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Transcript of Summer Training Project Report in Pnb Mutual Fund
SUMMER TRAINING PROJECT REPORTIN
PRINCIPAL PNB MUTUAL FUND
JAIPUR
In Partial Fulfillment For The Award Of P. G. Degree Of
Master Of Business Administration
SUBMITTED TO:
RAJASTHAN TECHNICAL UNIVERSITY, KOTA
SUBMITTED BY:
ANJU ARJANI, M.B.A. – PART II
MANSAROVAR, JAIPUR
1
ACKNOWLEDGEMENT
This is to acknowledge with respect to summer training project
report I have undertaken in the financial services organization
PRINCIPAL PNB mutual fund which is a part of our curriculum in
our management course pursued.
Therefore, indeed it is significant to pay gratitude and acknowledge
the vital personalities upon whose contribution and valuable
guidance made me possible to complete the project report with grace
and significant.
Primarily, I would like to acknowledge and pay my sincere thanks to
Mr. SANJEEV MEHTA, State Head, Principal PNB, who supervise
our work and provided timely and significant suggestions during the
tenure of the summer training and led us to accomplish our objective
“TRAINING & DEVELOPMENT” and inculcate in us the desired
professional skills and knowledge which is strived by a management
candidate.
Secondly, I would like to thanks all my colleagues and supportive
staff for all the cooperation provided to me in fulfilling my training
successfully.
I would also like to thanks to my Faculty incharge for the guidance
made to us in preparation and submission of the summer training
project report.
ANJU ARJANI
MBA - II
2
PREFACE
Training is a practical orientation of the theoretical knowledge being
taught and studied under a management course that forms a part of
the entire profession. It is always essential for a management trainee
to undergo a summer training under a firm or organization where
he/she able to learn the corporate environment and culture of the
people working over there.
As per norms and stipulations with respect to RAJASTHAN
UNIVERSITY, I had undergone a practical training in Principal
PNB, Jaipur. It was a good exposure for me to undergo training in
such a company to get the knowledge and experience regarding
training and development of various mutual fund advisors as well as
executives consisting Assistant sales managers, Sales managers etc. I
was able to get familiarized with the field component that will help
me in the future.
Thus I would say that this training was
beneficial educative & good exposure to me,
which will certainly help in my near future.
This project was designed with respect to
Principal PNB . The project made me to get
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the enhanced knowledge regarding
investments and how well the organization
has performed in the past and trends in the
near future.
Table of Contents
S.No. Particulars Pages
Acknowledge
Preface
1. Objective 1
2. INTRODUCTION TO MUTUAL FUNDS 2
3. CORPORATE PROFILE 13
4. PRINCIPAL PNB – PRODUCTS 23
5. TRAINING & DEVELOPMENT 29
6. ROLE OF TRAINING & DEVELOPMENT 37
7. KNOWLEDGE MANAGEMENT 43
8. RESEARCH METHODOLOGY 50
9. DATA ANALYSIS & INTERPRETATION 54
10. FINDINGS 60
11. SWOT ANALYSIS 63
12. LIMITATIONS 66
13. RECOMMENDATIONS 70
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14. CONCLUSION 73
15. BIBLIOGRAPHY 76
16. QUESTIONNAIRE 79
17. GLOSSARY 83 – 91
Objective
The main of the present study of is accomplish the following
objective.
Proper understanding and analysis of life insurance advisors.
To know about life insurance advisors, their performance and working
era as well as their perception towards the life insurance industry.
Conduct a general survey on a sample selected from the entire
population of life insurance advisors and derived opinion on that
research.
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To determine the potential, stability as well as scope of life insurance
advisors in the near future via effective Evaluation of their
performance in our city.
And base on analysis of the result thus obtained make a report on that
research.
Training aims at recruiting maximum number of Life Advisors and to
Sell the maximum policies for the company and bring the business for
the company which ever is going at the particular point of time.
INTRODUCTION TO MUTUAL FUNDS
6
Introduction
Mutual Fund
A Mutual Fund is a trust registered with the Securities and Exchange
Board of India (SEBI), which pools up the money from individual /
corporate investors and invests the same on behalf of the investors
/unit holders, in equity shares, Government securities, Bonds, Call
money markets etc., and distributes the profits. The income earned
through these investments and the capital appreciation realised are
shared by its unit holders in proportion to the number of units owned
by them.
This pooled income is professionally managed on behalf of the unit-
holders, and each investor holds a proportion of the portfolio i.e.
entitled not only to profits when the securities are sold, but also
subject to any losses in value as well.
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Why Mutual Funds :
Why should one choose to Invest in Mutual Fund?
For retail investor who does not have the time and expertise to
analyze and invest in stocks and bonds, mutual funds offer a viable
investment alternative. This is because:
Mutual Funds provide the benefit of cheap access to expensive
stocks.
Mutual funds diversify the risk of the investor by investing in
a basket of assets.
A team of professional fund managers manages them with in-
depth research inputs from investment analysts.
Being institutions with good bargaining power in markets,
mutual funds have access to crucial corporate information
which individual investors cannot access.
Concept of Mutual Fund
How Mutual Fund operates
The following chart gives us operational flow of a Mutual Fund
8
Organisational Structure of MF :
There are many entities involved and the diagram below illustrates
the organisational set up of a mutual fund:
9
Types of Mutual Funds
Open-ended and close-ended mutual funds schemes:
In an open-ended mutual fund there are no limits on the total size of
the corpus. Investors are permitted to enter and exit the open-ended
scheme at any point of time at a price that is linked to the net asset
value (NAV). In case of close-ended funds, the total size of the
corpus is limited by the size of the initial offer.
Do both open-ended and close-ended funds come out with an
initial offering?
10
Yes. But the only difference is that in case of open-ended funds, a
month after the initial offer closes the continuous offer period starts
when the investor can enter and exit the fund at a price linked to the
NAV
Advantages of Mutual Fund
1. Affordability
2. Professional Management
3. Diversification
4. Variety of Investment according to Financial status of the Investor
5. Return potential
6. Flexibility
7. Transparency
8. Tax Benefits
9. Liquidity
10.Clear – Cut regulations [SEBI]
11
Limitations of Mutual funds
1. Investors cannot contain costs so long as SEBI specified limits
are complied with.
2. Investors pay management fees so long as they remain
invested in the fund.
3. No tailor made portfolios
4. Investors end up delegating investment decisions to fund
managers and have no say/control on their decisions
5. The availability of a large number of mutual fund schemes
means that, except for the empowered investor , others require
advice when selecting a fund which best meets their
investment objectives
History of Mutual Funds
1. Unit Trust of India is the first Mutual Fund set up under a
separate act, UTI Act in 1963, and started its operations in
1964 with the issue of units under the scheme US-64
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2. In the year 1987 Public Sector banks like State Bank of India,
Punjab National Bank, Indian Bank, Bank of India, and Bank
of Baroda have set up mutual funds.
3. Apart from these above mentioned banks Life Insurance
Corporation [LIC] and General Insurance Corporation [GIC]
too have set up mutual funds
4. With the entry of Private Sector Funds a new era has started in
Mutual Fund Industry [e.g:- Principal Mutual Fund]
Institutions that have floated Mutual Funds in India:
Currently sector banks like:
State Bank of India, Canara Bank, Bank of Baroda, Oriental Bank,
Private sector banks like:
ICICI, HDFC, Kotak, Foreign Institutions like Principal, Morgan
Stanley, Templeton, Fidelity and Private financial companies like
Kotak,DSP Merrill Lynch, Sundaram etc. have floated their own
mutual funds
Mutual Funds in India currently:
13
Presently there are 33 Mutual Funds in India and close to 700 mutual
fund schemes.
Why has the concept of mutual funds taken so long to pick up in
India?
Even in the US the concept of mutual funds has started picking up
only in the last decade. This whole process of investor education and
investor awareness takes a lot of time. But Indian investors are now
beginning to understand the benefits of investing through the mutual
funds route and hence the collections are beginning to pick up
Regulatory Body of Mutual Fund
What is the Regulatory Body for Mutual Funds?
Securities Exchange Board of India (SEBI) is the regulatory body for
all the mutual funds mentioned above. All the mutual funds must get
registered with SEBI. The only exception is the UTI, since it is a
corporation formed under a separate Act of Parliament.
Risk Management
How do mutual funds diversify their risks?
Financial theory states that an investor can reduce his total risk by
holding a portfolio of assets instead of only one asset. This is
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because by holding all your money in just one asset, the entire
fortune of your portfolio depends on this one asset. By creating a
portfolio of a variety of assets, this risk is substantially reduced.
15
Can mutual funds be viewed as risk-free investments?
