense ratios when the load is considered. The expense ratio is the anticipated annual cost to the investor of holding shares of the fund. For example, on a $100,000

03

investment, an expense ratio of 0.2% means $200 of annual expense, while a 1.5% expense ratio would result in $1,500 of annual expense. These expenses are before any sales commissions paid to purchase the mutual fund. Many fee-only financial advisors strongly suggest no-load funds such as index funds. If the advisor is not of the fee-only type but is instead compensated by commissions, the advisor may have a conflict of interest in selling highcommission load funds.

Hidden cost in mutual fund

The costs involved in any investment determine the returns it can generate. In the case of mutual funds, the daily volatility of NAVs hogs the news, but the costs are never adequately addressed nor fully understood. These costs vary from fund to fund, just like NAVs and their impact on different categories of funds is different. The costs involved in mutual funds can be broadly classified into two categories:

Entry/exit loads: These are one-time costs incurred when you enter or exit a fund, and are charged as a percentage of your investment/encashment amount. Expense ratio: It comprises some of the major expenses that a fund incurs: i) Investment management and advisory fees ii) Transfer agent fee and expenses iii) Custodian fees iv) Various operating expenses

03

Why costs matter? The answer is obvious- each rupee that a mutual fund incurs as cost, reduces your returns by an equal amount. This is not to say that the mutual fund which has the lowest costs, is always better. It just indicates how important it is for an invest to clearly understand mutual fund costs.

On the face of it, a mere 1% difference in costs may not seem significant, as long as the returns look attractive. However, even a seemingly minor 1 per cent difference in cost is significant in the long run, as in the following example. Consider an investment of Rs.10,000 in two funds giving the same returns. The net return after accounting for the costs shows a substantial difference. Returns Costs Net Rs.10000 after (%) (%) return 10 yrs 20 yrs (%) Fund 15 A Fund 15 B 2 1 13 14 Rs.33945 Rs.1,15230 Rs.37072 Rs.1.37435

How to determine fund costs? Entry/exit loads and expense ratios of all mutual funds are regularly reported in the financial press and on Websites. The information is also easily available from the funds.

03

There are certain other costs which mutual funds incur that are more difficult to determine. These include the commission and brokerage fee paid when shares, bonds and other securities are bought and sold. The extent of these costs varies directly with how much, and how often, a fund reshuffles its portfolio. Thus, the higher the portfolio churn (reshuffle), the higher the costs. For funds with higher turnovers, transaction costs can have a major impact on the cost of doing business. While this invisible cost is automatically reflected in the fund's performance results that is no reason to ignore it. A look at the investment style and policies listed in a fund's prospectus should give you an idea of its portfolio reshuffle policy.

How Funds Can Earn Money for You

You can earn money from your investment in three ways:
1. Dividend Payments A fund may earn income in the form of

dividends and interest on the securities in its portfolio. The fund then pays its shareholders nearly all of the income (minus disclosed expenses) it has earned in the form of dividends.
2. Capital Gains Distributions The price of the securities a fund owns

may increase. When a fund sells a security that has increased in price, the fund has a capital gain. At the end of the year, most funds distribute these capital gains (minus any capital losses) to investors.
3. Increased NAV If the market value of a fund's portfolio increases

after deduction of expenses and liabilities, then the value (NAV) of the fund and its shares increases. The higher NAV reflects the higher value of your investment. With respect to dividend payments and capital gains distributions, funds usually will give you a choice: the fund can send you a check or other form of payment, or you can have your dividends or distributions reinvested in the fund to buy more shares (often without paying an additional sales load).

03

INVESTMENT PHILOSOPHY:
You can get a clearer picture of a fund's investment goals and policies by reading its annual and semi-annual reports to shareholders. Whether a fund believes in value investing, or is aggressive in its style of investing etc. these entire have a bearing on the performance of the fund.

Size of the fund family: The size of a fund's family does matter. In large fund families moving from one type of fund to another is easier. For example, the market is showing bearish signs and you want to get out of your stock fund and into a money market fund. This transaction would most likely be cheaper and easier within the same fund family. Also fund families generally waive load fees when switching funds if you originally paid a comparable load. This policy of switching from one load fund to another has also been used to reduce tax obligations. Large fund families can spread out their normal operating costs. For example, a large fund family can have a bigger research department than smaller ones at a lower cost. Economies of scale usually favor the 'big guys'.

Size of fund: Bigger is usually better. The bigger funds can diversify better, attract better talent and have access to more information. However, if the fund's investment style focuses on small-capitalization stocks, bigger isn't always better. The success of many small-cap stock funds often depends on their ability to move in and out of holdings quickly. Larger small-cap funds, especially those that have ballooned recently, can't always achieve the same gains. In fact, some small-cap funds are so large they drastically affect the stock prices of companies they buy and sell.

