Report of Cp
-
Upload
vishal-shah -
Category
Documents
-
view
216 -
download
0
Transcript of Report of Cp
-
7/29/2019 Report of Cp
1/15
Concept of Mutual Fund:
A Mutual Fund is a trust that pools the saving of a number of investors who shares a common
financial goal. The money is thus collected is then invested in capital market instruments
such as shares, debentures and other securities. The income earned though these investments
and the capital appreciation realized are shared by its unit holders in proportion to the number
of units owned by them. Thus a mutual fund is the most suitable investment for the common
man as it offers an opportunity to invest in a diversified, professionally managed basket of
securities at a relatively low cost. The assets in a mutual fund's portfolio are managed by a
professional money manager(s) who decides which securities to buy and sell based on the
fund's investment objective, detailed in the fund's prospectus. When somebody invests in a
mutual fund, they are actually buying shares in the fund, which means that they own a small
percentage of the fund's entire portfolio. These shares are a fractional representation of the
entire mutual fund's diversified holdings. The price of a share at any time is called the fund's
net asset value, or NAV.
If somebody invests Rs.1, 000 in a mutual fund with an NAV of Rs.24.75, they will receive
40.40 shares of that fund. (Unlike stocks, one can own fractional shares in a mutual fund).
When the value of the portfolio increases, the value of your investment also increases. If,
however, the value of the fund decreases, your investment value will decrease as well. The
primary asset categories found in mutual funds are money markets, bonds, and/or stocks.
Mutual funds may invest in a single asset class or a combination of all. Maintaining the
weight of each category and the decision on when to buy or sell is the function of the mutual
fund's manager(s). Typically, the fund category indicates the primary investments (holdings)
-
7/29/2019 Report of Cp
2/15
Investors
Fund House
Securities
Based on
Common
Financial Goal
Returns
of the fund. For example, a fund that holds 85% stocks, 10% bonds and 5% cash equivalents
is typically categorized as a stock fund.
The flow chart below describes broadly the working of mutual fund:
Why mutual fund?
Mutual funds are a popular investment for many types of investors because they offer a
convenient, cost-effective and easy way to invest in the financial markets. Mutual fund is
only one kind of financial intermediary. In a sense, mutual fund is the purest form of financial
intermediary because there is almost perfect pass through of money between unit holders and
the securities in which they invest. Unit holders are indicated-a-priori in what type securities
their funds will be invested. Value of the securities held in the portfolio is translated on daily
basis directly to the value of the units held by the unit holders. Contrastingly a commercial
bank is not a pass through type of financial intermediary. Bank collect deposit from
depositors and these depositors have no knowledge of how their funds will be used. Bank
invest the money of depositors where they feel appropriate at a specific time and banks give
-
7/29/2019 Report of Cp
3/15
interest on these deposits which is not linked with how the loans and advances perform. It is
very important to understand that an investor can lose money in a mutual fund. Though
regulations ensure disciplined investments in ceilings on expenses that are charged to the unit
holders. Unit holders assume investment risk, including the possible loss of principal,
because mutual fund invest in securities whose value rise and fall. Unlike bank deposits,
mutual funds are not insured under Deposit Insurance & Credit Guarantee Corporation Act,
1961. Mutual fund unit holders are fund shareholders, while bank depositors are the banks
creditors .
How Mutual Funds work:
Every mutual fund has a goal - either growing its assets (capital gains) and/or generating
income (dividends) for its investors. Distributions in the form of capital gains (short-term
and long-term) and dividends may be passed on (paid) to shareholders as income or
reinvested to purchase more shares. For tax purposes, one must keep track of their
distributions and cost basis of purchased/reinvested shares.
Returns
As an investor, we want to know the fund's return-its track record over a specified period of
time. So what exactly is "return"?
A mutual fund's return is the rate of increase or decrease in its value over a specific period of
time usually expressed in the following increments: one, three, five, and ten year, year to
date, and since the inception of the fund. Since return is a common measure of performance,
you can use it to evaluate and compare mutual funds within the same fund category.
Generally expressed as an annualized percentage rate, return is calculated assuming that all
-
7/29/2019 Report of Cp
4/15
distributions from the fund are reinvested.Since average returns can sometimes "hide" short-
term highs and lows, you should evaluate returns for a time period of several years-not just
one year or less. A fund that has a high return in one year may have experienced losses in
other years-these fluctuations may not be apparent in its average return. While a fund's return
shows its track record, keep in mind that past performance is no guarantee of future
results. When using returns to compare funds, always use net returns. Net returns are the true
returns of both load and no-load funds after deducting all costs and expenses.
