What are Mutual Funds

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					             PROJECT REPORT
                   ON
         “MUTUAL FUNDS IN INDIA”




              SUBMITTED BY,

      NAME: NIRMAL OMPRAKASH SAINI

       ADMISSION NO: DPGD/OC10/1061

        SPECIALIZATION: FINANCE




WELINGKAR INSTITUTE OF MANAGEMENT
        DEVELOPMENT & RESEARCH

       SUBMISSION YEAR: AUGUST 2012




                                      1
                  INDEX
1. Introduction To Project           5

2. Mutual Funds An Overview          8

3. Fund Structure And Constitution   28

4. SBI Mutual Fund                   33

5. Findings                          58

6. Conclusion                        68

7. Bibliography                      69




                                          2
Executive Summary:
Mutual Funds are financial intermediaries, which collect the saving of investors
and invest them in a large and well-diversified portfolio of securities such as
money market instruments, corporate and government bonds and equity shares
of joint stock companies. A mutual fund is a pool of commingle funds invested
by different investors, who have no contact with each other.

Mutual Fund work in a distinctively manner as compared to other savings
organizations such as savings, post office, non-banking financial companies etc.

Mutual Funds are conceived as institutions for providing small investors with
avenues of investments in the capital market. Since small investors generally do
not have adequate time, knowledge, experience and resources for directly
accessing the capital market, they have to rely on an intermediary, which
undertakes informed investment decision and provides consequential benefits of
professional expertise.

The advantages for the investors are reduction in risk, expert professional
management, diversified portfolios and liquidity of investment and tax benefits.
By pooling their assets through mutual funds, investors achieve economies of
scale. The interests of the investors are protected by the SEBI, which acts as a
watchdog. Mutual Funds are governed by the SEBI (Mutual Funds)
Regulations, 1993.

Funds management is an in-house function. But all other dimensions heavily
rest on non-exclusive outsiders- custodian, banker, distributors, registrar,
advertising and public relations. And for efficient product and service delivery,
funds have to build robust business systems and processes. And as they
economize, some of the key functions have to be internalized for reasons of
service, cost or exclusivity.

Technology can improve customer service, especially in the case of mutual
funds. Customers rarely get an opportunity to interact first-hand, unlike other
retail financial services like loans and banking products. A fund’s ability to
build an edge will depend on its ability to embrace technology.




                                                                                3
 A fund company is typically structured around investment management and
marketing, and both are closely intertwined today as marketing rests on
performance today. Independent and distinct capability can be built in all facets
of business, especially to enhance customer service via technology for a
sustainable business advantage.

Mutual Funds can survive and thrive only if they can live up to the hopes and
trust of their individual members. The project deals with the structure of the
Indian Mutual Funds and it’s constituents. It also classifies the Mutual Funds
schemes and covers its financial planning, marketing and distribution network.




                                                                                4
 Chapter 1

Introduction
    To
  Project




               5
1.1 Aims And Objectives:
Mutual Funds are growing popularity as an Investment Avenue. The main aim
of this project is to study the Mutual Fund Industry and understanding it’s
functioning.


Objectives:
      To understand the basics of Mutual Fund as an Investment Avenue.
      To throw light on the functioning of the Mutual Fund Industry.
      To study the various schemes of Mutual Funds and their investment
       patterns.
      To understand the role of marketing and distributors/agents in Mutual
       Fund Industry.
      To compare Mutual Fund scheme with other popular investment avenues.
      Observe the fund management process of mutual funds.



1.2 Methods of Data Collection:
To achieve the objective of studying the stock market data has been collected.

Research    methodology     carried    for   this   study   can   be   two   types
1.Primary
2.Secondary


PRIMARY:
The data, which has being collected for the first time and it is the original data.
In this project the primary data has been taken from SBI Mutual Fund Manager
(operations) & guide of the project.



                                                                                 6
SECONDARY:
The secondary information is mostly taken from websites, books, journals, etc.




1.3 Limitations:
      The time constraint was one of the major problems.
      The study is limited to the different schemes available under the mutual
       funds selected.
      The study is limited to selected mutual fund schemes.
      The    lack   of   information    sources    for     the   analysis   part.


There are certain malpractices in the mutual fund industry especially such as
Insider Trading and Price Rigging, which cannot be put on record due to the
academic nature of the project. Data on the above malpractices is not even
shared by organizations such as SEBI and AMFI.




                                                                                7
 Chapter 2

MUTUAL FUNDS
    AN
 OVERVIEW




               8
2.1 INTRODUCTION
A Mutual Fund collects saving from small investors, invest them in Government
& Other securities .It is a Systematic Investment Plan (SIP) where each fund
is divided in small fractions called Units.

UTI is a first Mutual Fund company in India (1963).It works on the principles
of “small drop of water make a big ocean.”

Thus, Mutual Fund acts as a gateway to enter into big companies with small
investment.

It is well established fact that in India the household saving have a dominant
role to play in capital formation in the country. Channelising the household
savings to capital markets has been successfully done by mutual funds in India.
The growth of the mutual fund industry in India has been nothing short
phenomenal.

The fund mobilization by mutual funds in India has been on the increase since
their inception in 1964, i.e.with the launch of US-64, the flagship scheme of
UTI. Again it was in 1987 and 1989, when public sector banks and corporations
entered the mutual funds market scene of the country.

Further, keeping in tune with the objective of New Economic Policy of 1991,
mutual funds market was thrown open to private sector during 1993 in India.
then, the investment trend shifted in favour of private sector funds. The corpus
of mutual funds in India has been swelling with almost 60% of the total
investment going into private sector mutual funds today.

Overall growth in mutual funds industry in India is phenomenal inspite of
certain occasional jolts by fly-by-night operators. But the problem that surfaced
in UTI related to mismanagement of funds, in fact, contributed to reduced
                                                                                9
confidence and apathy in the mind of general investors as regards mutual funds
in India. The situation however has taken turn for the good since the division of
UTI into two parts, one being a specified undertaking managing US-64 scheme
and another a UTI mutual fund like any other fund to which the rules and
regulations of SEBI applies.

In short,

A mutual fund is a professionally managed type of collective investment
scheme that pools money from many investors and invests typically in
investment securities (stocks, bonds, short-term money market instruments,
other mutual funds, other securities, and/or commodities such as precious
metals). The mutual fund will have a fund manager that trades (buys and sells)
the fund's investments in accordance with the fund's investment objective. In the
U.S., a fund registered with the Securities and Exchange Commission (SEC)
under both SEC and Internal Revenue Service (IRS) rules must distribute nearly
all of its net income and net realized gains from the sale of securities (if any) to
its investors at least annually. Most funds are overseen by a board of directors
or trustees (if the U.S. fund is organized as a trust as they commonly are) which
is charged with ensuring the fund is managed appropriately by its investment
adviser and other service organizations and vendors, all in the best interests of
the fund's investors.




                                                                                  10
Diagram No: 2.1.1-Mutual Fund cycle




A mutual fund is a professionally managed type of collective investment
    scheme that pools money from many investors and invests typically in
    investment securities (stocks, bonds, short-term money market instruments
    other mutual funds, other securities, an commodities such as precious
    metals) The mutual fund will have a fund manager that buys and sells the
    fund's investments in accordance with the fund's investment objective.
    Mutual funds may invest in many kinds of securities The most common

    securities purchased are "cash" or money market instruments,      stocks,
    bonds,   other mutual fund shares and more exotic instruments such as

    derivatives    like   forwards, futures, options     and   swaps.   Some
    funds' investment objectives define the type of investments in which the
    fund invests. Most mutual funds' investment   portfolios are continually
    monitored by one or more employees within the sponsoring   investment
    adviser or management company,             typically called a   portfolio
    manager and their assistants, who invest the funds assets in accordance
                                                                           11
with its investment objective and trade securities in relation to any net
inflows or outflows of investor capital (if applicable), as well as the
ongoing performance of investments appropriate for the fund. A mutual
fund is advised by the investment adviser under an advisory contract which
generally is subject to renewal annually.




