Ebook Mutual Fund Basics For Entrepreneurs

MUTUAL FUND BASICS
FOR
ENTREPRENEURS
by :
DR. T.K. JAIN
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My words....
Here I present a basic structure of mutual funds in
India. I wish that more people should become
entrepreneurs. An ordinary Indian entrepreneur
wishes to remain an honest entrepreneur and
contribute to the development of nation but we
have to strengthen those institutions which truly
promote entrepreneurship, not just degree
granting institutions. Let us work together to
promote knowledge, wisdom, social development
and education. We believe in free education for
all, free support for all, entrepreneurship
opportunities and training for all. Let us work
together for these goals. ... I alone cant do much, I
need support of perosns like you .......... ...
T.K. Jain
Mutual fund is a trust that pools the savings of a
number of investors who share a common financial
goal. This pool of money is invested in accordance
with a stated objective. The joint ownership of the
fund is thus “Mutual”, i.e. the fund belongs to all
investors. The money thus collected is then
invested in capital market instruments such as
shares, debentures and other securities. The
income earned through these investments and the
capital appreciations realized are shared by its unit
holders in proportion the number of units owned
by them. Thus a Mutual Fund is the most suitable
investment for the common man as it offers an
opportunity to invest in a diversified, professionally
managed basket of securities at a relatively low
cost. A Mutual Fund is an investment tool that
allows small investors access to a well-diversified
portfolio of equities, bonds and other securities.
Each shareholder participates in the gain or loss of
the fund. Units are issued and can be redeemed as
needed. The funds Net Asset value (NAV) is
determined each day.
Investments in securities are spread across a
wide cross-section of industries and sectors and
thus the risk is reduced. Diversification reduces the
risk because all stocks may not move in the same
direction in the same proportion at the same time.
Mutual fund issues units to the investors in
accordance with quantum of money invested by
them. Investors of mutual funds are known as unit
holders.
When an investor subscribes for the units of a

mutual fund, he becomes part owner of the assets
of the fund in the same proportion as his
contribution amount put up with the corpus (the
total amount of the fund). Mutual Fund investor is
also known as a mutual fund shareholder or a unit
holder.
Any change in the value of the investments made
into capital market instruments (such as shares,
debentures etc) is reflected in the Net Asset Value
(NAV) of the scheme. NAV is defined as the market
value of the Mutual Fund scheme's assets net of its
liabilities. NAV of a scheme is calculated by
dividing the market value of scheme's assets by the
total number of units issued to the investors.
ADVANTAGES OF MUTUAL FUND
• Portfolio Diversification
• Professional management
• Reduction / Diversification of Risk
• Liquidity
• Flexibility & Convenience
• Reduction in Transaction cost
• Safety of regulated environment
• Choice of schemes
• Transparency
DISADVANTAGE OF MUTUAL FUND
• No control over Cost in the Hands of an Investor
• No tailor-made Portfolios
• Managing a Portfolio Funds
• Difficulty in selecting a Suitable Fund Scheme
HISTORY OF THE INDIAN MUTUAL FUND

INDUSTRY
The mutual fund industry in India started in 1963

with the formation of Unit Trust of India, at the
initiative of the Government of India and Reserve
Bank. Though the growth was slow, but it
accelerated from the year 1987 when non-UTI
players entered the Industry.
In the past decade, Indian mutual fund industry

had seen a dramatic improvement, both qualities
wise as well as quantity wise. Before, the monopoly
of the market had seen an ending phase; the Assets
Under Management (AUM) was Rs67 billion. The
private sector entry to the fund family raised the
Aum to Rs. 470 billion in March 1993 and till April
304; it reached the height if Rs. 1540 billion.
The Mutual Fund Industry is obviously growing at

a tremendous space with the mutual fund industry
can be broadly put into four phases according to
the development of the sector. Each phase is briefly
described as under.
First Phase – 1964-87
Unit Trust of India (UTI) was established on 1963

by an Act of Parliament by the Reserve Bank of
India and functioned under the Regulatory and
administrative control of the Reserve Bank of
India. In 1978 UTI was de-linked from the RBI and
the Industrial Development Bank of India (IDBI)
took over the regulatory and administrative control
in place of RBI. The first scheme launched by UTI
was Unit Scheme 1964. At the end of 1988 UTI had
Rs.6,700 crores of assets under management.
Second Phase – 1987-1993 (Entry of Public

Sector Funds)
1987 marked the entry of non- UTI, public sector

mutual funds set up by public sector banks and Life
Insurance Corporation of India (LIC) and General
Insurance Corporation of India (GIC). SBI Mutual
Fund was the first non- UTI Mutual Fund
established in June 1987 followed by Canbank
Mutual Fund (Dec 87), Punjab National Bank
Mutual Fund (Aug 89), Indian Bank Mutual Fund
(Nov 89), Bank of India (Jun 90), Bank of Baroda
Mutual Fund (Oct 92). LIC established its mutual
fund in June 1989 while GIC had set up its mutual
fund in December 1990.At the end of 1993, the
mutual fund industry had assets under
management of Rs.47,004 crores.
Third Phase – 1993-303 (Entry of Private