Types of Mutual funds:
Existing types of mutual funds can be classified into three types. They are:
Based on Maturity period:
Open-ended mutual fund Close-ended mutual funds.
Based on Investment objective:
Growth scheme or Equity scheme Income scheme or debt oriented scheme Balanced scheme Money market scheme.
Other Equity-related schemes:
Tax savings scheme Index scheme
-
7/29/2019 Report of Cp
5/15
Sectoral scheme.
As a prospective mutual fund investor, you can decide to invest in growth scheme, income
scheme or balance scheme either as an open-ended or a close-ended mutual fund.
Open ended mutual funds:
If you are looking for a scheme that gives you the feasibility for subscription all through the
year, an open-ended mutual fund is the appropriate choice. With no fixed maturity period,
you can buy and sell units at Net Asset Value (NAV) prices. Ease of liquidity is the key
aspect of open-ended mutual funds.
Close ended mutual funds:
Unlike an open-ended mutual fund, you have the option for subscription only during a
specified period, normally at the time of public issue of shares or debentures. Also, the
maturity period is fixed ranging from 3-15 years. Once the initial public issue of shares is
over, you can buy or sell the units on the respective stock exchanges. An additional feature
of close-ended mutual fund is the option of selling the units back to the mutual fund, at NAV
related prices.
Growth scheme or Equity scheme
If you do not expect immediate liquidity and willing to gain over a period of time, growth
scheme could be your preferred choice. Under the growth scheme, mutual funds invest a
majority of funds in equities (shares) and a small portion in money market instruments. Over
a long period of time they promise increased return on investments but are exposed to high
risks given the perennial fluctuation in equity markets, which is influenced by external
factors such as social, political and economic factors.
-
7/29/2019 Report of Cp
6/15
Income scheme
Also termed as monthly income scheme, this involves investing in income funds that can
fetch you regular and steady income. Investments are made in fixed income securities such
as bonds, corporate debentures, money market instruments and government securities. You
may not benefit from capital appreciation as it is very limited but the risks are much lower
compared to the growth fund. Fluctuations in the equity market may not affect you, but the
change in interest rates (as and when it become effective) is likely to have an impact on
returns. The net asset value of your funds is likely to increase or decrease with corresponding
changes in interest rates.
Balanced scheme
Investing in balanced fund, you enjoy the twin benefits of growth and a regular income. This
is possible as the funds are invested both in equities (shares) and fixed income securities
(such as bonds, corporate debentures and government securities). This means, in case the
proportion of investment is higher in equities than in fixed income securities, as an investor
you would be exposed to higher risks.
Money Market schemes
Easy liquidity, preservation of capital and moderate income- these are key aspects of money
market schemes. Under this scheme, your funds are invested exclusively in short-term
instruments such as treasury bills, commercial paper, certificates of deposit and inter-bank
call money, government securities etc. Commercially safe, it is less volatile compared to
other funds. You can select money market schemes for its short period and less risks.
-
7/29/2019 Report of Cp
7/15
Tax Savings scheme
Equity linked savings schemes (ELSS) and pension schemes are the two schemes that offer
tax rebates or tax benefits. Subscriptions to the units not more than Rs.10, 000 would be
eligible to a deduction from Income tax. Governed by the provisions of the Income Tax Act,
you can enjoy Tax incentives for investments in specified avenues. However, you cannot
assign/transfer/pledge/redeem/switch the units purchased under this scheme until completion
of 3 years from the date of allotment of individual units.
Index schemes
Under this scheme, the performance of the market as a whole, or a specific sector is assessed.
This helps you to decide on whether to invest on the market as a whole or in any specific
fund.
Sectoral schemes
You can decide to invest in specific sectors namely, FMCG, Information Technology,
Banking, Pharmaceuticals etc. Sectoral schemes pose high risk as compared to equity
schemes. This is because the portfolio is less diversified and very specific, concentrating on
selected industrial group.
Following is a glossary of some risks to consider when investing in mutual funds.
Call Risk. The possibility that falling interest rates will cause a bond issuer toredeemor callits high-yielding bond before the bond's maturity date.