                                                                        12
2.2 HISTORY OF MUTUAL FUND IN INDIA:
The mutual fund industry started in India in 1963 with the formation of UTI, at
the initiative of RBI and the Government of India. The objective then was to
attract the small investors and introduce them to market investment. Since then
the history of Mutual Fund in India can be broadly divided into 5 distinct
phases.

Phase = I – 1964-1987 (Unit Trust of India)
The UTI was the sole player in the industry. Created by an Act in the parliament
in 1963, UTI launched its first product, the Unit Scheme 1964, which is even
today a single largest mutual fund scheme.

Later in 1970s and 80s, UTI started innovating and offering different schemes
to suit the needs of different class of investors. Unit Linked Insurance
Plan(ULIP) was launched in 1971. Six schemes were introduced between 1981
and 1984. During 1984-84, new schemes like Children’s Gift Growth Fund
(1986) and Master share (1987) were launched. Master share could be termed as
the first diversified investment scheme in India. The first Indian offshore fund,
India Fund was launched in August 1986. During 1990s, UTI catered to the
demands of income-oriented schemes by launching monthly income scheme, a
somewhat unusual mutual fund product offering, “Assured Returns”. At the end
of this phase UTI managed assets of RS.6700 crores.

            Mutual Fund Mobilization And Asset Under Management

                                  1987-88

                   Amount          Assets Under       Mobilization as
                                                          % of
                  Mobilized        Management
                                                      Gross Domestic
                  (Rs.Crores)       (Rs.Crores)
                                                          Savings

      UTI            2,175             6,700                3.1%

      TOTAL          2,175             6,700                3.1%


                                                                               13
Phase =II- 1987-1993 (Entry of Public Sector Fund)
In 1987 public sector banks and financial institutions entered the mutual fund
industry. SBI mutual fund was the first non-UTI fund to be set up in November
1987. This was followed by Canbank Mutual Fund launched in December 1987,
LIC Mutual Fund launched in 1989, Indian Bank Mutual Fund in 1990, Bank of
India Mutual Fund, GIC Mutual fund and PNB Mutual Fund.

Significant shift of investors from deposits to mutual fund industry happened
during this period. Most funds were growth oriented closed end funds. By the
end of this period, asset under UTI’s management grew to Rs.38, 247crores and
public sectors fund managed Rs.8757 crores.

From 1987 to 1992-93, the fund industry expanded nearly seven times in terms
of Asset under Management.

            Mutual Fund Mobilization And Asset Under Management

                                  1992-93

                    Amount         Assets Under       Mobilization as
                                                          % of
                   Mobilized       Management
                                                     Gross Domestic
                   (Rs.Crores)      (Rs.Crores)
                                                         Savings

      UTI            11,057           38,247               5.2%

      PUBLIC         1,964             8,757               0.9%
      SECTOR

      TOTAL          13,021           47,004               6.1%




                                                                            14
Phase = III-1993-1996(Emergence Of Private Funds)
A new era in mutual fund industry began with the permission granted for the
entry of private sector funds in 1993. During the year 1993-94, five private
sector mutual funds launched their schemes followed by six others in1994-95.
Foreign fund management companies were also allowed to operate mutual
funds, most of them coming into India through their joint ventures with Indian
promoters. These private funds brought in with them the latest product
innovation, investment management techniques and investor servicing
technology that made the mutual industry a vibrant and growing financial
intermediary.

One influencing factor for the mutual fund industry had been the development
of a SEBI driven regulatory framework. Another important factor had been the
steadily improving performance of several funds themselves.


Phase = IV-1996-1999 (SEBI Regulation For Mutual Funds)
The entire mutual fund industry in India, despite initial hiccups, has since scaled
new heights in terms of mobilization of funds and number of players.

Deregulation and liberalization of Indian economy had introduced competition
and provided impetus to the growth of the industry. Finally more investors
small and large shifting towards mutual funds as opposed to banks or direct
market investments.

More investor friendly regulatory measures had been taken both by SEBI to
protect the investors and by the Government to enhance investor’s returns
through tax benefits. A comprehensive set of regulations for all mutual funds
operating in India had been accomplished with SEBI (Mutual Funds)
Regulation, 1996. These regulations set uniform standards for all mutual funds
and UTI came voluntary SEBI supervision.




                                                                                 15
            Mutual Fund Mobilization And Asset Under Management

                                   1996-99

                     Amount          Assets Under       Mobilization as
                                                            % of
                    Mobilized        Management
                                                        Gross Domestic
                    (Rs.Crores)       (Rs.Crores)
                                                            Savings

      UTI             11,679            53,320              2.79%

      PUBLIC           1,732             8,292              0.08%
      SECTOR

      PRIVATE          7,966             6,860              1.14%
      SECTOR

       TOTAL          21,377            68,472               5.1%




Phase =V-1999-2002
This phase was marked by very rapid growth in the industry, and the significant
increase in the market shares of private sector players. Asset crossed Rs. 1,
00,000 crores. The tax break offered to the mutual funds in 1999 created
arbitrage opportunities for a number of institutional players. Bond funds and
liquid funds registered the highest growth in this period, accounting for nearly
60% of the assets. UTI’s share of the industry dropped to nearly 50%




                                                                              16
2.3 WHY TO DO INVESTMENT IN MUTUAL FUNDS?
A proven principle of sound investment is-do not put all eggs in one basket.
Investment in mutual funds is beneficial as Firstly; they help in pooling of funds
and investing in large basket of shares of different companies. Thus by
investing in diverse companies, mutual funds can protect against unexpected
fall in value of investment.

Secondly, an average investor does not have enough time and resources to
develop professional attitude towards their investment. Here professional fund
managers engaged by mutual funds take desirable investment decision on behalf
of investors so as to make better utilization or resources.

Thirdly, investment in mutual funds is comparatively more liquid because
investor can sell the units in open market or can approach mutual fund to
repurchase the units at declared Net Asset Value depending upon the type of
scheme.

Fourthly, investors can avail tax rebates by investing in different tax-saving
schemes floated by these funds, approved by the Government.

Lastly, operating cost in minimized per head because of large size of investible
funds, thereby releasing more net income for investors.




                                                                                17
2.4 DIFFERENT TYPES OF MUTUAL FUND SCHEMES
 1)   Open-ended Scheme-


      In this scheme size of the fund is not predetermined as entry to or exit
      from the fund is open to investor who can buy or sell its securities to the
      fund at any time. This characteristic imparts greater liquidity to the unit
      of these funds along with the pre-determined repurchase price based on
      declared Net Asset Value. Portfolio mix of such schemes consists of
      actively traded securities in the market, preferably equity shares. As
      investors can anytime withdraw from the fund, therefore, the
      management of such funds is quite tedious.


 2)   Close-ended Scheme-


      This scheme has deposit redemption date unlike open-ended scheme.
      These fund have fixed capital base and are traded among the investors in
      secondary market. The forces of demand & supply, hence determine their
      price. Price is free to deviate from its net asset value. Management of
      such funds is comparatively easier because manager can evolve long-term
      investment plans depending upon the life of the scheme.
              Within these two broad operational classifications it have following
      sub-classification:
         a)   Return-based Classification-
     Income Funds
                    These are for investors who are more concerned about
                    regular returns from investments.
                                                                                18
   Growth Fund
                     Here the objective is to achieve an increase in value of
                     investment through capital appreciation and not the regular
                     income.
   Conservative Funds
                     These funds aim at giving reasonable rate of return in
                     addition to capital appreciation.




         b)    Investment-based Classification
   Equity Funds
               These funds invest in the equity shares of companies and undertake
               greater risk associated with it. This gives good rate of return in
               rising market.
   Bond Funds
              These funds provide greater security to investors by investing in
    bonds,                      debentures, etc. Investment here has no chance of
    appreciation.
   Balanced Funds
              These funds work out a balance in the mix of equity shares and
    bonds.
              Trends in the market will determine which proportion of the mix is
    to
              be increased.