No. Mutual fund investments are not totally risk free. In fact,
investing in mutual funds contains the same risk as investing in the
markets, the only difference being that due to professional
management of funds the controllable risks are substantially reduced.
What are the risks involved in investing in mutual funds?
A very important risk involved in mutual fund investments is the
market risk. When the markets experience a downturn, most funds
will reflect this decline in their NAVs. However,the company
specific risks are largely eliminated due to professional fund
management.
Miscellaneous
How much return can I expect by investing in mutual funds?
Investors need to be clear that mutual funds are essentially medium
to long term investments. Hence, short-term abnormal profits will
not be sustainable in the long run. But in the medium to long run the
mutual funds tend to outperform most other avenues of investments
at the same time avoiding the risk of direct investment accompanied
with professional fund management
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What is the difference between mutual funds and portfolio
management schemes?
While the concept remains the same of collecting money from
investors, pooling them and investing the funds, the target investors
are different. In the case of portfolio management the target investors
are high networth investors while in case of mutual funds the target
investors are the retail investors
Association of Mutual Funds in India (AMFI)
The Association of Mutual Funds in India (AMFI) is dedicated to
developing the Indian Mutual Fund Industry on professional, healthy
and ethical lines and to enhance and maintain standards in all areas
with a view to protect and promot the interests of mutual funds and
their unit holders.
17
CORPORATE PROFILE
18
Corporate profile
About Principal PNB Mutual Fund
Our corporate mission and philosophy is to help business and people
meet their financial goals by providing quality investment and
retirement solutions. Principal Mutual Fund (formerly known as
IDBI-PRINCIPAL Mutual Fund) has been constituted as a Trust in
accordance with the provisions of the Indian Trusts Act, 1882 (2 of
1882).
The Mutual Fund is registered with SEBI under Registration No.
MF/019/94/0, dated December 13, 1994. The underlying objective of
Principal Mutual Fund is to mobilize savings from the public,
provide investment expertise to achieve optimal returns on their
investments.
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The Fund was initially set up by Industrial Development Bank of
India (IDBI) in 1994 by execution of a Trust Deed dated November
25, 1994, under which IDBI was the sole Settlor, Subsequently, on
March 31, 2000, Principal Financial Services Inc. USA became the
deemed sponsor (along with the IDBI) by acquiring 50% stake in
IDBI-PRINCIPAL Asset Management Company Limited.
In June 2003, Principal Financial Services Inc. USA became the sole
sponsor by acquiring 100% stake in IDBI-PRINCIPAL Asset
Management Company Limited, through its wholly owned
subsidiary Principal Financial Group (Mauritius) Limited (Principal
Mauritius). Principal Mauritius has become the sole settlor of the
Fund. Name of the Asset Management Company was changed to
Principal Asset Management Company Private Limited, to reflect the
change in ownership.
In May 2004, Principal admitted two Public Sector Banks - Punjab
National Bank and Vijaya Bank into the venture. Accordingly,
Principal Mauritius, Punjab National Bank and Vijaya Bank have
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65%, 30% and 5% respectively of all the rights, title, interest and
obligations as co-settlors to Principal Mutual Fund.
Our Investment Philosophy
Having thoroughly understood the needs of our investors, we at
Principal Mutual Fund provide investors with a disciplined
investment approach that takes acceptable risks, whilst attempting to
minimize volatility in the portfolio.
Equity Funds create wealth for our investors by investing in well-
managed companies that are attractively valued, to generate
sustainable cash flows in the future. We add value by maintaining a
strong focus on credit research and every company is added to the
portfolio after it undergoes a thorough credit analysis.
We proactively manage our Debt and Liquid Funds by continuously
monitoring the macroeconomic environment and undertaking
fundamental research of the fiscal and the monetary position. Both
our corporate and individual clients get to choose from a variety of
structured, diversified investment options that meet their investment
needs at all stages in their life.
21
SPONSERS:
Principal Financial Services Inc., USA (Holding Company of
Principal Financial Group (Maritius) Limited / a member of the
Principal Financial Group Inc., USA)
The Principal Financial Group
1. Delivers -quality retirement, mutual funds, life insurance and
asset-management services with $304.2 billion in assets under
management¹.
2. Manages assets for 11 of the 25 largest pension funds in the
United States².
3. Is the 38th largest institutional asset manager in the world³
4. Is a publicly traded company on the New York Stock Exchange
(NYSE ticker symbol: PFG)
5. Provides financial services to more than 18.8 million customers
worldwide from offices in Asia, Australia, Europe, Latin America
and the United States.
22
Principal Financial Group's, comprehensive knowledge of retirement
services and asset management gives it a true edge in the
marketplace. This knowledge and experience has helped The
Principal* become a global leader in delivering high-quality
financial services to clients around the world through its diverse
family of companies.
As the 401(k) leader in the U.S.A4, and a member of the FORTUNE
500 and the S&P 500, The Principal has become a trusted source for
clients since 1879. Diversity of strengths and skills has increased its
ability to deliver innovative solutions to millions of individuals and
businesses around the world.
Having built a strong reputation in United States, the Principal has
steadily entered markets around the globe. We pride ourselves on our
long record of providing value through our expertise in investments,
administration, system design, distribution management, education
and client service.
FINANCIAL STRENGTH RATINGS 5
A+ (Superior) - A.M. Best Company, as of January 2008. Second
highest of 16 rating levels.
23
Aa2 (Excellent) - Moody's Investors Service, as of March 2008. Third
highest of 21 rating levels.
AA (Very strong) - Standard & Poor's Rating Group, as of March 2008.
Third highest of 21 rating levels.
AA (Very strong) Fitch, as of July 2007. Third highest of 24 rating
levels.
1. As of March 31, 2008
2. Derived from the PENSIONS & INVESTMENTS "P&I 1,000"
report on the largest pension plans dated Jan. 21, 2008, compared to
its internal records as of March 31, 2008. Principal Global Investors,
LLC.
3. Out of 784 managers profiled, Managers ranked by total
worldwide institutional assets under management, as of Dec. 31,
2006. "2007 Money Managers Directory". PENSIONS &
INVESTMENTS, May 28, 2007.
4. The Principal ranks number one in total plan for all asset sizes
among fully bundled 401(k) provider-2006 Spectrum Group analysis
of fully-bundled 401(k) provider (companies that provide by
administrative and investment services).
24
5. Financial strength ratings are assigned to the largest operating
subsidiary Principal Life Insurance Company. A high rating by a
particular firm does not constitute and endorsement of the rated issue
by the ratings firm.
Punjab National Bank:
With its presence virtually in all the important centres of the country,
Punjab National Bank offers a wide variety of banking services
which include corporate and personal banking, industrial finance,
agricultural finance, financing of trade and international banking.
Among the clients of the Bank are Indian conglomerates, medium
and small industrial units, exporters, non-resident Indians and
multinational companies. The large presence and vast resource base
have helped the Bank to build strong links with trade and industry.
Vijaya Bank:
Vijaya Bank established in 1931, has built a network of about 1000
branches spread across the country. In recent years, the bank has
opened 43 branches offering specialized banking for industrial
finance, small scale industries, agricultural (hi-tech) finance, capital
25
market, commercial and personal banking, asset recovery
management, overseas banking, corporate banking, and funds
transfer. The Bank has introduced several customer friendly deposit
schemes and has launched several retail lending schemes to cater to
its vast client base.
TRUSTEE COMPANY:
Principal Trustee Company Private Limited
Principal Trustee Company Private Limited (formerly IDBI-
PRINCIPAL Trustee Company Limited), a company incorporated
under the Companies Act, 1956 is the Trustee to the Fund with effect
from October 2002. Prior to October 2002 Board of Trustees
discharged the Trusteeship function of the Fund. In June 2003,
Principal Financial Services Inc. USA acquired 100% stake in IDBI-
PRINCIPAL Trustee Company Limited, through its wholly owned
subsidiary Principal Financial Group (Mauritius) Limited.
Name of the Trustee Company was changed to Principal Trustee
Company Private Limited, to reflect the change in ownership.
26
In May 2004, Punjab National Bank and Vijaya Bank became equity
shareholders of the Trustee Company and post this, Principal
Financial Group (Mauritius) Limited, Punjab National Bank and
Vijaya Bank hold 65%, 30% and 5% respectively of the paid up
equity capital of the Trustee Company.