Sector Funds)
1993 was the year in which the first Mutual Fund
Regulations came into being, under which all
mutual funds, except UTI were to be registered and
governed. The erstwhile Kothari Pioneer (now
merged with Franklin Templeton) was the first
private sector mutual fund registered in July 1993.
The 1993 SEBI (Mutual Fund) Regulations were

substituted by a more comprehensive and revised
Mutual Fund Regulations in 1996. The industry
now functions under the SEBI (Mutual Fund)
Regulations 1996. As at the end of January 303,
there were 33 mutual funds with total assets of Rs.
1,21,805 crores.
Fourth Phase – since February 303
In February 303, following the repeal of the Unit

Trust of India Act 1963 UTI was bifurcated into two
separate entities. One is the Specified Undertaking
of the Unit Trust of India with assets under
management of Rs.29,835 crores as at the end of
January 303, representing broadly, the assets of US
64 scheme, assured return and certain other
schemes
The second is the UTI Mutual Fund Ltd, sponsored

by SBI, PNB, BOB and LIC. It is registered with
SEBI and functions under the Mutual Fund
Regulations. consolidation and growth. As at the
end of September, 304, there were 29 funds, which
manage assets of Rs.153108 crores under 421
schemes.
STRUCTURE OF THE INDIAN MUTUAL

FUND INDUSTRY
Mutual fund is a trust that pools the savings of a number of

investors who share a common financial goal. This pool of
money is invested in accordance with a stated objective. The
joint ownership of the fund is thus “Mutual”, i.e. the fund
belongs to all investors. The money thus collected is then
invested in capital market instruments such as shares,
debentures and other securities. The income earned through
these investments and the capital appreciations realized are
shared by its unit holders in proportion the number of units
owned by them. Thus a Mutual Fund is the most suitable
investment for the common man as it offers an opportunity
to invest in a diversified, professionally managed basket of
securities at a relatively low cost. A Mutual Fund is an
investment tool that allows small investors access to a well-
diversified portfolio of equities, bonds and other securities.
Each shareholder participates in the gain or loss of the fund.
Units are issued and can be redeemed as needed. The funds
Net Asset value (NAV) is determined each day.
Investments in securities are spread across a wide cross-

section of industries and sectors and thus the risk is
reduced. Diversification reduces the risk because all stocks
may not move in the same direction in the same proportion
at the same time. Mutual fund issues units to the investors
in accordance with quantum of money invested by them.
Investors of mutual funds are known as unit holders.
When an investor subscribes for the units of a mutual fund,

he becomes part owner of the assets of the fund in the same
proportion as his contribution amount put up with the
corpus (the total amount of the fund). Mutual Fund investor
is also known as a mutual fund shareholder or a unit holder.
Any change in the value of the investments made into capital
market instruments (such as shares, debentures etc) is
reflected in the Net Asset Value (NAV) of the scheme. NAV
is defined as the market value of the Mutual Fund scheme's
assets net of its liabilities. NAV of a scheme is calculated by
dividing the market value of scheme's assets by the total
number of units issued to the investors.
The largest categories of Mutual Funds are the ones floated

by the private sector and by Foreign Asset Management
Companies. The largest of these are Prudential ICICI AMC
and Birla Sun Life AMC. The aggregate corpus of assets
managed by this category of AMCs is in excess of Rs.350 bn.
Earlier the Indian Mutual Fund industry was dominated by

the Unit Trust of India which has a total corpus of Rs.700 bn
collected from more than 20 million investors. The UTI has
many funds/schemes in all categories i.e. equity, balanced,
income etc. with some being open-ended and some being
closed-ended. The Unit Scheme 1964 commonly referred to
as US 64, which is a balanced fund, is the biggest scheme
with a corpus of about Rs.200 bn. UTI was floated by
financial institutions and is governed by a special Act of
Parliament. Most of its investors believe that the UTI is
government owned and controlled, which, while legally
incorrect, is true for all practical purposes.
The second largest categories of mutual funds are the ones

floated by nationalized banks. Can bank Asset Management
floated by Canara Bank and SBI Funds Management floated
by the State Bank of India are the largest of these. GIC AMC
floated by the General Insurance Corporation and Jeevan
Bima Sahayog AMC floated by the LIC are some of the other
prominent ones. The aggregate corpus of funds managed by
this category of AMCs is about Rs.200 bn.
ABOUT MUTUAL FUNDS
A Mutual Fund is a trust that pools the savings of a number

of investors who share a common financial goal. The money
thus collected is then invested in capital market instruments
such as shares, debentures and other securities. The income
earned through these investments and the capital
appreciation realized is shared by its unit holders in
proportion to the number of units owned by them. Thus a
Mutual Fund is the most suitable investment for the
common man as it offers an opportunity to invest in a
diversified, professionally managed basket of securities at a
relatively low cost. The flow chart below describes broadly
the working of a mutual fund.
Saving AMC
s
Trus Investment
t s
Unit
Unit s Return
holders s
Registrar
Trust
SEBI
Custodian AMC
• The structure of Mutual Funds in India is governed by

SEBI (Mutual Fund) Regulations, 1996.
• It is mandatory to have a three tier structure of Sponsor –