03

Some point to consider: Mutual funds are not guaranteed or insured by any bank or government agency. Even if you buy through a bank and the fund carries the bank's name, there is no guarantee. Mutual funds always carry investment risks. Some types carry more risk than others. The fund's portfolio has investment risk directly related to the securities it contains as well as to general market and business conditions. For example, an aggressive growth fund, because the prices of securities in its portfolio are more volatile, is generally riskier than an income fund, which may invest in conservative stocks and bonds whose prices do not fluctuate greatly but that pay high dividends or interest. Regardless of the investment strategy or portfolio no fund can escape market risk. Understand that a higher rate of return typically involves a higher risk of loss. Past performance is not a reliable indicator of future performance. Beware of dazzling performance claims. Shop around. Compare a mutual fund with others of the same type before you buy.

Golden rule of Mutual fund investingWhen small stocks do better than big ones, funds will beat the market. When big ones do better, the market will outperform the funds. If you think small stocks are due for a run, then you would expect actively managed funds to beat the indexes. Determine your financial objectives and how much money you have to invest. Make sure the fund's objectives coincide with your own. Don't change your objectives or exceed the amount set aside for investment unless you have good reason. Always obtain all available information before you invest. Request the prospectus, and the latest shareholder report from each fund you are considering. Be on the alert for incorporation by reference. You will have "no excuse" for not knowing this information, if a problem arises. You may be legally presumed to know materials incorporated by reference in a prospectus or other documents. Always determine all sales charges, fees and expenses before you invest. Shop around among the many funds offered and

03

compare the various fees and costs connected with funds that appeal to you. Learn the costs of redemption.

Sometimes investors are surprised to learn that they have to pay to get out of funds through back-end loads or redemption fees. Find out the redemption costs

before you invest so you won't be unpleasantly surprised when you redeem your shares. Never treat the risks of investment in a fund lightly. Weigh the risks of the funds you want to buy against your ability to tolerate the ups and downs of the market and your investment goals. Be extra cautious when considering investing in funds with high yield/high risk portfolios. Don't be misled by the name of a fund. Some funds have been given names denoting safety, stability and low risk, despite the fact that the underlying investments in the portfolio are volatile and highly risky.

03

Tips on mutual fund investing

Millions of investors have come to rely on mutual funds as their primary investments. The growth of funds has been explosive, with individuals, retirement plans and others putting well over $1 trillion in the funds in the 90's. If you are thinking of investing in a mutual fund, you should remember that they are only one of the many types of investments and that, as with any investment, you should know and understand the nature and risks of mutual funds and options available to you before you invest any of your money. You can earn money out of a fund in basically three ways. First, a fund may receive income in the form of dividends and interest on the securities it owns which it pays to its shareholders in the form of dividends. Second, the price of the securities a fund owns may increase. When a fund sells a security that has increased in price, the fund has a capital gain. At the end of the year, most funds distribute these capital gains (minus any capital losses) to investors. Third, if a fund does not sell but holds on to securities that have increased in price, the value of its shares (NAV) increases. The higher NAV reflects the higher value of your investment. If you sell your shares, you make a profit (this also is a capital gain). Today there is a bewildering array of funds on offer. So how does one choose a well performing fund. There is one golden rule of Mutual fund investing- When small stocks do better than big ones, funds will beat the market. When big ones do better, the market will outperform the funds. If you think small stocks are due for a run, then you would expect actively managed funds to beat the indexes.

03

But before you invest it is better to do some background work: Know yourself:
Before you invest, decide whether the goals and risks of any fund you are considering are a good fit for you. You take risks when you invest in any mutual fund. You may lose some or all of the money you invest (your principal), because the securities held by a fund go up and down in value. What you earn on your investment also may go up or down. A portfolio's asset allocation or 'mix of funds' should represent one's tolerance for risk and time horizon. An investor should establish what percentage to invest in stocks, bonds, cash, etc. before choosing a portfolio of worthy funds. In fact, searching for funds without considering asset allocation may lead to a portfolio of funds that are all invested in the same thing. A good portfolio diversifies into different assets to hedge against unforeseen market declines. Which kind of fund is a good investment for you is trickier; the best answer is, a fund whose manager is doing something you understand and are comfortable with as a long-term investment. Read some annual reports; get a feel for the people who run the fund; see if they think the way you do. Or buy an index fund, which is run on autopilot.

Establish your benchmark:

Be clear in how you will measure the performance of the fund. If it is a dedicated fund like say pharma, FMCG etc. then its performance can be measured only against those particular indices. A small cap fund's performance cannot be measured against the BSE Sensex performance. So be clear what is the profile of the fund and what will its performance be compared to. Post that, how much you want the fund to out performs that index is dependant on your risk profile and market conditions.

03

Does your home work?

There are sources of information that you should consult before you invest in mutual funds. The most important of these is the prospectus of the fund you are considering. The prospectus is the fund's selling document and contains information about costs, risks, past performance, and the fund's investment goals. Request a prospectus from a fund or from a financial professional if you are using one. Read the prospectus before you invest. The Annual Report of the fund is another source of information. Look at "fee table," where the fund shows what it's charging you. Any waivers or temporary fee reductions have to be disclosed--but, of course, they're in the fine print, where you'll have to squint to read them. Read all official fund disclosure documents from back to front. All the stuff that can hurt you is buried in the back, where the people who run the fund hope you'll never see it. So read the stuff at the back first, so you get the bad news on the table at the start. Also once you invest in a fund track it. If you have not recently examined the prospectus for a fund you own, you should monitor your investment by obtaining and reading the most recent prospectus, SAI and financial statements--these may contain important changes. Careful reading of quarterly and annual reports is also necessary to keep up with changes in your investment.