Directors of the Trustee company as on April 15, 2008 are:
Mr. B. G. Deshmukh; Chairman (Independent Director)
Mr. H.M.Singh; Independent Director
Mr. V.S. Mathur; Independent Director
Mr. Pramod Lele; Independent Director
Mr. Ned Burmeister; Associate Director
Mr. Ranjan Dhawan; Associate Director
27
PRINCIPAL PNB - PRODUCTS
28
Products
ELSS (Tax Benefit) Schemes Principal Personal Tax Saver Fund
Principal Tax Savings Fund Equity Linked Saving Schemes (ELSS)
are those that invest pre-dominantly in equity shares of companies
The objective of ELSS is to provide long-term capital gains to the
investors through capital appreciation along with tax saving benefits.
These schemes have a three year lock-in period. Equity / Growth
Schemes Principal Dividend Yield Fund Principal Emerging
Bluechip Fund Principal Growth Fund
Principal Index Fund Principal Junior Cap Fund Principal Large Cap
Fund Principal PNB Long Term Equity Fund 3 Year Plan - Series I
Principal PNB Long Term Equity Fund 3 Year Plan - Series II
Principal Resurgent India Equity Fund
Principal Services Industries Fund
29
Equity schemes are those that invest pre-dominantly in equity shares
of companies The objective of an equity fund is long-term growth
through capital appreciation, although dividends and interest are also
sources of revenue. Equity funds may be a mutual fund or exchange-
traded fund. Equity funds provide a high level of return, but have a
high level of risk too. Equity investments can be sold at any time,
with prices based on the current market value.
Fund of Funds Schemes Principal Global Opportunities Fund: Fund
of Funds schemes are those schemes that invests primarily in other
schemes of the same mutual fund or other mutual funds. The
objective of such schemes is to provide long term capital
appreciation by predominantly investing in mutual fund schemes and
a certain portion of its corpus in Money Market / Liquid Securities.
Debt/Income Schemes Principal Fixed Duration Fund 3 Year Plan
Series I Principal Floating Rate Fund – Flexible Maturity Plan
Principal FMP 30 Days Series I Principal FMP 540 Days Series I
Principal Government Securities Fund - Investment Plan Principal
Government Securities Fund - Savings Plan Principal Income Fund
Principal Income Fund - Short Term Plan Principal Liquid Plus Fund
Principal Pnb Fixed Maturity Plan 385 Days - Series V Principal Pnb
30
Fixed Maturity Plan 385 DAYS - Series VII Principal Pnb Fixed
Maturity Plan 385 Days-Series VIII Principal Pnb Fixed
Maturity Plan 385 Days-SeriesIX Principal Pnb Fixed Maturity Plan
540 Days - Series II Principal Pnb Fixed Maturity
Plan 91 Days - Series XVI Principal Pnb Fixed Maturity Plan 91
Days - SeriesXV Principal Pnb Fixed Maturity Plan 91
Days - SeriesXVII Principal Pnb Fixed Maturity Plan 91 Days -
SeriesXVIII Principal Pnb Fixed Maturity Plan 91 Days – Series
XIV Principal Pnb Fixed Maturity Plan(FMP-54)30 Days-SeriesII
Principal Pnb FMP 385 Days - SeriesVI
Principal Pnb FMP 460 Days - Series IV Principal Pnb FMP 91
Days - Series XIII
Debt schemes are those that pre-dominantly invest in debt securities.
Since most debt securities pay periodic interest to investors, these
funds are also known as income funds. However, it must be
remembered that funds investing in debt products can also offer a
growth option to their investors. Debt funds have the advantage of
being much less risky than equities. If steady, predictable returns are
what you expect, a debt fund will deliver precisely that. Debt funds
31
tend to create a variety of options for investors by choosing one or
more of these segments of the debt markets in their investment
portfolio.
Liquid Schemes Principal Cash Management Fund Principal
Floating Rate Fund - Short Maturity Plan Principal Money
Manager Fund
Liquid schemes are those that pre-dominantly invest only in short-
term money market instruments including treasury bills, commercial
paper and certificates of deposit. The objective is to provide liquidity
and preserve the capital.
The period of investment could be as short as a day. They provide
easy liquidity. They have emerged as an alternative for savings and
short-term fixed deposit accounts with comparatively higher returns.
These funds are ideal for Corporate, institutional investors and
business houses who invest their funds for very short periods.
Balanced Schemes Principal Balanced Fund Principal Child Benefit
Fund Balanced schemes are also called hybrid schemes. Balanced
schemes are those that invest in a combination of common stock,
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preferred stock bonds, and short term bonds to provide income and
capital appreciation while avoiding excessive risks.
33
Balanced funds invest in equity (shares) and debt (fixed income
instruments). Usually, they put around 50% of their total investments
in debt and 50% in equity.
MIP Schemes Principal Monthly Income Plan Principal Monthly
Income Plan - MIP Plus MIP schemes are those that invest, typically
a large portion (80-100%) of the fund is invested in debt and money
market instruments and the rest (0-20% approximately) in equity.
MIP scheme are best for a risk-averse investor who wishes to better
the returns offered by conventional fixed income instruments and yet
retain liquidity.
34
TRAINING & DEVELOPMENT
35
About Training & Development
TRAINING: Training refers to the acquisition of knowledge, skills,
and competencies as a result of the teaching of vocational or
practical skills and knowledge that relates to specific useful skills. It
forms the core of apprenticeships and provides the backbone of
content at technical colleges and polytechnics. Today it is often
referred to as professional development.
Physical training is more mechanistic: planned suites of regimes
develop specific skills or muscles with a view to peaking at a
particular time. A field of training often used in sports is autogenic
training. Another type of training is fartlek training which is a
flexible training type which can be adapted to suit almost any
athlete. Many early American astronauts trained extensively in
Iceland's central highlands due to its similarity to an extraterrestrial
planet.Training & Development is the field concerned with
workplace learning to improve performance.
36
Such training can be generally categorized as on-the-job or off-the-
job. On-the-job describes training that is given in a normal working
situation, using the actual tools, equipment, documents or materials
that they will use when fully trained. On-the-job training is usually
most effective for vocational work. Off-the-job training takes place
away from normal work situation which means that the employee is
not regarded as productive worker when training is taking place.
An advantage of off-the-job training is that it allows people to get
away from work and totally concentrate on the training being given.
This is most effective for training concepts and ideas. In military use,
training means gaining the physical ability to perform and survive in
combat, and learning the many skills needed in a time of war.
These include how to use a variety of weapons, outdoor survival
skills, and how to survive capture by the enemy, among others. See
military education and training. In religious and spiritual use,
training means purifying mind, heart, understanding and actions to
obtain a variety of spiritual goals such as closeness to God or
37
freedom from suffering. Typical of institutionalized spiritual
trainings is the Buddhist Threefold Training. Training differs from
exercise in that exercise may be a one of occasional activity for fun.
Training is specific and done to improve one's capability, capacity,
and performance.
Need for Training:
a. Employment for inexperienced and new labour requires detailed
instructions for effective performance on the job.
b. With the help of training, supervision during work period can be
reduced, cost may go down, waste and spoilage may be prevented
and production of qualitative goods and services can be produced.
c. Increasing use of fast challenging techniques in production and
other operations demands training to be provided for the
induction and get acquainted with the latest term of the process of
work.
d. Old employees need refresher training for keeping them abreast
of changing techniques and the use of the sophisticated tools and
equipments.
38
e. It is essential when a person has to move from the one job to
another because of transfer, promotion or demotion.
Benefits: A well planned and executed training results in:
a. Improvement in the quality of products with the reduction of
spoilage, wastes etc.
b. Reduce supervision and learning time
c. Improvement in the method of working, morale and productivity
of employees with reduced grievances.
d. Increased financial incentives, opportunity for internal promotion
and rising pay scales.
e. Reduction in breakages and maintenance cost leading effective
performance and contribution towards the goals of the employees.
f. Better Corporate image, fosters authencity and trust.
g. Improvement in skills, experience and knowledge that aids in
organizational development.
39
h. Improves the morale of the workforce, aids in understanding and
carrying out organizational policies.
i. Avoids management conflicts and Improves the organizational
communication.
j. Develop a sense of responsibility to the organization for being
competent and knowledge.
DEVELOPMENT: Development (in general) - it is a dynamic
process of improvement, which implies a change, an evolution,
growth and advancement. Development as a phenomenon suggests
that people are able to control their future and can improve their
condition in the world (living conditions, capacity to feed, education
level, life length, etc.) through process towards something better.
Thus the development refers broadly to the nature and direction of
change induced in employees, particularly managerial personnel,
through the process of training and educative process.
National Industrial conference Board:
“Management Development is all those activities and programs
when recognized and controlled, have substantial influence in
40
changing the capacity of the individual to perform his assignment
better and in doing so are likely to increase his potential for future
assignments.”
