APROJECT REPORT

ON“Comparatives Study of Balanced Mutual Funds Offer by

Various Companies in Indian Market.” AT

SURATSubmitted To

VEER NARMAD UNIVERSITY

IN PARTIAL FULFILLMENT OF THEMASTER OF BUSINESS ADMINISTRETION (M.B.A-III)

ACADMIC YEAR (2008-2009)PREPARED BY: GUIDED BY:

VINAY CHAUDHARI DR. V.B.PATEL (D.B.I.M)

MR. AVINASH CHACHRE

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COLLEGE CERTIFICATE

This is to certify that the summer project report

entitled “Comparatives Study of Balanced Mutual Funds Offer

by Various Companies in Indian Market.”out by Gaurav k.

Chaudhari at NJ India Invest Pvt. Ltd. as a partial

fulfillment of the requirement for the degree of

Master of Business Administration (M.B.A.) during

academic year 2008-09.

PROJECT GUIDED DR. V.B.PATEL

MR. AVINASH CHACHRE (DBIM)

Project Guided.

Place: Surat

Date:

Time:

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DECLARATION

I here by declare that the summer project report titled

“Comparatives Study of Balanced Mutual Funds Offer by

Various Companies in Indian Market.”is an original piece of work

done by me for the fulfillment of the award of degree of Master of

Business Administration. And whatever information has been taken

from any sources had been duly acknowledge.

I further declare that, this project is carried out for academic purpose

only.

CHAUDHARI GAURAV K.

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ACKNOWLEDGEMENT

I would like to take this opportunity to express my deep sense of

gratitude towards my college DEPARTMENT OF BISINESS & INDUSRIEAL

MANAGEMENT COLLEGE AT VNSGU SURAT for giving me this

tremendous opportunity to work in the industry for the real time

project.

I am also thankful to Mr. AVINASH CHACHRE (MENTOR) of NJ

India Invest Pvt. Ltd., Ahmedabad for giving me an opportunity for

getting invaluable experience in such reputed organization. At the

same time, I am very much thankful to all staff members of NJ India

Invest Pvt. Ltd. for their kind co-operation.

I express my gratitude to Dr.V.B.PATEL, of DEPARTMENT OF BUSINESS &

INDUSTRIAL MANAGEMENT. VNSGU,SURAT.

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P r e f a c e

The research provides an opportunity to a student to demonstrate application of his/her

knowledge, skill and competencies required during the technical session. Research also helps

the student to devote his/her skill to analyze the problem to suggest alternative solution, to

evaluate them and to provide feasible recommendation on the provided data.

The research is on the topic of ““Comparatives Study of Balanced Mutual Funds Offer by

Various Companies in Indian Market.”although I have tried my level best to prepare this

report. An error free reports every effort has been made to offer the most authenticated position

with accuracy.

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SR. NO. PARTICULARS PAGE NO

1 TITTLE PAGE

2 COLLEGE CERTIFICATE 2

3 DECLARATION 3

4 AKNOWLEDGEMENT 4

5 PREFACE 5

6 EXECUTIVE SUMMURY 7

7 INTRODUCTION 8

8 INDUSTRY ANALYSIS 9

9 COMPANY PROFILE 54

10 RESERCH METHODOLOGY 86

11 DATA ANALYSIS AND INTERPRETATION 92

12 FINDIGS 104

13 CONCUTION 105

14 SUGGESTION 106

15 LIMITATION OF THE STUDY 107

16 BIBLOGRAPHY 108

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Executive Summary:

This project is on study of Comparatives Study of Balanced Mutual Funds

Offer by Various Companies in Indian Market.” .It is about how to measure the

mutual fund and study the factors affecting the Balanced mutual fund.

This project has been a great learning experience for me; at the same time it gave me enough

scope to implement my analytical ability. This project as a whole can be divided into two parts:

The first part gives an insight about the mutual funds and its various aspects. It is purely based

on whatever I learned at NJ INDIAINVEST PVT. LTD. One can have a brief knowledge about

mutual funds and all its basics through the project. Other than that the real servings come when

one moves ahead..

All the topics have been covered in a very systematic way. The language has been kept simple so

that even a layman could understand. All the data have been well analyzed with the help of

charts and graphs.

The second part consists of data analysis,. The data collected has been well organized and

presented. Hope the research findings and conclusions will be of use. OVERALL

PERFORMANCE of the Blalanced funds has been good on a risk –return adjusted basis. The

volatility has been more than that of the benchmark return, but at the same time other parameters

are well served.

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ABOUT MUTUAL FUNDS

CONCEPT

Individuals or institutions when have surplus money, i.e. savings, would like to invest with the common and logical motive of growing money by getting returns on the investments. There are various avenues to park money towards fulfillment of your objective of return on investment.

One can invest money either where you can get assured returns & hence the risk is low but returns also are low compared to the high risk investments.

The other way is through investing in shares i.e. equity market. Generally the returns on equity investments are higher than debt investment but risk also is higher. To get good returns one really needs to understand the economy and performance of companies where you are investing money. For a common man it may be cumbersome while managing own profession, job or business.

Hence the concept of mutual fund has evolved to manage the funds i.e. on behalf of the investor; fund managers will be taking decisions to maximize the investor’s returns.

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

The new entries of mutual fund companies in India were SBI Mutual Fund, Canbank Mutual Fund, Punjab National Bank Mutual Fund, Indian Bank Mutual Fund, Bank of India Mutual Fund.

The succeeding decade showed a new horizon in Indian mutual fund industry. By the end of 1993, the total AUM of the industry was Rs. 470.04 bn. The private sector funds started penetrating the fund families. In the same year the first Mutual Fund Regulations came into existence with re-registering all mutual funds except UTI. The regulations were further given a revised shape in 1996.Kothari Pioneer was the first private sector mutual fund company in India which has now merged with Franklin Templeton. Just after ten years with private sector player penetration, the total assets rose up to Rs. 1218.05 bn. Today there are 34 mutual fund companies in India.

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MUTUAL FUND INDUSTRY

The Phases of Growth

The Indian mutual industry has come a long way since the inception of UTI in 1963.According to AMFI, the evolution of the industry can be classified broadly into four phases, which mark its transition from a period when UTI ruled the roost to a period of competition and increased awareness among investors.

i) First Phase (1964-87) – UTI all the wayThis phase begin with the inception of the Unit Trust of India (UTI). It remained the only mutual fund player in the country till 1987. UTI started its operation in July 1964 “with a view to encouraging savings and investments and participation in income, profits and gains accruing to the corporation from acquisition, holding, management and disposal of securities.” In short, it was set up by Indian government with a view to augment small savings in the country and to channelize these savings to the capital markets. UTI witnessed a slow and steady growth over the 1970s and the 1980s and by the end of 1988 it had an AUM of Rs.67bn. It still continues to be the largest player in the domestic mutual fund industry with an AUM of Rs. 23,500 cr as on March 31, 2008.

ii) Second Phase (1987-1993) – Enter Public sector Mutual FundsPublic sector mutual funds set up by public sector banks, Life insurance Corporation of India (LIC) and the General insurance Corporation of India (GIC) entered in the market in 1987. The first non mutual fund was the SBI Mutual Fund established in June 1987, followed by Canbank Mutual Fund in December 1987, Punjab National Bank Mutual Fund in August 1989, India Bank Mutual Fund in Nov 1989, Bank of India Mutual Fund in June 1990 and Bank of Baroda Mutual Fund in Oct 1992. LIC set up its mutual Fund in Jun e 1989 while GIC established its Mutual Fund in Dec 1990. During this period, the total asset of the industry grew to about Rs. 610bn with the total number of schemes increasing to about 167 by the end of 1994.

1992-93

Amount

Mobilised

Assets Under

Management

Mobilisation as % of gross

Domestic Savings

UTI 11,057 38,247 5.2%

Public

1,964 8,757 0.9%

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Sector

iii) Third Phase of (1993-2003) – Private players enter the sceneThis phase marked the entry of private sector funds. The phase also signaled the intensification of competition. Both domestic and foreign players entered the market, offering a wide variety of schemes to investors. Kothari Pioneer Mutual Fund was the first private sector fund to establish in association with the foreign fund. Private players like Morgan Stanley, Jardine Fleming, JP Morgan, George Soros and Capital International entering the market. The total AUM by the end of Jan 31, 2003 increased to $ 34,927mn from $23,260mn in March 1995 with a CAGR of 6.92%.

iv) Fourth Phase (since Feb 2003)– UTI’s restructuring and beyondIn Feb 2003 UTI ACT 1963 was replaced and UTI was bifurcated into two separate entities: Specified undertaking of Unit Trust of India, which is still under the Govt. of India and the UTI Mutual Fund Ltd. This was done in the wake of the sever payment crisis that UTI suffered on account of its assured return schemes of US-64 that finally resulted in an adverse impact on the India capital markets. US-64 was the first scheme launched by UTI with a significant equity exposure and the returns of which were not linked to the market. However, the industry has overcome that shock and is hoped to have learnt its lesson.

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Major Mutual Fund Companies in India:

Kotak Mahindra Mutual Fund

Kotak Mahindra Asset Management Company (KMAMC) is a subsidiary of Kotak Mahindra Bank Limited (KMBL). It is presently having more than 1,99,800 investors in its various schemes. KMAMC started its operations in December 1998. Kotak Mahindra Mutual Fund offers schemes catering to investors with varying risk - return profiles. It was the first company to launch dedicated gilt scheme investing only in government securities.

ii) HDFC Mutual Fund

HDFC Asset Management Company Ltd (AMC) was incorporated under the Companies Act, 1956, on December 10, 1999, and was approved to act as an Asset Management Company for the HDFC Mutual Fund by SEBI vide its letter dated June 30, 2000. HDFC Mutual Fund was setup with two sponsors namely Housing Development Finance Corporation Limited and Standard Life Investments Limited.

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iii) Unit Trust of India Mutual Fund

UTI Asset Management Company Private Limited, established in Jan 14, 2003, manages the UTI Mutual Fund with the support of UTI Trustee Company Private Limited. UTI Asset Management Company presently manages a corpus of over Rs.20000 Crores. The sponsors of UTI Mutual Fund are Bank of Baroda (BOB), Punjab National Bank (PNB), State Bank of India (SBI), and Life Insurance Corporation of India (LIC). The schemes of UTI Mutual Fund are Liquid Funds, Income Funds, Asset Management Funds, Index Funds, Equity Funds and Balance Funds.

iv) Prudential ICICI Mutual Fund

The mutual fund of ICICI is a joint venture with Prudential Plc. of America, one of the largest life insurance companies in the US of A. Prudential ICICI Mutual Fund was setup on 13th of October, 1993 with two sponsors, Prudential Plc. and ICICI Ltd. The Trustee Company formed is Prudential ICICI Trust Ltd. and the AMC is Prudential ICICI Asset Management Company Limited incorporated on 22nd of June, 1993.

v) Reliance Mutual Fund

Reliance Mutual Fund (RMF) was established as trust under Indian Trusts Act, 1882. The sponsor of RMF is Reliance Capital Limited and Reliance Capital Trustee Co. Limited is the Trustee. It was registered on June 30, 1995 as Reliance Capital Mutual Fund which was changed on March 11, 2004. Reliance Mutual Fund was formed for launching of various schemes under which units are issued to the Public with a view to contribute to the capital market and to provide investors the opportunities to make investmentsindiversifiedsecurities.

vi) ABN AMRO Mutual Fund

ABN AMRO Mutual Fund was setup on April 15, 2004 with ABN AMRO Trustee (India) Pvt. Ltd. as the Trustee Company. The AMC, ABN AMRO Asset Management (India) Ltd. was incorporated on November 4, 2003. Deutsche Bank AG is the custodian of ABN AMRO Mutual Fund.

vii) Birla Sun Life Mutual FundBirla Sun Life Mutual Fund is the joint venture of Aditya Birla Group and Sun Life Financial. Sun Life Financial is a global organization evolved in 1871 and is being represented in Canada, the US, the Philippines, Japan, Indonesia and Bermuda apart from India. Birla Sun Life Mutual Fund follows a conservative long-term approach to investment. Recently it crossed AUM of Rs. 10,000 crores.

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viii) Bank of Baroda Mutual Fund (BOB Mutual Fund)Bank of Baroda Mutual Fund or BOB Mutual Fund was setup on October 30, 1992 under the sponsorship of Bank of Baroda. BOB Asset Management Company Limited is the AMC of BOB Mutual Fund and was incorporated on November 5, 1992. Deutsche Bank AG is the custodian.

ix) HSBC Mutual FundHSBC Mutual Fund was setup on May 27, 2002 with HSBC Securities and Capital Markets (India) Private Limited as the sponsor.

x) ING Vysya Mutual FundING Vysya Mutual Fund was setup on February 11, 1999 with the same named Trustee Company. It is a joint venture of Vysya & ING. The AMC, ING Investment Management Pvt. Ltd. was incorporated on April 6, 1998.

xi) Sahara Mutual FundSahara Mutual Fund was set up on July 18, 1996 with Sahara India Financial Corporation Ltd. as the sponsor. Sahara Asset Management Company Private Limited incorporated on August 31, 1995 works as the AMC of Sahara Mutual Fund. The paid-up capital of the AMC stands at Rs 25.8 crore.xii) State Bank of India Mutual FundState Bank of India Mutual Fund is the first Bank sponsored Mutual Fund to launch offshore fund, the India Magnum Fund with a corpus of Rs. 225 cr. approximately. Today it is the largest Bank sponsored Mutual Fund in India. They have already launched 35 Schemes out of which 15 have already yielded handsome returns to investors. State Bank of India Mutual Fund has more than Rs. 5,500 Crores as AUM. Now it has an investor base of over 8 Lakhs spread over 18 schemes.

xiii) Tata Mutual FundTata Mutual Fund (TMF) is a Trust under the Indian Trust Act, 1882. The sponsors for Tata Mutual Fund are Tata Sons Ltd., and Tata Investment Corporation Ltd. The investment manager is Tata Asset Management Limited and Tata Trustee Company Pvt. Ltd. Tata Asset Management Limited's is one of the fastest in the country with more than Rs. 7,703 Crores (on April 30, 2005).

xiv) Standard Chartered Mutual FundStandard Chartered Mutual Fund was set up on March 13, 2000 sponsored by Standard Chartered Bank. The Trustee is Standard Chartered Trustee Company Pvt. Ltd. Standard Chartered Asset Management Company Pvt. Ltd. is the AMC which was incorporated with SEBI on December 20, 1999.