Dont get taken in by past performance:

A fund's past performance is not as important as you might think. Advertisements, rankings, and ratings tell you how well a fund has performed in the past. But studies show that the future is often different. This year's "number one" fund can easily become next year's below average fund. Although past performance is not a reliable indicator of future performance, volatility of past returns is a good indicator of a fund's future volatility.

03

Compare the fund on total return:

Check the fund's total return. Included in the computation are distributions paid to investors, capital gains distributions and unrealized capital gains and losses. Since all fund activity which has an effect on net asset value is represented, this measure provides a picture of performance which is more complete than yield. You will find it in the Financial Highlights, near the front of the prospectus. Total return measures increases and decreases in the value of your investment over time, after subtracting costs. See how total return has varied over the years. The Financial Highlights in the prospectus show yearly total return for the most recent 10-year period. An impressive 10-year total return may be based on one spectacular year followed by many average years. Looking at year-to-year changes in total return is a good way to see how stable the fund's returns have been. Yield: Yield is the income generated over a specified time period divided by the fund's current price per share. This is a measure of mutual fund performance, which is figured by dividing the income generated (dividends, capital gains distribution, etc.) per share for a specific time period by the fund's current price per share. For example if, during a year, a single share of a fund had paid income totaling Re.1 and its share price was Re.10, the annual yield for that year would be figured by dividing 1 by 10, which equals one tenth, or a yield of 10%. While yield is a measure of current performance-how much income an investment generates--total return measures per share change in total value over a specified time period. All fund activity that has an effect on net asset value (dividends, capital gains, unrealized capital gains and losses, etc.) is represented in this measure. It provides, therefore, a more complete picture of fund performance than the yield or net asset value alone. The investor may approximate total return by using data that appears in the "Per Share Changes

03

and Capital Income" section of the prospectus. Changes in yield do not reflect a corresponding increase or decrease in the fund's net asset value. A fund may increase yield by purchasing investments that are riskier but offer higher interest payments. But, the higher yield may be offset by a deteriorating capital position or a lower total return.

Costs:
Costs are important because they lower your returns. A fund that has a sales load and high expenses will have to perform better than a low-cost fund, just to stay even with the low-cost fund. Find the fee table near the front of the fund's prospectus, where the fund's costs are laid out. You can use the fee table to compare the costs of different funds. The fee table breaks costs into two main categories: 1. Sales loads and transaction fees (paid when you buy, sell, or exchange your shares), and 2.Ongoing expenses (paid while you remain invested in the fund).

Sales Loads:
Sales charges on mutual funds are often referred to as the "load." Loads can be classified as front-end and back-end. You pay the front-end load when you purchase shares, as in the example cited above. You pay the back-end load when you redeem your shares. No-load funds do not charge sales loads. They sell their shares to investors without a direct sales charge. However even noload funds have ongoing expenses, however, such as management fees. When a mutual fund charges a sales load, it usually pays for commissions to people who sell the fund's shares to you, as well as other marketing costs. Sales loads buy you a broker's services and advice; they do not assure superior performance. In fact, funds that charge sales loads have not performed better on average (ignoring the loads) than those that do not charge sales loads. Another fee that acts like a back-end load is the redemption fee. This fee can be as high as 2% and is charged when you redeem your shares. Funds can have both a redemption fee and a back-end load. Prices for most mutual funds appear in the business or financial sections of newspapers. For a no-load fund, the sale price and net asset value are identical. For a load fund, the sale price is the

03

"offer price" or "asked price." If you are investing in any fund with a load, make sure you know exactly how much the sales charge is. The broker dealer who sells you the shares is not required to disclose sales charges on the confirmation slip that is provided after the sale is complete. You must ask for this information.

Ongoing Expenses:
These are expenses as a percentage of the fund's assets, generally for the most recent fiscal year and basically include the management fee (which pays for managing the fund's portfolio), along with any other fees and expenses. High expenses do not assure superior performance. Higher expense funds do not, on average, perform better than lower expense funds. However in case the fund provides special services, like toll-free telephone numbers, check-writing and automatic investment programs, then the higher expenses are justified. Note carefully any difference in expenses as even a small variation can make a big difference in the value of your investment over time. Check the fee table to see if any part of a fund's fees or expenses has been waived. If so, the fees and expenses may increase suddenly when the waiver ends (the part of the prospectus after the fee table will tell you by how much). Many funds allow you to exchange your shares for shares of another fund managed by the same adviser. The first part of the fee table will tell you if there is any exchange fee.

03

Advantages of Mutual Funds

Since their creation, mutual funds have been a popular investment vehicle for investors. Their simplicities along with other attributes provide great benefit to investors with limited knowledge, time, or money. To help you decide whether mutual funds are best for you and your situation, we are going to look at some reasons why you might want to consider investing in mutual funds.