Thus the Management Development is not merely training or a
combination of various training programs though some kind of
training is necessary; it is the overall development of the competency
of managerial personnel in the light of the present requirements as
well as future requirements
Assumptions of the Management Development:
a. Management Development is a continuous process as there is no
time limit for learning to occur. It is not one – shot program but
continuous throughout the career of a manager. There may be one
shot programs but they are just the elementary input to the
consideration for the Development process.
b. Management Development is based on the assumption that there’s
always exist a gap between individual’s performance and his
41
potential for the performance. The untapped potential can be
transformed in to the actual performance through the process of
development.
c. Management Development seldom takes place in the peaceful and
relaxed atmosphere, as it involves stress and strains. It s a
challenging job. It may be accomplished by errors and failures.
d. Management Development requires clear setting of goals which
one wants to achieve through development process.
e. Management Development requires conducive environment which
should – be encouraging and stimulating with continuous
feedback about the Degree of development. The development
should be such that learned behavior is appropriately applied to
achieve the desired objective. Both training and development are
necessary for any organization to build its effective human
resource for optimum utilization of the resources in order to
achieve the overall desired objectives of the company.
42
ROLE OF TRAINING & DEVELOPMENT
43
Role of Training & Development
There is always a pressure by the working corporate environment for
viable solution and efficient performance level, which can only be
achieved through the process of systematic training and development
that may yields, expected results with growth factors to sustain in
future. Where training imparts skills, efficiency and inculcate a
desire to mark unachieved milestones development frames out the
necessary production of the will to work as well as a constant
motivational factors that keep reminding a person to perform at a
certain level suitable for the organization as well as to him for the
future prospective ness.
What necessitates training are technological advancement,
organizational complexity and the relations sustain and made by
humans. All these factors are related to each other.
Thus the role of the training can be summarized herein as follows: -
44
1. Training plays an active role in building efficiency of employees by
making them do a specific task with more specific operations and
learning them the latest means of performance and technological
advancement.
2. Training inculcates an increase in morale of employees which can be
evidenced by inspiring enthusiasm, voluntary confrontation with
regulation and willing ness to work and cooperate. This is done by
relating the skills with the job requirements making the jobs more
meaningful and sustainable.
3. Training attempts to increase the quality of human relations in an
organization. Growing complexity of organizations has led to
various human problems like alienation, inter-personal and inter-
group problems. Suitable human relations training can overcome
many of these problems. Technical training has been emerged for
resolving these problems of social and psychological nature.
4. Trained employees require less supervision since their working
morale is high for the desired performance level and therefore with
the given autonomy and power their fulfill the objectives with more
advancement and quality efficiency.
45
This may results into less number of intermediate levels as well as lesser
interruption from senior management to indulge in the sound working of
the personnel.
5. Training is necessary to maintain violability and flexibility necessary
for an organization to sustain in the environment of uncertainty
despite the loss of its key personnel. Therefore there are no greater
assets than the trained staff enough motivated to turn assets into
productivity and growth of the firm.
46
Policy on Training & Development
The objective of the policy is to articulate the organizational therapy
on employee training and development and provide a framework for
initiatives in this area. The organization is committed to the
development of its human resources through various interventions
one of the most important is Training and Development.
It believes that the employee must exhibit ownership of his/her
individual development with all possible inputs provided by the
company. All interventions in training and development will seek to
align individual needs with business needs or objectives. Equal
opportunity will be made available to every single employee
irrespective of level or function. What Training and Development
program does when an employee undergoes in PRINCIPAL PNB
MUTUAL FUND?
Human resources improve employee and management effectiveness
by providing programs and services to all. Training is often used to
promote employee development and to keep employees informed of
new procedures and technology. The training offered is diverse and
reflect the variety of jobs and training needs which exists in a large
47
Telecom service provider. Starting with Basic Telecom Awareness
which has 4 modules – it offers varied training which promote the
development of professional, quality customer service skills.
Several modules are available which assist the employees in
developing a customer – conscious focus and skills which add value
to their customer’s experience. Training and Development programs
are advertised in regular in regular employee mailings, inter-
departmental memo’s or on the notice board. Employees are required
to consult their supervisors about their department’s requirements
regarding training programs.
48
KNOWLEDGE MANAGEMENT
49
Knowledge Management
Knowledge Management refers to a range of practices used by
organisations to identify, create, represent, and distribute knowledge
for reuse, awareness and learning across the organisation.
Knowledge Management programs are typically tied to
organisational objectives and are intended to lead to the achievement
of specific outcomes such as shared intelligence, improved
performance, competitive advantage, or higher levels of innovation.
Knowledge transfer (one aspect of Knowledge Management) has
always existed in one form or another, for example through on-the-
job peer discussions, formal apprenticeship, corporate libraries,
professional training, and mentoring programs. However, since the
late twentieth century — additional technology has been applied to
this task, such as knowledge bases, expert systems, and knowledge
repositories. Knowledge Management programs attempt to manage
the process of creation or identification, accumulation, and
50
application of knowledge or intellectual capital across an
organisation.
Knowledge Management, therefore, attempts to bring under one set
of practices various strands of thought and practice relating to:
a. Intellectual capital and the knowledge worker in the knowledge
economy
b. The idea of the learning organization;
c. Various enabling organizational practices such as Communities of
Practice and corporate Yellow Page directories for accessing key
personnel and expertise;
d. Various enabling technologies such as knowledge bases and
expert systems, help desks, corporate intranets and extranets,
Content Management, wikis, and Document Management.
While Knowledge Management programs are closely related to
Organizational Learning initiatives, Knowledge Management may be
distinguished from Organizational Learning by its greater focus on
the management of specific knowledge assets and development and
cultivation of the channels through which knowledge flows.
51
The emergence of knowledge management has generated new
organisational roles and responsibilities an early example of which
was the Chief Knowledge Officer. In recent years, Personal
knowledge management (PKM) practice has arisen in which
individuals apply KM practice to themselves, their role in the
organisation and their career development.
While it has been applied to all industrial sectors, and increasingly to
Government, Knowledge Management is a continually evolving
discipline, with a wide range of contributions and a wide range of
views on what represents good practice in Knowledge Management.
Approaches to knowledge management
There is a broad range of thought on knowledge management with
no agreed definition current or likely. The approaches vary by author
and school. For example, knowledge management may be viewed
from each of the following perspectives:
1. Techno-centric : Focus on technologies, ideally those that enhance
knowledge sharing / growth, frequently any technology that does
fancy stuff with information.
52
2. Organisational : How does the organization need to be designed to
facilitate knowledge processes? Which organisations work best with
what processes?
3. Ecological : seeing the interaction of people, identity, knowledge and
environmental factors as a complex adaptive system.
4. Combinatory : Combining more than one of the above approaches
where possible without contradiction. In addition as the discipline is
maturing we see an increasing presence of academic debates within
epistemology emerging in both the theory and practice of knowledge
management.
Knowledge capture stages
Knowledge may be accessed, or captured, at three stages: before,
during, or after knowledge-related activities. For example,
individuals undertaking a new project for an organization might
access information resources to learn best practices and lessons
learned for similar projects undertaken previously, access relevant
information again during the project implementation to seek advice
on issues encountered, and access relevant information afterwards
for advice on after-project actions and review activities.
53
Knowledge management practitioners offer systems, repositories,
and corporate processes to encourage and formalize these activities.
Similarly, knowledge may be captured and recorded before the
project implementation, for example as the project team learns
lessons during the initial project analysis. Similarly, lessons learned
during the project operation may be recorded, and after-action
reviews may lead to further insights and lessons being recorded for
future access.
Ad hoc knowledge access
One alternative strategy to encoding knowledge into and retrieving
knowledge from a knowledge repository such as a database, is for
individuals to access experts on an ad hoc basis, as needed, with
their knowledge requests. A key benefit of this strategy is that the
response from the expert individual is rich in content and
contextualised to the particular problem being addressed and
personalized to the particular person or people addressing it.
54
The downside is, of course, that it is tied to the availability and
memories of specific individuals in the organisation. It does not
capture their insights and experience for future use should they leave
or become unavailable, and also does not help in the case when the
experts' memories of particular technical issues or problems
previously faced change with time.
The emergence of narrative approaches to knowledge management
attempts to provide a bridge between the formal and the ad hoc, by
allowing knowledge to be held in the form of stories.
55
RESEARCH METHODOLOGY
56
Research Methodology
Research:
Research always starts with a question or a problem. Its purpose is to
question through the application of the scientific method. It is a
systematic and intensive study directed towards a more complete
knowledge of the subject studied.