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xv) Franklin Templeton India Mutual Fund

The group, Franklin Templeton Investments is a California (USA) based company with a global AUM of US$ 409.2 bn. (as of April 30, 2005). It is one of the largest financial services groups in the world. Investors can buy or sell the Mutual Fund through their financial advisor or through mail or through their website. They have Open end Diversified Equity schemes, Open end Sector Equity schemes, Open end Hybrid schemes, Open end Tax Saving schemes, Open end Income and Liquid schemes, Closed end Income schemes and Open end Fund of Funds schemes to offer.

xvi) Morgan Stanley Mutual Fund India

Morgan Stanley is a worldwide financial services company and its leading in the market in securities, investment management and credit services. Morgan Stanley Investment Management (MISM) was established in the year 1975. It provides customized asset management services and products to governments, corporations, pension funds and non-profit organizations. Its services are also extended to high net worth individuals and retail investors. In India it is known as Morgan Stanley Investment Management Private Limited (MSIM India) and its AMC is Morgan Stanley Mutual Fund (MSMF). xvii) Escorts Mutual Fund

Escorts Mutual Fund was setup on April 15, 1996 with Escorts Finance Limited as its sponsor. The Trustee Company is Escorts Investment Trust Limited. Its AMC was incorporated on December 1, 1995 with the name Escorts Asset Management Limited.

xviii) Alliance Capital Mutual Fund

Alliance Capital Mutual Fund was setup on December 30, 1994 with Alliance Capital Management Corp. of Delaware (USA) as sponsor. The Trustee is ACAM Trust Company Pvt. Ltd. and AMC, the Alliance Capital Asset Management India Private Ltd. with the corporate office in Mumbai.

xix) Chola Mutual Fund

Chola Mutual Fund under the sponsorship of Cholamandalam Investment & Finance Company Ltd. was setup on January 3, 1997. Cholamandalam Trustee Co. Ltd. is the Trustee Company and AMC is Cholamandalam AMC Limited.

xx) LIC Mutual Fund

Life Insurance Corporation of India set up LIC Mutual Fund on 19th June 1989. It contributed Rs. 2 Crores towards the corpus of the Fund. LIC Mutual Fund was constituted as a Trust in

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accordance with the provisions of the Indian Trust Act, 1882. . The Company started its business on 29th April 1994. The Trustees of LIC Mutual Fund have appointed Jeevan Bima Sahayog Asset Management Company Ltd as the Investment Managers for LIC Mutual Fund.

xxi) GIC Mutual Fund

GIC Mutual Fund, sponsored by General Insurance Corporation of India (GIC), a Government of India undertaking and the four Public Sector General Insurance Companies, viz. National Insurance Co. Ltd (NIC), The New India Assurance Co. Ltd. (NIA), The Oriental Insurance Co. Ltd (OIC) and United India Insurance Co. Ltd. (UII) and is constituted as a Trust in accordance with the provisions of the Indian Trusts Act, 1882.

The Players in the Mutual Fund Industry

The players in the Indian Mutual Funds Industry are similar to some extent to the players in other financial services industry. The players are as follows:

SEBIThe Securities Exchange Board of India (SEBI) is the regulatory authority for all the mutual funds sponsored by the public/private sector banks, financial institutions, private sector companies, non- banking finance companies and foreign institutional investors. SEBI has laid down the rules and regulations regarding the obligations of the entities involves in a mutual fund, its establishment and launch of different schemes, investments and valuation, financial reporting, conduct and operations of mutual funds.

Asset Management Company (AMC)

Its role is highly significant in the mutual funds operation. They are the fund managers i.e. they invest the investors money in various securities after proper research and analysis. They also look after the administrative functions of a mutual fund for which they charge management fee.

Intermediaries

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They act as a link between the mutual fund companies and the investors. The intermediaries include brokers, sub- brokers, and investment houses. The other intermediary- registrar and transfer agents perform activities, which are associated with maintaining records concerning units already issued or to be issued by the company. The registrar also performs other activities such as dividend payment, investor grievance, etc.

InvestorsInvestors subscribe to the units issued by the mutual funds in the hope of getting a return commensurate with the risk involved. SEBI protects the interest of the investors through the guidelines laid down under SEBI (Disclosure and Investor Protection) Guidelines, 2000. The mutual fund investor mainly includes individual, HUF, corporate and trusts.

Types of Mutual Funds

There are many types of mutual funds available to the investor. However, these different types of funds can be grouped into certain classifications for better understanding.

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Structure of a Mutual Fund

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SOURCE: http://amfiindia.com

ASSOCIATION OF MUTUAL FUNDS IN INDIA:-

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With the increase in mutual fund players in India, a need for mutual fund association in India was generated to function as a non-profit organization. Association of Mutual Funds in India (AMFI) was incorporated on 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 holder

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 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 that 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 in India do represent the Government of India, the Reserve Bank of India and other related bodies on matters relating to the Mutual Fund Industry.

It develops a team of well qualified and trained Agent distributors. It implements a program of training and certification for all intermediaries and other engaged in the mutual fund industry.

AMFI undertakes all India awareness programmed for investor’s in order to promote proper understanding of the concepts and working of mutual funds.

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

Regulatory Aspects:

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Schemes of mutual funds:-

The Asset management company shall launch no schemes unless the trustees approve such scheme and a copy of the offer has been filed with the Board.

Every mutual fund shall along with the offer documents of each scheme pay filing fees. The offer document shall contain disclosures which are adequate in order to enable the

investors to make informed investment decision including the disclosure non maximum investments proposed to be made by the scheme in the listed securities of the group companies of the sponsor. A close-ended scheme shall be fully redeemed at the end of the maturity period. “Unless a majority of the unit holders otherwise decide for its rollover by passing a resolution”.

The mutual fund and asset management company shall be liable to refund the application money to the applicants:-

If the mutual fund fails to receive the minimum subscription amount referred to in clause (i) of sub- regulation.

If the moneys received from the applicants for units are in excess of subscription as referred to in clause (ii) of sub-regulation.

The asset management company shall issue to the applicant whose:

Application has been accepted, unit certificates or a statement of accounts Specifying the number of units allotted to the applicant as soon as possible But not later than six weeks from the date of closure of the initial Subscription list and or from the date of receipt of the request from the unit Holders in any open ended scheme.

Rules Regarding Advertisement :-

The offer document and advertisement materials shall not be misleading or contain any statement or opinion, which are incorrect or false.

Investment objectives and valuation policies:-

The price at which the units may be subscribed or sold the price at which such unit may at any time be repurchased by the mutual fund shall be made available to the investors.General Obligation:-

Every asset management company for each scheme shall keep and maintain proper book of accounts, records and document, for each scheme so as to explain its transaction and to disclose at any point of time the financial position of each scheme and in particular give a

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true and fair view of the state of affairs of the fund and intimate to the board the place where such books of accounts, records and documents are maintained.

The financial year for all the scheme shall end as of March 31 of each year. Every mutual fund or the asset management company shall prepare in respect of each financial year an annual report and annual statement of accounts of the schemes and the fund as specified in Eleventh Schedule.

Every mutual fund shall have the annual statement of accounts audited by an auditor who is not in any way associated with the auditor of the asset management comp

Procedure for Action In Case Of Default:-

On and from the date of the suspension of the certificate or the approval, as the case may be, the mutual fund, trustees or asset management company, during the period of suspension and shall be subject to the direction of the Board with regard to any records, documents, or securities that may be in its custody or control relating to its activities as mutual funds, trustees or the asset management company.

Some facts for the growth of mutual funds in India :-

o 100% growth in the last 6 years.

o Number of foreign AMC’s is in the queue to enter the Indian markets like Fidelity

Investments, US based, with over US$1trillion assets under management

worldwide.

o Our saving rate is over 23%, highest in the world. Only channelizing these

savings in mutual funds sector is required.

o We have approximately 29 mutual funds which is much less than US having more

than 800. There is a big scope for expansion.

o '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.

o Mutual fund can penetrate rural like the Indian insurance industry with simple and

limited products.

o SEBI allowing the MF's to launch commodity mutual funds.

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ORGANISATION AND MANAGEMENT OF MUTUAL FUNDS:-

In India Mutual Fund usually formed as trusts, three parties are generally involved viz.

Settler of the trust or the sponsoring organization.

The trust formed under the Indian trust act, 1982 or the trust company registered

under the Indian companies act, 1956

Fund mangers or The merchant-banking unit

Custodians.

MUTUAL FUNDS TRUST:-

Mutual fund trust is created by the sponsors under the Indian trust act, 1982

Which is the main body in the creation of Mutual Fund trust

The main functions of Mutual Fund trust are as follows:

Planning and formulating Mutual Funds schemes.

Seeking SEBI’s approval and authorization to these schemes.

Marketing the schemes for public subscription.

Seeking RBI approval in case NRI’s subscription to Mutual Fund is Invited

Attending to trusteeship function. This function as per guidelines can be assigned to

separately established trust companies too. Trustees are required to submit a

consolidated report six monthly to SEBI to ensure that the guidelines are fully being

complied with trusted are also required to submit an annual report to the investors in the

fund.

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FUND MANAGERS (OR) THE ASSES MANAGEMENT COMPANY (AMC)

AMC has to discharge mainly three functions as under:

I. Taking investment decisions and making investments of the funds through market

dealer/brokers in the secondary market securities or directly in the primary capital

market or money market instruments

II. Realize fund position by taking account of all receivables and realizations, moving

corporate actions involving declaration of dividends,etc to compensate investors for

their investments in units; and

III. Maintaining proper accounting and information for pricing the units and arriving at net

asset value (NAV), the information about the listed schemes and the transactions of

units in the secondary market. AMC has to feed back the trustees about its fund

management operations and has to maintain a perfect information system.

CUSTODIANS OF MUTUAL FUNDS:-

Mutual funds run by the subsidiaries of the nationalized banks had their respective

sponsor banks as custodians like canara bank, SBI, PNB, etc. Foreign banks with higher

degree of automation in handling the securities have assumed the role of custodians for

mutual funds. With the establishment of stock Holding Corporation of India the work of

custodian for mutual funds is now being handled by it for various mutual funds. Besides,

industrial investment trust company acts as sub-custodian for stock Holding Corporation

of India for domestic schemes of UTI, BOI MF, LIC MF, etc

Fee structure:-

Custodian charges range between 0.15% to 0.20% on the net value of the customer’s

holding for custodian services space is one important factor which has fixed cost element.

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RESPONSIBILITY OF CUSTODIANS:-

Receipt and delivery of securities

Holding of securities.

Collecting income

Holding and processing cost

Corporate actions etc

FUNCTIONS OF CUSTOMERS

Safe custody

Trade settlement

Corporate action

Transfer agents

RATE OF RETURN ON MUTUAL FUNDS:-

An investor in mutual fund earns return from two sources:

Income from dividend paid by the mutual fund.

Capital gains arising out of selling the units at a price higher than the acquisition

price

Formation and regulations:

1. Mutual funds are to be established in the form of trusts under the Indian trusts act and

are to be operated by separate asset management companies (AMC s)

2. AMC’s shall have a minimum Net worth of Rs. 5 crores;

3. AMC’s and Trustees of Mutual Funds are to be two separate legal entities and that an

AMC or its affiliate cannot act as a manager in any other fund;

4. Mutual funds dealing exclusively with money market instruments are to be regulated by

the Reserve Bank Of India

5. Mutual fund dealing primarily in the capital market and also partly money market

instruments are to be regulated by the Securities Exchange Board Of India (SEBI)

6. All schemes floated by Mutual funds are to be registered with SEBI

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Schemes:-

1. Mutual funds are allowed to start and operate both closed-end and open-end schemes;

2. Each closed-end schemes must have a Minimum corpus (pooling up) of Rs 20 crore;

3. Each open-end scheme must have a Minimum corpus of Rs 50 crore

4. In the case of a Closed –End scheme if the Minimum amount of Rs 20 crore or

60% of the target amount, which ever is higher is not raised then the entire

subscription has to be refunded to the investors;

5. In the case of an Open-Ended schemes, if the Minimum amount of Rs 50 crore or 60

percent of the targeted amount, which ever is higher, is no raised then the entire

subscription has to be refunded to the investors.

Investment norms:-

1. No mutual fund, under all its schemes can own more than five percent of any

company’s paid up capital carrying voting rights;

2. No mutual fund, under all its schemes taken together can invest more than 10 percent of

its funds in shares or debentures or other instruments of any single company;

3. No mutual fund, under all its schemes taken together can invest more than 15 percent of

its fund in the shares and debentures of any specific industry, except those schemes

which are specifically floated for investment in one or more specified industries in

respect to which a declaration has been made in the offer letter.

4. No individual scheme of mutual funds can invest more than five percent of its corpus

in any one company’s share;

5. Mutual funds can invest only in transferable securities either in the money or in the

capital market. Privately placed debentures, securitized debt, and other unquoted debt,

and other unquoted debt instruments holding cannot exceed 10 percent in the case of

growth funds and 40 percent in the case of income funds.

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A Mutual fund is a common pool of money into which investors place their contributions that are to be invested in accordance with a stated objective. The ownership of the fund is thus joint or “mutual”; the fund belongs to all investors. A single investor’s ownership of the fund is in the same proportion as the amount of the contribution made by him bears to the total amount of the fund.

A mutual fund uses the money collected from investors to buy those assets, which are specifically permitted by its stated investment objective. Thus, an equity fund would buy mainly equity assets-ordinary shares, preference shares, warrants, etc. a bond fund would mainly buy debt instruments, such as debentures, bonds, or government securities. It is these assets, which are owned by the investors in the proportion of their investments.

When an investor subscribes to a mutual fund, he or she buys a part of the assets or the pool of funds that are outstanding at that time. It is no different from buying “shares” of a joint stock company, in which case the purchase makes the investor a part owner of the company and its assets. In fact, in the USA, a mutual fund is constituted as an investment company and an investor “buys in to the fund” meaning he buys the shares of the fund. In India, a mutual fund id constituted as a trust an investor subscribes to the “units” issued by the fund, which is where the term Unit Trust comes from. . Mutual funds issues units to the investors in accordance with quantum of money invested by them. Investors of Mutual funds are known as Unit Holders.

Investments in securities are spread across a wide cross-section of industries and sectors and thus the risk is reduced. Diversification reduces the risk because all stocks may not move in the same direction in the same proportion at the same time. The profits and losses are shared by the investors in proportion to their investments. Mutual funds normally come out with a number of schemes with different investments objectives which are launched from time to time. A mutual fund is required to be registered with Securities and Exchange Board of India which regulates securities markets before it can collect funds from public.