                                                                               19
3)   Sector-based Classification


     These are the funds/schemes that invest in the securities of only those
     sectors or industries as specified in the offer documents.           E.g.
     Pharmaceuticals, Software, Fast Moving Consumer Goods (FMCG),
     Petroleum stocks, etc. The returns in these funds are dependent on the
     performance of the respective sectors/industries. While these funds may
     give higher returns, they are more risky compared to diversified funds.
     Investors need to keep a watch on the performance of those
     sectors/industries and must exit at an appropriate time. They may also
     seek advice of an expert.


4)   Leverage-based Classification


     Here concept of leverage is made use of by borrowings funds from
     market as well as investing along with fund investments thereby making
     leverage benefits available to mutual fund investor, i.e. giving good
     return to investors from the income earned by investing borrowed funds.



5)   Index-based Classification


     These scheme invest in the securities in the same weightage comprising
     of an index. NAVs of such schemes would rise or fall in accordance with
     the rise or fall in the index, though not exactly by the same percentage
     due to some factors. Necessary disclosures in this regard are made in the
     offer document of the mutual fund scheme. These are also exchange
     traded index funds launched by the mutual funds that are traded on the
     stock exchanges.
                                                                            20
6)   Gilt Fund


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




                                                                            21
2.5 The Advantages of Mutual Fund Investing
  1. Spreading The Risk
  When you invest in a mutual fund, you're actually investing in a variety of
  securities within the fund. A professional money manager moves your
  money, as well as that of the other fund investors, among the different
  securities as economic conditions change. When you invest in a single stock
  or bond, on the other hand, you run the risk of losing your money if that one
  security fails to perform.
  2. Low Cost
  According to the Mutual Fund Education Alliance, a portfolio of 50
  individual stocks would require $100,000 in investment capital plus broker
  commissions. When you purchase a mutual fund, you are also diversifying
  your money among a large number of securities, but you can start with as
  little as $1,000 or less. If you purchase a no-load fund, you won't have to pay
  any sales commissions.
  3.   Liquidity
  Mutual funds are liquid assets, meaning you can withdraw your money
  quickly if the need arises. In many cases, it's simply a matter of picking up
  the telephone and calling the fund's customer service line to initiate the
  transaction. You may be able to have the money deposited into your bank
  account in two or three days.


  4.   Convenience
  Most mutual funds allow you to access information via the telephone or
  Internet 24 hours a day. This helps you to keep close tabs on your fund's
  performance. You can even set up an automatic investment plan where a


                                                                              22
specified amount that you choose is deducted from your bank account on a
specific day of each month, which makes investing easy.
5.   Choice
There are mutual funds available for virtually every type of investment want
or need. For example, you can choose a fund that invests solely in foreign
companies or in specific industries. You can also select a fund that best suits
your risk tolerance, ranging from the very conservative to the extremely
risky. This gives investors the ultimate freedom of choice.
6.   Inexpensive Reallocation
Most mutual funds are part of fund families – a series of funds with different
investment objectives that are all issued by the same parent company. Most
fund families allow their shareholders a reasonable number of opportunities
per year to switch their money among the various funds within the family
with little or no service charges applied. Because of this, mutual fund
investors can often reallocate their portfolios at a substantially lower cost
than others who invest directly in the underlying securities.



7. Asset Allocation and Retirement Planning Tools

As a service to their shareholders, many mutual fund companies offer free
services, such as asset allocation optimization software or retirement
planning analyzers, that are designed to help investors select the most
appropriate funds for their needs.
8. A Wide Range Of Investment Style

With literally thousands of mutual funds in existence and more being created
all the time, the odds are good there's a mutual fund that specializes in



                                                                             23
  investing in virtually every investment vehicle, style, and approach that
  investors can imagine.




2.6 The Disadvantages of Mutual Fund Investing


  1.   Management Turnover

  Many investors select mutual funds based on their past performance.
  Unfortunately, with the high rate of management turnover within the asset
  management industry, the managers who were primarily responsible for a
  particular fund's superior performance in the past may no longer be working
  for that company. Therefore, investors should examine not only a fund's past
  performance, but also who was responsible for that performance and whether
  or not the same manager or team is still running the fund.
  2. Investment Style Fluctuation

  An investor who wants to maintain a certain asset allocation has to rely on
  the manager of the fund that he or she selects not to deviate from their stated
  investment styles. Any changes in priorities or investment styles could
  override and defeat the investor's asset allocation.
  3. Panic Selling

  During sharp market downturns, investors often have a tendency to panic.
  When this happens, they look to sell their fund shares. Since the fund
  managers must redeem the shares, they have no choice but to sell the
  underlying securities at a time when there are few, if any, buyers. If not for
  the flood of redemptions, the fund manager would likely not sell the
  underlying securities. Thus, the professional manager's expertise, judgment,


                                                                               24
and objectives are upset and overridden by the actions of the fund's
investors.
4. Commission

With the exception of no-load mutual funds, all other mutual funds have
what brokers refer to as load fees. The three types of load fees are front-end,
back-end and level. A front-end load fee is similar to a commission you pay
to the broker when you buy shares in the fund. A back-end load fee is similar
to a sales commission you pay to the broker when you sell shares in the fund.
A level load fee is a fixed percentage the broker charges you for every year
you keep your mutual fund.


5.   Fees & Expenses
Common fees paid for both no-load and loaded mutual funds include the cost
to manage the fund, marketing, distribution and selling cost fees, operating
and accounting expenses. Other fees include purchase and redemption fees.
The purchase fee is the cost you have to pay to buy the fund, but is not the
same as a front-end load fee. The redemption fee is the cost you pay to
redeem or sell your shares and is not the same as a back-end load fee. You
pay the purchase and redemption fees in addition to front and back end
loads.




6.   Capital Gains Taxes
All mutual fund distributions are taxable in the year the fund pays them out
to you. This includes dividends you reinvest in the mutual fund. If you sell
your shares, the amount you receive from the sale is subject to capital gains
                                                                            25
      taxes. Even if the fund, as a whole, had a negative return in the current tax
      year, if the broker sells any part of the fund for a gain, you will have to pay
      capital gains taxes on the gain from the sale.




2.7 THE DIFFERENT PLANS THAT MUTUAL FUNDS OFFER?

 1)    Growth plan
         Under the growth plan, the investor realizes only the capital appreciation
         on the investment (by an increase in NAV) and does not get any income
         in the form of dividend.


 2)    Income plan
         Under the income plan, the investor realizes income in the form of
         dividend. However, his NAV will fall to the extent of the dividend.


 3)    Dividend Re-investment plan
         Here the dividend accrued on mutual funds is automatically re-invested in
         purchasing additional units in open-ended funds. In most cases mutual
         funds offer the investor an option of collecting dividends or re-investment
         the same.


 4)    Systematic Investment plan(SIP)
         Here the investor is given the option of preparing a predetermine number
         of post-dated cheques in favour of the fund. He will get units on the date
         of the cheque at the existing NAV. For instance, if on 5 th March, he has
         given a post-dated cheque for June 5th, he will get units on 5th June at
         existing NAV.