Research specifies the information required to address these issues,
designs, and the method for collecting information, manage and
implemented the data collection process, analyses the results and
communicate the findings and their implication.
I have prepared our project as descriptive type, as the objective of
the study demands the answers of the question related to the
performance Evaluation and management of life insurance advisors
in Jaipur:
57
The Research Process
As Research is a systemic and formalized process, it follows a
certain sequence of research action. The marketing process has the
following steps:
Formulating the problems
Developing objectives of the research
Designing an effective research plan
Data collection techniques
Evaluating the data and preparing a research report
There are two types of data collection method use in my project report.
Primary data and Secondary data.
For my project, I decided on primary data collection method for
observing the life insurance advisors in and outside the company and
approaching customers directly in the field, tele-calling, cold calling,
campaigning and through references to know their interest in
business with company in my project and also make questionnaire
for creating database of people is Jaipur.
58
I decided on Secondary data collection method was used by
referring to various websites, books, magazines, journals and daily
newspapers for collecting information regarding project under study.
Sampling techniques: - there are usually teo techniques of
sampling being taken – Random sampling and systematic sampling.
I have adopted random sampling for the conduct of the survey.
Sample Size: The sample size was 35 mutual fund advisors and
executives from varied fields of working.
59
DATA ANALYSIS & INTERPRETATION
60
Data Analysis & Interpretation
Q.1 Are you a?
Analysis: - It was inferred from the internal survey to the organization that
out of 35 Mutual funds advisors as well as executives as a whole; Freshers
were 6, Working for over an year were 20 and Well Experienced were 9
17%26%
57%
Fresher Working for over an year Well Experienced
Q.2 Are you available with necessary training & development?
Analysis: - It was depicted that life insurance advisors are providing with
necessary training & development pertaining to existing products/policies by
11 advisors, Pertaining to customer relationship & selling policies: 12,
pertaining to new product updation: 9 and No by 3 surveyed advisors.
61
Q.3 How frequently times have you been provided with training
sessions?
Analysis: Further it was also analyzed that the respondents have been
provided with training sessions in regular sessions although not in much
frequency but adequately to update their skills and knowledge pertaining to
task and area of work as categorized as follows: More than 20 times by 3,
More than 10 times by 7 and Less than 10 by 25 advisors and executives. .
Q.4 Are you satisfied with the way of training & development being
imparted to you for updating with present issues?
Analysis: it was found that respondents were highly satisfied with the
training & development pattern that is being imparted in the organization as
well as with the way of behaviour and conduct of senior level management
with the advisors analyzed as follows: Yes by 19 majority of advisors &
executives, No by 10 and To some extent by 6 mutual fund advisors.
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Q.5 What satisfy you most?
Analysis: Most derivable Satisfaction factors for life insurance advisors as been
depicted below:
Reputation of the company: 7 Higher Commission: 8
Good training sessions 6 Rewards & Recognitions: 5
Environment and Ambience: 4 Freedom to work: 5
Q.6 What dissatisfy you most during training & development?
Analysis: Most derivable dissatisfaction factors for life insurance advisors as been
depicted below:
Negative attitude of customers: 16 Private – Public myth: 7
Non-supportive colleagues & staff: 3 No permanency:5
No fixed salary: 4
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Q.7 Do you agree that cordial nature of management as well as infusion
of new skills and strategies being imparted through training &
development process time to time will lead to augmentation of efficient
performance?
Analysis: - It was agreed by 27 wide majority of mutual fund advisors that
that cordial nature of management as well as infusion of new skills and
strategies being imparted time to time will lead to augmentation of efficient
performance where mere 2 said no and 6 favored to some extent
Q.8 How many calls do you make every day for fetching appointments?
Analysis: - Calls made by mutual funds efficiently after being undertaken
training effectively by every day for fetching appointments were More than
10 (9), Less than 10 (19) and Less than 5 (7).
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Q.9 Your monthly average number of appointments with the
customers/clients?
Analysis: - Monthly average number of appointments with the
customers/clients was More than 20 by 2, less than 20 by 6 respondets, Less
than 10 by 17 respondets and Less than 5 by 10 respondets surveyed for the
purpose of their performance Evaluation.
Q.10 How many appointments turned into sales of policies if you were
being provided adequate and proper training & development?
Analysis: - Respondents agreed that if there wee being provided sufficient
and on time the necessary training & development then taking averaging as
20, appointments turned into sales of policies can be depicted as Less than 5
out of 20 by 21, Less than 10 out of 20 by 9, Less than 15 out of 20 by 3 and
More than 15 and less than 20 by remaining 2 respondents.
65
FINDINGS
66
FINDINGS
Following are the suggestions conducive to the upliftment and
performance of Principal PNB Mutual Fund, as perceived by me:
1. the mutual fund industry offering its best services and
opportunities in every sphere,
2. the employees working in, are satisfied with their jobs as well as
treatment of the superior organizational members and regular
training & development are being imparted to them to make alive
to present circumstances.
3. employees are loyal towards the organization resulting enriched
and considerable working experience.
4. despite being simply graduated, by maintaining their healthier
working experience many of them have been promoted by their
hard work and creative expertise.
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5. the management control over the lower management and
supervisory section is medium and not high because of the fact
employees are enough to handle their tasks and responsibilities
fairly and honestly.
6. the Daily reporting to the Superior by the corresponding
subordinate employee os maintained so as to judge the
comparative performance of the particular day
68
SWOT ANALYSIS
69
SWOT Analysis
STRENGTHS: -
1) A Strong brand name of PRINCIPAL PNB.
2) An Excellent corporate working environment
3) Highly trained professionals with good teamwork and
leadership.
4) Latest means of technical know how.
5) Company best norms and incentives measures.
6) Performance level achievement system of promotion.
WEAKNESSES: -
1) Over power in senior management.
2) Seldom delay in payments and reimbursements.
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OPPORTUNITIES: -
1) Need to keep motivated the supervisory level and keep
informative about the policies so that they may be well versed in
advanced with outcomes.
2) Sound promotional and technical improvements and amenities
should be provided to the employees at large.
THREAT: -
1) Advisors may be reluctant to work if they are not provided
adequate training & development for updating their skills and
knowledge and this may prove to be a dent on the overall progress of
the company.
2) Skilled personnel may leave the company to other favourable
atmosphere with better perks and facilities in the absence of desired
training & development. .
71
LIMITATIONS
72
LIMITATIONS
Some of the difficulties and limitations faced by me during my training
are as follows:
Lack of awareness among the people – This is the biggest limitation
found in this sector. Most of the people are not aware about the
importance and the necessity of the insurance in their life. They are
not aware how useful life insurance can be for their family members if
something happens to them.
Perception of the people towards Mutual Fund sector – People still
are not much aware about mutual fund and consider it as a share and
securities type of investment which is highly volatile and risky.
Therefore it makes it difficult for advisors to satisfy them completely
and make their potential investment.
Insurance does not give good returns – Still today people think that
Insurance does not give good returns. They are not aware of the
modern Unit Linked Insurance Plans which are offered by most of the
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Private sector players. They are still under the perception that if they
take Insurance they will get only 5-6% returns which is not true
nowadays.
Nowadays most of the modern Unit Linked Insurance Plans gives
returns which are many times more than that of bank Fixed deposits,
National saving certificate, Post office deposits and Public provident
fund.
Lack of awareness about the earning opportunity in the Insurance
sector – People still today are not aware about the earning opportunity
that the Insurance sector gives. After the privatization of the insurance
sector many private giants have entered the insurance sector. These
private companies in order to beat the competition and to increase
their Insurance Advisors to increase their reach to the customers are
giving very high commission rates but people are not aware of that.
Increased competition – Today the competition in the Insurance
sector has became very stiff. Currently there are 14 Life Insurance
companies working in India including the LIC (life insurance
Corporation of India).
74
Today each and every company is trying to increase their Insurance
Advisors so that they can increase their reach in the market. This
situation has created a scenario in which to recruit Life insurance
Advisors and to sell life Insurance Policy has became very very
difficult.
75
RECOMMEDATIONS
76
Recommendations
Based on the analysis of data collection through the performance
analysis and appraisal forms and individual training needs
identification forms some, following are the recommendations
hereby been suggested for the benefit of the company: -
a) Training should be conducted on regular basis at frequent
intervals so that the MF advisors as well as management
employees may beable to adapt the present product information
and furnish themselves with latest news and affairs to deal with
the queries of customers.
b) For the overall effective achievement of goals and objectives
of the organization systematic development areas should be
outlined and projected so that training may be imparted and
assessment of their capabilities with the operational
requirements may be ascertain.