However, whether the investor gets funds shares or units is only a matter of legal distinction. In any case, a mutual fund shareholder or unit holder is a part owner of the fund’s assets. The term unit-holder includes the mutual fund account-holder or closed-end fund shareholder. A unit holder in Unit Trust of India US-64 scheme is the same as a UTI Master shareholder or an investor in an alliance

Each share or unit that an investor holds needs to be assigned a value. Since the units held by investor evidence the ownership of the assets, the value of the total assets of the fund when divided by the total number of units issued by the mutual fund gives us the value of one unit. This is generally called the Net Asset Value (NAV) of one unit or one share. The value of an investor’s part ownership is the determined by the NAV of the number of units held.

Example: If the value of a fund’s assets stands at Rs 1000 and it has 10 investors who have bought 10 units each, the total numbers of units issued are 100, and the value of one unit is Rs 10 (1000/100). If a single investor in fact owns 3 units, the value of his ownership of the fund will be Rs 30 (1000/100*3). Note that the value of the fund’s investments will keep fluctuating with the market price movements, causing the NAV also fluctuate. For example, if the value of our

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funds assets increased from Rs 1000 to Rs 1200, the value of our investors holding of 3 units (1200/100*3) Rs 36. The investment value can go up and down, depending on the market value of the fund’s assets.

The flow chart below describes broadly the working of a mutual fund:

SOURCE: AMFI

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Advantages of Mutual Funds

If mutual funds are emerging as the favorite investment vehicle, it is because of the many advantages they have over other forma and avenues of investing, particularly for the investor who has limited resources available in terms of capital and ability to carry out detailed research and market monitoring. The following are the major benefits offered by mutual funds to all investors:

i) Portfolio Diversification Mutual Funds spread the investment across different securities (stocks, bonds, money market instruments, real estate, fixed deposits etc.) by investing in a number of companies across a broad cross-section of industries and sectors (auto, textile, information technology etc.). This kind of a diversification may add to the stability of your returns and reduces the risk with far less money than you can do on your own. For example during one period of time equities might underperform but bonds and money market instruments might do well enough to offset the effect of a slump in the equity markets.

ii) Convenient AdministrationInvesting in a Mutual Fund reduces paperwork and helps you avoid many problems such as bad deliveries, delayed payments and follow up with brokers and companies.

iii) Professional ManagementQualified investment professionals who seek to maximize returns and minimize risk monitor investor's money. The investment professional has experience in making investment decisions. It is the Fund Manager's job to (a) find the best securities for the fund, given the fund's stated investment objectives; and (b) keep track of investments and changes in market conditions and adjust the mix of the portfolio, as and when required.

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

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v) AffordabilityInvestors individually may lack sufficient funds to invest in high-grade stocks. A mutual fund because of its large corpus allows even a small investor to take the benefit of its investment strategy.

vi) VarietyMutual funds offer a tremendous variety of schemes. This variety is beneficial in two ways: first, it offers different types of schemes to investors with different needs and risk appetites; secondly, it offers an opportunity to an investor to invest sums across a variety of schemes, both debt and equity.

vii) Tax BenefitsIn case of Individuals and Hindu Undivided Families a deduction up to Rs. 9,000 from the Total Income will be admissible in respect of income from investments specified in Section 80L, including income from Units of the Mutual Fund. Units of the schemes are not subject to Wealth-Tax and Gift-Tax.

viii) TransparencyOpen-ended mutual funds disclose their Net Asset Value (NAV) daily and the entire portfolio monthly. This level of transparency, where the investor himself sees the underlying assets bought with his money, is unmatched by any other financial instrument.

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Disadvantages of Mutual Funds

While the benefits of investing through mutual funds far outweigh the disadvantages, an investor and his advisor will do well to be aware of few shortcomings of using the mutual fund as an investment vehicle.

i) No Tailor-made-PortfoliosInvesting through funds means, the investor delegates the decision of investing through which securities to fund manager. The very high-net-worth individuals or large corporates may find this as a constraint in achieving their objectives. However this constraint can be overcome to some extent by offering families of schemes to investor, within the same fund.

ii) No control over costsInvestor pays the investment management fees as long as he remains within the fund. Fees are usually payable as a percentage of the value of his investments, whether the fund value is rising or declining. The investor also pays the fund distribution cost, which he would not incur in direct investment.

iii) Managing a Portfolio of FundsAvailability of a large number of options from mutual funds can actually mean too much choice for the investor. He may again need advice on how to select a fund to achieve his objectives.

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Mutual Fund Classification

SOURCE: http://amfiindia.com

Categories of mutual funds:

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By Structure

i) Open-ended FundsAn open-end fund is one that is available for subscription all through the year. These do not have a fixed maturity. Investors can conveniently buy and sell units at Net Asset Value (NAV) related prices. Hence, the unit capital of the schemes keeps changing each day. Such schemes thus offer very high liquidity to investors and are becoming increasingly popular in India. Please note that an open-ended fund is NOT obliged to keep selling/issuing new units at all times, and may stop issuing further subscription to new investors. On the other hand, an open-ended fund rarely denies to its investor the facility to redeem existing units.

ii) Closed-ended Funds

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A closed-end fund has a stipulated maturity period which generally ranging from 3 to 15 years. The fund is open for subscription only during a specified period. Investors can invest in the scheme at the time of the initial public issue and thereafter they can buy or sell the units of the scheme on the stock exchanges where they are listed. In order to provide an exit route to the investors, some close-ended funds give an option of selling back the units to the Mutual Fund through periodic repurchase at NAV related prices. SEBI Regulations stipulate that at least one of the two exit routes is provided to the investor. Closed-ended schemes are usually more illiquid as compared to open-ended schemes and hence trade at a discount to the NAV. This discount tends towards the NAV closer to the maturity date of the scheme.

iii) Interval FundsInterval funds combine the features of open-ended and close-ended schemes. They may be traded on the stock exchange or may be open for sale or redemption during pre-determined intervals at NAV based prices.

By Investment Objective

i) Growth FundsThe aim of growth funds is to provide capital appreciation over the medium to long- term. Such schemes normally invest a majority of their corpus in equities. It has been proven that returns from stocks, have outperformed most other kind of investments held over the long term. Growth schemes are ideal for investors having a long-term outlook seeking growth over a period of time.

ii) Income FundsThe aim of income funds is to provide regular and steady income to investors. Such schemes generally invest in fixed income securities such as bonds, corporate debentures and Government securities. Income Funds are ideal for capital stability and regular income.

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

iv) Money Market Funds

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The aim of money market funds is to provide easy liquidity, preservation of capital and moderate income. These schemes generally invest in safer short-term instruments such as treasury bills, certificates of deposit, commercial paper and inter-bank call money. Returns on these schemes may fluctuate depending upon the interest rates prevailing in the market. These are ideal for Corporate and individual investors as a means to park their surplus funds for short periods.

v) Gilt Fund These funds invest exclusively in government securities. Government securities have no default risk. NAVs of these schemes also fluctuate due to change in interest rates and economic factors as is the case with income or debt oriented schemes.

vi) Index FundsIndex Funds replicate the portfolio of a particular index such as the BSE sensitive index, S&P NSE 50 index(Nifty).These schemes invest in the securities in the same weight age comprising of an index. NAV’s of such schemes would rise or fall in accordance with the rise or fall in the index, though not exactly by the same percentage due to some factors known as “Tracking Error” in technical terms. Necessary disclosure in this regard is made in the offer document of the mutual fund scheme. There are also exchange traded index funds launched by the mutual funds which are traded on the stock exchanges.

On the basis of Load

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

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

Other Schemes

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i) Tax Saving SchemesThese schemes offer tax rebates to the investors under specific provisions of the Indian Income Tax laws as the Government offers tax incentives for investment in specified avenues. Investments made in Equity Linked Savings Schemes (ELSS) and Pension Schemes are allowed as deduction u/s 88 of the Income Tax Act, 1961. The Act also provides opportunities to investors to save capital gains u/s 54EA and 54EB by investing in Mutual Funds, provided the capital asset has been sold prior to April 1, 2000 and the amount is invested before September 30, 2000.

ii) Industry Specific Schemes Industry Specific Schemes invest only in the industries specified in the offer document. The investment of these funds is limited to specific industries like InfoTech, FMCG, and Pharmaceuticals etc.

iii) Sectoral SchemesSectoral Funds are those, which invest exclusively in a specified industry or a group of industries or various segments such as 'A' Group shares or initial public offerings. In these funds or schemes the investor invests in the securities of only those sectors or industries which are specified in the offer documents. E.g. Pharmaceuticals, software, Fast Moving Consumers goods (FMCG), petroleum stocks, etc. the return on these funds is dependent on the performance of the respective sector/industries. While these funds may give higher returns, they are more risky compared to the diversified funds. Investors need to keep a watch on the performance of these sectors and must exit at an appropriate time. They may seek an advice of an expert.

Spreading the Mutual Fund Culture

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Though the Indian Mutual Fund industry has a huge potential, it is yet to be realized. To realize its growth potential, industry will have to focus on its reach in the retail segment. According to Chairman of AMFI there are about 180 million households in India, of which just 11.8 millions invest in mutual funds, making it penetration of 6.7% in the urban areas 13.7% of the households invest in mutual funds; in rural areas this percentage is just 3.8%. So there is a need to focus on rural penetration for future growth. To achieve its growth, educating the customer about the mutual funds as a saving vehicle will be critical. More efforts are required from the regulators and the industry to manage the wealth of individuals to further propel the growth of the industry by popularizing the use of mutual funds. The govt. should properly regulate and monitor the regulation so that a favorable climate can be created. Regulations should be tightened to curb unethical practices. They should also develop a comprehensive risk management system so that it can induce more investment. The industry should focus on product innovation and maintain transparency, flexibility, service and innovation to realize its potential.

Offer Document

When an AMC or a Fund Sponsor wishes to launch a new mutual fund scheme, they are required to formulate the details of the schemes and register it with SEBI before announcing the scheme and inviting the investors to subscribe to the fund. Launch of a new mutual fund scheme is called a New Fund Offer (NFO). The document containing the details of the new fund offer that the AMC or the Sponsor prepares and circulates to the prospective investors is called the Offer Document. Offer Document issued by mutual funds serve the same purpose of inviting investors and giving them the information about the new fund offer. The offer document of the closed-end fund is issued only once at the time of issue, as the units are normally not re-purchasable for investors. But, the open-end fund could issue and repurchase units on an ongoing basis. This means that the offer document of the open-end funds is valid for all the time, until amended, though it will be first issued at the time of launch of the scheme. SEBI requires the offer document of the open-end fund to be revised every two years.

Options Offered to Investors:

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Dividend Option : The investor can choose to receive a part of the profits of the mutual fund at some intervals before their redemption. This option is Dividend Option. Investors who choose dividend option can again have 2 sub options:

Dividend Payout Option : Investors who choose the dividend payout option on their investments will receive dividends as and when such dividends are declared by the scheme. Dividends are paid out to the investors in the form of warrants or are directly credited to the investor’s bank account.

Dividend Re-investment Option : Investors who opt for the dividend reinvestment option do not take the amount of dividend out of the scheme. They re-invest the dividends that are declared by the mutual funds back into the mutual funds itself, at a NAV that is prevalent immediately after the declaration of dividend or the NAV at the time of re-investment. This NAV is known as ex-div NAV.

Growth Option : The investors who do not want to receive any part of profits of the mutual fund before its redemption. Rather they want to retain the profits made in the pool and want their returns to grow by being compounded. Whenever they need to get some money or profits back, they would sell a part of their units. This is Growth Option.

Investor Earning Opportunities:Dividend Payout Dividend

ReinvestmentGrowth Option

Dividend Yes Yes No

Change in NAV Yes Yes Yes

Lock-in Period Options:Mutual funds usually do not have lock-in periods, during which investors cannot exit the fund. Mutual funds may create products with lock-in periods. Repurchase information can be found in the offer document. There are 2 normal situations when investors are restricted from exiting the fund:

An open-ended fund may announce an initial offer period, during which time it will only sell units. There may be no repurchase during that period. The fund will announce a date from which further sales and repurchases will take place.

Some specific funds scheme can be designed to have a minimum period of investment. Example: Investments in special “Equity Linked Savings Scheme” are eligible for tax rebates. In order to enjoy the tax rebate, the investor is required to stay invested for a period of 3 years.

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In extra-ordinary situations, mutual funds can, with notice to the investors through a national daily, impose temporary lock-in periods. Investors have to check the offer document to see if the mutual fund has sought such a right for itself.

Regulations regarding Cutoff Timings: All funds except liquid funds

Purchases :In respect of valid applications received upto 3 p.m. by the Mutual Fund, same day’s closing NAV shall be applicable.In respect of valid applications received after 3 p.m. by the Mutual Fund, the closing NAV of the next business day shall be applicable.

Redemption :In respect of valid applications received upto 3 p.m. by the Mutual Fund, same day’s closing NAV shall be applicable.In respect of valid applications received after 3 p.m. by the Mutual Fund, the closing NAV of the next business day shall be applicable.

Liquid fund Purchases :

In respect of valid applications, closing NAV of the day immediately before the day on which funds are available for utilization by the fund shall be applicable. However, in respect of any application received after 1 p.m. by the Mutual Fund and the funds are available for utilization by the fund on the same day, closing NAV of the same day shall be applied.

Redemption In respect of valid applications received upto 10:00 a.m. by the Mutual Fund, previous day’s closing NAV shall be applicable. In respect of valid applications received after 10:00 a.m.by the Mutual Fund, same day’s NAV shall be applicable.

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Net Asset Value

Net Asset Value (NAV) represents a fund's per share market value. This is the price  at which investors buy (bid price) fund shares from a fund company and sell them (redemption price) to a fund company. Dividing the total value of all the cash and securities in a fund’s portfolio, less any liabilities, by the number of shares outstanding, derives it. The NAV computation is undertaken once at the end of each trading day based on the closing market prices of the portfolio's securities.

NAV: Net Assets of the Scheme/ Number of Units Outstanding Or(Market Value of Investment + Receivables + Other Accrued Income + Other Assets – Accrued Expenses – Other Payables – Other Liabilities)/Number of Units Outstanding on the Valuation Date

For the purpose of NAV calculation, the day on which NAV is calculated by a fund is known as the Valuation Date. NAV of all schemes must be calculated and published at least every Wednesday for Closed-end schemes and daily for Open-end schemes. The day’s NAV must be posted on AMFI website by 8:00 p.m. that day. This applies to both Open-end & Closed-end schemes.