                                                                                   26
5)   Systematic withdrawal plan
      As opposed to the systematic Investment Plan, the Systematic
      Withdrawal Plan allows the investor the facility to withdraw a pre-
      determined amount/units from his fund at a pre-determined interval. The
      investor’s units will be redeemed at the existing NAV as on that day. The
      unit holder may setup a Systematic Withdrawal Plan on a monthly,
      quarterly or semi-annual or annual basis to: Redeem a fixed number of
      units or redeem enough units to provide a fixed amount of money.


6)   Retirement Pension Plan
      Some schemes are linked with retirement pension. Individuals participate
      in these plans for themselves, and corporate for their employees.



7)   Insurance Plan
      Some schemes launched by UTI and LIC offer insurance cover to
      investors. Like; Tax Saving Schemes, Load or No-load Funds, Sales or
      Repurchase/Redemption Price.etc.




                                                                             27
  Chapter 3

Fund structure
     And
 Constitution




                 28
3.1 Fund Structure And Constituents:
The fund structure of mutual funds in India is governed by the SEBI(Mutual
Funds) Regulation, 1996. These regulations make it mandatory for mutual funds
to have a three-tier structure of Sponsor-Trustee-Asset Management Company
(AMN). The Sponsor is the promoter of the fund and appoints the Trustees. The
trustees are responsible to the investors in the mutual fund, and appoint the AM
for managing the investment portfolio. The AMC is the business face of the
mutual fund, as it manages all the affairs of the mutual fund. The mutual fund
and the AMC have to be registered with SEBI.

The UTI is also structured as a trust. The important difference though, is that
UTI does not have sponsors or a separate AMC. Financial institution and banks
that contributed to the initial capital of the UTI have their representatives on
UTI’s Board of Trustees, which oversees the operations of UTI. The chairman
appointed by the Board, who in turn employs managers and staff to its
activities, manages UTI.




3.2 The Fund Sponsor:

“Sponsor” is defined under SEBI regulations as any person who, acting alone or
in combination of other corporate, established a mutual fund. The sponsor is the
promoter of the mutual fund and registers the same with SEBI.



    Sponsor appoints the trustees, custodians and the AMC with prior approval
     of SEBI, and in accordance with SEBI Regulations.


                                                                              29
    Sponsor must have at least five years track record of business interest in the
     financial markets.



    Sponsor must have been profit making in at least three of the above five
     years.


    Sponsors must contribute at least 40% of the capital of the AMC.




3.3 Trustees:

The mutual fund, which is a trust, may be managed either by a Board of
Trustees-a body of individual, or a Trust Company- a corporate body.

Board of trustees and the trust companies are governed by the provisions on the
Indian Trust Act. If the trustee is a company, it is also subject to the provisions
of the Indian Companies Act. It is the responsibility of the trustees to protect the
interest of investors, whose fund is managed by the AMC. The AMC and other
functionaries are functionally accountable to the trustees.

The trust is created through a document called the Trust Deed that is executed
by the fund sponsor in favour of the trustees. The Trust Deed has to be stamped
and registered according to the Indian Registration Act. The appointment of all
trustees has to be done with the prior approval of SEBI.




                                                                                  30
3.4 The Asset Management Company (AMC)

The role of an AMC is to act as an investment manager of the Trust under the
board supervision and direction of the trustees. The AMC is required to be
approved and registered with the SEBI.

The AMC of a mutual fund must have a net worth of at least Rs.10 crores, at all
times. An AMC cannot be a AMC or Trustee of another mutual fund. The AMC
must always act in interest of the unit holders and report to the trustees with
respect to its activities.




3.5 Custodian And Depositories:

Mutual Funds are in business and selling of securities in large volumes.

Handling these securities in terms of physical delivery and eventually
safekeeping is therefore a specialized activity. The custodian is appointed by
Board of Trustees for safekeeping of securities or participating in any clearing
system through approved depository companies on behalf of the mutual fund
and must fulfill its responsibilities in accordance with the agreement with the
mutual fund. The custodians should be an entity independent of the sponsors
and is required to be registered with SEBI.

The Indian capital markets are moving away from having physical certificate
for securities, to ownership of these securities in “dematerialized” form with a
depository. Thus, a mutual fund’s dematerialization securities holding will be
held by a depository through a depository participant.



                                                                              31
3.6 Bankers:

A fund’s activity involves in dealing with money on continuous basis primarily
with respect to buying and selling units, paying for investments made, receiving
the proceeds on sale of investments and discharging its obligations towards
operating expenses. A fund’s bankers therefore play a crucial role with respect
to its financial dealings by holding its bank accounts and providing its
remittance services.

3.7 Transfer Agents:

Transfer agents are responsible for issuing and redeeming units of the mutual
fund and provide other related services such as preparation of transfer
documents and updating investor records. A fund may choose to carry out this
activity in-house and change the scheme for the service at a competitive market
rate. Where and outside Transfer Agents is used, the fund investor will find the
agent to be an important interface to deal with, since all the investor service that
a fund provide (besides the investment management) are going to be dependent
on the transfer agent.




                                                                                 32
Chapter 4

SBI MUTUAL
  FUND




             33
4.1 Introduction Of SBI Mutual Fund
SBI Mutual Fund is India’s largest bank sponsored mutual fund and has an
enviable track record in judicious investments and consistent wealth creation.

The fund traces its lineage to State Bank of India (SBI) – India’s largest banking
enterprise. The institution has grown immensely since its inception and today it
is India’s largest bank, patronized by over 80% of the top corporate houses of
the country.


SBI Mutual Fund is a joint venture between the State Bank of India and
Society General Asset Management, one of the world’s leading fund
management companies that manages over US$ 500 Billion worldwide.

In twenty years of operation, the fund has launched 38 schemes and
successfully redeemed fifteen of them. In the process it has rewarded its
investors handsomely with consistent returns. A total of over 5.8 million
investors have reposed their faith in the wealth generation expertise of the
Mutual Fund.

Schemes of the Mutual fund have consistently outperformed benchmark indices
and have emerged as the preferred investment for millions of investors and
HNI’s. Today, the fund manages over Rs. 38,782 crores of assets and has a
diverse profile of investors actively parking their investments across 38 active
schemes. (As on December 2009)

The fund serves this vast family of investors by reaching out to them through
network of over 130 points of acceptance, 28 investor service centers, 46
investor service desks and 56 district organizers.

SBI Mutual is the first bank-sponsored fund to launch an offshore fund –
Resurgent India Opportunities Fund.




                                                                               34
SBI Mutual Fund (SBIMF) has been the proud recipient of the

ICRA Online Award – 8 times,

CNBC TV – 18.

Crisil Award 2006 – 4 Awards

The Lipper Award (Year 2005-2006) and

Most recently with the CNBC TV – 18 Crisil Mutual Fund of the Year Award
2007 and 5 Awards for its schemes.




                                                                      35
4.2 How To Invest in SBI Mutual Funds
The SBI Mutual Fund, which takes its name from the State Bank of India, has
been in operation for eighteen years and boasts more than two million investors.
With 30 active funds, or schemes, within the SBI mutual fund itself, the
company offers a variety of strategies for investing. The following will give you
a general idea of how to invest in SBI mutual funds.


Instructions:-
   1. Decide how much you'd be willing to invest in a mutual fund, both

      initially and on a monthly basis. Don't plan on investing more than 10
      percent of your overall investment portfolio.


   2. Look over the online information on the SBI Mutual Funds website on

      each of the funds. From the "Products" tab, choose between Equity
      Schemes, Debt Schemes and Balanced Schemes.


   3. Take the SBI Mutual Funds' Invest Test online to see which fund they

      suggest for you. From the "Learning Center" tab, select "Invest Test" and
      answer each question as honestly as you can.