Diversification One rule of investing that both large and small investors should follow is asset diversification. Used to manage risk, diversification involves the mixing of investments within a portfolio. For example, by choosing to buy stocks in the retail sector and offsetting them with stocks in the industrial sector, you can reduce the impact of the performance of any one security on your entire portfolio. To achieve a truly diversified portfolio, you may have to buy stocks with different capitalizations from different industries and bonds having varying maturities from different issuers. For the individual investor this can be quite costly. By purchasing mutual funds, you are provided with the immediate benefit of instant diversification and asset allocation without the large amounts of cash needed to create individual portfolios. One caveat (beware), however, is that simply purchasing one mutual fund might not give you adequate diversification - check to see if the fund is sector or industry specific. For example, investing in an oil and energy mutual fund might spread your money over fifty companies, but if energy prices fall, your portfolio will likely suffer.

03

Economies of Scale The easiest way to understand economies of scale is by thinking about volume discounts: in many stores the more of one product you buy, the cheaper that product becomes. For example, when you buy a dozen donuts, the price per donut is usually cheaper than buying a single one. This occurs also in the purchase and sale of securities. If you buy only one security at a time, the transaction fees will be relatively large. Mutual funds are able to take advantage of their buying and selling size and thereby reduce transaction costs for investors. When you buy a mutual fund, you are able to diversify without the numerous commission charges. Imagine if you had to buy the 10-20 stocks needed for diversification. The commission charges alone would eat up a good chunk of your savings. Add to this the fact that you would have to pay more transaction fees every time you wanted to modify your portfolio - as you can see the costs begin to add up. Mutual funds are able to make transactions on a much larger scale (and cheaper). Divisibility Many investors don't have the exact sums of money to buy round lots of securities. One to two hundred dollars is usually not enough to buy a round lot of a stock, especially after deducting commissions. Investors can purchase mutual funds in smaller denominations, ranging from $100 to $1000 minimums. So, rather than having to wait until you have enough money to buy higher-cost investments, you can get in right away with mutual funds. This leads us to the next advantage

03

Liquidity Another advantage of mutual funds is the ability to get in and out with relative ease. You can sell mutual funds at any time as they are as liquid as regular stocks. Both the liquidity and smaller denominations of mutual funds provide mutual fund investors the ability to make periodic investments through monthly purchase plans while taking advantage of dollar-cost averaging. Professional Management When you buy a mutual fund, you are also choosing a professional money manager. This manager will use the money that you invest to buy and sell stocks that he or she has carefully researched. Therefore, rather than having to research thoroughly every investment before you decide to buy or sell, you have a mutual fund's money manager to handle it for you. As with any investment, there are risks involved in buying mutual funds. These investment vehicles can experience market fluctuations and sometimes provide returns below the overall market. Also, the advantages gained from mutual funds are not free: many of them carry loads, annual expense fees and penalties for early withdrawal. In the next article we will take a closer look at some of these drawbacks so you can decide if mutual funds are right for you.

03

Disadvantages of Mutual Funds

Like many investments, mutual funds offer advantages and disadvantages, which are important for you to consider and understand before you decide to buy. Here we explore some of the drawbacks of mutual funds. Fluctuating Returns Mutual funds are like many other investments without a guaranteed return. There is always the possibility that the value of your mutual fund will depreciate. Unlike fixed-income products, such as bonds and Treasury bills, mutual funds experience price fluctuations along with the stocks that make up the fund. When deciding on a particular fund to buy, you need to research the risks involved - just because a professional manager is looking after the fund, that doesn't mean the performance will be stellar. Another important thing to know is that mutual funds are not guaranteed by the U.S. government, so in the case of dissolution, you won't get anything back. This is especially important for investors in money market funds. Unlike a bank deposit, a mutual fund will not be FDIC insured. Diversification? Although diversification is one of the keys to successful investing, many mutual fund investors tend to over diversify. The idea of diversification is to reduce the risks associated with holding a single security; over diversification (also known as diworsification) occurs when investors acquire many funds that are highly related and so don't get the risk reducing benefits of diversification. At the other extreme, just because you own mutual funds doesn't mean you are automatically diversified. For example, a fund that invests only in a particular industry or region is still relatively risky.

Cash, Cash and More Cash

03

As you know already, mutual funds pool money from thousands of investors, so everyday investors are putting money into the fund as well as withdrawing investments. To maintain liquidity and the capacity to accommodate withdrawals, funds typically have to keep a large portion of their portfolio as cash. Having ample cash is great for liquidity, but money sitting around as cash is not working for you and thus is not very advantageous. Costs Mutual funds provide investors with professional management; however, it comes at a cost. Funds will typically have a range of different fees that reduce the overall payout. In mutual funds the fees are classified into two categories: shareholder fees and annual fund-operating fees. The shareholder fees, in the forms of loads and redemption fees, are paid directly by shareholders purchasing or selling the funds. The annual fund operating fees are charged as an annual percentage - usually ranging from 1-3%. These fees are assessed to mutual fund investors regardless of the performance of the fund. As you can imagine, in years when the fund doesn't make money these fees only magnify losses. Misleading Advertisements The misleading advertisements of different funds can guide investors down the wrong path. Some funds may be incorrectly labeled as growth funds, while others are classified as small-cap or income. The SEC requires funds to shave at least 80% of assets in the particular type of investment implied in their names. The remaining assets are under the discretion solely of the fund manager. The different categories that qualify for the required 80% of the assets, however, may be vague and wide-ranging. A fund can therefore manipulate prospective investors by using names that are attractive and misleading. Instead of labeling sitself a small cap, a fund may be sold under the heading growth fund. Or, the "Congo High-Tech Fund" could be sold with the title "International High-Tech Fund".