Trustee – Asset Management Company.
• The trust is established by a Sponsor or more than one
sponsor who is like a promoter of a company. He appoints
the Trustees who are responsible to the investors of the
fund.
• The Trustees of the mutual fund hold its property for the
benefit of the unit holders.
• Asset Management Company (AMC) approved by SEBI is

the business face of the mutual fund as it manages all the
affairs of the fund by making investments in various types
of securities.
• Custodian, who is registered with SEBI, holds the

securities of various schemes of the funds in its
custody.
WHY MUTUAL FUNDS?
• An investor normally prioritizes his investment needs
before undertaking an investment. So different goals will
be allocated different proportions of the total disposable
amount. Investments for specific goals normally find their
way into the debt market as risk reduction is of prime
importance. This is the area for the risk-averse investors
and here, mutual funds are generally the best option. The
reasons are not difficult to see.
• One can avail of the benefits of better returns with added

benefits of anytime liquidity by investing in open-ended
debt funds at lower risk. Many people have burnt their
fingers by investing in fixed deposits of companies who
were assuring high returns but have gone bust in course of
time leading to distraught investors as well as pending
cases in the Company Law Board.
• This risk of default by any company that one has chosen to
invest in, can be minimized by investing in mutual funds
as the fund managers analyze the companies’ financials
more minutely than an individual can do as they have the
expertise to do so. They can manage the maturity of their
portfolio by investing in instruments of varied maturity
profiles. Since there is no penalty on pre-mature
withdrawal, as in the cases of fixed deposits, debt funds
provide enough liquidity. Moreover, mutual funds are
better placed to absorb the fluctuations in the prices of the
securities as a result of interest rate variation and one can
benefits from any such price movement.
• Apart from liquidity, these funds have also provided very
good post-tax returns on year to year basis. Even
historically, we find that some of the debt funds have
generated superior returns at relatively low level of risks.
On an average debt funds have posted returns over 10
percent over one-year horizon. The best performing funds
have given returns of around 14 percent in the last one-
year period. In nutshell we can say that these funds have
delivered more than what one expects of debt avenues
such as post office schemes or bank fixed deposits.
Though they are charged with a dividend distribution tax
on dividend payout at 10 percent (plus a surcharge of 10
percent), the net income received is still tax free in the
hands of investor and is generally much more than all
other avenues, on a post tax basis.
• Moving up in the risk spectrum, we have people who
would like to take some risk and invest in equity
funds/capital market. However, since their appetite for
risk is also limited, they would rather have some exposure
to debt as well. For these investors, balanced funds
provide an easy route of investment. Armed with the
expertise of investment techniques, they can invest in
equity as well as good quality debt thereby reducing risks
and providing the investor with better returns than he
could otherwise manage. Since they can reshuffle their
portfolio as per market conditions, they are likely to
generate moderate returns even in pessimistic market
conditions.
• This risk of default by any company that one has chosen to
invest in, can be minimized by investing in mutual funds
as the fund managers analyze the companies’ financials
more minutely than an individual can do as they have the
expertise to do so. They can manage the maturity of their
portfolio by investing in instruments of varied maturity
profiles. Since there is no penalty on pre-mature
withdrawal, as in the cases of fixed deposits, debt funds
provide enough liquidity. Moreover, mutual funds are
better placed to absorb the fluctuations in the prices of the
securities as a result of interest rate variation and one can
benefits from any such price movement.
• Next come the risk takers. Risk takers by their very
nature, would not be averse to investing in high-risk
avenues. Capital markets find their fancy more often than
not, because they have historically generated better
returns than any other avenue, provided, the money was
judiciously invested. Though the risk associated is
generally on the higher side of the spectrum, the return-
potential compensates for the risk attached.
• Capital markets interest people, albeit not all for there are
several problems associated. First issue is that of
expertise. While investing directly into capital market one
has to be analytical enough to judge the valuation of the
stock and understand the complex undertones of the
stock. One needs to judge the right valuation for exiting
the stock too. It is very difficult for a small investor to
keep track of the movements of the market. Entrusting the
job to experts, who watch the trends of the market and
analyze the valuations of the stocks will solve this problem
for an investor. Mutual funds specialize in identification
of stocks through dedicated experts in the field and this
enables them to pick stocks at the right moment. Sector
funds provide an edge and generate good returns if the
particular sector is doing well.
• Next problem is that of funds/money. A single person
can’t invest in multiple high-priced stocks for the sole
reason that his pockets are not likely to be deep enough.
This limits him from diversifying his portfolio as well as
benefiting from multiple investments.
• Here again, investing through MF route enables an
investor to invest in many good stocks and reap benefits
even through a small investment. This not only diversifies
the portfolio and helps in generating returns from a
number of sectors but reduces the risk as well. Though
identification of the right fund might not be an easy task,
availability of good investment consultants and
counselors will help investors take informed decision.
How are the Mutual Funds Structured?