   4. Choose the SBI mutual fund scheme that sounds the best to you. This

      may or may not be the scheme the Invest Test recommends for you.


   5. Order the prospectuses for the funds you're interested in and read them

      thoroughly. Note any service fees charged.


   6. Compare fees, projected profits and performance charts for each

      prospectus you have.


                                                                                36
  7. Look up the SBI mutual fund's risk level as calculated by Morningstar.


  8. Select the SBI mutual fund you are most interested in, and download the

      appropriate application form. All forms are available by clicking on the
      "Downloads" tab on the home page.


  9. Submit your completed application to the SBI investment office listed on
      the application.

      Investing in mutual funds is not hard, especially when you have a
      professional, registered broker that you trust assisting you. Basically, you
      meet with the broker of your choice who specializes in mutual fund
      investing, consult with him about your investment needs, fill out an
      application and deliver a check in the amount to be invested, and the
      investment process begins. With today's technology and the Internet,
      investing in SBI mutual funds can even be done online by first
      establishing an Internet banking account with the SBI bank. The investor
      will also need a Mutual Fund Identification Number (MIN) which she
      will also obtain from the SBI.
Tips & Warnings:-
     Make sure you have a good understanding of your financial goal for
      investing: Is it for an upcoming purchase? Is it a long-term investment for
      retirement? Is it for a medium-range investment such as your child's
      college fund?
     Take advantage of the planning tools on the SBI website, even if you
      don't end up investing with SBI.
     Mutual funds are a wise investment for those who seek a medium- to
      long-range payoff. They are not the answer for those looking for a quick
      payoff.
                                                                                 37
4.3 How Does an SBI Mutual Fund Make Money?




                 SBI mutual fund has 20 years of knowledge and experience
  and is linked to the largest state bank in India, the Bank of India. SBI mutual
  fund has over 5.4 million investors and is considered to be one of the largest
  mutual funds in the nation.
  With an SBI mutual fund, savings from many investors are pooled together.
  These are investors who have the same financial interests and purpose. Units
  of a fund are purchased according to the investors' needs. The fund manager
  invests the pool of money referred to as a corpus into various securities that
  are a collection of shares, money market ventures and debentures.
  These securities include stocks, bonds, and various other securities.
  When certain holdings are not as successful, they are counterbalanced by
  other securities that are successfully performing well. Often, professional
  money managers are hired to help inexperienced investors make wise
  investment decisions and to oversee the success of the investor's investment.
  When the various securities perform well, the income gained from the capital
  appreciation is then distributed and divided between the investors according
  to the amount of units purchased by each. Mutual funds can supply a high
  return on an investor's money due to investing in a diversified mutual fund
  investment strategy.




                                                                               38
4.4 THE PRODUCTS (SCHEMES, FUNDS) THAT SBI
MUTUAL FUND OFFERS:


Equity Schemes:

                                          Magnum COMMA
      Fund
                                          Magnum Equity Fund
                                          Magnum Global Fund
                                          Magnum Index Fund
                                          Magnum Midcap Fund
                                          Magnum Multicap
      Fund
                                          Magnum Multiplier
      Plus 1993
                                          Magnum NRI
      Investment Fund – Flexi Asset Plan
                                          Magnum Sector Funds
      Umbrella



Debt Schemes:

                                          Magnum Children`s
      Benefit Plan
                                          Magnum Gilt Fund
                                          Magnum Gilt Fund
      (Long Term)


                                                                39
                                 Magnum Gilt Fund
      (Short Term)
                                 Magnum Income Fund
                                 Magnum Income Plus
      Fund
                                 Magnum Income Plus
      Fund (Saving Plan)
                                 Magnum Income Plus
      Fund (Investment Plan)
                                 Magnum Insta Cash
      Fund
                                 Magnum Insta Cash
      Fund -Liquid Floater Plan
                                 Magnum Institutional
      Income Fund
                                 Magnum Monthly
      Income Plan
                                 Magnum Monthly
      Income Plan Floater
                                 Magnum NRI
      Investment Fund
                                 SBI Capital Protection
      Oriented Fund – Series I
                                 SBI Debt Fund Series

Balanced Scheme:

                                 Magnum Balanced
      Fund
                                                         40
Exchange Traded Scheme:

                          SBI Gold Exchange
      Traded Scheme




                  well running
      Schemes, funds of The
              SBI Mutual Fund




                                               41
                   4.5 MAGNUM BALANCED FUND
                      (An Open-ended Balanced Scheme)
Invest In
Magnum Balanced Fund will be investing in equity & equity related instrument
as also debt instrument (including securitized debt), Government Securities &
money market instruments (such as call money market, repos, reverse repos and
any alternative to the call money market as may be directed by the RBI)

   Investment Objective
   To provide investors long term capital appreciation along with the liquidity
   of an Open-ended scheme by investing in a mix of debt and equity. The
   scheme will invest in a diversified portfolio of equities of high growth
   companies and balance the risk through investing the rest in a relatively
   portfolio of debt.
   Asset Allocation Pattern Of The Scheme
            Types Of Instruments           Normal Allocation( % of net assets)
  Equity and equity related instruments Not less than 50%
  Debt instruments like debentures,     Upto 40%
  bonds etc.
  Securitized debt                      Not more than 10% of investments in
                                        debt instruments
  Money Market Instruments              Balance

   Performance Of the Scheme (As on 31st March,2010)
       Compounded                  MBF Returns (%)     CRISIL Balanced Fund
    Annualized Returns                                 Index Returns (%)
  Returns for the last 1               68.67%                 47.70%
  year
  Returns for the last 3               12.69%                  11.44%
  year
  Returns for the last 5               21.02%                  15.95%
  year
  Returns since inception              18.33%                    N.A



                                                                                  42
Source-Prospectus of SBI Mutual Fund
                              (31st March, 2010)




   Plans and Options
   Growth and Dividend option. Dividend option with payout and
   Reinvestment facility.
   Minimum Application Amount
         Purchase            Additional Purchase            Repurchase
         Rs.1000             Multiples of Rs.500              Rs.500

   Benchmark Index
   CRISIL Balanced Index
   Risk Profile of the Scheme
   Mutual Fund Units involves investment risks including the possible loss of
   principal. Please read the SID/OD Carefully for details on risk factor before
   investment.


                 4.6 MAGNUM TAXGAIN SCHEME
                    (Open-ended Equity Saving Scheme (ELSS))
Invest In
Magnum Tax gain Scheme 1993 will be investing in equity and equity related
instruments. Derivatives as also debt instruments and money market instrument
(such as call money market, repos, reverse repos and any alternative to the call
money market as may be directed by the RBI). The liquidity of the scheme’s
investments is inherently restricted by trading volumes and settlement periods.
In the event of an inordinately large number of redemption requests, or of a
restructuring of the scheme’s investment portfolio. These periods may become
Significant.

                                                                              43
Investment Objective
The prime objective of scheme is to deliver the benefit of investment in a
portfolio of equity shares, while offering deduction under section 80c of the
Income-Tax Act, 1961. It also seeks to distribute income periodically
depending on distributable surplus.
Investment in this scheme would be subject to a statutory lock-in of 3 years
from the date of investment to avail section 80c benefits.
Asset Allocation Pattern Of The Scheme
        Types of Instruments            Normal Allocation( % of net assets)
Equity/cum. Convertible Preference                  80-100%
Shares/Fully Convertible Debentures
and Bonds
Money Market Instruments                              00-20%



Performance of The Scheme (As On 31st March, 2010)
     Compounded             MTGS Returns (%)        BSE 100 Returns (%)
  Annualized Returns
Returns for the last 1            86.99%                     88.17%
year
Returns for the last 3            10.84%                     12.16%
year
Returns for the last 5            26.30%                     21.71%
year
Returns since inception           18.50%                     13.87%




                 Source-Prospectus of SBI Mutual Fund
                           (31ST, March, 2010)




                                                                            44
Plans And Option
Dividend & Growth option. Dividend has payout and reinvestment facility.
Minimum Application Amount
      Purchase             Additional Purchase           Repurchase
       Rs.500              Multiples of Rs.500             Rs.500



Benchmark Index
BSE 100
Risk Profile of the Scheme
Mutual Fund Units involves investment risks including the possible loss of
principal. Please read the SID/OD Carefully for details on risk factor before
investment.