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c) Appraisal assessment of the performance together with the
development processes which have been carried out till yet
have to be analyzed and ascertain so as to gain importance and
distinguish between the efficient and inefficient employees.
d) Since PRINCIPAL PNB MUTUAL FUND is a growing
financial services company and is becoming a big giant in
India and therefore it is essential to keep an eye on all the
human resource activities carried out in the company at large.
e) Advanced study materials and modules should be provided for
the background knowledge enhancement besides quality
training.
f) Training should be adhered to the working situation and should
be projected to increase the work level and performance
efficiency so that company labour turnover may go down with
respect to achieving growth scenario.
78
CONCLUSION
79
Conclusion
In the course of summer training project conducted in PRINCIPAL
PNB MUTUAL FUND was concluded that the survey was made on
to the mutual fund advisors and management employees with respect
to training and development of human resources, the problem
suffered by them as well as the alternatives solution suggested. Our
results was depicted that mostly employed of the prestigious
organization are satisfied and regular in their working and
performing for their company with full efforts. All these activities
related to human resource and personnel were conducted.
A Brief summary: -
a) Weekly arrangement and meeting with all employees were
scheduled and their problems were heard one by one.
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b) Recording and undertaking of interpretation of the problems
pertaining to the training and development of different
employees.
c) Provision of the due solution favourable in all condition to them
and conduces with maintaining healthier relation with company
in respect of efficient ways and duration of training to the
required personnel and development for the future course of
action in order to achieve organizational goals.
81
BIBLIOGRAPHY
82
Bibliography
Following sources have been referred in the completion of Summer
training:
BOOKS:
Human Resource & Personnel Management, Aswathappa, K
Basics of Management, Pandey S.N.
Research Methodology & Management, Kothari C.R.
Personnel Management & Industrial Relations, Tripathi
Organizational Behaviour, Fred Luthans
NEWSPAPER
News Paper: - Economic Times
The Financial Express
MAGAZINES:
India Today
Businedd World
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WEBSITES: -
www.principalpnb.com
www.mutualfundindia.com
www.businessworld.in
www.invesedia.com
www.tradeindia.com
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Annexure: Questionnaire
NAME OF THE EMPLOYEE: ________________________________
DESIGNATION: ___________________________________________
JOB ASSIGNMENT: ________________________________________
Q.1 Are you a:
Fresher
Experienced
Q.2 Are you available with necessary training & development?
for existing products
for customer relationship & sales
New product updation
No
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Q.3 How frequently times have you been provided with training
sessions?
More than 20
More than 10
Less than 10
Q.4 Are you satisfied with the way of training & development
being imparted to you for updating with present issues?
Yes
No
To some extent
Q.5 What satisfy you most?
Reputation of the company:
Higher Commission:
Good training sessions
Rewards & Recognitions:
Environment and Ambience:
Freedom to work:
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Q.6 What dissatisfy you most during training & development?
Negative attitude of customers
Private – Public myth
Non-supportive colleagues & staff
No permanency
No fixed salary
Q.7 Do you agree that cordial nature of management as well as
infusion of new skills and strategies being imparted through
training & development process time to time will lead to
augmentation of efficient performance?
Yes
No
To some extent
Q.8 How many calls do you make every day for fetching
appointments?
More than 10
Less than 10
Less than 5
87
Q.9 Your monthly average number of appointments with the
customers/clients?
More than 20
Less than 20
Less than 10
Less than 5
Q.10 How many appointments turned into sales of policies if you
were being provided adequate and proper training &
development?
Less than 5
Less than 10
Less than 15
Less than 20
Other associated comments:
1. ________________________________________________
2. ________________________________________________
3. ________________________________________________
ANJU ARJANI
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GLOSSARY: -ACCOUNT STATEMENT A document issued by the mutual fund, giving details of transactions and holdings of an investor. ADJUSTED NAV (TOTAL RETURN) The net asset value of a unit assuming reinvestment of distributions made to the investors in any form. ADVISOR Your financial consultant who gives professional advice on the fund's investments and who supervise the management of its assets. AGE OF FUND The time elapsed since the launch of the fund. nterest is higher than that of principal. This relationship is reversed at the end of the loan.ANNUAL RETURN The percentage of change in net asset value over a year's time, assuming reinvestment of distribution such as dividend payment and bonuses. APPRECIATION When an investment increases in value, it appreciates. For example, a equity share whose price goes from Rs. 20/- to Rs. 25/- has appreciated by Rs. 5/-.ASSET Property and resources, such as cash and investments, comprise a person's assets; i.e., anything that has value and can be traded. Examples include stocks, bonds, real estate, bank accounts, and jewellery. ASSET ALLOCATION When you divide your money among various types of investments, such as stocks, bonds, and short-term investments (also known as "instruments"), you are allocating your assets. The way in which your money is divided is called your asset allocation. ASSET MANAGEMENT COMPANY / AMC It is the investment manager for the mutual fund. It is a company set up primarily for managing the investment of mutual funds and makes investment decisions in accordance with the scheme objectives, deed of Trust and other provisions of the Investment Management Agreement. ASKED OR OFFERING PRICE The price at which a mutual fund's shares can be purchased. The asked or offering price means the current net asset value (NAV) per share plus sales charge, if any. For a no-load fund, the asked price is the same as the NAV. ASSET ALLOCATION FUND A fund that spreads its portfolio among a wide variety of investments, including domestic and foreign stocks and bonds, government securities, gold bullion and real estate stocks. This gives small investors far more diversification than they could get allocating money on their own. Some of these funds keep the proportions allocated between different sectors relatively constant, while others alter the mix as market conditions change. ANNUALISED RETURN This is the hypothetical rate of return, if the fund achieved it over a year's time, would produce the same cumulative total return if the fund performed consistently over the entire period. A total return is expressed in a percentage and tells you how much money BACK END LOAD The difference between the NAV of the units of a scheme and the price at which they are redeemed. The difference is charged by the fund. BALANCE SHEET A financial statement showing the nature and amount of a company's assets, liabilities and shareholders' equity. BALANCED FUND A mutual fund that maintains a balanced portfolio, generally 40% bonds and 60% equity. BEAR MARKET Period during which investors are on a selling spree and the share prices are going down.
89
BENCHMARK A parameter with which a scheme can be compared. For example, the performance of a scheme can be benchmarked against an appropriate index. BLUE CHIP A share in a large, safe, prestigious company, of the highest class among stock market investments. A blue-chip company would be called thus by being well-known, having a large paid-up capital, a good track record of dividend payments and skilled management. BOND An interest-bearing promise to pay a specified sum of money -- the principal amount -- due on a specific date. BOND FUNDS Registered investment companies whose assets are invested in diversified portfolios of bonds primarily fixed income securities. BROKER One who guides the investors on one or more investments and facilitates the process of investment. A broker is a member of a recognized stock exchange who buys and sells or otherwise deals in securities. BROKERAGE The fee payable to a broker for acting as an intermediary in a transaction. For example, brokerage is payable by a fund for getting fresh investments from investors. BSE INDEX A index reflecting the stock prices of 30 companies listed on the Bombay Stock Exchange (BSE) which is taken to be representative of the stock market movement. BULL MARKET Period during which the prices of stocks in the stock market keep continuously rising for a significant period of time on the back of sustained demand for the stocks. CAPITAL This is the amount of money you have invested. When your investing objective is capital preservation, your priority is trying not to lose any money. When your investing objective is capital growth, your priority is trying to make your initial investment grow in value.CAPITAL GAINS The difference between an asset's purchased price and selling price, when the difference is positive. A capital loss would be when the difference between an asset's purchase price and selling price is negative. CAPITAL MARKET The market where capital funds, debt (bonds) and equity ( stocks) are traded. CERTIFICATE OF DEPOSIT Interest-bearing, short-term debt instrument mainly issued by Financial institutions. CLOSED-ENDED MUTUAL FUND A mutual fund that offers a limited number of shares. They are traded in the securities markets. Price is determined by supply and demand. Unlike open-ended mutual funds, closed-ended funds do not redeem their shares. COLLATERAL SECURITY This is extra security provided by a borrower to back up his/her intention to repay a loan. COMMON STOCKS Stocks represent a share in the ownership of a particular company. If the company does well, the value of each share generally goes up. Although common stocks have a history of long-term growth, their prices fluctuate based on changes in a company's financial condition and on overall market and economic conditions. COMMERCIAL PAPER Short-term, unsecured promissory notes with maturities shorter than 3 months. They are issued by corporations to fund short-term credit needs. COMMISSION The broker's or agent's fee for buying or selling securities for a client. The fee is usually based on a percentage of the transaction's market value.