Country Risk. The possibility that political events (a war, national elections),financial problems (rising inflation, government default), or natural disasters (an
earthquake, a poor harvest) will weaken a country's economy and cause investments
in that country to decline.
Credit Risk. The possibility that a bond issuer will fail to repay interest and principalin a timely manner. Also called default risk.
Currency Risk. The possibility that returns could be reduced for Americans investingin foreign securities because of a rise in the value of the U.S. dollar against foreign
currencies. Also called exchange-rate risk.
-
7/29/2019 Report of Cp
8/15
Income Risk. The possibility that a fixed-income fund's dividends will decline as aresult of falling overall interest rates.
Industry Risk. The possibility that a group of stocks in a single industry will declinein price due to developments in that industry.
Inflation Risk. The possibility that increases in the cost of living will reduce oreliminate a fund's real inflation-adjusted returns.
Interest Rate Risk. The possibility that a bond fund will decline in value because ofan increase in interest rates.
Manager Risk. The possibility that an actively managed mutual fund's investmentadviser will fail to execute the fund's investment strategy effectively resulting in the
failure of stated objectives.
Market Risk. The possibility that stock fund or bond fund prices overall will declineover short or even extended periods. Stock and bond markets tend to move in cycles,
with periods when prices rise and other periods when prices fall.
Mutual Funds Industry in India
The origin of mutual fund industry in India is with the introduction of the concept of mutual
fund by UTI in the year 1963. Though the growth was slow, but it accelerated from the year
1987 when non-UTI players entered the industry.
In the past decade, Indian mutual fund industry had seen dramatic improvements, both
quality wise as well as quantity wise. Before, the monopoly of the market had seen an ending
phase; the Assets Under Management (AUM) was Rs. 67bn. Putting the AUM of the Indian
Mutual Funds Industry into comparison, the total of it is less than the deposits of SBI alone,
constitute less than 11% of the total deposits held by the Indian banking industry.The main
reason of its poor growth is that the mutual fund industry in India is new in the country.
Large sections of Indian investors are yet to be intellectuated with the concept. Hence, it is
the prime responsibility of all mutual fund companies, to market the product correctly abreast
of selling. The mutual fund industry can be broadly put into four phases according to the
development of the sector. Each phase is briefly described as under.
First Phase - 1964-87
Unit Trust of India (UTI) was established on 1963 by an Act of Parliament. It was set up by
the Reserve Bank of India and functioned under the Regulatory and administrative control of
the Reserve Bank of India. In 1978 UTI was de-linked from the RBI and the Industrial
-
7/29/2019 Report of Cp
9/15
Development Bank of India (IDBI) took over the regulatory and administrative control in
place of RBI. The first scheme launched by UTI was Unit Scheme 1964. At the end of 1988
UTI had Rs.6,700 crores of assets under management.
Second Phase - 1987-1993 (Entry of Public Sector Funds)
Entry of non-UTI mutual funds. SBI Mutual Fund was the first followed by Canbank Mutual
Fund (Dec 87), Punjab National Bank Mutual Fund (Aug 89), Indian Bank Mutual Fund
(Nov 89), Bank of India (Jun 90), Bank of Baroda Mutual Fund (Oct 92). LIC in 1989 and
GIC in 1990. The end of 1993 marked Rs.47,004 as assets under management.
Third Phase - 1993-2003 (Entry of Private Sector Funds)
With the entry of private sector funds in 1993, a new era started in the Indian mutual fund
industry, giving the Indian investors a wider choice of fund families. Also, 1993 was the year
in which the first Mutual Fund Regulations came into being, under which all mutual funds,
except UTI were to be registered and governed. The erstwhile Kothari Pioneer (now merged
with Franklin Templeton) was the first private sector mutual fund registered in July 1993.The
1993 SEBI (Mutual Fund) Regulations were substituted by a more comprehensive and
revised Mutual Fund Regulations in 1996. The industry now functions under the SEBI
(Mutual Fund) Regulations 1996.The number of mutual fund houses went on increasing, with
many foreign mutual funds setting up funds in India and also the industry has witnessed
several mergers and acquisitions. As at the end of January 2003, there were 33 mutual funds
with total assets of Rs. 1,21,805 crores. The Unit Trust of India with Rs.44,541 crores of
assets under management was way ahead of other mutual funds.