The Mutual Funds are structured in two forms: Company
form and Trust form.
• Company Form: These forms of mutual funds are

more popular in US.
• Trust Form: In India, mutual funds are organized as

Trusts. The Trust is either managed by a Board of
Trustees or by a Trustee Company.
There must be at least 4 members in the Board of
Trustees and at least 2/3 of the members of the board
must be independent.
NOTE: Trustee of one mutual fund cannot be a trustee
of another mutual fund.
Unit Trusts – Constituents:

A Mutual Fund is set up in the form of a Trust which has the
following constituents:-
1. Fund Sponsor
2.Mutual Fund as Trust
3.Asset Management Company
4.Other Fund Constituents
4.1. Custodian and Depositors
4.2.Brokers
4.3.Transfer Agent
4.4.Distributors
FUND SPONSOR
What a promoter is to a company, a sponsor is to a mutual

fund. The sponsor initiates the idea to set up a mutual fund.
It could be a financial services company, a bank or a
financial institution. It could be Indian or foreign. It could
do it alone or through a joint venture. In order to run a
mutual fund in India, the sponsor has to obtain a license
from SEBI. For this, it has to satisfy certain conditions, such
as on capital and profits, track record (at least five years in
financial services), default-free dealings and a general
reputation for fairness. The sponsor must have been profit
making in at least 3 years of the above 5 years.
The Sponsor appoints the Trustees, Custodian and the AMC

with the prior approval of SEBI and in accordance with SEBI
Regulations. Like the company promoter, the sponsor takes
big-picture decisions related to the mutual fund, leaving
money management and other such nitty-gritty to the other
constituents, whom it appoints. The sponsor should inspire
confidence in you as a money manager and, preferably, be
profitable. Financial muscle, so long as it is complemented
by good fund management, helps, as money is then not an
impediment for the mutual fund- it can hire the best talent,
invest in technology and continuously offer high service
standards to the investors.
In the days of assured return schemes, sponsors also had to

fulfill return promises made to the unit holders. This
sometimes meant meeting shortfalls from their own pockets,
as the government did for UTI. Now that assured return
schemes are passed, such bailouts won’t be required. All
things considered, choose sponsors who are good money
managers, who have a reputation for fair business practices
and who have deep pockets.
TRUST
The Mutual Fund is constituted as a Trust in accordance

with the provisions of the Indian Trusts Act, 1882 by the
Sponsor. The trust deed is registered under the Indian
Registration Act, 1908. The Trust appoints the Trustees who
are responsible to the investors of the fund.
TRUSTEES
Trustees are like internal regulators in a mutual fund, and

their job is to protect the interests of the unit holders.
Trustees are appointed by the sponsors, and can be either
individuals or corporate bodies. In order to ensure they are
impartial and fair, SEBI rules mandate that at least two-
thirds of the trustees be independent, i.e., not have any
association with the sponsor.
Trustees appoint the AMC, which subsequently, seeks their

approval for the work it does, and reports periodically to
them on how the business being run. Trustees float and
market schemes, and secure necessary approvals. They
check if the AMCs investments are within defined limits and
whether the fund’s assets are protected. Trustees can be held
accountable for financial irregularities in the mutual fund.
Rights of the Trustees:

 Trustees appoint the AMC in consultation with the
sponsor and according to the SEBI Regulations.
 All Mutual Fund Schemes floated by the AMC have to

be approved by the Trustees.
 Trustees can seek information from the AMC regarding

the operations and compliance of the mutual fund.
 Trustees can seek remedial actions from AMC, and in

cases can dismiss the AMC.
 Trustees review and ensure that the net worth of the

AMC is according to the stipulated norms, every
quarter.
Obligations of the Trustees:
 Trustees must ensure that the transactions of the
mutual fund are in accordance with the trust deed.
 Trustees must ensure that the AMC has systems and

procedures in place.
 Trustees must ensure due diligence on the part of AMC

in the appointment of constituents and business
associates.
 Trustees must furnish to the SEBI, on half yearly basis a

report on the activities of the AMC.
 Trustees must ensure compliance with SEBI

Regulations.
ASSET MANAGEMENT COMPANY (AMC)
An AMC is the legal entity formed by the sponsor to run a

mutual fund. The AMC is usually a private limited company
in which the sponsors and their associates or joint venture
partners are the shareholders. The trustees sign an
investment agreement with the AMC, which spells out the
functions of the AMC. It is the AMC that employs fund
managers and analysts, and other personnel. It is the AMC
that handles all operational matters of a mutual fund – from
launching schemes to managing them to interacting with
investors.
The people in the AMC who should matter the most to you
are those who take investment decisions. There is the head
of the fund house, generally referred to as the Chief
Executive Officer (CEO). Under him comes the Chief
Investment Officer (CIO), who shapes the fund’s investment
philosophy, and fund managers, who manages its schemes.
They are assisted by a team of analysts, who track markets,
sectors and companies.
Although these people are employed by the AMC, its you,

the unit holders, who pays their salaries, partly or wholly.
Each scheme pays the AMC an annual ‘fund management
fee’, which is linked to the scheme size and results in a
corresponding drop in your return. If a scheme’s corpus is
up to Rs.100 crores it pays 1.25% of its corpus a year; on
over Rs.100 crores, the fee is 1% of the corpus. So, if a fund
house has two schemes, with a corpus of Rs.100 crores and
Rs.200 crores respectively, the AMC will earn Rs.3.25 crore
(1.25+2) as fund management fee that year.
If an AMCs expenses for the year exceed what it earns as

fund management fee from its schemes, the balance has to
be met by the sponsor. Again, financial strength comes into
play: a cash-rich sponsor can easily pump in money to meet
short falls, while a sponsor with less financial clout might
force the AMC to trim costs, which could well turn into an
exercise in cutting corners.
Regulatory requirements for the AMC:
 Only SEBI registered AMC can be appointed as

investment managers of mutual funds.
 AMC must have a minimum net worth of Rs.10 crores