                                                                           45
           4.7 MAGNUM MONTHLY INCOME PLAN
   (An open-ended debt scheme Income is not assured and is subject to the
                   availability of distributable surplus)
Investment Objective
To provide regular income, liquidity and attractive returns to the investors
through an actively managed portfolio of debt, equity and money market
instruments.
Asset Allocation Pattern Of The Scheme
       Types Of Instruments             Normal Allocation( % of net assets)
Equity and equity related instruments Not less than 15%
Debt instruments (including           Not less than 85%
securitized debt) & government
securities & Money Market
Instruments
Securitized debt                      Not more than 10% of investments in
                                      debt instruments

Performance of The Scheme (As On 31st March, 2010)
     Compounded           Growth Option Returns CRISIL MIP Blended
  Annualized Returns               (%)          Index Returns (%)
Returns for the last 1           -6.10%                -0.16%
year
Returns for the last 3             2.07%                      5.68%
year
Returns for the last 5             4.20%                      6.07%
year
Returns since inception            6.70%                       N.A



                 Source-Prospectus of SBI Mutual Fund
                           (31ST, March, 2010)




                                                                               46
Options
Monthly Dividend option. Quarterly Dividend option, Annual Dividend
option and Growth Option.
Minimum Application Amount
      Purchase             Additional Purchase            Repurchase
      Rs.10000             Multiples of Rs.500              Rs.500

Benchmark Index
CRISIL MIP Blended Index




Dividend Policy
Monthly, Quarterly & Annual dividends under the Dividend option.
Dividend options offer the facility of payout or reinvestment of Dividend.


Risk Profile of the Scheme
Mutual Fund Units involves investment risks including the possible loss of
principal. Please read the SID/OD Carefully for details on risk factor before
investment.




                                                                             47
            4.8 MAGNUM CHILDREN’S BENEFIT PLAN
                              (Open-ended Scheme)
   Investment Objective
   To provide attractive returns to the Magnum holders/units holders by means
   of capital appreciation through an actively managed portfolio of debt, equity,
   government securities and money market instrument.
   Asset Allocation Pattern Of The Scheme
          Types Of Instruments             Normal Allocation( % of net assets)
  Equity and equity related instruments Not less than 25%
  Debt instruments (including           Upto 100%
  securitized debt) & government
  securities & Money Market
  Instruments
  Securitized debt                      Not more than 10% of investments in
                                        debt instruments

The scheme however intends to invest only 20% of the corpus in equity an
equity related instruments. Any investment in equity and equity related
instruments above 20% but within 25% would depend on market
conditions.


   Performance of The Scheme (As On 31st March, 2010)
       Compounded              MCBP Returns (%)        CRISIL MIP Blended
    Annualized Returns                                 Index Returns (%)
  Returns for the last 1             -1.63%                   -0.16%
  year
  Returns for the last 3              3.84%                     5.68%
  year
  Returns for the last 5              6.18%                     6.07%
  year
  Returns since inception             0.08%                      N.A

                    Source-Prospectus of SBI Mutual Fund
                              (31ST, March, 2010)
                                                                               48
Plans & Options
Growth Plan
Minimum Application Amount
      Purchase             Additional Purchase           Repurchase
      Rs.1500              Multiples of Rs.100            Rs.1000

Benchmark Index
CRISIL MIP Blended Index
Risk Profile of the Scheme
Mutual Fund Units involves investment risks including the possible loss of
principal. Please read the SID/OD Carefully for details on risk factor before
investment.




                                                                           49
              4.9 MAGNUM INCOME PLUS FUND
                       (Open-ended Income Scheme)
To provide attractive returns to the Magnum holders/units holders either
through periodic dividends or through capital appreciation through an
actively managed portfolio of debt, equity and money market instruments.


Asset Allocation Pattern Of The Scheme
Types of instruments        Normal Allocation(%of net
                                      assets)
                           Savings Plan      Investment
                                                Plan
Corporate Debenture and     Upto 100%         Upto 100%
Bonds/PSU, FI,
Government guaranteed
Bonds. Government
Securities including
Securitized Debt and
Internal Bonds
Of which Securitized    Not More than        Not More than
Debt                    10% of the           10% of the
                        investments in       investments in
                        debt instruments     debt
                                             instruments
Of which Securitized     Within SEBI         Within SEBI
Debt                     stipulated limits   stipulated
                                             limits
Equity and equity               Nil             Upto 20%
related instruments
Derivatives                  Within             Within
Instruments              approved limits       approved
                                                 limits
Cash and call and
Money Market                Upto 25 %          Upto 25 %
Instruments


Pursuant to RBI Guidelines, presently Mutual Funds are not allowed to
participate in call Money.
                                                                           50
Only Such Stocks that comprise the BSE 100 index will be considered for
investment under this plan.


Performance of The Scheme (As On 31st March, 2010)
MIPF-Saving Plan
    Compounded             Growth Option(%)     CRISIL Composite
  Annualized Returns                            Bond Index Returns
                                                (%)
Returns for the last 1          -0.67%                  7.30%
year
Returns for the last 3           0.83%                  6.39%
year
Returns for the last 5           0.72%                  4.52%
year
Returns since inception          0.96%                  6.31%

MIPF-Investment Plan
    Compounded             Growth Option(%)     CRISIL Composite
  Annualized Returns                            Bond Index Returns
                                                (%)
Returns for the last 1          -2.12%                 -0.16%
year
Returns for the last 3           3.65%                  5.68%
year
Returns for the last 5           5.87%                  6.07%
year
Returns since inception          5.85%                  6.31%

                 Source-Prospectus of SBI Mutual Fund
                          (31ST, March, 2010)




                 Source-Prospectus of SBI Mutual Fund

                                                                     51
                              (31ST, March, 2010)



   MIPF-Saving plan
   Plans & Options
   Saving Plan with Growth and Dividend Options; Investment plan with
   Growth & Divided options.
   Minimum Application Amount
         Purchase             Additional Purchase             Repurchase
         Rs.25000             Multiples of Rs.5000             Rs.1000

Benchmarking Index
CRISIL Composite Bond Index(Saving Plan); CRISIL MIP Blended Index
(Investment Plan)
Dividend Policy
Dividend would be declared on a quarterly basis under the dividend option of
investment plan. The dividend option under both offers the facility of payout or
reinvestment of dividend.


Risk Profile of the Scheme
Mutual Fund Units involves investment risks including the possible loss of
principal. Please read the SID/OD Carefully for details on risk factor before
investment.




                                                                                52
             4.10 MAGNUM NRI INVESTMENT FUND
               (Open-ended Scheme offering two debt schemes)
Invest In
Magnum NRI Investment fund will be investing in debt instrument (including
Securitized debt and International securities), Government Securities and
money market instruments (such as call money market, repos, reverse repos and
any alternative to the call money market as may be directed by the RBI) as also
equity & equity related instruments.