The fund’s NAV is affected by these 4 factors: Purchase & Sale of investment securities Valuation of all investment securities held Other assets & liabilities Units sold or redeemed

Pricing Of Units

Although NAV per unit defines the fair value of the investor’s holding in the fund, the fund may not repurchase the investor’s units at the same price as NAV. There can be entry or exit loads. The Sale price is NAV + Entry Load and the Repurchase price is NAV – Exit Load. SEBI requires that fund must ensure that repurchase price is not lower than 93% of NAV (95% in the case of a closed-end fund). On the other side, the fund may sell new units at a price that is different from the NAV, but the sale price cannot be higher than 107% of NAV. Also, the difference between the repurchase price and the sale price of the unit is not permitted to exceed 7% of the sale price.Sale Price: Applicable NAV * (1 + Entry Load)Repurchase Price: Applicable NAV * (1 – Exit Load)

Fees & Expenses:

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An AMC may charge the scheme with Investment Management & Advisory Fees that are fully disclosed in the offer document subject to the following limits:

1.25% of the first Rs.100 Crores of weekly average net assets outstanding in the accounting year, and @ 1% of weekly average net assets in excess of Rs.100 Crores.

For no load schemes, the AMC may charge an additional management fee up to 1% of weekly average net assets outstanding in the accounting year.

Initial Issue Expenses Initial Issue Expenses will be permitted for Closed Ended Scheme only and such scheme

will not charge entry load. Initial Issue Expenses of launching schemes (not to exceed 6% of initial resources raised

under the scheme)

Total Expenses:Total Expenses charged by the AMC to a scheme, excluding issue or redemption expenses but including investment management & advisory fees, are subject to the following limits:

On the first Rs.100 Crores of daily or average weekly net assets 2.5%

On the next Rs.300 Crores of daily or average weekly net assets 2.25%

On the next Rs.300 Crores of daily or average weekly net assets 2.0%

On the balance of daily or average weekly net assets 1.75%

For Bond Funds:

On the first Rs.100 Crores of daily or average weekly net assets 2.25%

On the next Rs.300 Crores of daily or average weekly net assets 2.0%

On the next Rs.300 Crores of daily or average weekly net assets 1.75%

On the balance of daily or average weekly net assets 1.5%

Investment Plans

The term “investment plans” generally refers to the portfolio flexibility that the funds to investors offering different ways to invest or reinvest. The different investment plans are an important consideration in the investment decision, because they determine the level of flexibility available to the investor. Also, the investment plan offered by a fund allows the investors freedom with respect to investing one time or at regular intervals, making transfers to different schemes within the same fund family, or receiving income at specified intervals or accumulating distributions. These are some of the investment plans offered by mutual funds in India:

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Automatic Reinvestment Plans (ARP) : Many funds offer 2 options under the same scheme- the Dividend Option & the Growth Option. The ARP allows the investor to reinvest the amount of dividends or other distributions made by the fund in the same fund & receive additional units, instead of receiving them in cash.

Systematic Investment Plan (SIP) :These require the investor to invest a fixed sum periodically, thereby letting the investor save in a disciplined and phased manner. The mode of investment could be though direct debit to the investor’s salary or bank account. A modified version of SIP is the Voluntary Accumulation Plan (VAP) that allows the investor flexibility with respect to the amount and frequency of investment.

Systematic Withdrawal Plan (SWP) :Such plans allows the investor to make systematic withdrawals from his fund investment account on a periodic basis, thereby providing the same benefit as regular income. The investor must withdraw a specific minimum amount with the facility to have withdrawal amounts sent to his residence by a cheque or credited directly into the bank account. The amount withdrawn is treated as redemption of units at the applicable NAV as specified in the offer document. The investor is usually required to maintain a minimum balance in his fund account under this plan.

Systematic Transfer Plan (STP) :These plans allow the investor to transfer on a periodic basis a specified amount from one scheme to another with the same fund family- meaning two schemes managed by the same AMC and belonging to the same mutual fund. A transfer will be treated as redemption of units from the scheme from which the transfer is made, and as investment in units of the scheme into which the transfer is made. Such redemption or investment will be at the applicable NAV for the respective schemes as specified in the offer document. The investor is usually required to maintain a minimum balance in his fund account under this plan for which the transfer is made.

Performance Evaluation

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PARAMETERS OF MUTUAL FUND EVALUATION:

Risk Returns Liquidity Expense Ratio Composition of Portfolio

Risks Associated With Mutual Funds

Investing in mutual funds as with any security, does not come without risk. One of the most basic economic principles is that risk and reward are directly correlated. In other words, the greater the potential risk, the greater the potential return. The types of risk commonly associated with mutual funds are:

Market Risk: Market risk relate to the market value of a security in the future. Market prices fluctuate and are susceptible to economic and financial trends, supply and demand, and many other factors that cannot be precisely predicted or controlled.

Political Risk:

Changes in the tax laws, trade regulations, administered prices etc. is some of the many political factors that create market risk. Although collectively, as citizens, we have indirect control through the power of our vote, individually as investors, we have virtually no control.

Inflation Risk:

Inflation or purchasing power risk, relates to the uncertainty of the future purchasing power of the invested rupees. The risk is the increase in cost of the goods and services, as measured by the Consumer Price Index.

Interest Rate Risk:

Interest Rate risk relates to the future changes in interest rates. For instance, if an investor invests in a long term debt mutual fund scheme and interest rate increase, the NAV of the scheme will fall because the scheme will be end up holding debt offering lowest interest rates.

Business Risk:

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Business Risk is the uncertainty concerning the future existence, stability and profitability of the issuer of the security. Business Risk is inherent in all business ventures. The future financial stability of a company can not be predicted or guaranteed, nor can the price of its securities. Adverse changes in business circumstances will reduce the market price of the company’s equity resulting in proportionate fall in the NAV of mutual fund scheme, which has invested in the equity of such a company.

Economic Risk :

Economic Risk involves uncertainty in the economy, which, in turn can have an adverse effect on a company’s business. For instance, if monsoons fall in a year, equity stocks of agriculture bases companies will fall and NAVs of mutual funds, which have invested in such stocks, will fall proportionately.There are 3 different methods with the help of which we can measure the risk.

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HOW LONG TO KEEP INVESTMENT TO GET MAXIMUM RETURNS

Technically open-ended funds you can withdraw your investments even within a week, but to get desired returns positive time frame is required are:

Funds Time Period

Equity Funds 3 Years (plus)

Balanced Funds 18 months to 3 Years

MIP’s 1 Year (plus)

Income Funds 6 months to 1 Year

Liquid Funds few days to 6 months

WHAT RETURNS CAN I EXPECT IF I KEEP MY MONEY FOR SUGGESTED TIME FRAMES

Funds Returns

Sector funds 22% to 25% p.a

Balance funds 15% to 18% p.a

MIP’s Pension Plans 12% to 15% p.a

Income Funds 10% to 12% p.a

Liquid Funds 7% to 9% p.a

The above-mentioned returns in the table are indicative and not assured. All investments in MUTUAL FUNDS are securities and are subject to market risk and the NAVs of the schemes may go up and down depending upon the factors and forces affecting the security market including the fluctuations in the internal rates .The past performance of the MUTUAL FUNDS is not indicative of future performance.

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Tax Provisions

Income earned by any mutual fund registered with SEBI (Mutual Fund) Regulation, 1996 is fully exempt from tax under section 10 (23D) of the IT act.

However, income distributed to unit-holders by a closed-end or debt fund is liable to a dividend distribution tax at a rate stipulated by the Government. This tax is not applicable to distributions made by open-end-equity-oriented funds (funds with more than 50% of their portfolio in Equity).

Dividend Distribution Tax is payable by the fund on its distributions and out of its income, the investor pays indirectly since the fund’s NAV and the value his investment will come down by the amount of tax paid by the fund. Example: If a closed-end or a debt fund declares a dividend distribution of Rs.100, Rs.10.20 (Tax Rate 10.2%) will be the tax in the hands of the fund. While the investor will get Rs.100, the fund will have Rs.10.20 less to invest. The fund’s current cash flow diminish by Rs.10.20 paid as tax, and its impact will be reflected in the lower value of the fund’s NAV and hence investor’s investment on a compound basis in future periods.

Since the tax is on distributions, it makes income schemes less attractive in comparison to growth schemes, as the objective of income schemes is to pay regular dividends.

The fund cannot avoid the tax even if the investor chooses to reinvest the distribution back into the fund. Example: The fund will still pay Rs.10.20 tax on the announced distribution, even if the investor chooses to reinvest his dividends in the concerned scheme.

Tax Benefits to the Investor Dividends Received from Mutual Funds :

Income distributed by a fund is exempted in the hands of investors No TDS on any income distribution by mutual fund

Capital Gains on Sale of Units : If the investor sells his units and earn ‘Capital Gains’, the investor is subject to the Capital Gains Tax as under:

If units are held for more than 12 months, they will be treated as short term capital asset, otherwise as long term capital asset.

Tax law definition of Capital Gains : Sale Consideration – (Cost of Acquisition + Cost of Improvements + Cost of Transfer)

If the units were held for over one year, the investor gets the benefit of “Indexation”, which means his purchase price is marked up by an inflation index, so his capital gain amount is less than otherwise. Purchase Price of a long term capital asset after indexation is computed as:

Cost of Acquisition or Improvement :

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Actual Cost of Acquisition or Improvement * Cost Inflation Index for year of transfer/ Cost Inflation Index for year of Acquisition or Improvement or for 1981, whichever is later.

Restrictions on Investments

A mutual fund scheme shall not invest more than 15% of its NAV in debt instruments issued by a single issuer, which are rated not below investment grade by a credit rating agency authorized to carry out such activity under the Act. Such investment limit may be extended to 20% of the NAV of the scheme with the prior approval of the Board of Trustees and the Board of Asset Management Company.

A mutual fund scheme shall not invest more than 10% of its NAV in unrated debt instruments issued by a single issuer and the total investment in such instruments shall not exceed 25% of the NAV of the scheme. All such investments shall be made with the prior approval of the Board of Trustees and the Board of Asset Management Company.

No mutual fund under all its schemes should own more than 10% of any company's paid up capital carrying voting rights.

Such transfers are done at the prevailing market price for quoted instruments on spot basis. The securities so transferred shall be in conformity with the investment objective of the scheme to which such transfer has been made.

A scheme may invest in another scheme under the same asset management company or any other mutual fund without charging any fees, provided that aggregate inter scheme investment made by all schemes under the same management or in schemes under the management of any other asset management company shall not exceed 5% of the net asset value of the mutual fund.

The initial issue expenses in respect of any scheme may not exceed 6% of the funds raised under that scheme.

Every mutual fund shall buy and sell securities on the basis of deliveries and shall in all cases of purchases, take delivery of relative securities and in all cases of sale, deliver the securities and shall in no case put itself in a position whereby it has to make short sale or carry forward transaction.

Every mutual fund shall, get the securities purchased or transferred in the name of the mutual fund on account of the concerned scheme, wherever investments are intended to be of long-term nature.

No mutual fund scheme shall make any investment in; Any unlisted security of an associate or group company of the

sponsor; or Any security issued by way of private placement by an

associate or group company of the sponsor; or

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The listed securities of group companies of the sponsor which is in excess of 30% of the net assets (of all the schemes of a mutual fund)

No mutual fund scheme shall invest more than 10 per cent of its NAV in the equity shares or equity related instruments of any company. Provided that, the limit of 10% shall not be applicable for investments in index fund or sector or industry specific scheme.

A mutual fund scheme shall not invest more than 5% of its NAV in the equity shares or equity related investments in case of open-ended scheme and 10% of its NAV in case of close-ended scheme.

Asset Allocation Principles

Asset allocation means determining the percentage of your investment to be held in equities, bonds and money market/cash instruments. It has been observed that 90% of a managed portfolio comes from right levels of asset allocation between stocks and bonds/cash.

Benjamin Graham’s 50/50 Balance Benjamin Graham advocates 50/50 split between equities & bonds, the common approach to start with. When value of equities goes up, balance can be restored by liquidating part of the equity portfolio and vice versa. This is the basic defensive or conservative investment approach. But it is good to get half a return of a rising market and to avoid the full losses of a falling market.

50/50 Portfolio of Mutual Funds Bogle suggested the following combinations

1. A Basic Managed Portfolio : 50% in diversified Equity Value Funds 25% in a Government Securities Fund 25% in High Grade Corporate Bond Funds

2. A Basic Indexed Portfolio : 50% in Total Stock Market/Index Funds 50% in Total Bond Market Value

3. A Simple Managed Portfolio : 85% in Balanced 60/40 Fund 15% in Medium Term Bond Fund

4. A Complex Managed Portfolio : 20% in Diversified Equity Fund 20% in Aggressive Growth Funds 10% in Specialty Funds 30% in Long-Term Bond Funds 20% in Short-Term Bond Funds

5. A Readymade Portfolio : Single Index Fund with 60/40 Equity/Bond holding

Strategic Asset Allocation Graham’s 50/50 is the basic asset allocation. Bogle recommends adjusting the percentages for each group in terms of their lifecycle phases. During the Accumulation Phase, an investor would be building assets by periodic investments of capital &

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reinvestment of all dividends received. During the Distribution Phase, he will stop adding assets and start receiving dividends as income. Considered with conjunction with the investor’s age, he recommends the following strategic allocations:

1. Investor in Accumulation Phase :

Diversified Equity & Balanced Fund 65 - 80%

Income & Gilt Funds 15 – 30%

Liquid Funds & Bank Deposits 5%

2. Investor in Distribution Phase :

Diversified Equity & Balanced Fund 15 – 30%

Income & Gilt funds 65 – 80%

Cash Funds 5%

Bogle gives a nice rule of thumb for asset allocation: Debt portion of an investor’s portfolio should be equal to his age. For Example: A 30 year old investor will make 70/30 (Equity/Debt) Asset Allocation, and 50 year will make a 50/50 (Asset/Debt) Asset Allocation.