A comparative study

03

Why mutual funds can pay more than insurance Ulips

1. Higher agent commission Insurance agents are often given front loaded commission. front loading, as name suggest, are polices for which its agents are paid higher commission in the initial years it self instead of staggering it over the years. It could be as high as 40% of premium paid in one year. For instance, on selling a 15 year Ulip as insurer might be its agent 30% in first year, 20% in second as well as third year and 55 thereafter. Such structure of commission paying- which is widely prevalent in the industry- ultimately reduces the investor return. If u opt for an insurance policy with annual premium of Rs 10000 and the first year agent commission of 30% in that cash, only Rs 7000 is invested into the fund in the first year. If the NAV of the fund appreciates by 20%, your portfolio would be worth Rs 8400. This is still lesser than your original investment. Remember Rs 3000 has gone as commission to your insurance agent. In the contrast, the commission structures in the case of mutual fund are far lower. Its ranges from 2.5% of investment in first year. The subsequent year have commission, which is not more than 1% every year. In addition, SEBI the mutual fund watch dog, has put an overall cap of 2.5% per annum for expenses of equity fund.

2- costlier exit option

It is costlier to pre maturedly exit an insurance Ulpi than a mutual fund. While both are open ended products, surrender value for an insurance Ulip is very low in the initial year. Surrender value refers to the actual amount that investor get net of all exit charges on redeeming investments. In the contrast, mutual fund are open ended in the true sense. If you find that the fund is not performing well, investor could exit the fund at no cost. For an equity fund, if the exit is with in six months, one might have to pay around 2%, but nothing beyond that. In the case of Ulip policy, exit charges reduce only over the year. But then, the higher commission and exit charges just make it unviable for an investor to exit prematuredly.

3- No track record

03

Many of the Ulip funds donot have a performance track record of more than three years. While handfuls of fund have a three year history, it is actually advisable to check fund performqance over market cycle. In the last four year, the equity market has only moved up. While over the shorter term, it is did see bearish phases, it might be interesting to see how the fund performes over longer bearish periods like that of 2000- 03. Mutual fund in contrast, have longer track record of performance across market cycle.Some of the private fund houses are operating for more than are decade. In addition, handful of independent rating agencies gives fund rating helping investors tyake investment decision. At this juncture, ther arent any rating available for Ulips.

4- Larger commitments
Investment in equity fund of mutual fund house might be a one of thing, but not ulpis. Once you opt for Ulips , investor has to commit to pay annual premiums over the entire period( say 15 years or so ) as you might have non by now, the penalty for premature withdrawl is far higher.

5- Insurance Vs Investment
Insurance Ulip has been a hit among retail investor and its collections have matched that of mutual fund schemes but the largest question is the whether we should separate insurance and investment needs? Insurance is primarily product for protection. Investment lacing is just an additional feature. But since the insure make more money from asset management fees, they push Ulips over traditional products like term policies, which provides only life cover. A savvy investor is probably better off investing in a mutual fund, while taking term policies from an insurer. Say, this to an insurance company and there are bound to be controversies.

03

Insurance cover Expenses

ULIPS Provide insurance cover

Expenses ratio is much higher in the initial years, but reduces to 20%p.a levels over 15 yrs and above Investment Suits only long -term horizon investors, 10 yrs or more Tax All Ulips enjoy section 80c benefit benefit up to Rs 1 lac Liquidity Liquidity comes at higher cost (in case of premature exit)though the is at NAV value Portfolio Only quarterly portfolios disclosure are disclosed by insurance companies Investment Generally less aggressive style and resort to lesser churning Track Not more than 3 yrs of fund record performance is available foe most insurance cos

MUTUAL FUND Doesnt provide insurance cover Expenses ratio is capped around 2.5%p.a by SEBI

Suit short term as well as long term investors Only ELSS fund enjoy sec 80C benefit up to Rs 1 lac `after three year lock in(foe all ELSS funds)redemption are at NAV values Monthly portfolios are disclosed by most MFs Comparatively more active in fund management Equity funds have long history of fund performance

Mutual funds vs. other investments

03

Mutual funds offer several advantages over investing in individual stocks. For example, the transaction costs are divided among all the mutual fund Shareholders, who also benefit by having a third party (professional fund managers) apply their expertise, dedicate their time to manage and research investment options. However, despite the professional management, mutual funds are not immune to risks. They share the same risks associated with the investments made. If the fund invests primarily in stocks, it is usually subject to the same ups and downs and risks as the stock market.