Investment Objective
To provide attractive returns to the Magnum/Unit holders either through
periodic dividends or through capital appreciation through an actively managed
portfolio of debt, money market instruments.
   Asset Allocation Pattern Of The Scheme
  Types of instruments         Normal Allocation(%of net
                                         assets)
                               Short Term       Long Term
                                Bond Plan        Bond Plan
  Corporate Debenture and      Upto 25% @        Upto 100%
  Bonds/PSU, FI,
  Government guaranteed
  Bonds including
  Securitized Debt and
  International Bonds
  Of which Securitized    Not More than     Not More than
  Debt                    30% of the        30% of the
                          investments in    investments in
                          debt instruments  debt
                                            instruments
  Of which International    Within approved Within
  Bonds                     limits          approved
                                            limits
  Equity and equity related         Nil            Nil
  instruments
  Derivatives Instruments Within approved        Within
                                  limits       approved
                                                 limits
                                                                             53
  Cash and call and Money
  Market Instruments            Upto 100%          Upto 25 %

  Government Securities          Upto 25%        Upto 100%



Pursuant to RBI guidelines, Presently Mutual Funds are not allowed to
participate in call money.
In the case of Short Term Bond Plan, investments in corporate bonds and
debentures will be in securities with maturities not exceeding 5years. The short
term bond plan will be ideal for investors with a short-term investment horizon
(between 6months to 1 year)
In the Long Term Bond plan will be ideal for investors with a medium to long-
term investment horizon(more than one year) wherein investments will be
predominantly in corporate Bonds, Debentures & Government securities. Under
this plan average maturity of the scheme under normal market conditions will
be above 3 years.


   Performance of The Scheme (As On 31st March, 2010)
   Short Term Loan Plan
       Compounded               Short Term Bond          CRISIL Liquid Fund
    Annualized Returns            Returns (%)             Index Returns (%)
  Returns for the last 1             1.12%                     8.81%
  year
  Returns for the last 3              1.14%                     7.56%
  year
  Returns for the last 5              1.66%                     6.33%
  year
  Returns since inception             1.67%                       N.A




                                                                               54
  Long Term Loan Plan
       Compounded             Long Term Bond         CRISIL Liquid Fund
    Annualized Returns          Returns (%)           Index Returns (%)
  Returns for the last 1          -3.31%                   7.30%
  year
  Returns for the last 3           0.78%                     6.39%
  year
  Returns for the last 5           1.10%                     4.52%
  year
  Returns since inception          1.25%                      4.60

                    Source-Prospectus of SBI Mutual Fund
                            (31ST, March, 2010)


                    Source-Prospectus of SBI Mutual Fund
                            (31ST, March, 2010)




Plans And Options

Short Term Bond Plan, Long Term Bond Plan. Both Plans offer Growth and
Dividend Options.

  Minimum Application Amount
         Purchase           Additional Purchase            Repurchase
         Rs.50000           Multiples of Rs.1000            Rs.1000

Benchmark Index
Crisil Liquid Fund Index (Short Term Bond Plan);CRISIL composite Bond
Index(Long Term Bond Plan).




                                                                          55
Dividend Policy

Dividend would be declared on a monthly basis under the dividend option of
short term bond plan. Dividends would be declared on a quarterly basis under
the dividend option of Long Term Bond Plan.


Risk Profile of the Scheme
Mutual Fund Units involves investment risks including the possible loss of
principal. Please read the SID/OD Carefully for details on risk factor before
investment.




                                                                                56
             4.11 SBI Gold Exchange Traded Scheme

Investment Objective

The investment objective of the fund is to seek to provide returns that
closely correspond to returns provided by price of gold through
investment in physical Gold. However the performance of the scheme may
differ from that of the underlying asset due to tracking error.

Asset Allocation

     Instrument          % of Portfolio of Plan          Risk Profile
                                A&B
Debt & Money Market             0-10%                         Low
Instruments
Gold and gold bullion            90-100%               Medium to High


Scheme Highlights

Launch Date                           Minimum Application
March 30, 2009                        Rs. Investment of Rs.5000 and in
                                      multiples of Re. 1 thereafter
Expense Ratio                         1.30%


NAV's

Plan              Latest NAV                        Date
SBI Gold Exchange 1921.7498                         24/09/2010
Traded   Scheme –
Growth Option




                                                                          57
 CHAP-5

FINDINGS



           58
5.1 Some Of The AMC’s Currently Operating
         Name Of The AMC                Nature Of Ownership
Alliance Capital Asset Management   Private Foreign
Pvt Ltd
Birla Sun Life Asset Management     Joint Venture
Company Ltd
Bank of Baroda Asset Management     Banks
Company Ltd
Bank of India Asset Management      Banks
Company Ltd
Canbank Investment Management       Banks
Services Ltd
Cholamandalam Asset Management      Private Indian
Company Ltd
Dundee Asset Management             Private Foreign
Company Ltd.
DSP Merrill Lynch Asset             Private Foreign
Management Company Ltd
Escorts Asset Management Ltd        Private Indian
First India Asset Management Ltd    Institution
GIC Asset Management Company        Institution
Ltd
IDBI Principal Investment           Joint Venture
Management Company Ltd
IL&FS Asset Management Company      Institution
Ltd
ING Investment Asset Management     Private Foreign
Company Private Ltd
J M Capital Management Ltd          Private Indian
Jardine Fleming Asset Management    Private Foreign
Ltd
Kotak Mahindra Asset Management     Private Indian
Company Ltd
Pioneer ITI Asset Management        Private Foreign

                                                              59
Company Ltd
LIC Asset Management Company           Institution
Ltd
Prudential ICICI Asset Management      Joint Venture
Company Ltd
Punjab National Bank Asset             Banks
Management Company Ltd
Reliance Capital Asset Management      Private Indian
Company Ltd
State Bank Of India Funds              Banks
Management Ltd
Sun F & C Asset Management             Private Foreign
Company Ltd
Sundaram Newton Asset                  Private Foreign
Management Company Ltd
Tata TD Waterhouse Asset               Joint Venture
Management Company Ltd
Franklin Templeton Asst                Private Foreign
Management Private Ltd
Unit Trust Of India                    Institution
Zurich Asset Management Company        Private Foreign
Ltd



5.2 Net Asset Value Calculation

A Mutual Fund is a Common investment vehicle where the asset of
mutual funds belongs directly to the investors. The fund does not
account investors subscription as liabilities or deposits but as Unit
Capital. On the other hand, the investments made on behalf of the
investors are reflected on the assets side and are the main constituents
of the balance sheet. There are however liabilities of strictly short-
                                                                      60
term nature that may be part of the balance sheet. The funds Net Asset
defined as Asset minus Liabilities. As There are many investors in a
fund, it is a common practice for mutual funds to compute the share
of each investor on the basis of the value of Net Asset Per Share/Unit,
commonly known as the Net Asset Value (NAV).

NAV=Net Asset Of The Scheme/Number Of Unit Outstanding i.e.,
Market Value Of The Investments + Receivables + Other Accrued
Income + Other Assets - Accrued Expenses - Other payables - Other
Liabilities

Factor Affecting NAV Of Fund:

The major Factors affecting the NAV Of a fund are;

      Sale and purchase of investment securities.
      Sale and repurchase of units.
      Valuation of all investment securities held.
      Accrual of income and expenses.

Frequency Of NAV Calculation:

SEBI Regulations Regarding NAV Computation And Disclosure:

      All Mutual Funds have to disclose their NAV every day, by
       posting it on the AMFI web site by 8 p.m
      Open-ended funds have to compute and disclose their NAVs
       everyday, while the close-ended funds can compute NAVs
       every week, but disclosure has to be made every day.
                                                                     61
      Close-ended schemes not mandatorily listed on can publish
       NAVs according to the periodicity of 1 month to 3 months, as
       permitted by SEBI.