90
COMPOUNDING When you deposit money in a bank, it earns interest. When that interest also begins to earn interest, the result is compound interest. Compounding occurs if bond income or dividends from stocks or mutual funds are reinvested. Because of compounding, money has the potential to grow much faster. CONSIDERATION The 'consideration' is the total purchase or sale amount associated with a transaction. The amount you 'pay' or 'receive'. It may also be the basis for working out the commission, taxes and any other charges you are asked to pay. COUPON The term is used colloquially to refer to a security's interest rate. COUPON RATE The annual rate of interest payable on a debt security expressed as a percentage of the principal amount. CURRENCY FLUCTUATION Changes in the value of a currency in relationship to other major currencies. Currency fluctuations can have a significant effect on the value of international mutual funds. CURRENCY RISK The risk that shifts in foreign exchange rates may undermine the dollar or any other foreign currency value of overseas investments. CURRENT INCOME Monies paid during the period an investment is held. Examples include bond interest and stock dividends. CURRENT LOAD Load structure applicable currently. Funds keep revising the load structures from time to time. CURRENT MARKET VALUE The amount a willing buyer will pay for a bond today, which may be at a premium (above face value) or a discount (below face value). CURRENT YIELD The ration of interest to the actual market price of the bond stated as a percentage Annual interest---------------------------- = Current yield Current market value DATE OF REDEMPTION The date specified for the redemption of a scheme. No such date is specified for an open-ended scheme. DEBT /INCOME FUNDS Funds that invest in income bearing instruments such as corporate debentures, PSU bonds, gilts, treasury bills, certificates of deposit and commercial papers. Although these funds are less volatile, the underlying investments carry a credit risk. Comparatively, these funds are the least risky and are preferred by risk-averse investors. DEFICIT The shortfall between government revenues and budgetary spending in any given year. A surplus occurs when annual revenues exceed expenditures. DERIVATIVE An investment contract based on an underlying investment called an "instrument." The most common type of derivative is an option contract, which involves the right to buy or sell the underlying instrument at an agreed price. Futures contracts are also derivatives. DIVIDEND Income distributed by the Scheme on the Units DIVIDEND FREQUENCY The periodicity of dividend payout of a scheme. This is especially valid in the case of an income/debt scheme. DIVIDEND HISTORY The track record of dividends declared by a fund till date. DIVIDEND PER UNIT Total amount of dividend declared by a fund for a scheme divided by total number of units issued to all the investors. DIVIDEND PERIOD The period for which the dividend is declared
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DIVIDEND PLAN In a dividend plan, the fund pays dividend from time to time as and when the dividend is declared. DIVIDEND WARRANT An instrument issued by companies/ mutual funds to an investor for the purpose of payment of dividends DIVIDEND YIELD The dividend earned per unit of a scheme at the prevailing per unit price. DURATION Duration estimates how much a bond's price fluctuates with changes in comparable interest rates. ENTRY LOAD Load on purchases/ switch-out of units. EQUITY SCHEMES Schemes where more than 50% of the investments are done in equity shares of various companies. The objective is to provide capital appreciation over a period of time. EXCHANGE PRIVILEDGE The right to transfer investments from one fund into another, generally within the same fund group, at nominal cost. EXCHANGE RATE The price at which one currency trades for another EXPENSE RATIO Annual percentage of fund's assets that is paid out in expenses. Expenses include management fees and all the fees associated with the fund's daily operations. EXIT LOAD Load on redemptions Dividend switch-out of units FACE VALUE The face value is the term used to describe the value of a bond in terms of what the company which issued the bond will actually repay when the loan matures. It's sometimes described as nominal or par value. FII Foreign Institutional Investors, registered with SEBI under the Securities and Exchange Board of India (Foreign Institutional Investors) Regulations, 1995. FUND CATEGORY Classification of a scheme depending on the type of assets in which the mutual fund company invests the corpus. It could be a growth, debt, balanced, gilt or liquid scheme FUND MANAGER The person who makes all the final decisions regarding investments of a scheme GILT FUNDS Funds, which invest only in government securities of different maturities. With virtually no default risk, they are very secure. While returns are steady and secure, they are lower than those from other debt funds GROWTH FUND A mutual fund whose primary investment objective is long-term growth of capital. It invests principally in common stocks with significant growth potential. Growth Stocks of companies that have shown or are expected to show rapid earnings and revenue growth. Growth stocks have relatively more risk than other conventional forms of investment. INCOME FUND A mutual fund that primarily seeks current income rather than growth of capital. It will tend to invest in stocks and bonds that normally pay high dividends and interest. INDEX FUND A passively managed, limited-expense (advisor fee no higher than 0.50%) fund designed to replicate the performance of an unmanaged stock index on a reinvested basis. INITIAL PUBLIC OFFERING (IPO)/ INITIAL ISSUE The first sale of stock by a private company to the public. IPO’s are often issued by smaller, younger companies
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seeking capital to expand, but can also be done by large privately-owned companies looking to become publicly traded. In an IPO, the issuer obtains the assistance of an underwriting firm, which helps it determine what type of security to issue (common or preferred), best offering price and time to bring it to market. Also referred to as a "public offering". INITIAL OFFER PRICE The price at which units of a scheme are offered in its Initial Public Offer (IPO). INITIAL OFFER PERIOD The dates on or the period during which the initial subscription to units of the Scheme can be made. INSTITUTUONAL INVESTOR An institutional investor is a professional money manager whose job it is to put money into shares and other assets on behalf of private investors who entrust them with money via their pension and life insurance funds. INTEREST The amount paid by a borrower as compensation for the use of borrowed money. This amount is generally expressed as an annual percentage of the principal amount. INVESTMENT OBJECTIVEThe identification of attributes associated with an investment or investment strategy, designed to isolate and compare risks, define acceptable levels of risk, and match investments with personal goals. ISSUE DATE The date on which a security is deemed to be issued or originated. ISSUED SHARE CAPITALThis is the total number of shares a company has made publicly available multiplied by the total nominal value of the shares. A company may have 10 million shares in issue, each with a nominal value of Re. 1. So the issued share capital is Rs. 10 million. LAUNCH DATE The date on which a scheme is first made open to the public for subscription LIQUIDITY: The ability to buy or sell an asset quickly or the ability to convert to cash quickly LIQUID FUNDS /MONEY MARKET FUNDS Funds investing only in short-term money market instruments including treasury bills, commercial paper and certificates of deposit. The objective is to provide liquidity and preserve the capital LOAD A charge that may be levied as a percentage of NAV at the time of entry into the Scheme/Plans or at the time of exiting from the Scheme/Plans. LOCK IN PERIOD The period after investment in fresh units during which the investor cannot redeem the units. MANAGEMENT FEE Money paid by a mutual fund to its investment manager or advisor for overseeing the portfolio. A management fee is usually between one-half and one percent of the fund's net asset value.MARKET A public place where the buying and selling of all types of bonds, stocks and other securities takes place. A stock exchange is a market. MARKET PRICE: The price at which the units of a scheme are quoted on a stock exchange. MARKET RISKThe risk that the price of a security will rise or fall due to changing economic, political, or market conditions, or due to a company's individual situation. MATURITY: The date upon which the principal of a security becomes due and payable to the security holder.