Model Portfolios (By Jacobs) In preparing an Investment Portfolio, the advisor would have to deal with investors at different stages of their life-cycle and with different needs. Therefore, Jacobs gives 4 different models:

Investor Recommended Model Portfolio

Young, Unmarried Professional 50% in Aggressive Equity Funds25% in High Yield Bond Funds, Growth & Income Funds25% in Conservative Money Market Funds

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Young Couple with 2 Incomes & 2 Children

10% in Money Market30% in Aggressive Equity Funds25% in High Yield Bond Funds & Long Term Growth Funds35% in Municipal Bond Funds

Other Couple, Single Income 30% in Short-Term Municipal Funds35% in Long-Term Municipal Funds25% in Moderately Aggressive Equity10% in Emerging Growth Equity

Recently Retired Couple 35% in Conservative Equity Funds for Capital Preservation/Income25% in Moderately Aggressive Equity for Modest Capital Growth40% in Money Market Funds

Wealth Cycle Classification

Stage Financial Needs Investment Preferences

Accumulation Stage Investing for long term identified financial goals

Growth options and long term products. High risk appetite.

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Transition Stage Near term needs for funds as pre-specified needs draw closer

Liquid and medium term investments. Lower risk appetite

Reaping Stage Higher Liquidity requirement Liquid and medium term investments. Preference for income and debt products

Inter-Generational Stage

Long term investment of inheritance

Low liquidity needs. Ability to take risk and invest for long term

Sudden Wealth Stage Medium to Long term Wealth preservation. Preference for low risk products.

Comparison of Investment Products

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Investors tend to constantly compare one form of investment with another. There are 2 kinds of comparisons possible among different investment options.

1. By Nature of Investment : Investor look for the Best returns on different options. However, to determine which option is better, the comparison should be made in terms of other benefits that the investor ought to look for in any investment.

Return Safety Convenience

Volatility Liquidity

Equity High Low High High

FI Bonds Moderate High Moderate Moderate

Corporate Debentures

Moderate Moderate Moderate Low

Company Fixed Deposits

Moderate Low Low Low

Banks Deposits Low High Low High

PPF Moderate High Low Moderate

Life Insurance Low High Low Low

Gold Moderate High Moderate Moderate

Real Estate High Moderate High Low

Mutual Funds High High Moderate High

2. By Performance : The comparison on the basis of performance highlights the flexibility offered by mutual funds from the investor’s perceptive. An investor can choose from a

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wide variety of funds to suit his risk tolerance, investment horizon & investment objective.

Investment Objective

Risk Tolerance Investment Horizon

Equity Capital Appreciation High Long Term

FI Bonds Income Low Medium-Long Term

Corporate Debentures

Income High-Medium-Low Medium-Long Term

Company Fixed Deposits

Income High-Medium-Low Medium

Bank Deposits Income Generally Low Flexible-All Times

PPF Income Low Long Term

Life Insurance Risk Cover Low Long Term

Gold Inflation Hedge Low Long Term

Real Estate Inflation Hedge Low Long Term

Mutual Funds Capital Growth, Income

High-Medium-Low Flexible-All Times

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RISK RETURN GRID

Risk Tolerance/Return Expected

Focus Suitable Products Benefits offered by MFs

Low Debt Bank/ Company FD, Debt based Funds

Liquidity, Better Post-Tax returns

Medium Partially Debt, Partially Equity

Balanced Funds, Some Diversified Equity Funds and some debt Funds, Mix of shares and Fixed Deposits

Liquidity, Better Post-Tax returns, Better Management, Diversification

High Equity Capital Market, Equity Funds (Diversified as well as Sectoral)

Diversification, Expertise in stock picking, Liquidity, Tax free dividends

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BANKS V/S MUTUAL FUNDS

BANKS MUTUAL FUNDS

Returns Low Better

Administrative Expenses High Low

Risk Low Moderate

Investment Options Less More

Network High penetration Low but improving

Liquidity At a cost Better

Quality of Assets Not transparent Transparent

Interest calculation Minimum balance between 10th & 30th. of every month

Everyday

Guarantee Maximum Rs.1 lakh on deposits None

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COMPANY INFORMATION

1. HISTORY

NJ IndiaInvest Pvt. Ltd. is one of the leading advisors and distributors of financial products and services in India. Established in year 1994, NJ has over a decade of rich exposure in financial investments space and portfolio advisory services. From a humble beginning, NJ over the years has evolved out to be a professionally managed, quality conscious and customer focussed financial / investment advisory & distribution firm.

NJ prides in being a professionally managed, quality focused and customer centric organisation. The strength of NJ lies in the strong domain knowledge in investment consultancy and the delivery of sustainable value to clients with support from cutting-edge technology platform, developed in-house by NJ.

At NJ we believe in …

having single window, multiple solutions that are integrated for simplicity and sapience making innovations, accessions, value-additions, a constant process providing customers with solutions for tomorrow which will keep them above the curve,

today

NJ has over INR 30 billion* of mutual fund assets under advice with a wide presence in over 60 locations* in 15 states* in India. The numbers are reflections of the trust, commitment and value that NJ shares with its clients.

NJ Wealth Advisors, a division of NJ, focuses on providing financial planning and portfolio advisory services to premium clients of high net-worth. At NJ Wealth Advisors, we have developed processes that focus on providing the best in terms of the advice and the ongoing management of your portfolio and financial plans.

At NJ, our experience, knowledge and understanding enables us to provide you with the expected value, in an enhanced way. As a leading player in the industry, we continue to successfully meet the expectations of our clients, through meaningful and comprehensive solutions offered by NJ Wealth Advisors

2.VISION & MISSION OF NJ India invest

Vision

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To be the leader in our field of business through,

Total Customer Satisfaction Commitment to Excellence Determination to Succeed with strict adherence to compliance Successful Wealth Creation of our Customers

Mission

Ensure creation of the desired value for our customers, employees and associates, through constant improvement, innovation and commitment to service & quality. To provide solutions which meet expectations and maintain high professional & ethical standards along with the adherence to the service commitments

3.PHILOSOPHY

At NJ our Service and Investing philosophy inspire and shape the thoughts, beliefs, attitude, actions and decisions of our employees. If NJ would resemble a body, our philosophy would be our spirit which drives our body. 

Service Philosophy:                              Our primary measure of success is customer satisfaction …

We are committed to provide our customers with continuous, long-term improvements and value-additions to meet the needs in an exceptional way. In our efforts to consistently deliver the best service possible to our customers, all employees of NJ will make every effort to:

think of the customer first, take responsibility, and make prompt service to the customer a priority

deliver upon the commitments & promises made on time anticipate, visualize, understand, meet, exceed our customer’s needs bring energy, passion & excellence in everything we do be honest and ethical, in action & attitude, and keep the customer’s interest supreme strengthen customer relationships by providing service in a thoughtful & proactive

manner and meet the expectations, effectively  

Investing Philosophy:                  We aim to provide Need-based solutions for long-term wealth creation  

We aim to provide all customers of NJ, directly or indirectly, with true, unbiased, need-based solutions and advice that best meets their stated & un-stated needs. In our efforts to provide quality financial & investment advice, we believe that

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Clients want need-based solutions, which fits them Long-term wealth creation is simple and straight Asset-Allocation is the ideal & the best way for long-term wealth creation Educating and disclosing all the important facets which the customer needs to be aware

of, is important  The solutions must be unbiased, feasible, practical, executable, measurable and flexible Constant monitoring and proper after-sales service is critical to complete the on-going

process

At NJ our aim is to earn the trust and respect of the employees, customers, partners, regulators, industry members and the community at large by following our service and investing philosophy with commitment and without exceptions.

4.MANAGEMENT

The management at NJ brings together a team of people with wide experience and knowledge in the financial services domain. The management provides direction and guidance to the whole organisation. The management has strong visions for NJ as a globally respected company providing comprehensive services in financial sector.

The ‘Customer First’ philosophy in deeply ingrained in the management at NJ. The aim of the management is to bring the best to the customers in terms of

Range of products and services offered Quality Customer Service

All the key members of the organisation put in great focus on the processes & systems under the diverse functions of business. The management also focuses on utilizing technology as the key enabler for all the activities and to leverage the technology for enhancing overall customer experience.

The key members of the management are:

Mr. Neeraj Choksi                          Jt. Managing Director Mr. Jignesh Desai                          Jt. Managing Director

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Sales Team:Mr. Misbah Baxamusa                       National HeadMr. Naveen Rathod                         V.P.

Executive Team:Mr. Shirish Patel                            Information TechnologyMr. Vinayak Rajput                        Finance & OperationsMr. Abhishek Dubey                     Marketing & DevelopmentMr. Viral Shah                                ResearchMr. Dhaval Desai                           Human Resources

5.SERVICE STANDARDS

Service in words, service in action

Service is the key to unlocking customer satisfaction, which again is key for sustainability of any business. At NJ we understand this very well. NJ has set strict processes in place to deliver quality services to customers. At NJ strict quality service standards are set and a well-defined process is established and followed religiously by our quality customer service teams. Performance is evaluated on a frequent basis and glitches are ironed out.

But quality service also involves quality people in addition to processes. NJ gives significant focus to the proper training and development of the people involved in the service delivery chain.

Further we,

Have well-defined "Privacy Policy" to keep clients’ information confidential & internal audits done on the same at regular intervals

Receive various statistics which are analyzed on an ongoing basis to improve the service standards

We are committed to improve and enhance our services and undertake new service initiatives. Such and other services differentiate us with other service providers in the industry.

Our Service Commitments …

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The service commitments are to guide the actions of the people at NJ. Clearly stated, customers can freely communicate any such actions/events wherein they feel that any of the following commitments have been breached / compromised. At NJ we desire to honour our commitments at all points of time and to all our customers without any bias.

To provide customer-focussed need-based valued services To provide reliable, accurate and timely information To maintain all records in privacy To optimize services/benefits at least justifiable cost To develop and grow the customers’ business To provide constructive after sales service To honour our service commitments

6.PRODUCTS

Life Vista

Life is counted not in years, but in moments. Moments of truth, joy, achievement and satisfaction. Of peace, tranquility, and freedom. At NJ, we bring such moments to life.

Connecting Goals

Life Vista is for individuals who are looking for goal oriented planning. The client would typically have a family, with multiple goals directed at meeting the obligations/goals in life. Meeting obligations like education and marriage of children, meeting basic needs like purchase of property, or business assets, would ideally be on agenda for such clients. Retirement planning would also be an important goal in life along with securing the future for those dependent.

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Process of Connecting Goals

With Life Vista we take the onus to help you achieve your goals in life. Our team would undertake a detailed financial planning exercise for you. An ideal personalised, financial plan would then be recommended after detailed study. The team would then constantly monitor the progress of your plan. Any changes in the environment that may happen during the interim period would be incorporated into your plan. At Life Vista our objective is to connect you with your goals and your dreams with reality.

How we can help you

We will do a detailed study of your goals and objectives in life and would help you by devising a comprehensive plan to help you achieve them. We would also regularly monitor your plans to make sure that you are always on track to achieve your goals.

Asset Vista

Wealth is not an end. Neither is it a beginning. Wealth is a process, a journey.A journey of power, achievement and responsibility .

At NJ we ensure that this journey continues and grows.

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Creating Wealth

Asset Vista is ideal for individuals or corporates looking for portfolio management services. Typically, the client would have sizeable investments made into multiple assets and/or products. The need for Asset Vista may arise due to time constraints, the size of the investments, or the need for professional advice. The objective may be to have effective management of portfolio aimed at capital creation with capital protection at the backdrop.

Process of Wealth Creation

Asset Vista sees your portfolio as a reflection of your profile aimed to fulfill the identified objectives. Asset Vista would include a detailed risk assessment and recommendation of an ideal asset allocation for you. Post asset allocation, a portfolio would be prepared and dynamically managed on an ongoing basis. Asset Vista would ensure that your portfolio is logical, strategic, and in tune with the changing environment and always on track to achieve the defined objectives.

How we can help you

We will seek to manage and monitor your portfolio as per your objectives and your risk profile. We would manage your portfolio the Asset Allocation way which is the most effective & ideal way to manage investments. You would also have access to consolidated portfolio reports that enable you to see all your investments into multiple avenues at a single place.

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7.SERVICES PROVIDED TO CLIENT

As NJ Wealth Advisor’s Global Private Client, you get comprehensive set of services that ensure you stay informed, insightful, in command, of your investments at all times.

Comprehensive Financial Planning

We all have many responsibilities and goals in our lives. We have dreams and aspirations for a better future. But quite often we are not sure as to how we will fulfill these goals and

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aspirations. Life changes over time. We may never be sure what today holds for us tomorrow. What if something goes wrong? How do we make sure that we get what we wish?

A comprehensive Financial Plan is what you need. At NJ Wealth Advisors we offer you with Comprehensive Financial Planning solutions which would involve …

A detailed study of your goals Preparation of a comprehensive Financial Plan Monitoring of the Financial Plan on an on-going basis

At NJ Wealth Advisors we offer you with comprehensive Financial Planning Services under the product – Life Vista.

Quality Portfolio Advisory

Making money is easy. Managing money is difficult. And managing money in today’s complex financial markets with multiple products on an ongoing basis becomes even more difficult.

As investors we often may feel the lack of time and energy to undertake monitoring and managing of our investments in multiple avenues. This requires both dedicated efforts and skills in portfolio management.

At NJ Wealth Advisors we realise the need for quality, unbiased portfolio advisory services. At NJ we would aim to manage your portfolio with a superior, time tested and much effective way of Asset Allocation keeping in mind your risk profile.  

At NJ Wealth Advisors we offer you with quality Portfolio Advisory Services under the product – Asset Vista.

Consolidated Reporting

Quality online Wealth Account:

As a premium client you would have access to one of the best online investment accounts that offer comprehensive reports, many of which are unique in nature and give valuable insights on our investments

Our online Wealth Account covers almost all the investment avenues that you may have:

Mutual Funds – All AMCs, All Schemes Direct Equity

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Life Insurance Physical Assets – Gold and Property Private Equity – Business Debt Products

o Bank Deposits and Company Deposits o RBI / Infrastructure Bonds o Postal Savings – KVP, MIS, NSC o Debentures o Small Savings – PPF, NSS

  You would have access to Consolidated Net Asset Reports which would give you a single view of all your investments into different avenues as given above.

Further, within each of the Asset class we have many more reports and utilities. Some of the reports covered are …

Consolidated:Consolidated Asset Allocation, Consolidated Net Asset, Interest Income, Profit & Loss

Mutual Funds:              Valuation, Transaction, Profit & Loss, Performance, Portfolio reports like - AMC / Sector / Equity / Credit /    Debt Exposure, Weighted Average Maturity, Dividend history, etc

Direct Equity:Demat accounts, Transaction, Valuation, Profit & Loss

Life Insurance:Policy Report, Premium Reminder, Cash Flow

Debt:                            Transaction, Interest Income, Maturity reports for different Asset

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8. 360° – ADVISORY PLATFORM

NJ believes in “360° – Advisory Platform” philosophy …

With this philosophy, we try to offer all possible products, services and support which an Advisor would need in his business.