Criticism of managed mutual funds

Historically, only a small percentage of actively managed mutual funds, over long periods of time, have returned as much, or more than comparable index mutual funds. This, of course, is a criticism of one type of mutual fund over another. Another criticism concerns sales commissions on load funds, an upfront or deferred fee as high as 8.5 percent of the amount invested in a fund (although the average up-front load is no more than 5% normally). *(Mutual Funds have to qualify to charge the maximum allowed by law, which is 8.5% and most of them DO NOT qualify for this.) In addition, no-load funds typically charge a 12b-1 fee in order to pay for shelf space on the exchange the investor uses for purchase of the fund, but they do not pay a load directly to a mutual fund broker, who sells it. Critics point out that high sales commission can sometimes represent a conflict of interest, as high commissions benefit the sales people but hurt the investors. Although in reality, "A shares", which appear to have the highest up front load, (around 5%) are the "cheapest" for the investor, if the investor is planning on 1) keeping the fund for more than 5 years, 2) investing more than 100,000 in one fund family, which likely will qualify them for "breakpoints, which is a form of discount, or 3) staying with that "fund family" for more than 5 years, but switching "funds" within the same fund company. In

03

this case, the up front load is best for the client, and at times "outperforms" the "no load" or "B or C shares". High commissions can sometimes cause sales people to recommend funds that maximize their income. This can be easily solved, buy working with a "registered investment advisor" instead of a

"broker", where the investment advisor can charge strictly for advise, and not charge a "load, or commission" for their work, at all. This is a discussion of criticism, and solutions regarding one mutual fund over another. 12b-1 fees, which are found on most "no load funds" can motivate the fund company to focus on advertising to attract more and more new investors, as new investors would also cause the fund assets to increase, thus increasing the amount of money that the mutual fund managers make. Mutual fund managers, and companies need to disclose by law,if they have a conflict of interest due to the way they are paid. In particular fund managers may be encouraged to take more risks with investors' money than they ought to: Fund flows (and therefore compensation) towards successful, market beating funds are much larger than outflows from funds that lose to the market. Fund managers may therefore have an incentive to purchase high risk investments in the hopes of increasing their odds of beating the market and receiving the high inflows, with relatively less fear of the consequences of losing to the market (1). Many analysts, however, believe that the larger the pool of money one works with, the harder it is to manage actively, and the harder it is to squeeze good performance out of it. This is true, due to the fact that there are only so many companies that one can identify to put the money into ( buy shares of) that fit with the "style" of the mutual fund, due to what is disclosed in the propectus. Thus some fund companies can be focused on attracting new customers, and forget to "close" their mutual funds to new customers, when they get too big, to invest the assets properly, thereby hurting its existing investors' performance. A great deal of a fund's costs are flat and fixed costs, such as the salary for the manager. Thus it can be more profitable for the fund to try to allow it to grow as large as possible, instead of limiting its assets. Most fund companies, have closed some funds to new investors to maintain the integrity of the funds for

03

existing investors. If the funds reach more than 1 billion dollars, many times, these funds, have gotten too large, before they are closed, and when this happens, the funds tend to not have a place to put the money and can and tend to lose value.

Other critisicms of mutual funds are that some funds illegally are gulity of market timing (although many fund companies tightly control this) and that some fund managers, also illegal, accept extravagant gifts in exchange for trading stocks through certain investment banks, which presumably charge the fund more for transactions than would non-gifting investment bank. This practice, although done, is completely illegal. As a result, all fund companies strictly limit or completely bar such gifts

Mutual Funds: Conclusion

03

A mutual fund brings together a group of people and invests their money in stocks, bonds, and other securities. The advantages of mutual are professional management, diversification, economies of scale, simplicity and liquidity. The disadvantages of mutual are high costs, overdiversification, possible tax consequences, and the inability of management to guarantee a superior return. There are many, many types of mutual funds. You can classify funds based on asset class, investing strategy, region, etc. Mutual funds have lots of costs. Costs can be broken down into ongoing fees (represented by the expense ratio) and transaction fees (loads). The biggest problems with mutual funds are their costs and fees. Mutual funds are easy to buy and sell. You can either buy them directly from the fund company or through a third party. Mutual fund ads can be very deceiving.

DATA COLLECATION TECHNIQUES A Questionnaire was designed with the help of our respectable guide which consisted of both open ended and multiple choice questions to elicit responses of the channel members involved into the distribution network of the steel pipes. A list of outlets to be surveyed was provided by the company itself, which consisted of the distributors, major dealers and retailers of the capital city. The Distributors, Dealers and Retailers wear separately given to fill up the questionnaire.

03

SOURCES OF DATA PRIMARY DATA *Questionnaire: In questionnaire we have open ended question as well as multiple- choice question respondents are free to give any suggestion, opinion. While in multiple- choice question respondents are given some options and they are allowed to select one or more than one options. In this way, through the help of Questionnaire primary data are collected. * Personal interview: Personal interview is a method of collecting primary data. In which personal interview of the various Distributors, dealers and retailers are taken.

BIBLIOGRAPHY: *Websites www.religaresecurities.com www.religarefinvest.com www.religarecommodities.com www.religareonline.com www.religarearts.com

03

www.google.com *From brochure of the company about their products range.