at all times.
 An AMC cannot be an AMC or Trustee of another

Mutual Fund.
 AMCs cannot indulge in any other business, other than
that of asset management
 At least half of the members of the Board of an AMC

have to be independent.
 The 4th schedule of SEBI Regulations spells out rights

and obligations of both trustees and AMCs.
Obligations of the AMC:
 Investments have to be according to the investment

management agreement and SEBI regulations.
 The actions of its employees and associates have to be

as mandated by the trustees.
 AMCs have to submit detailed quarterly reports on the

working and performance of the mutual fund.
 AMCs have to make the necessary statutory disclosures
on portfolio, NAV and price to the investors.
Restrictions on the AMC:
 AMCs cannot launch a scheme without the prior

approval of the trustees.
 AMCs have to provide full details of the investments by

employees and Board members in all cases where the
investment exceeds Rs.1 lakh.
 AMCs cannot take up any activity that is in conflict with

the activities of the mutual fund.
Conditions under which two AMCs can be merged:

SEBI Regulations require the following:
 SEBI and Trustees of both the funds must approve of
the merger.
 Unit holders should be notified of the merger, and
provided the option to exit at NAV without load.
Conditions under which an AMC can be taken over:
SEBI approval is required for the change of ownership and
unit holders have to be informed of the takeover.
Scheme take over:

If an existing mutual fund scheme is taken over by another
AMC, it is called as scheme take over. The two mutual funds
continue to exist. Trustee and SEBI approval and
notification of the unit holders are required for scheme take
over.
CUSTODIAN
A custodian handles the investment back office of a mutual

fund. Its responsibilities include receipt and delivery of
securities, collection of income, distribution of dividends
and segregation of assets between the schemes. It also track
corporate actions like bonus issues, right offers, offer for
sale, buy back and open offers for acquisition. The sponsor
of a mutual fund cannot act as a custodian to the fund. This
condition, formulated in the interest of investors, ensures
that the assets of a mutual fund are not in the hands of its
sponsor. For example, Deutsche Bank is a custodian, but it
cannot service Deutsche Mutual Fund, its mutual fund arm.
BROKERS
Role of Brokers in a Mutual Fund:
 They enable the investment managers to buy and sell

securities.
 Brokers are the registered members of the stock

exchange.
 They charge a commission for their services.
 In some cases, provide investment managers with

research reports.
 Act as an important source of market information.
REGISTRAR OR TRANSFER AGENTS
Registrars, also known as the transfer agents, are
responsible for the investor servicing functions. This
includes issuing and redeeming units, sending fact sheets
and annual reports. Some fund houses handle such
functions in-house. Others outsource it to the Registrars;
Karvy and CAMS are the more popular ones. It doesn’t really
matter which model your mutual fund opt for, as long as it is
prompt and efficient in servicing you. Most mutual funds, in
addition to registrars, also have investor service centers of
their own in some cities.
Some of the investor – related services are:-
 Processing investor applications.
 Recording details of the investors.
 Sending information to the investors.
 Processing dividend payout.
 Incorporating changes in the investor information.
 Keeping investor information up to date.
DISTRIBUTORS
Role of Selling and Distribution Agents:
 Selling agents bring investor’s funds for a commission.
 Distributors appoint agents and other mechanisms to

mobilize funds from the investors.
 Banks and post offices also act as distributors.
The commission received by the distributors is split into

initial commission which is paid on mobilization of funds
and trail commission which is paid depending on the time
the investor stays with the fund.
TYPES OF MUTUAL FUNDS
Mutual fund schemes may be classified on the basis of its
structure and its investment objective.
By Structure:
 Open-ended Funds
An open-end fund is one that is available for subscription all

through the year. These do not have a fixed maturity.
Investors can conveniently buy and sell units at Net Asset
Value ("NAV") related prices. The key feature of open-end
schemes is liquidity.
 Closed-ended Funds
A closed-end fund has a stipulated maturity period which

generally ranging from 3 to 15 years. The fund is open for
subscription only during a specified period. Investors can
invest in the scheme at the time of the initial public issue
and thereafter they can buy or sell the units of the scheme
on the stock exchanges where they are listed. In order to
provide an exit route to the investors, some close-ended
funds give an option of selling back the units to the Mutual
Fund through periodic repurchase at NAV related prices.
SEBI Regulations stipulate that at least one of the two exit
routes is provided to the investor.
 Interval Funds
Interval funds combine the features of open-ended and

close-ended schemes. They are open for sale or redemption
during pre-determined intervals at NAV related prices.
By Investment Objective:
 Growth Funds
The aim of growth funds is to provide capital appreciation

over the medium to long- term. Such schemes normally
invest a majority of their corpus in equities. It has been
proven that returns from stocks, have outperformed most
other kind of investments held over the long term. Growth
schemes are ideal for investors having a long-term outlook
seeking growth over a period of time.
 Income Funds
The aim of income funds is to provide regular and steady

income to investors. Such schemes generally invest in fixed
income securities such as bonds, corporate debentures and
Government securities. Income Funds are ideal for capital
stability and regular income.
 Balanced Funds
The aim of balanced funds is to provide both growth and