The support functions are generally in the following areas …

Business Planning and Strategy Training and Development – Self and of employees Products and Service Offerings Business Branding Marketing Sales and Development Technology Advisors Resources - Tools, Calculators, etc.. Research Communications

With this comprehensive supporting platform, the NJ Fundz Partners stays ahead of the curve in each respect compared to other Advisors/competitors in the market.

Needless to say, the complete NJ Fundz offering is hard to resis.

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ORGANIZATION STRUCTURE

Managing Director

Vice President

Associate Vice President

Branch Manager Branch Manager Branch Manager

RM RM RM RM RM RM (Direct) (Indirect) (Direct) (Indirect) (Direct) (Indirect)

RE RE RE RE RE RE

CRO CRO CRO

RM: - Relationship ManagerRE: - Relationship ExecutiveCRO: - Customer Relationship Officer

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EMPLOYEES PROFILE:

As per information regarding the employees working in NJ INDIA INVEST, there are mainly

ELEVAN employees for there administrative work. The Name, Designation and Educational

Qualification of the employees are as under:-

SO.

NO.

EMPLOYEE NAME DESIGNETION EDUCATION

QUILIFICATION

1 Mr. NIRAJ CHOKSI CHAIRMAN M.B.A

2 Mr. JIGNESH DESAI CHAIRMAN ENGINEERING

3 Mr. MISBAH BAXAMUSA MD M.B.A

4 Mr. KULBHUSHAN

NANDWANI

AVP M.B.A

5 Mr. DHAVAL DESAI HR MANAGER M.B.A

6 Mr. ABHISHEK DUBEY MARKETING MANAGER M.B.A

7 Mr. VIRAL SHAH RESEARCH ANALYST M.B.A

8 Mr. SARFARAZ PATEL RM M.B.A

9 Mr. PARITOSH DESAI RE M.B.A

10 Mr. MANOJ PATEL RE M.B.A

11 Mr. CHIRAG DESAI RE M.B.A

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ADMINISTRATION OFFICE:

Mr. Misbah Baxamusa / Mr. Kulbhusan Nandwani 914-917, 9th Floor, Vishwa Karma Arcade, Majura Gate. Surat-395002. Tel +91 -261-3095213, 3095214 Fax: +91-261-2435775 Mobile: +98241 14952/+98244 77845 Email: misbah@njindiainvest.com / kulbhushan@njindiainvest.com

TECHNICAL SUPPORT:

Rajeev Topiwala / Shirish Patel

11/1236, Nanavat Main Road Surat-395003.

Tel +91-261-2429284/2425995

Fax: +91-261-2435775

Email: rajeev@njfundz.com / shirish@njindiainvest.com

SURAT:

Mr. Kulbhusan Nandwani / Mr. Sarfaraz Patel

714-717, 7th Floor, Vishwa Karma Arcade, Majura Gate.

Surat-395002.

Tel +91 -261-3095213, 3095214, 3965001

Fax: +91-261-2453014

Mobile: +9374543688 / +9327916750

Email: kulbhushan@njindiainvest.com / sarfaraz@njindiainvest.com

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DEPARTMENTATIONGROUP COMPANY

NJ INDIAINVEST is a company, which is involved in this business from past 13 years as a

client focused need based investment advisory firm. It has developed it’s own IT Industry known as Finlogic India Pvt. Ltd. i.e., technology to support for client as well as its employees in their daily routine works. There is a very qualified staff for IT who has prepared a web site for the organization known as www.njindiainvest.com which provides a valuable support to clients as well as to the employees in trading. All the valuable information, are available on above mentioned web site.

ABOUT FINLOGIC PVT.LTD:

Finlogic Technologies India Pvt. Ltd (previously Finlogic India) was started in 2000 with a view to develop software applications to support the growing (financial services) distribution business. The company posse’s strong domain knowledge in the investment distribution space, as the company was promoted by NJ India Invest Pvt. Ltd, a leading investment distribution company. The company has successfully developed & implemented a powerful support system for the mutual fund distribution business at NJ India Invest Pvt.Ltd with a provision for integrating the same with other investment products as well as the financial accounting system

The company also possesses contents of the Indian mutual fund industry viz. NAV, Dividends, Portfolios, AMC information, Scheme Information, corpus of all the open ended mutual fund schemes. The company provides the data of the same in different formats the objective of the company is to develop sophisticated technologies across various platforms to service e the investment distribution companies & investment management companies. Also it plans to supply

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the distributors & manufacturing companies with relevant data & content for the mutual fund industry & other relevant economic data. The company has competence on various technology platforms viz. JAVA, SQL, Server, Oracle, VB, and may others, also it has a strong team for designing having competence on Adobe Photoshop, dream weaverFlash etc.

TECHNOLOGYTechnology is the biggest differentiator

NJ pots a lot of efforts and resources are put in to build a technological edge to give you the best possible services to you so that you give the same to your clients.

Technology has been and is our key strength. What we offer on the technological front is unique and comprehensive. Our focus can be gauged from the fact that we have a separate sister concern started for the sole purpose of providing the best support to NJ in terms of technology. High infrastructure spending is done to improve & strengthen our deliverables on this technological front. Finlogic Technologies (India) Pvt. Ltd. does all the development work in-house on a continuous basis through its team of talented professionals. All the tools, services, products, etc offered by NJ has been developed in-house according to what we feel

In today’s world much is dictated by two important words – Information and Technology. NJ realizes this more than anyone else. And that’s way we make constant efforts to keep you ahead of the curve and ensure that you and your client receive quality, accurate and timely information.

But technology by itself cannot make a difference. Only when technology is combined with strong domain knowledge and understanding of customer needs, can it truly help make a significant difference. And this is what NJ has achieved and aims to continue doing so.

Your Total Technology Solution

Website creation and Management On-line Automatic Investment Accounts to all clients Centralized Online Automatic Advisor Account (Partners Desk) for Management, MIS,

Portfolio Access, etc Marketing, Sales and other support through application of technology

There exists a strong difference in quality, scope and type of reports offered by NJ against other distributors. NJ, with very strong domain knowledge – especially in mutual funds, and with investment-management perspective offers reports that are superior to other advisors and brokers and are even superior compared to what many good banks offer.

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Further, the Partners Desk service offered by NJ is a pioneering effort in the industry. The kind of tools and reports offered on the Desk is unique, more useful and superior to those offered by other distributors.

Data Management at NJ

NJ has made arrangements to receive the following …

Details of transaction of any nature in Mutual Funds by any client, through our Associates or us, on a Daily basis

NAV, Dividend, and other details of all the Mutual Fund schemes on a Daily basis

Monthly Portfolio and other important information of all the Mutual Fund schemes

All relevant details of Direct Equities like – Prices, Dividends, Bonus, Market Capitalization’s, etc on a Daily basis

All relevant market related information in addition to economic, event-specific, key economic variables, etc on a Daily basis

at NJ and the same in used in providing you and your clients with up-to-date information and reports.

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DIVISION OF NJ IndiaInvest:-

NJ Fundz network a division of NJ INDIAINVEST is solely and wholly dedicated t investment advisors. NJ Fundz Network offers a complete business platform to investment advisors to service their customers effectively to satisfy their investment needs. The Network offers a mutual fund super market (over 1000 Mutual Fund Schemes), Fixed Deposits of quality companies, RBI Bonds and initial public offering of Bonds, Debentures and shares to their network Partners.

Education and training are an integral part of the network. The partners are benefited from a scientific, meaningful ad comprehensive training program from industry stalwarts to enhance their intellectual and selling skills.

Technology has been a discriminating strength of the network from the competitions. Its offers technology platform to their partners to give their customers their portfolio information online, the bouquet of repots and information offer on clients portfolio are unique an exclusive. In nutshell NJ Fundz Network shares the success of growing the investment advisory business.

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NJ Fundz Network has opportunities and solutions for you!

The only place must for every independent financial advisor to be in.

NJ Fundz Network s a dedicated platform for independent financial advisors providing them support and services. NJ Fundz Network offers a very unique comprehensive business platform to the independent Financial Advisors, which would help them run and grow their business successfully.

At NJ we believe in ‘Empowering the Independent Financial Advisors’ with weapons that would ensure success and growth.

We would help you in the following ways …

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If you are a ‘Fresher’ …

We would provide you with complete Training and educational material to appear and clear the AMFI Mutual Funds Advisors Module, which is a prerequisite for advising and distribution of Mutual Fundz. On successful completion on the same you become a Certified Mutual Fund Advisor.

If you are already an Advisor …

NJ would offer you with all the products, services and support that you may need to become a truly sought after professional advisors. At the very basic level, we would help you with the following…

1) Enrich your product offerings

Enriching your product offering is a very important step for advisors in today’s business scenario where people are looking for single window integrated solutions.

We would help you add Mutual Funds in your product basket in big way. NJ offers mutual funds of all the AMCs and all the schemes available in the market. In addition you will also have Infrastructure Bonds, Company or Bank Fixed Deposits, etc in your basket

2) Offer Technological Solutions

Leveraging technology to the maximum possible potential to offer desired value to customers in a simple, easy way would help create a positive environment for your business.

NJ would provide you with all the technological support and services that you would need in your business. In short you would get the following basic services:

You can get your own website with your own brand and quality, dynamic contents

Your clients would get their own automatic, online investment accounts with login facility from your website

You would get a Partner’s Desk from where you can gain access to the portfolio and other reports of your clients + MIS reports on your business + Various other Reports important from administration and business perspective. You would not need to maintain back-office records at your end

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In addition, you would also have various other support & services that make use of technology

3) Provide Business Planning, Development and Sales Support

A business to sustain needs quality planning, strategizing, and direction along with proper execution to achieve the objectives. The costs of gap in the quality, focus and direction would be very high in long term. A quality, experienced partner like NJ make things a lot easier for you.

You would have dedicated Relationship Executives who would guide you and/or help you in managing your business on a day-to-day basis. They would provide you with important sales and marketing support for the development of your business. Senior Executives and Relationship Managers would help you in planning, strategizing your business.

In case you would like to know how we can transform your business and take your business to the next level, please feel free to contact us. You can have a Relationship Executive to meet you at your convenience to help you know more. good product/service offering, targeted at meeting the needs of the clients, lies at the center of any business. With customers today expecting single window solutions and services, successful and easy integration of products is the need of the hour.

Any Advisor should wake up to this and other crucial changes taking place and try to adapt himself to this change to avoid being out-dated and out-serviced.

At NJ we try to foresee such changes and develop solutions that are new, needed and well appreciated in the industry. The services offered on the NJ Fundz Network are unique in the industry. The services are designed to equip the independent advisors with all the support and tools needed for a successful business. NJ provides services and support where an advisor may feel ill equipped and make them their strengths. The Partner on the NJ Fundz Network instantly beats competition by being on the Network itself. It’s a new paradigm.

Above this, we have a comprehensive offering for Independent Financial Advisors who wish to transform and grow their business.

WHY TO JOIN NJ?

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NJ INDIAINVEST is one of he fastest growing financial services form in India with over a decade of investment advisory experience. NJ Fundz network a division of NJ INDIAINVEST is solely dedicated to investment advisors, with about 1600 partners and 4400 advisors presently working with us. NJ Fundz network offers a complete business platform to Independent Financial Advisors to help grow their business and offer quality services to their customer

SERVIECES OFFERED BY NJ FUNDZ NETWOK

The services offered by NJ Fundz Network to there partner are as follows;

Your own website with your “Brand”

Effective marketing support.

Research support.

Training Program.

Business strategy planning.

Complete back office support.

Financial planning tools.

Attractive earnings model.

Unique technology platform.

MIS reports

Information about funds.

MARKETING

DEFINATION:

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“Marketing is a societal process by which individuals and group obtains what they need and want through creating offering and freely exchanging products and services of value with others”. There are six competing concepts under which organization can choose to conduct their business.

CHANNELS OF DISTRIBUTION

Channel of distribution may be defined as “a pathway composed of intermediaries, also called middle man, who

performs such function as ensure smooth and sequential flow of goods and services from the producer to the consuming ends in order to achieve marketing objective of a company.

Distribution channel means the set of marketing institution participating in the marketing activities related to the movement or flow of goods and services from the primary producer to the ultimate consumers.

N J INDIAINVEST sales the concept that is selling services through various channel which is as under.

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To Guide &Help the Advisor

OffersThe BestServices

DevelopsA Loyal

Clientele

Become A WiseAdvisor

Face CompetitionConfidently

ExpandsHis

Business

BecomeSuccessful

In Life

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1) Sales through corporate office.2) Direct sales3) Indirect sales

N J INDIAINVEST providing services to the investors as shown in the above chart. They are providing services directly to the investors from its corporate office, which is located at surat.

They are having direct branches in Gujarat at surat. Ahmedabad and Baroda. And the third one is indirect in which the employees as well as the N J partners are providing services to the investors. Among these entire pathways they are having highest business through indirect channel.

SALES PROMOTION

Sales promotion is a vital ingredient of the promotion mix. It is a sales effort undertaken by a business unit to boost sales. It is a vital link between personnel selling and advertising which backs up the pre selling and stimulates the impulse buying.

For sales N J INDIAINVEST has a particular sales process. All the different branches follow this process. This sales process is as under.

Sales promotion consist of adverse collection of incentive tools mostly mostly short term designed to stimulate quicker greater purchase of particular services by investors. The purpose of promotion is to attract the new investors or in cases the sales. Promotion activity has specified purpose. Which are as under?

1) To attract new investors2) To make investors aware about introduction of new schemes.3) To encourage present investors to invest more.

Now a day in this completive area sales promotion activity becomes the most powerful organ of any organization to promote the sales. For the purpose of sales promotion N J INDIAINVEST arrange seminars such as.

MOTIVATION:

NJ IndiaInvest follows an unique method for motivating the employees of the firm. This is scheme method, which changes every year. The scheme named “RUNN” was introduced last year. In this scheme the employees are given points for there work. In this scheme at 8000 RUNNS there was a free tour to “SWITZERLAND” 8 nights and 9 days for Couple. So the employees who reach up to this target get a chance to go to SWITZERLAND.

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But there were many employees who were very near to this target. For those employees who were having more than 5000 points but less than 8000 points were offered a Couple Tour to Singapore & Malaysia for 6 nights and 7 days Laptop.

For this year they have introduced a new scheme namely “RUN”. The detail of this scheme is as follows.