QUESTIONAIRE
1. Name- ____________________________________________ Address- ___________________________________________ ____________________________________________ Contact No. ___________________________

03

Permanent Address- ____________________________________

_________________________________________________________________________ __________________________________________________________________________

Occupation(a) Service If service- (a) Public

(b) Business

(c) others

(b) Private (C) Semi-government

2. What is your present income ? (a) < Rs5,000 >Rs10,000 Rs20,000 (b) <Rs10,000 >Rs20,000 (c) more than

3. Have you invested your money some where? (a) Yes (b) No 4. If yes, where? (a) Bank (b) Mutual funds (c) Equity (e) Life insurance (f) others (d) Stock market

5. What is the rate of return on investment? (a) Below 10% (b) More than 10% &less than 20% (c) More than 20% 6. Which investment sector is of your liking? (a) Bank (b) Mutual fund (c) Equities (e) Stock market (f) others (d) Life insurance

If so, why? (a) High returns (b) Less risk (c) High returns less risk (d) Low return less risk (e) only investment for future benefits

03

7. What is your expected rate of return from your liking Investment sector? (a) Below 10% (b) more than 10% less than 20% (c) More than 20% 8. Which company is best of your preference? 9. If so, why? (a) Performance

(b) Image (c) Service (d) others

10. Would you like to diversify your investment? (a) Yes (b) No 11. Would you like to attain best service from Religare (a Ranbaxy promoter group company)? Services area) Technical research b) Portfolio tracker report c) CRN no. d) Weekly & monthly report of your investment & market trend e) All time money card* f) Top up voucher.

RECOMMENDATION
1. Even if the organization has a sizeable number of branches in India, still then the organization has not reached its saturation point as far as Indian market potential is concerned.

03

2 3 4

5 6 7 8 9 10

By recruiting skilled manpower (right person for right job) in middle and lower level of management, it can also increase its business in terms of revenue. In order to have a better edge over its competitors it must take other sort of services into its portfolio to satisfy its present as well as upcoming clients in the near future. Effective training on companys profile and product related knowledge should be given to middle and lower level of management so that they can communicate and provide service effectively to the clients. Should recruit more skilled persons to give better after sales service. Effective advertisement should be done to increase awareness among the customers about the organization & its product. As the organiosation has a good brand value in the market it can also increase the target upon its employees to earn more revenue. The key information about the product should be elaborated to have a better understanding. Should recruit highly skilled professionals in the back office to provide better service. The organization should increase the number of official meetings so as to boost the employees morale, to discuss on bottlenecks that are coming in way & lastly to have a better bonding of relationship among the employees working together in the organization.

Glossary of Key Mutual Fund Terms

12b-1 Fees fees paid by the fund out of fund assets to cover the costs of marketing and selling fund shares and sometimes to cover the costs of providing shareholder services. "Distribution fees" include fees to compensate brokers and others who sell fund shares and to pay for advertising, the printing and mailing of prospectuses to new investors, and the printing and mailing of sales literature

03

"Shareholder Service Fees" are fees paid to persons to respond to investor inquiries and provide investors with information about their investments. Account Fee a fee that some funds separately impose on investors for the maintenance of their accounts. For example, accounts below a specified dollar amount may have to pay an account fee. Back-end Load a sales charge (also known as a "deferred sales charge") investors pay when they redeem (or sell) mutual fund shares, generally used by the fund to compensate brokers. Classes different types of shares issued by a single fund, often referred to as Class A shares, Class B shares, and so on. Each class invests in the same "pool" (or investment portfolio) of securities and has the same investment objectives and policies. But each class has different shareholder services and/or distribution arrangements with different fees and expenses and therefore different performance results. Closed-End Fund a type of investment company that does not continuously offer its shares for sale but instead sells a fixed number of shares at one time (in the initial public offering) which then typically trade on a secondary market, such as the New York Stock Exchange or the Nasdaq Stock Market. Legally known as a "closed-end company." Contingent Deferred Sales Load a type of back-end load, the amount of which depends on the length of time the investor held his or her shares. For example, a contingent deferred sales load might be (X)% if an investor holds his or her shares for one year, (X-1)% after two years, and so on until the load reaches zero and goes away completely. Conversion a feature some funds offer that allows investors to automatically change from one class to another (typically with lower annual expenses) after a set period of time. The fund's prospectus Deferred Sales Charge see "backend load" (above). Distribution Fees fees paid out of fund assets to cover expenses for marketing and selling fund shares, including advertising costs, compensation for brokers and others who sell fund shares, and payments for printing and mailing prospectuses to new investors and sales literature prospective investors. Sometimes referred to as "12b-1 fees."