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

preservation of capital and moderate income. These
schemes generally invest in safer short-term instruments
such as treasury bills, certificates of deposit, commercial
paper and inter-bank call money. Returns on these schemes
may fluctuate
depending upon the interest rates prevailing in the market.
These are ideal for Corporate and individual investors as a
means to park their surplus funds for short periods.
 Load Funds
A Load Fund is one that charges a commission for entry or
exit. That is, each time you buy or sell units in the fund, a
commission will be payable. Typically entry and exit loads
range from 1% to 2%. It could be worth paying the load, if
the fund has a good performance history.
 No-Load Funds
A No-Load Fund is one that does not charge a

commission for entry or exit. That is, no commission is
payable on purchase or sale of units in the fund. The
advantage of a no load fund is that the entire corpus is put
to work.
Other Schemes:
 Tax Saving Schemes
These schemes offer tax rebates to the investors under

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

specified in the offer document. The investment of these
funds is limited to specific industries like InfoTech, FMCG,
and Pharmaceuticals etc.
 Index Schemes
Index Funds attempt to replicate the performance of a

particular index such as the BSE Sensex or the NSE 50.
 Sectoral Schemes:-
Sectoral Funds are those, which invest exclusively in a

specified industry or a group of industries or various
segments such as 'A' Group shares or initial public
offerings.
BENEFITS OF MUTUAL FUND INVESTMENT
Professional Management
Mutual Funds provide the services of experienced and

skilled professionals, backed by a dedicated investment
research team that analyses the performance and prospects
of companies and selects suitable investments to achieve the
objectives of the scheme.
Diversification
Mutual Funds invest in a number of companies across a

broad cross-section of industries and sectors. This
diversification reduces the risk because seldom do all stocks
decline at the same time and in the same proportion. You
achieve this diversification through a Mutual Fund with far
less money than you can do on your own.
Convenient Administration
Investing in a Mutual Fund reduces paperwork and helps
you avoid many problems such as bad deliveries, delayed
payments and follow up with brokers and companies.
Mutual Funds save your time and make investing easy and
convenient.
Return Potential
Over a medium to long-term, Mutual Funds have the
potential to provide a higher return as they invest in a
diversified basket of selected securities.
Low Costs
Mutual Funds are a relatively less expensive way to invest
compared to directly investing in the capital markets
because the benefits of scale in brokerage, custodial and
other fees translate into lower costs for investors.
Liquidity
In open-end schemes, the investor gets the money back
promptly at net asset value related prices from the Mutual
Fund. In closed-end schemes, the units can be sold on a
stock exchange at the prevailing market price or the investor
can avail of the facility of direct repurchase at NAV related
prices by the Mutual Fund.
Transparency
You get regular information on the value of your investment
in addition to disclosure on the specific investments made
by your scheme, the proportion invested in each class of
assets and the fund manager's investment strategy and
outlook.
Flexibility
Through features such as regular investment plans, regular
withdrawal plans and dividend reinvestment plans, you can
systematically invest or withdraw funds according to your
needs and convenience.
Affordability
Investors individually may lack sufficient funds to invest in
high-grade stocks. A mutual fund because of its large corpus
allows even a small investor to take the benefit of its
investment strategy.
Choice of Schemes
Mutual Funds offer a family of schemes to suit your varying
needs over a lifetime.
Well Regulated
All Mutual Funds are registered with SEBI and they
function within the provisions of strict regulations designed
to protect the interests of investors. The operations of
Mutual Funds are regularly monitored by SEBI.
RISKS ASSOCIATED WITH MUTUAL
FUNDS
The most important relationship to understand is the risk-

return trade-off. Higher the risk greater the
returns/loss and lower the risk lesser the
returns/loss.Hence it is up to you, the investor to decide
how much risk you are willing to take. In order to do this
you must first be aware of the different types of risks
involved with your investment decision.
MARKET RISK
Sometimes prices and yields of all securities rise and fall.
Broad outside influences affecting the market in general lead
to this. This is true, may it be big corporations or smaller
mid-sized companies. This is known as Market Risk. A
Systematic Investment Plan (“SIP”) that works on the
concept of Rupee Cost Averaging (“RCA”) might help
mitigate this risk.
CREDIT RISK
The debt servicing ability (may it be interest payments or
repayment of principal) of a company through its cashflows
determines the Credit Risk faced by you. This credit risk is
measured by independent rating agencies like CRISIL who
rate companies and their paper. An ‘AAA’ rating is
considered the safest whereas a ‘D’ rating is considered poor
credit quality. A well-diversified portfolio might help
mitigate this risk.
INFLATION RISK
Things you hear people talk about: “Rs. 100 today is worth
more than Rs. 100 tomorrow.” “Remember the time when a
bus ride costed 50 paisa?” “Mehangai Ka Jamana Hai.”
The root cause , Inflation. Inflation is the loss of purchasing
power over time. A lot of times people make conservative
investment decisions to protect their capital but end up with
a sum of money that can buy less than what the principal
could at the time of the investment. This happens when
inflation grows faster than the return on your investment. A
well-diversified portfolio with some investment in equities
might help mitigate this risk.
INTEREST RATE RISK