Fourth Phase - since February 2003
This phase had bitter experience for UTI. It was bifurcated into two separate entities. One is
the Specified Undertaking of the Unit Trust of India with AUM of Rs.29,835 crores (as on
January 2003). The Specified Undertaking of Unit Trust of India, functioning under an
administrator and under the rules framed by Government of India and does not come under
the purview of the Mutual Fund Regulations.
The second is the UTI Mutual Fund Ltd, sponsored by SBI, PNB, BOB and LIC. It is
registered with SEBI and functions under the Mutual Fund Regulations. With the bifurcation
-
7/29/2019 Report of Cp
10/15
of the erstwhile UTI which had in March 2000 more than Rs.76,000 crores of AUM and with
the setting up of a UTI Mutual Fund, conforming to the SEBI Mutual Fund Regulations, and
with recent mergers taking place among different private sector funds, the mutual fund
industry has entered its current phase of consolidation and growth. As at the end of
September, 2004, there were 29 funds, which manage assets of Rs.153108 crores under 421
schemes.
Major Players in Indian Mutual Fund industry:
Some of the major players on the Indian mutual fund scene:
ABN AMRO Mutual Fund Benchmark Mutual Fund Birla Mutual Fund BOB Mutual Fund Canbank Mutual Fund Chola Mutual Fund Deutsche Mutual Fund DSP Merrill Lynch Mutual Fund Escorts Mutual Fund Fidelity Mutual Fund Franklin Templeton Investments HDFC Mutual Fund HSBC Mutual Fund ING Vysya Mutual Fund JM Financial Mutual Fund Kotak Mahindra Mutual Fund LIC Mutual Fund Morgan Stanley Mutual Fund PRINCIPAL Mutual Fund Prudential ICICI Mutual Fund UTI Mutual Fund Sahara Mutual Fund SBI Mutual Fund Standard Chartered Mutual Fund Sundaram Mutual Fund Tata Mutual Fund
-
7/29/2019 Report of Cp
11/15
Taurus Mutual Fund Unit Trust of India UTI Mutual Fund
COMPANY INTRODUCTION
INTRODUCTION:
UTI Mutual Fund is managed by UTI Asset Management Company Private Limited
(Estb: Jan 14, 2003) who has been appointed by the UTI Trustee Company Private Limited
for managing the schemes of UTI Mutual Fund and the schemes transferred / migrated from
UTI Mutual Fu n d .
The UTI Asset Management Company has its registered office at: UTI Tower, Gn Block,
Bandra - Kurla Complex, Bandra (East), Mumbai - 400 051 will provide professionally
managed back office support for all business services of UTI Mutual Fund (excluding fund
management) in accordance with the provisions of the Investment Management
Agreement, the Trust Deed, the SEBI (Mutual Funds) Regulations and the objectives of the
schemes. State-of-the-art systems and communications are in place to ensure a
seamless flow across the various activities undertaken by UTI AMC.
UTI AMC is a registered portfolio manager under the SEBI (Portfolio Managers)
Regulations, 1993 on February 3 2004, for undertaking portfolio management services and
also acts as the manager and marketer to offshore funds through its 100 % subsidiary,
UTI International Limited, registered in Guernsey, Channel Islands. UTI Mutual Fund has
come into existence with effect from 1st February
2003. UTI Asset Management Company presently manages a corpus of over Rs.29000 Crores.
UTI Mutual Fund has a track record of managing a variety of schemes catering to the needs of
every class of citizenry. It has a nationwide network consisting 68 UTI Financial Centers
(UFCs) and UTI International offices in London, Dubai and Bahrain. With a view to reach to
-
7/29/2019 Report of Cp
12/15
common investors at district level, 4 satellite offices have also been opened in select towns
and districts. It has a well-qualified, professional fund management team, who has been
highly empowered to manage funds with greater efficiency and accountability in the sole
interest of unit holders. The fund managers are also ably supported with a strong in-house
equity research department. To ensure better management of funds, a risk management
department is also in operation. It has reset and upgraded transparency standards for the
mutual funds industry. All the branches, UFCs and registrar offices are connected on a robust
IT network to ensure cost-effective quick and efficient service. All these have evolved UTI
Mutual Fund to position as a dynamic, responsive, restructured, efficient, and transparent and
SEBI compliant entity
SPONSORS:
Three leading public sector banks - Bank of Baroda (BOB), Punjab National Bank
(PNB) and State Bank of India (SBI) and Life Insurance Corporation of India (LIC), the
largest public financial investment institution and life insurer in India have entered into an
agreement with the Government of India
Sponsors of the UTI Mutual Fund.