5.3 Who Can Invest In Mutual Funds In India?

Mutual Funds In India Are Open To Investment By

  A.   Residents Including
         1.   Resident Indian Individuals
         2.   Indian Companies
         3.   Indian Trust/Charitable Institutions
         4.   Banks
         5.   Non Banking Finance Companies
         6.   Insurance Companies
         7.   Provident Funds
  B.   Non Resident Including
         1.   Non Resident Income
         2.   Other Corporate Bodies(OCBs)
  C.   Foreign Entities
         1.   Foreign Institutional Investors(FIIs)registered with SEBI.




                                                                           62
5.4 Mutual Fund Investment Options




                 Thousands of mutual funds are available with a number of
  different investment objectives.
  A mutual fund is a pool of investable funds contributed by individual
  investors. Portfolio managers invest the money collectively for the good of
  the shareholders, according to the investment objectives outlined in the
  fund's prospectus. Through the use of a mutual fund, an investor has access
  to a diversified portfolio of securities with one purchase. Although a fund
  may have a specific objective, most funds fall into one of only a few general
  investment categories.
        Stock Funds
  There are many types of stock funds, although they all invest primarily in the
  common stocks of individual companies. Most stock funds are divided by
  the size of the companies they invest in, such as large, mid or small cap.


  Stock funds can seek aggressive growth by investing in smaller companies
  in volatile industries, or they can be more conservative by investing in large,
  well-established companies with consistent earnings histories. An
  investment in a stock fund is typically made by investors seeking capital
  appreciation as their investment objective.

      Bond Funds
  Bond funds invest in the debt securities of companies or governments. U.S.
  government securities funds invest in the highest-rated bonds in terms of
  safety, but may sacrifice some interest income as a result. High yield or

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"junk" bond funds are on the other end of the investment spectrum, investing
in bonds of companies with troubled financial conditions that pay higher
rates of interest as way of compensation for the risk involved.


Municipal bond funds invest in the tax-free bonds issued by state and local
governments. Bond fund investors typically seek income as in investment
objective, with capital appreciation being a secondary goal.

    Balanced Funds
Balanced funds are hybrid funds that generally invest in both bonds and
stocks. As a result, balanced funds tend to offer a moderate opportunity for
growth in addition to the payment of a modest dividend. As stock and bond
markets do not always trade in synch, balanced funds tend to be less volatile
than straight stock or straight bond funds. Balanced funds tend to attract
more conservative investors who seek moderate returns in exchange for less
volatility.

    Index Funds
Index funds seek to replicate the performance of various market indices,
such as the S&P 500 Index. These funds tend to have lower fees than other
mutual funds and provide easy access for investors to recognizable market
proxies. Index funds are often used as the core investment around which
investors build complete portfolios.

    Specialty Funds
Specialty funds provide investors the opportunity to invest in market areas
that may be too risky or difficult to invest in on an individual security basis.
Examples of specialty funds include real estate investment trusts or emerging
markets funds, which invest in securities from countries such as Brazil,
Russia, or India. Other specialty funds invest in specific sectors of the
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  market, such as the financial or pharmaceutical sectors. Specialty funds are
  generally reserved for a small portion of an investor's overall portfolio.




5.5 Mutual Fund Investment Tips
  Invest your money wisely.
  Investing in mutual funds can be an excellent way to secure your financial
  future, but only if you choose the right funds and invests your money
  properly. Keeping your costs down and making sure the funds you choose
  are appropriate will go a long way toward helping you build a nest egg you
  can rely on for retirement, education and other major goals.

      Choose a Low Cost Fund
  Keeping fees and expenses down is one of the most critical parts of investing
  in mutual funds. Those fees and expenses can really eat into your return over
  time, so keeping costs under control is one of the best ways to boost your
  performance in the long term. Low cost stock index funds have expense
  ratios as low as 0.20 percent, so you can use that number as a benchmark
  when you shop for funds. Index funds simply purchase all of the stocks in a
  given index. That helps to keep costs down, since there are no money
  managers to pay and no high expenses to fund.

      Don't Chase Past Performance
  One of the biggest mistakes investors make is jumping into the mutual fund
  that did the best last year. Chasing past performance is generally a losing
  proposition, since few funds are able to consistently do better than the
  market as a whole. When investing in mutual funds, keep in mind that you
  cannot buy past performance. All you can do is investigate the funds



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   available to you and choose the one you feel will provide the best
   performance going forward.

       Invest Consistently
   One of the best ways to build a substantial nest egg with mutual funds is to
   use a dollar cost averaging approach. With dollar cost averaging, you simply
   invest the same amount of money month in and month out, regardless of
   what the stock market is doing. This approach means you automatically buy
   more shares when the stock market is down, and fewer when it is at all time
   highs. This helps to smooth out the ups and downs of the stock market,
   allowing you to accumulate more shares, and more money, over time.


   The best way to put this strategy into action is to set up an automatic
   monthly transfer from your checking or savings account to the mutual fund
   of your choice. Investing the money automatically forces you to save, while
   reducing the risk that you will miss a monthly investment.




5.6 How to Find a Mutual Fund Rating
Instructions
       To find a mutual fund rating, the best place to begin your search is

         Morningstar. Morningstar is the leading research and rating agency for
         mutual funds. They rate mutual funds on a scale of 0 to 5 stars with 5
         being the best. While a mutual fund rating should not be the only
         factor to consider, it is important.


       To use Morningstar, Go to Morningstar’s website and enter the ticker

         symbol for the mutual fund. For example, Type in "TREMX" to look


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        up Trowel Price Emerging Markets mutual fund. This will provide
        you with the mutual fund rating from Morningstar.


      Go to Business week’s website. Enter the ticker symbol again to

        receive the rating. Business week is a leading magazine and paper
        company and are generally unbiased in their ratings. I have used their
        rating systems myself and find them to be safe and reliable.


      If you watch Jim Cramer's Mad Money, then you should know that his

        website, TheStreet.com, provides both stock and mutual fund ratings.
        These ratings are the same as you receive on your report card. A, B, C,
        D, and F.


      Try not to focus on just one companies rating for a specific mutual

        fund. Some companies might be influenced by certain factors that
        sway their decision. For instance, a mutual fund might hold the stock
        of the parent company of the website. Obviously, this is going to
        influence the rating. I would suggest using all the ratings you can find
        to compute an average.




    Tips & Warnings
    Ratings are a good measure of a stocks past and future performance.
    Don't rely solely on ratings




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                               CONCLUSION
The Mutual Fund Industry has gone through ups and downs right from its
modest beginning in the year 1963. The industry is still in its growing stage and
is poised to grow in the year to come.

Today most of the investors in such funds are educated and have a good
knowledge of the working of the funds. More Investors Awareness has to be
created to rope in more and more people in such schemes.

A leading Financial Planner has aptly pointed out, “ Mutual Funds are poised to
be an Indispensable part of Financial Planning. No financial plan will be
complete without a significant exposure to mutual funds schemes.

The level of professionalism and transparency in Mutual Fund Schemes will
ensure good Investor confidence and better performance will ensure lifetime
loyalty to such schemes.”




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                            BIBLIOGRAPHY

This project has been done through extensive research & first person
knowledge. The Following are periodicals have been refered to-

     How Mutual Fund work
              -Albert J fredman & Russ wiles.
     Investment policy & performance of Mutual Fund
              -M.Jayadev.

Books-

     Mutual Funds Growth, Performance & Prospects
              -Jaspal Singh.

Journals-

     SBI Mutual Fund(Common Application-Equity Schemes)As on
      31st march 2010
     SBI Mutual Fund(Common Application-Debt & Liquid
      Schemes)As on 31st march 2010
     SBI Mutual Fund-(ABRIDGED ANNUAL REPORT 2009-
      2010)




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Web sites-

     www.sbimf.com
     www.amfindia.com
     www.valueresearchindia.com
     www.mutualfundsindia.com




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