In a free market economy interest rates are difficult if not
impossible to predict. Changes in interest rates affect the
prices of bonds as well as equities. If interest rates rise the
prices of bonds fall and vice versa. Equity might be
negatively affected as well in a rising interest rate
environment. A well-diversified portfolio might help
mitigate this risk.
POLITICAL RISK
Changes in government policy and political decision can
change the investment environment. They can create a
favorable environment for investment or vice versa.
LIQUIDITY RISK
Liquidity risk arises when it becomes difficult to sell the
securities that one has purchased. Liquidity Risk can be
partly mitigated by diversification, staggering of maturities
as well as internal risk controls that lean towards purchase
of liquid securities. You have been reading about
diversification above, but what is it? Diversification The
nuclear weapon in your arsenal for your fight against Risk. It
simply means that you must spread your investment across
different securities (stocks, bonds, money market
instruments, real estate, fixed deposits etc.) and different
sectors (auto, textile, information technology etc.). This kind
of a diversification may add to the stability of your returns.
ACCOUNTING AND VALUATION
Net Asset Value (NAV)
The net asset value of the fund is the cumulative market
value of the assets fund net of its liabilities. In other words,
if the fund is dissolved or liquidated by selling off all the
assets in the fund, this is the amount that the shareholders
would collectively own. This gives rise to the concept of net
asset value per unit, which is the value represented by the
ownership of one unit in the fund. It is calculated simply by
dividing the net asset value of the fund by the number of
units. However, most people refer loosely to the NAV per
unit as NAV, ignoring the “per unit”. We also abide by the
same convention.
Calculation of Net Asset Value
The most important part of the calculation is the valuation

of the assets owned by the fund. Once it is calculated, the
NAV is simply the net value of assets divided by the number
of the units outstanding. The detailed methodology for the
calculation of the net asset value is given below:
NAV = Market value of investments
+ Current assets and other assets
+ Accrued income
- Current liabilities and other liabilities
- Accrued expense
MAJOR PLAYERS IN MUTUAL FUNDS INDUSTRY
ABN AMRO Mutual Fund
ABN AMRO Mutual Fund was setup on April 15, 2004 with
ABN AMRO Trustee (India) Pvt. Ltd. as the Trustee
Company. The AMC, ABN AMRO Asset Management
(India) Ltd. was incorporated on November 4, 2003.
Deutsche Bank A G is the custodian of ABN AMRO Mutual
Fund.
Birla Sun Life Mutual Fund
Birla Sun Life Mutual Fund is the joint venture of Aditya
Birla Group and Sun Life Financial. Sun Life Financial is a
global organization evolved in 1871 and is being represented
in Canada, the US, the Philippines, Japan, Indonesia and
Bermuda apart from India. Birla Sun Life Mutual Fund
follows a conservative long-term approach to investment.
Recently it crossed AUM of Rs. 10,000 Crores.
Bank of Baroda Mutual Fund (BOB Mutual Fund)
Bank of Baroda Mutual Fund or BOB Mutual Fund was

setup on October 30, 1992 under the sponsorship of Bank of
Baroda. BOB Asset Management Company Limited is the
AMC of BOB Mutual Fund and was incorporated on
November 5, 1992. Deutsche Bank AG is the custodian.
HDFC Mutual Fund
HDFC Mutual Fund was setup on June 30, 2000 with two
sponsor namely Housing Development Finance Corporation
Limited and Standard Life Investments Limited.
HSBC Mutual Fund
HSBC Mutual Fund was setup on May 27, 2002 with HSBC
Securities and Capital Markets (India) Private Limited as
the sponsor. The Board of Trustees, HSBC Mutual Fund acts
as the Trustee Company of HSBC Mutual Fund.
ING Vysya Mutual Fund

ING Vysya Mutual Fund was setup on February 11, 1999
with the same named Trustee Company. It is a joint venture
of Vysya and ING. The AMC, ING Investment Management
(India) Pvt. Ltd. was incorporated on April 6, 1998.
Prudential ICICI Mutual Fund
The mutual fund of ICICI is a joint venture with Prudential
Plc. of America, one of the largest life insurance companies
in the US of A. Prudential ICICI Mutual Fund was setup on
13th of October, 1993 with two sponsors, Prudential Plc. and
ICICI Ltd. The Trustee Company formed is Prudential ICICI
Trust Ltd. and the AMC is Prudential ICICI Asset
Management Company Limited incorporated on 22nd of
June, 1993.
Sahara Mutual Fund
Sahara Mutual Fund was set up on July 18, 1996 with

Sahara India Financial Corporation Ltd. as the sponsor.
Sahara Asset Management Company Private Limited
incorporated on August 31, 1995 works as the AMC of
Sahara Mutual Fund. The paid-up capital of the AMC stands
at Rs 25.8 crore.
State Bank of India Mutual Fund
State Bank of India Mutual Fund is the first Bank sponsored

Mutual Fund to launch offshore fund, the India Magnum
Fund with a corpus of Rs. 225 cr. approximately. Today it is
the largest Bank sponsored Mutual Fund in India. They have
already launched 35 Schemes out of which 15 have already
yielded handsome returns to investors. State Bank of India
Mutual Fund has more than Rs. 5,500 Crores as AUM. Now
it has an investor base of over 8 Lakhs spread over 18
schemes.
Tata Mutual Fund
Tata Mutual Fund (TMF) is a Trust under the Indian Trust