MARKETING SUPPORT

The Marketing Team will help you give the relevant support needed for effective sales, creating brand and for the development of your business.

The Marketing / Sales team will help you with the following marketing supper

Branded Flyers and One-pagers for products, new launches/NFOs, services, etc

Business Organizers, Performance Review Hand-books, etc

Communication support – NJ Knowledge Edge and NJ I-Gurukul series Letters, Direct Mail pieces

Email Communications for products, new launches/NFOs, services, etc

Calculators and Tools for effective communication to clients Support in form of NJ websites, web services and product development Branded Presentations

Effective marketing support would help you complete your offering and package it properly. Such support would also add to your effectiveness in sales activities.

NJ IndiaInvest and NJ Fundz Network enjoy a strong brand in the industry. An NJ Fundz Network Partner leverages upon this brand in the market to gain credibility and acceptance. NJ aims to support the NJ Fundz Partners in marketing indirectly by

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contributing through written articles, advertisements in various magazines, newspapers, etc.

NJ RESEARCH SUPPORT

Original, Unbiased Analysis

NJ has its own Research team. The research team analyses and studies the markets, investment products, and other important things that are important from advisors point of view. The Research team also undertakes study and analysis on the mutual fund houses and schemes. Recommendations from the Research team truly reflect the unbiased nature of the study it undertakes.

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Objective of the research …

Keep all associates, employees and customers well informed so that they are able to make their own decisions.

Provide guidance, suggestions, recommendations, etc as per needs and study undertaken

To provide tools which would help associates/employees make better decisions for their clients and render quality services

The Research team follows a set process and methodology. The fund houses and their schemes are evaluated on multiple parameters like …

AMC Due Diligence

Service Standards Parentage & Pedigree of management

Soundness of the Trustees

Institutionalized or Personalized?

Information sharing & Compliance

Investment Philosophy – Clarity/flavor driven?

Adherence to philosophy & process

Past historical performance and variation in performance

We believe that ideally good schemes should form a part of a client’s portfolio. The research team regularly communicates such analysis/results to the employees and associates.

 

I - GURUKUL

I-Gurukul is a program run by NJ Fundz Network to educate and train Financial Advisors. The I-Gurukul program is run throughout the year at all the Branches of NJ.

The I-Gurukul Objectives :

To impart all the important knowledge and skills to Financial Advisors necessary to be successful – both as a professional and a business person

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To raise the quality and standard of such Advisors and bring them on par with the best Advisors in the industry

To ultimately benefit the investors with quality services, offerings and recommendations

The Team:

The Team at I-Gurukul combines rich industry experience along with in-depth knowledge of the financial advisory field and the products/markets. The team has been carefully selected keeping in mind the objective of the programs, from among the best in the company as well as from the industry.

topics covered, dates of Training, fees, speakers, etc

FINANCIAL TOOLS & PRESENTATIONS

NJ offers many useful financial tools and calculators to NJ Fundz Partners. Such tools are very useful in creating financial plans for clients, preparation of cash flows, etc.

NJ Tools & Calculators

Monthly Dynamic Debt Analysers

Dynamic SIP Calculator

Dynamic STP Calculator

Delay Cost Calculator

Insurance Planning/Comparison Tool

NJ Financial Planning Tool

In addition to Financial Tools and Calculators, each NJ Fundz Partner is also presented with NJ Sales Kit – a great compilation of selected useful presentations, which would help enrich the knowledge of the Advisors. The presentations can also be used while communicating with their clients.

Further the team at NJ also provides customized presentations to Partners to be presented to their clients, either for one-to-one basis or for group presentations.

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The Partners also receive presentations of new products/launches/NFOs by the mutual fund houses.

COMMUNICATIONS

Ongoing communications play a very important part in keeping in touch with you clients, having a goodwill and loyalty or simply as part of your service offering. Experience has shown that timely, continuous and quality communications to even unlikely clients has helped in converting them to your loyal clients.

NJ Fundz truly realize the importance of such communications. The Research and the Marketing teams at NJ offer many communications of use to you.

Under NJ Knowledge Edge series…

Objective : To keep everyone updated and well informed

Daily Market Update – A roundup of market, forex, economic news

Daily Mutual Fund Tracker – A daily Debt performance review of MF schemes

Weekly Performance Report – A weekly review of all the MF schemes as per sub-types

Monthly Fund Fact Sheet – A monthly publication

Updates, etc of important changes, events

Under NJ I-Gurukul series…

Objective: To make the difference between information & wisdom

Articles on Investments/Economy/Finance, etc

Training to employees and associates and also to investors

Regular market analysis, stories

BUSINESS PLANNING

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Segmentation will be used to determine the sales Pitch/product to be sold

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NJ has over a decade of experience in the financial advisory business. During this phase the people at NJ have gained very important insights and experience in successfully running and developing the business.

Such a deep understanding and knowledge is also actively tapped, all levels, in developing the business of the NJ Fundz Partners.

NJ Fundz Partners get active business planning and strategizing support from the team at NJ. The plans are customized at each NJ Fundz Partner level based on his own business environment. The dedicated Relationship Executives and Managers play a crucial role in the process. Each NJ Fundz Partner thus would ideally have his own business planning and strategy worked out. The whole thing is done keeping ‘You First’ principle in mind.

Proper planning and strategizing along with effective executive support is the most potent weapon to help you grow and develop your business. At NJ, we stay with you throughout the process and beyond on an ongoing basis.

This has truly transformed the business of our Partners with respect to the quality, scope of services and the scale of business.

 

SALES PROCESS

Suspect list Suspect to be listed in the suspect list register. This register is maintained by source through which the referral was received. This is summery suspect list that will help you to monitor the source used to generate your prospective clients.

Segment suspect ListUsing filtering Mechanism

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Next call 1

Next Premium

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Process list This is the list which you believe is worth calling on

This is the activity done to establish an appointment

First call

Interested

Not interested

Next call Appointment (Opener, Fact find,

Close etc, sales process)

N I I Buys Does not buy

NC 2 CloseFU 2 Date

NC 3 Client register FU 2 Date

Extensive Details of theClient as Listed in Sources

QUALITY POLICY OF NJ INIAINVEST

NJ aims at providing high quality on investment front through systematic and professional approach backed by total management commitment and team work. To achieve customer satisfaction a cost that represents value. We as a whole are committed to practice a policy “RIGHT AT THE FIRST TIME “and then continue improvement in our action and dealing.

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RESEARCH METHODOLOGY:

Research methodology gives student the necessary training in gathering materials and arranging

them participation in the field work when required. And techniques appropriate for the collection

of data to a particular problem is the use of statistics perameters and controlled experimentation

and in recording evidence, sorting it out and interpreting it thereafter.

NEED OF THE STUDY:

The driving force of Mutual Funds is the ‘safety of the principal’ guaranteed, plus the added

advantage of capital appreciation together with the income earned in the form of interest or

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dividend. The various schemes of Mutual Funds provide the investor with a wide range of

investment options according to his risk bearing capacities and interest besides; they also give

handy return to the investor. Mutual Funds offers an investor to invest even a small amount of

money, each Mutual Fund has a defined investment objective and strategy. Mutual Funds

schemes are managed by respective asset managed companies sponsored by financial

institutions, banks, private companies or international firms. A Mutual Fund is the ideal

investment vehicle for today’s complex and modern financial scenario.

The study is basically made to analyze the Balanced Mutual Fund various schemes of different

Asset Management Companies to highlight the diversity of investment that Mutual Fund offer.

Thus, through the study one would understand how a common man could fruitfully convert a

pittance into great penny by wisely investing into the right scheme according to his risk taking

abilities.

SCOPE:

The study here has been limited to analyse the Balanced Mutual Fund of different Asset

Management Companies namely HDFC PRUDENCE FUND GROETH, ICICIC

PRUDENTIAL CHILD CARE PLAN GIFT, BARODA PIONEER BALANCE GROWTH

FUND, UTI BALANCED FUND GROWTH, TATA BALANCED FUND each scheme is

analysed according to its performance against the other, based on factors like Sharpe’s Ratio,

Treynor’s Ratio, (Beta) Co-efficient, Returns.

OBJECTIVES:

1. To project Mutual Fund as the ‘productive avenue’ for investing activities.

2. To show the wide range of investment options available in Mutual Funds by explaining

its various schemes.

3. To compare the schemes based on Sharpe’s ratio, Treynor’s ratio, Co-efficient,

Returns and show which scheme is best for the investor based on his risk profile.

4. To help an investor make a right choice of investment, while considering the inherent

risk factors.

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To understand the recent trends in Mutual Funds world.

The comparison between these schemes is made based on the following factors

A) Sharpe’s Ratio

B) Treynor’s Ratio

C) (Beta) co-efficient.

D) Returns

A) The Sharpe’s Measure :-

In this model, performance of a fund is evaluated on the basis of Sharpe Ratio, which is a ratio

of returns generated by the fund over and above risk free rate of return and the total risk

associated with it.

According to Sharpe, it is the total risk of the fund that the investors are concerned about. So,

the model evaluates funds on the basis of reward per unit of total risk. Symbolically, it can be

written as:

Sharpe Index (Si) = (Ri - Rf)/Si

Where,

Si is Standard Deviation of the fund.

While a high and positive Sharpe Ratio shows a superior risk-adjusted performance of a fund, a

low and negative Sharpe Ratio is an indication of unfavorable performance.

B) The Treynor Measure :-

Developed by Jack Treynor, this performance measure evaluates funds on the basis of

Treynor's Index.

This Index is a ratio of return generated by the fund over and above risk free rate of return

(generally taken to be the return on securities backed by the government, as there is no credit

risk associated), during a given period and systematic risk associated with it (beta).

Symbolically, it can be represented as:

Treynor's Index (Ti) = (Ri - Rf)/Bi.

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Where,

Ri represents return on fund,

Rf is risk free rate of return,

and Bi is beta of the fund.

All risk-averse investors would like to maximize this value. While a high and positive

Treynor's Index shows a superior risk-adjusted performance of a fund, a low and negative

Treynor's Index is an indication of unfavorable performance.

C) (Beta) Co-efficient:-

Systematic risk is measured in terms of Beta, which represents fluctuations in the NAV of the

fund vis-à-vis market. The more responsive the NAV of a Mutual Fund is to the changes in the

market; higher will be its beta. Beta is calculated by relating the returns on a Mutual Fund with

the returns in the market. While unsystematic risk can be diversified through investments in a

number of instruments, systematic risk cannot. By using the risk return relationship, we try to

assess the competitive strength of the Mutual Funds vis-à-vis one another in a better way.

(Beta) is calculated as N ( XY) – X Y

N (Y2) – (Y) 2

D) Returns:- Total Returns and Returns for the last one-year of different schemes are taken

for the comparison and analysis part.

HYPOTHESIS:

The Hypothesis of the study involves Comparison between:

1. HDFC PRUDENCE FUND GROETH,

2. ICICIC PRUDENTIAL CHILD CARE PLAN GIFT,

3. BARODA PIONEER BALANCE GROWTH FUND,

4. UTI BALANCED FUND GROWTH,

5. TATA BALANCED FUND

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RESEARCH PLAN:

The Methodology involves randomly selecting Open-Ended equity schemes of different fund

houses of the country. The data collected for this project is basically from two sources, they

are:-

1. Primary sources: The monthly fact sheets of different fund houses and research reports

from banks.

2. Secondary sources: Collection of data from Internet and Books.

SAMPLING PLAN:

Sampling Method.

In the context of this project the study the five top performance of balanced mutual fund companies selecting as randomly .

Sample Size: Total sample size is balanced mutual fund schemes with different

AMC(the return of five company taking as 1mnt,3mnt,6mnt, 1yr, and 3yrs).

DATA:

The study uses secondary data in the form of return on funds and collectively of a 5

schemes in total as well as own selected S&P NIFTY Benchmark returns to compare the same.

Introductory part of the study, which is the subjective understanding of the investment product,

the industry as well as various performance measurement parameters is also secondary data

obtained with the help of internet, various books on the same subject as well as research papers

on the relating to the concerned study.

COMPARISION

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Well, the inter scheme comparison, each one is compared which one another to see

whose performance has been highest in that particular sub group. In this way ranking will be

given to each and every fund scheme to rank the schemes. To measure and analyze the

investment performance of sampled mutual fund schemes which are all Balanced funds by the

way of nine ratios viz, Average returns, Total returns, Beta, , Standard deviation (Risk),

Sharpe’s ratio, Treynor’s ratio respectively.

PERFORMANCE MEASUREMENT

The performance of the mutual funds is done with the help of various ratios as mentioned before.

They are as under:-

CALCULATION OF ARTHMETIC MEAN:-

= X / N

CALCULATION OFTOTAL RETURNS (%)

(Closing NAV - Opening NAV) *100 Opening NAV

CALCULATION OF STANDARD DEVIATION (σ) :-

= √ (X-Xbar)2 / N

CALCULATION OF BETA CO-EFFICIENT:-

= N ( XY) – X Y

N (y2) – (y) 2

CALCULATION OF SHARPE’S RATIO:-

=Rp-Rf-/ σ

CALCULATION OF TREYNOR’S RATIO :-

= Rp-Rf/

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DATA ANALYSIS& INTERPRETATIONS:

Note: All the data used for analysis is taken

up to the period 31-MAY-2009.

BRIFE INTRODUCTION ABOUT BALANCED MUTUAL FUND:

Balanced schemes also referred to as Hybrid schemes, invest in a mix of equity and debt

instruments. It may be equity oriented or debt oriented or have a variable asset allocation.

In this schemes, the diversification of investment some part in equity or rest of in debt.

Here, this is the example of how to compare the mutual fund by using investment factors.

BARODA PIONEER BALANCE FUND.

YEAR Rp Rm Rf

(Rp-Rp bar

(Rm-Rm bar) X2 XY Y2 NAV

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X Y  

LAST 1 MONTH 5.51 4.37 6 -9.726

-20.194 94.59508 196.4068

407.7976 OPE- 10

LAST 3 MONTHS 23.27 33.32 6 8.034 8.756 64.54516 70.3457

76.66754 CLO- 23.95

LAST 6 MONTHS 40.06 60.99 6

24.824 36.426 616.231 904.239

1326.853

LAST 1 YR. 0.42 9.96 6

-14.81

6

-14.604

219.5139 216.3729213.276

8

LAST 3 YRS 7.34 14.236 6 -7.896

-108.64 62.34682 857.8214

11802.65

TOTAL 76.18 122.82 =0.42= -

98.256 =1057.232 2245.18613827.2

5

Where,

Rp: portfolio return of company.