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MATURITY VALUE The amount (other than periodic interest payment) that will be received at the time a security is redeemed at its maturity. On most securities the maturity value equals the par value. MINIMUM ADDITIONAL INVESTMENT: The minimum amount, which an existing investor should invest for purchasing fresh units. MINIMUM BALANCE Minimum amount specified by a fund that should remain invested in a scheme after any redemption. MINIMUM SUBSCRIPTION: The minimum amount required to be invested to purchase units of a scheme of a mutual fund. MINIMUM WITHDRAWAL: The smallest sum that an investor can withdraw (get redeemed) from the fund at one time. MONEY MARKET INSTRUMENTS Commercial paper, treasury bills, GOI securities with an unexpired maturity up to one year, call money, certificates of deposit and any other instrument specified by the Reserve Bank of India. MORTGAGE A legal instrument given by a borrower to the lender entitling the lender to take over pledged property if conditions of the loan are not met. MOVING AVERAGES The average price of a mutual fund calculated periodically over some designated period of time and plotted on a chart against actual price. The effect of a moving average is to minimize short-term price fluctuations and highlight long-term price fluctuations. MUTUAL FUND An investment that pools shareholders money and invests it toward a specified goal. The funds are invested by a professional investment manager usually called the AMC ( Asset Management Company). MUTUAL FUND REGULATIONS Securities and Exchange Board of India (Mutual Funds) Regulations, 1996 as amended up to date and such other Regulations, as may be in force from time to time, to regulate the activities of the Mutual Fund. NO-LOAD SCHEME: A Scheme where there is no initial Entry or Exit Load. NAV: Net Asset Value of the Units in each plan of the Scheme is calculated in the manner provided in this Offer Document or as may be prescribed by Regulations from time to time. NAV Change The difference between today's closing net asset value (NAV) and the previous day's closing net asset value (NAV).NAV Change % The percentage change between today's closing net asset value (NAV) and the previous day's closing net asset value (NAV) NET WORTH: A person's net worth is equal to the total value of all possessions, such as a house, stocks, bonds, and other securities, minus all outstanding debts, such as mortgage and revolving credit lines. NET YIELD: Rate of return on a security net of out-of-pocket costs associated with its purchase, such as commissions or markups. NON PERFORMING INVESTMENTS Part of the portfolio investment of a debt fund which is not making interest payment or principal amount repayments in time. NIFTY An index of prices of a group of fifty stocks listed on the NSE. OFFER DOCUMENT OR PROSPECTUS The official document issued by mutual funds prior to the launch of a fund describing the characteristics of the proposed fund to all its prospective investors. It contains information required by the Securities and Exchange
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Board of India, such as investment objective and policies, services, and fees. Individual investors are encouraged to read and understand the fund's prospectus. OFFERING PERIOD The period during which the initial offer to subscribe for the units of a scheme is open. OFFER PRICE The lowest price that a seller is willing to accept from a prospective buyer. In the case of a mutual fund with a sales charge, this price is the net asset value (NAV) plus the sales charge. In the case of no-load funds, it is the NAV. OFFERING DATE The date on which a distribution of stocks or bonds will first be available to the public. OPEN-ENDED SCHEMES/ FUNDS A fund whose units are redeemable at any time at asset value, Except for funds that no longer accept new unitholder, new units are offered continuously. OPENING NAV The NAV disclosed by the fund for the first time after the closure of an IPO. OPPORTUNITY RISK The risk that a better opportunity may present itself after you have already committed your money elsewhere. PLANS The Scheme offers five Plans, Growth Plan and four Dividend Plans viz. Monthly, quarterly, Half Yearly and Annual Dividend Plans. PORTFOLIO The list of securities owned by the mutual fund. This list may be long, for example, Fidelity Magellan, with over 2000 stocks, or relatively short, for example, Sequoia, with only 16 stocks. PREMIUM The amount by which a bond/ or a stock (in case of a IPO) sells above its par (face) value. PRICE OF UNITS Price offered by a mutual fund for repurchase or sale of a unit on a daily basis. Price/Earnings Ratio This is the price of a stock divided by its earnings per share. This ratio gives an investor an idea of how much they are paying for a particular company's earning power. A trailing P/E refers to a ratio that is based on earnings from the latest year, while a forward P/E uses an analyst's forecast of next year's earnings. PRIMARY MARKET(NEW ISSUE MARKET) The market on which newly issued securities are sold, including government security auctions and underwriting purchases of blocks of new issues, which are then resold. PROSPECTUS An official document that each investment company must publish, describing the mutual fund and offering its shares for sale. It contains information that has been mandatorily required by SEBI. PURCHASE PRICE Purchase Price to the investor of Units of any of the plans computed in the manner indicated in this Offer Document. RATE OF RETURN The total proceeds derived from the investment per rupee initially invested. Proceeds must be defined broadly to include both cash distributions and capital gains. The rate of return is expressed as a percentage. RATINGS Designations given by credit rating agencies indicating relative credit quality as compared to other funds. REDEMPTION The paying off or buying back of units of a mutual fund / bond by the issuer. REDEMPTION FEE A fee charged by a limited number of funds for redeeming, or buying back, fund units.
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REDEMPTION PRICE The price at which a mutual fund's units are redeemed (bought back) by the fund. The redemption price is usually equal to the current NAV per unit. REFUND The act of returning money to an investor by the fund. This could be on account of rejection of an application to subscribe units or in response to an application made by the investor to the fund to redeem units held by him. RETURNS The dividend and capital appreciation accruing to the investor on the investment held by him.REVERSE REPO Purchase of securities with simultaneous agreement to sell them at a later date. RISK ADJUSTED RETURNS Generally, the expected returns from an investment are dependent on the risk involved in the investment. For the purpose of comparing returns from investments involving varying levels of risk, the returns are adjusted for the level of risk before comparison. Such returns (reduced for the level of risk involved) are called risk-adjusted returns. SAPs Special Purpose Vehicles approved by the appropriate authority or the Government of India.SALE PRICE The price at which a fund offers to sell one unit of its scheme to investors. This NAV is grossed up with the entry load applicable, if any. SALES CHARGE Fee on the purchase of new shares of a mutual fund. A sales charge is similar to paying a premium for a security in that the customer must pay a higher offering price. Sometimes called a load. SCHEME: A mutual fund can launch more than one scheme. With different schemes, in spite of there being a common trust, the assets contributed by the unit holders of a particular scheme are maintained and managed separately from other schemes and any profit/loss from the assets accrue only to the unit holders of that scheme SEBI: The Securities and Exchange Board of India. SECONDARY MARKET: The market where the securities are traded i.e purchased or sold after they have been initially offered to the public through a public offer in the primary market. SECURITY: Generally, an instrument evidencing debt of or equity in a common enterprise in which a person invests on the expectation of financial gain. The term includes notes, stocks, bonds, debentures or other forms of negotiable and non-negotiable evidences of indebtedness or ownership. SHARE HOLDERThe owner of one or more shares of stock in a corporation. Shareholder rights can vary according to the articles of incorporation of the by-laws of a particular company. SYSTEMATIC INVESTMENT PLAN: Many mutual funds offer investment programs whereby unitholders can invest. The Unitholders of the scheme can benefit by investing specific Rupee amounts periodically, for a continuous period. The SIP allows the investors to invest a fixed amount of Rupees every month or quarter for purchasing additional units of the scheme at NAV based prices. SYSTEMATIC WITHDRAWAL PLANS: Many mutual funds offer withdrawal programs whereby unitholders receive payments from their investments. These payments are usually drawn from the fund's dividend income and capital gain distributions, if any, and from principal only when necessary.
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SYSTEMATIC TRANSFER PROGRAM (STP): A plan that allows the investor to give a mandate to the fund to periodically and systematically transfer a certain amount from one scheme to another. TAKEOVER: A change in the controlling interest of a corporation. A takeover may be a friendly acquisition or a hostile bid. A hostile takeover is usually attempted through a public tender offer. TAXABLE EQUIVALENT YIELD: The interest rate return which must be received on a taxable security to provide the holder the same after-tax return as that earned on a tax-exempt security. TERM: The time during which interest payments will be made on a bond or certificate of deposit. TOTAL RETURN: Return on an investment, taking into account capital appreciation, dividends or interest, and individual tax considerations adjusted for present value and expressed on an annual basis. TRADE DATE: The actual date on which your shares were purchased or sold. The transaction price is determined by the closing Net Asset Value on that date. TRANSACTION DAY: A Transaction day ( Day 'T' commences after the previous working day's cut off time to the following working day's cut off time. Presently 'T' day commences after 2 p.m. of the previous working day and ends at Z p.m. of the following working day. TURNOVER: The extent to which the fund's portfolio is turned over during the course of a year. High turnover results in greater investment expenses and therefore in an erosion of the value of share assets. TURNOVER RATE: A measure of the fund's trading activity calculated by dividing total purchases or sales of portfolio securities (whichever is lower) by the fund's net assets over a period of time. UNDERWRITER: The organisation that acts as the distributor of an initial offer share to broker/dealers and investors and undertakes to subscribe to any under-subscription of the offer. UNIT: The interest of the investors in any of the plans of the Scheme which consists of each Unit representing a share in the assets of the corresponding plan of the Scheme. UNIT HOLDER: A person who holds Unit(s) under any plan of the Scheme. UNIT HOLDER OF RECORD: Unitholders whose names appear on the unitholders register of the concerned plan/ (s) on the date of determination of dividend, subject to realisation of the proceeds towards subscription VALUATION: Calculation of the market value of the assets of a mutual fund scheme at any point of time. VALUE DATE: The date on which a foreign exchange transaction or a cash movement takes place. Can be used interchangeably with settlement date. VALUE STOCKS: Stocks that are considered to be undervalued based upon such ratios as price-to-book or price-to-earnings (P/E). These stocks generally have lower price-to-book and price-earnings ratios, higher dividend yields and lower forecasted growth rates than growth stocks. VOLATILITY: In investing, volatility refers to the ups and downs of the price of an investment. The greater the ups and downs, the more volatile the investment.
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