Ba n k o f Ba r o d a
Bank of Baroda was established in July 1908 by Maharaja - Sir Sayajirao Gaikwad III.
During the period since inception, it has always maintained its practice of sound value based
banking to emerge as one of the premier public sector Banks of the country today. It has a
track record of uninterrupted profits since inception in 1908. The financial strength of the
Bank and its long tradition of efficient customer service are drawn substantially from the
extensive reach of its 2,715 strong branch network (as of 31.03.2003) covering almost every
State and Union Territory in the Country. The Bank is also one of the few Indian Banks with
a formidable presence overseas with 38 branches. Thus, the total branch network is 2,753 as at
-
7/29/2019 Report of Cp
13/15
31.03.2006
Life Insurance Corporation of India
Life Insurance Corporation of India (LIC) is amongst the largest insurance companies in
the world, serving over 10 crore policy holders and managing a Fund of over Rs.-186000
crores.
Punjab National Bank
PNB is a statutory body performing banking activities in terms of Banking Companies
(Acquisition and Transfer of undertaking) Act 1970 under which the Undertaking of the
Bank was taken over by the Central Government. The main object of the bank under the
said Act is asAn act to provide for the acquisition and transfer of the undertaking of
certain banking companies, having regard to their size, resources coverage and
organization, in order to further to control the heights of the economy, to meet
progressively and serve better, the needs of the development of the economy and to
promote the welfare of the people, in conformity with the policy of the State towards
securing the principles laid down in clause (b) and (c) of Article 39 of the Constitution of
India and for matter connected therewith or incidental therein. Punjab National Bank has 4037
branches and 4 subsidiaries. The bank has a deposit size of Rs.75813.49 crores as on
31.03.2003.
State Bank of India
The State Bank of India is the largest public sector bank in India with 9033 branches
in India and 48 offices in 28 countries worldwide. In addition to this, SBI also has 17
subsidiaries The sponsors are neither responsible nor liable for any loss resulting from the
operation of all the schemes of UTI Mutual Fund beyond the contribution of an amount of
Rs.10000/- made by them towards setting up of the UTI Mutual Fund.
UTI Trustee Company Private Limited
-
7/29/2019 Report of Cp
14/15
A company incorporated under The Companies Act, 1956 will be the Trustee of
transferred/migrated schemes are the first and sole trustee of the Mutual Fund under the
Trust Deed dated December 9, 2002 executed between the Sponsors and the Trustee
Company (the Trustee)
SOME OF THE FUNDS OF UTI WITH THEIR OBJECTIVES
UTI Master Share
An equity fund aiming to provide benefit of capital appreciation and income distribution
through investing in equity.
UTI Master Plus (Equity)
Capital appreciation through investments in Equities and equity related instruments,
convertible debentures, derivatives in India and also in overseas markets.
UTI Equity Fund
UTI equity fund is opened-ended equity scheme with an objective of investing at least 80% of
its funds in equity and equity related instrument with medium to high risk profile and up to 20% in
debt and money market instrument with low to medium risk profile.
UTI Contra Fund
To provide long-term capital appreciation / dividend distribution through investments in listed
equities and equity relayed instruments. The fund offers an opportunity to benefit from the impact of
-
7/29/2019 Report of Cp
15/15
non rational investors behavior by focusing on stocks that are currently under valued because of
emotional and behavioral patterns present in the stock market
UTI Wealth Builder
To achieve long term capital appreciation by investing predominantly in a diversified portfolio of
equity and equity related instruments.
UTI Infrastructure Fund
An open-ended equity fund with the objective to provide capital appreciation through investing in the
stocks of the companies engaged in the sectors like Metals, Building materials, oil and gas, power,
chemicals, engineering etc. The fund will invest in the stocks of the companies which form part of
infrastructure industries.
UTI Dividend fund
An open-ended equity scheme which aims to provide medium to long term capital gains and/or
dividend distribution by investing in equity or equity related instruments, which offer high dividend
yield.
UTI Services Industries Fund
An open-ended equity scheme which invests in the equities of the Services Sector companies in the
country. One of the growth sector funds aiming to provide growth of capital over a period of time as
well as to make income distribution by investing the funds in stocks of companies engaged in service
sectors.