Rm: market return of Benchmark S&P NIFTY

Rf: risk free rate of return 6% .

CALCULATION OF ARTHMETIC MEAN :-

= Rp / N

= 76.18/ 5

Rp-bar = 15.236

CALCULATION OF STANDARD DEVIATION (σ ) :-

variance= (X-Xbar) 2 / N-1

= 1057.22/4

σ =√264.305

=16.2574

CALCULATION OF BETA CO-EFFICIENT:-

= N ( XY) – X Y

N (y2) – (y) 2

Where. y2: Square Annual minus Average rates of return of market.

y: Annual minus Average rates of return of market.

= 5(2245.186) – (0,42)(-98.256)

5(13827.25) – (-98.256) 2

= 11225.93 + 41.2675

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69136.25-9654.2415

= 11267.1975

59482.003

= 0.1894

CALCULATION OF SHARPE’S RATIO:-

ARp: Average return portfolio return

= ARp-Rf / s

=15.236-6 /16.2574

= 0.568

CALCULATION OF TREYNOR’S RATIO :-

= ARp-Rf /

= 15.236-6/0.1894

= 48.76

=0.8173

CALCULATION OF TOTAL RETURNS (%)

(Closing NAV - Opening NAV) *100 Opening NAV

= (23.95-10) *100

10

=139.5

INTERPRETATION:

Rp bar saws the average return (15.236)of Baroda pioneer Balanced fund.

STANDARD DEVIATION (σ ) (16.2574):it implies that higher the standard deviation higher

the risk, so the risk of Baroda pioneer balanced fund has less risky because of it’ lower rate.

BETA:(0.18942) here the Beta ratio does not near the 1, so it is not the most valuable fund

because of it implies that unsystematic risk is more.

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SHARPE’S RATIO:-(0.568) A high and positive Sharpe Ratio shows a superior risk-adjusted

performance of a fund, otherwise unfavorable. Here, it denotes the average risk adjusted

performance of a fund.

TREYNOR’S RATIO: (48.76) Treynor measure implicitly assumes that the portfolio is well

diversified.

TOTAL RETURN:Total return is 139.5 which indicates higher than face value.

RANKING

. Each fund scheme will first be ranked individually on the basis of various ratios (that are

parameters as mentioned above) and then . Ranking for various parameters are as follows :-

Total Returns : As an absolute measure, the fund with the highest total returns is ranked 1 and

the one with least is ranked the lowest.

Average Returns : Same as Total Return calculations

Standard Deviation : Higher the standard deviation connotes higher risk and thus lower rank,

the one with the least risk has the 1st rank.

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BETA : Beta value near to 1 i.e. less than one is given highest rank and then the ones with value

above 1 are ranked lower.

Sharpe : A high and positive Sharpe Ratio shows a superior risk-adjusted performance of a fund,

and thus is ranked higher whereas, a low and negative Sharpe Ratio is an indication of

unfavorable performance and is ranked the least.

Treynor: Treynor measure reflects the excess return per unit of risk. As systematic risk is the

measure of risk , the Treynor measure implicitly assumes that the portfolio is well diversified.

OBSERVATIONS;

Observations are made from the data analysis.

The following observations are drawn from the analysis of schemes:

COMPANY HDFC PRUDENCE FUND

ICICI PRUDENTIAL CHILD CARE GIFT PLAN

BARODA PIONEER BALANCE FUND

UTI BALANCED FUND

TATA BALANCED FUND

MONTHLY RETURN

5.84 5.52 5.51 5.07 5.07

TOTAL RETURN

1300.4 280.7 139.5 504.2 509.8

AVERAGE RERURN

27.864 15.434 15.236 21.138 23.862

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SHARP’S RATIO

1.14 0.708 0.568 0.95 1.054

TERYNOR’S RATIO

94.69 56.62 48.76 73.52 90.90

CO-EFFICIENT BETA

0.23089 0.1666 0.18942 0.2059 0.1965

STD. DEVIATION

19.09 13.31 16.257 15.90 16.944

TABLE 1.

COMPANY HDFC PRUDENCE FUND

ICICI PRUDENTIAL CHILD CARE GIFT PLAN

BARODA PIONEER BALANCE FUND

UTI BALANCED FUND

TATA BALANCED FUND

MONTHLY RETURNS

5.84 5.52 5.51 5.07 5.07

RANK 1 2 3 4 5

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Above graph saws that, As an absolute measure, the fund with the highest monthly returns is ranked 1 and the one with least is ranked the lowest. This graph indicates that HDFC PRUDECE FUND has the highest monthly return, so it gives the 1 rank as return point of view and leas is ranked the lowest.

TABLE 2.

COMPANY HDFC PRUDENCE FUND

ICICI PRUDENTIAL CHILD CARE GIFT PLAN

BARODA PIONEER BALANCE FUND

UTI BALANCED FUND

TATA BALANCED FUND

TOTAL RETURN

1300.4 280.7 139.5 504.2 509.8

RANK 1 4 5 3 2

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HDFC PRUDEN

CE FUND

ICICI PRUDEN

TIAL C

HILD CARE G

IFT PLA

N

BARODA PIONEE

R BALANCE F

UND

UTI BALA

NCED FU

ND

TATA

BALANCED

FUND

0

400

800

1200

1300.4

280.7 139.5504.2 509.8

TOTAL RETURN

TOTAL RETURN

company name

TotalReturn

Above graph indicates that, Same as Monthly Return calculations. The total return of

HDFC PRUDENCE has the high total return (1300.4) which is mostly favorable for customers and given as 1st rank and lower rank to less total return.

TABLE 3.

COMPANY HDFC PRUDENCE FUND

ICICI PRUDENTIAL CHILD CARE GIFT PLAN

BARODA PIONEER BALANCE FUND

UTI BALANCED FUND

TATA BALANCED FUND

AVEARAGE RETURN

27.864 15.434 15.236 21.138 23.862

RANK 1 4 5 3 2

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Above graph saws the average return of companies which is lower than the average market return because of recession of market situation but here highly average return is HDFC PRUDECE FUND (27.864) has given 1st rank and 2nd rank TATA BALANCED FUND (23.862) and give rank same method.

TABLE 4:

COMPANY HDFC PRUDENCE FUND

ICICI PRUDENTIAL CHILD CARE GIFT PLAN

BARODA PIONEER BALANCE FUND

UTI BALANCED FUND

TATA BALANCED FUND

SHARP’S RATIO

1.14 0.708 0.568 0.95 1.054

RANK 5 2 1 3 4

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A high and positive Sharpe Ratio shows a superior risk-adjusted performance of a fund, and thus is ranked higher whereas, a low and negative Sharpe Ratio is an indication of unfavorable performance and is ranked the least. Above graph saws the Sharp ratio which means postulate a linear relationship between risk and return through they employ different measures of risk. Here lower sharp’s ratio indicates the lower risk and given 1st rank and more risky has lower than less risky sharp’ ratio. so BARODA PIONEER FUND (0568) has lower ratio thus, it has given 1st rank.

TABLE 5:

COMPANY HDFC PRUDENCE FUND

ICICI PRUDENTIAL CHILD CARE GIFT PLAN

BARODA PIONEER BALANCE FUND

UTI BALANCED FUND

TATA BALANCED FUND

TERYNOR’S RATIO

94.69 56.62 48.76 73.52 90.9

RANK 1 4 5 3

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The Treynor measure of portfolio performance relates the excess on a the portfolio beta. Hence , the Treynor measure reflects the excess return earned per unit of risk. As systematic risk is the measure of risk, the measure of risk, the Treynor measure that the portfolio is well diversified. Here, the higher ratio indicates that well diversified fund so, higher ratio gives good diversified fund. HDFC PRUDENCE FUNS has highest ratio (94.69) which saws the good investment fund for investors and, give 1st rank. Same kind of method, other companies has given rank.

TABLE: 6

COMPANY HDFC PRUDENCE FUND

ICICI PRUDENTIAL CHILD CARE GIFT PLAN

BARODA PIONEER BALANCE FUND

UTI BALANCED FUND

TATA BALANCED FUND

CO-EFFICINT BETA

0.23089 0.1666 0.18942 0.2059 0.1965

RANK 1 5 4 2 3

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Beta determines the volatility, or risk, of a fund in comparison to that of its index or benchmark.

A fund with a beta very close to 1 means the fund's performance closely matches the index or

benchmark--a beta greater than 1 indicates greater volatility than the overall market, and a beta

less than 1 indicates less volatility than the benchmark.

Beta value near to 1 i.e. less than one is given highest rank and then the ones with value above 1 are ranked lower. Here the HDFC PRUDECE FUND has beta ratio (0.23,089) near to 1 so performance of this fund is very closely to benchmark and, give 1st rank to it and not closely gives less rank. Here others have given the same way.

TABLE 7:

COMPANY HDFC PRUDENCE FUND

ICICI PRUDENTIAL CHILD CARE GIFT PLAN

BARODA PIONEER BALANCE FUND

UTI BALANCED FUND

TATA BALANCED FUND

TOTAL RETURN

19.09 13.32 16.257 15.9 16.944

RANK 5 1 3 2 4

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The fund with the lower standard deviation would be more optimal because it is maximizing the return received for the amount of risk acquired. Higher the standard deviation connotes higher risk and thus lower rank, the one with the least risk has the 1st rank. Above graph saws the Standard deviation among the companies. Here lower ratio of ICICI CHILD CARE FUND (13.31) means it has list risk.

FINDINGS & CONCLUSIONS:

OVERALL PERFORMANCE of the Blalanced funds has been good on a risk –return adjusted

basis. The volatility has been more than that of the index, but at the same time other parameters

are well served.

1. HDFC PRUDECE FUND has the highest monthly return, so it gives the 1 rank as return point of view and leas is ranked the lowest. Now we can see that return on the Balanced Fund is very good for less risk taken investors.

2. HDFC PRUDENCE has the high total return (1300.4) which is mostly favorable for customers and given as 1st rank and lower rank to less total return. Here average return is higher than the benchmark return.

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3. The average return of companies which is lower than the average market return because of recession of market situation.

4. A high and positive Sharpe Ratio shows a superior risk-adjusted performance of a fund, and thus is ranked higher whereas, a low and negative Sharpe Ratio is an indication of unfavorable performance and is ranked the least. Here lower sharp’s ratio indicates the lower risk and given 1st rank and more risky has lower than less risky sharp’ ratio. so BARODA PIONEER FUND (0568) has lower ratio thus, it has given 1st rank. Means balanced fund has lower risk than other funds.

5. As systematic risk is the measure of risk, the measure of risk, the Treynor measure that the portfolio is well diversified. Here, the higher ratio indicates that well diversified fund so, higher ratio gives good diversified fund. HDFC PRUDENCE FUNS has highest ratio (94.69) which saws the good investment fund for investors.

6. Beta value near to 1 i.e. less than one is given highest rank and then the ones with value above 1 are ranked lower. Here the HDFC PRUDECE FUND has beta ratio (0.23,089) near to 1 so performance of this fund is very closely to benchmark

7. The fund with the lower standard deviation would be more optimal because it is maximizing the return received for the amount of risk acquired. Higher the standard deviation connotes higher risk and thus lower rank, the one with the least risk has the 1st rank. Above graph saws the Standard deviation among the companies. Here lower ratio of ICICI CHILD CARE FUND (13.31) means it has list risk.

CONCUTIONS: The Balanced Fund include the power of equities (shares) and the stability of

debt market instruments (fixed return investments like bonds) and are most likely to take you to

your goal safely.

They are the best hope for those who want to benefit from the stock market but don't have the

stomach for volatility.

We believe all sorts of investors should have at least some portion of their investments in

balanced funds.

What makes balanced funds such a power investment tool is their inherent design, which allows

them to maintain an effective balance between debt and equity. Balanced funds have proved their

worth time and again and rewarded investors with superlative returns and stability.

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The returns may not be as flashy as diversified equity funds, but balanced funds are the ultimate

vehicle for long-term growth for conservative investors.

They will save you from bumpy rides and ensure a soft landing.

SUGGESTIONS:-

The Asset Management Company must design the portfolio in such a way, to increase the

returns.

The Asset Management Company must design the portfolio in such a way, to lessen the

risk that is common in the market.

The Asset Management Company must dedicate itself, because it motivates the investors

and potential investors to invest in Mutual Funds.

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The Asset Management Company must manage the Fund efficiently and with dedication to

earn the goodwill of the public.

The Asset Management Company must make the most advantageous use of print and

electronic media in order to motivate the investors and potential investors to invest in

Mutual Funds.

An average balanced fund maintains a 60:40 equity debt ratio. That means 60% of their total

investment is in equity and the balance in debt. But, in a booming market (like the current

bull run we are facing now), funds cross this 60% limit in the search of higher returns. And,

if the fund manager makes a few wrong investments, the fund's returns may go for a toss.

The debt market is not doing too well right now, so most funds have been making optimum

use of their equity component to earn returns. In the past year, most of the top performers in

this category have kept their debt allocation below 30%. So Fund Manager has to less

amount invest in equity market.

LIMITATIONS OF THE STUDY:

1. The study is limited only to the analysis of different schemes and its suitability to

different investors according to their risk-taking ability.

2. The study is based on secondary data available from monthly fact sheets, websites and

other books, as primary data was not accessible.

3. The study is limited by the detailed study of various schemes of Five Asset

Management Company.

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BIBLIOGRAPHY:

BOOKS:

1 “INVESTMENT MANAGEMETN” 12TH EDITION V.K BHALLA BY

SULTAN CANDE

2 “PORTFOLIO MANAGEMENT” V. K BHALLA

3 INVESTMENT ANALYSIS AND PORTFOLIO MANAGEMENT BY DR.

PRASANNA CHANDRA.THIRD EDITION.

4 FINANACIAL MANAGEMENT, NINTH EDITION I M PANDEY.

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JOURNALS:

The Fund Fact Sheet, NJ Indiainvest Pvt. Ltd.

The Fund Fact Sheet, others various AMC’S

NEWS PAPER :

ECONOMICS OF TIMES BISUNESS STANDARD

MEGAZIN : INDIA TODAY BISUNESS TODAY MF INSITE CAPITAL MARKETS MARKET OUTLOOK

WEB SITE:

www.njindiainvest.com www.njfundz.com www.about.com www.indiainfoline.com www.valueresearchonline.com www.amfiindia.com www.bseindis.com www. moneycontrol.com

OTHERS: NJ REFLETS NJ BROUCHERS BUDGET REFLETS VARIOUS RESEARCH REPORT

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