03

Exchange Fee a fee that some funds impose on shareholders if they exchange (transfer) to another fund within the same fund group. Exchange-Traded Funds a type of an investment company (either an openend company or UIT) whose objective is to achieve the same return as a particular market index. ETFs differ from traditional open-end companies and UITs, because, pursuant to SEC exemptive orders, shares issued by ETFs trade on a secondary market and are only redeemable from the fund itself in very large blocks (blocks of 50,000 shares for example). Expense Ratio the fund's total annual operating expenses (including management fees, distribution (12b-1) fees, and other expenses) expressed as a percentage of average net assets. Front-end Load an upfront sales charge investors pay when they purchase fund shares, generally used by the fund to compensate brokers. A front-end load reduces the amount available to purchase fund shares. Index Fund describes a type of mutual fund or Unit Investment Trust (UIT) whose investment objective typically is to achieve the same return as a particular market index, such as the S&P 500 Composite Stock Price Index, the Russell 2000 Index, or the Wilshire 5000 Total Market Index. Investment Adviser generally, a person or entity who receives compensation for giving individually tailored advice to a specific person on investing in stocks, bonds, or mutual funds. Someinvestment advisers also manage portfolios of securities, including mutual funds. Investment Company a company (corporation, business trust, partnership, or limited liability company) that issues securities and is primarily engaged in the business of investing in securities. The three basic types of investment companies are mutual funds, closed-end funds, and unit investment trusts. Load Management Fee fee paid out of fund assets to the fund's investment adviser or its affiliates for managing the fund's portfolio, any other management fee payable to the fund's investment adviser or its affiliates, and any administrative fee payable to the investment adviser that are not included in the

03

"Other Expenses" category. A fund's management fee appears as a category under "Annual Fund Operating Expenses" in the Fee Table. Market Index a measurement of the performance of a specific "basket" of stocks considered to represent a particular market or sector of the U.S. stock market or the economy. For example, the Dow Jones Industrial Average (DJIA) is an index of 30 "blue chip" U.S. stocks of industrial companies (excluding transportation and utility companies). Mutual Fund the common name for an open-end investment company. Like other types of investment companies, mutual funds pool money from many investors and invest the money in stocks, bonds, short-term money-market instruments, or other securities. Mutual funds issue redeemable shares that investors purchase directly from the fund (or through a broker for the fund) instead of purchasing from investors on a secondary market. NAV (Net Asset Value) the value of the fund's assets minus its liabilities. SEC rules require funds to calculate the NAV at least once daily. To calculate the NAV per share, simply subtract the fund's liabilities from its assets and then divide the result by the number of No-load Fund a fund that does not charge any type of sales load. But not every type of shareholder fee is a "sales load," and a no-load fund may charge fees that are not sales loads. No-load funds also charge operating expenses. Open-End Company the legal name for a mutual fund. An open-end company is a type of investment company Operating Expenses the costs a fund incurs in connection with running the fund, including management fees, distribution (12b-1) fees, and other expenses. Portfolio an individual's or entity's combined holdings of stocks, bonds, or other securities and assets. Profile summarizes key information about a mutual fund's costs, investment objectives, risks, and performance. Although every mutual fund has a prospectus, not every mutual fund has a profile. Prospectus describes the mutual fund to prospective investors. Every mutual fund has a prospectus. The prospectus contains information about the mutual fund's costs, investment objectives, risks, and performance. You can get a

03

prospectus from the mutual fund company (through its website or by phone or mail). Your financial professional or broker can also provide you with a copy. Purchase Fee a shareholder fee that some funds charge when investors purchase mutual fund shares. Not the same as (and may be in addition to) a front-end load. Redemption Fee a shareholder fee that some funds charge when investors redeem (or sell) mutual fund shares. Redemption fees (which must be paid to the fund) are not the same as (and may be in addition to) a back-end load (which is typically paid to a broker). The SEC generally limits redemption fees to 2%. Sales Charge (or "Load") the amount that investors pay when they purchase (front-end load) or redeem (back-end load) shares in a mutual fund, similar to a commission. The SEC's rules do not limit the size of sales load a fund may charge, but NASD rules state that mutual fund sales loads cannot exceed 8.5% and must be even lower depending on other fees and charges assessed. Shareholder Service Fees fees paid to persons to respond to investor inquiries and provide investors with information about their investments. See also "12b-1 fees." Statement of Additional Information (SAI) conveys information about an open- or closed-end fund that is not necessarily needed by investors to make an informed investment decision, but that some investors find useful. Although funds are not required to provide investors with the SAI, they must give investors the SAI upon request and without charge. Also known as "Part B" of the fund's registration statement. Total Annual Fund Operating Expense the total of a fund's annual fund operating expenses, expressed as a percentage of the fund's average net assets. You'll find the total in the fund's fee table in the prospectus. Unit Investment Trust (UIT) a type of investment company that typically makes a one-time "public offering" of only a specific, fixed number of units. A UIT will terminate and dissolve on a date established when the UIT is created (although some may terminate more than fifty years after they are created). UITs do not actively trade their investment portfolios.

03

03

CONTENTS
Page Acknowledgement 2 Declaration Abstract Objective of study Corporate Overview 6-38 Introduction to mutual fund 39-40 Mutual fund in India Usage and expenses of mutual fund Types of mutual fund Fund management Risk in investment Classes of fund 65 Load and expanses Investment philosophy Tips on mutual fund investing 73-78 Advantages and disadvantages Comparative Study 84- 87 Criticism of Mutual fund 87- 89

3 4 5

41-46 47-51 52-60 61-62 63-64 66-69 70-72 79-83

03

Mutual fund conclusion Methodology 91-94 Recommendation 95 Glossary 96-100 Bibliography 101

90

03