Act, 1882. The sponsors for Tata Mutual Fund are Tata Sons
Ltd., and Tata Investment Corporation Ltd. The investment
manager is Tata Asset Management Limited and its Tata
Trustee Company Pvt. Limited. Tata Asset Management
Limited is one of the fastest in the country with more than
Rs. 7,703 Crores (as on April 30, 2005) of AUM.
Kotak Mahindra Mutual Fund
Kotak Mahindra Asset Management Company (KMAMC) is

a subsidiary of KMBL. It is presently having more than
1,99,818 investors in its various schemes. KMAMC started
its operations in December 1998. Kotak Mahindra Mutual
Fund offers schemes catering to investors with varying risk -
return profiles. It was the first company to launch dedicated
gilt scheme investing only in government securities.
Unit Trust of India Mutual Fund
UTI Asset Management Company Private Limited,

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

Indian Trusts Act, 1882. The sponsor of RMF is Reliance
Capital Limited and Reliance Capital Trustee Co. Limited is
the Trustee. It was registered on June 30, 1995 as Reliance
Capital Mutual Fund which was changed on March 11, 2004.
Reliance Mutual Fund was formed for launching of various
schemes under which units are issued to the Public with a
view to contribute to the capital market and to provide
investors the opportunities to make investments in
diversified securities.
Standard Chartered Mutual Fund
Standard Chartered Mutual Fund was set up on March 13,

2000 sponsored by Standard Chartered Bank. The Trustee is
Standard Chartered Trustee Company Pvt. Ltd. Standard
Chartered Asset Management Company Pvt. Ltd. is the AMC
which was incorporated with SEBI on December 20,1999.
Franklin Templeton India Mutual Fund
The group, Franklin Templeton Investments is a California

(USA) based company with a global AUM of US$ 409.2 bn.
(as of April 30, 2005). It is one of the largest financial
services groups in the world. Investors can buy or sell the
Mutual Fund through their financial advisor or through mail
or through their website. They have Open end Diversified
Equity schemes, Open end Sector Equity schemes, Open end
Hybrid schemes, Open end Tax Saving schemes, Open end
Income and Liquid schemes, Closed end Income schemes
and Open end Fund of Funds schemes to offer.
Morgan Stanley Mutual Fund India
Morgan Stanley is a worldwide financial services company
and its leading in the market in securities, investment
management and credit services. Morgan Stanley
Investment Management (MISM) was established in the
year 1975. It provides customized asset management
services and products to governments, corporations,
pension funds and non-profit organizations. Its services are
also extended to high net worth individuals and retail
investors. In India it is known as Morgan Stanley
Investment Management Private Limited (MSIM India) and
its AMC is Morgan Stanley Mutual Fund (MSMF). This is
the first close end diversified equity scheme serving the
needs of Indian retail investors focusing on a long-term
capital appreciation.
Escorts Mutual Fund
Escorts Mutual Fund was setup on April 15, 1996 with

Escorts Finance Limited as its sponsor. The Trustee
Company is Escorts Investment Trust Limited. Its AMC was
incorporated on December 1, 1995 with the name Escorts
Asset Management Limited.
Alliance Capital Mutual Fund
Alliance Capital Mutual Fund was setup on December 30,

1994 with Alliance Capital Management Corp. of Delaware
(USA) as sponsorer. The Trustee is ACAM Trust Company
Pvt. Ltd. and AMC, the Alliance Capital Asset Management
India (Pvt.) Ltd. with the corporate office in Mumbai.
Benchmark Mutual Fund
Benchmark Mutual Fund was setup on June 12, 2001 with

Niche Financial Services Pvt. Ltd. as the sponsorer and
Benchmark Trustee Company Pvt. Ltd. as the Trustee
Company. Incorporated on October 16, 2000 and
headquartered in Mumbai, Benchmark Asset Management
Company Pvt. Ltd. is the AMC.
Canbank Mutual Fund
Canbank Mutual Fund was setup on December 19, 1987 with
Canara Bank acting as the sponsor. Canbank Investment
Management Services Ltd. incorporated on March 2, 1993 is
the AMC. The Corporate Office of the AMC is in Mumbai.
Chola Mutual Fund
Chola Mutual Fund under the sponsorship of

Cholamandalam Investment & Finance Company Ltd. was
setup on January 3, 1997. Cholamandalam Trustee Co. Ltd.
is the Trustee Company and AMC is Cholamandalam AMC
Limited.
LIC Mutual Fund
Life Insurance Corporation of India set up LIC Mutual Fund

on 19th June 1989. It contributed Rs. 2 Crores towards the
corpus of the Fund. LIC Mutual Fund was constituted as a
Trust in accordance with the provisions of the Indian Trust
Act, 1882. . The Company started its business on 29th April
1994. The Trustees of LIC Mutual Fund have appointed
Jeevan Bima Sahayog Asset Management Company Ltd as
the Investment Managers for LIC Mutual Fund.
GIC Mutual Fund
GIC Mutual Fund, sponsored by General Insurance

Corporation of India (GIC), a Government of India
undertaking and the four Public Sector General Insurance
Companies, viz. National Insurance Co. Ltd (NIC), The New
India Assurance Co. Ltd. (NIA), The Oriental Insurance Co.
Ltd (OIC) and United India Insurance Co. Ltd. (UII) and is
constituted as a Trust in accordance with the provisions of
the Indian Trusts Act, 1882.
Fidelity Investments
Fidelity Investments was founded in 1946. Fidelity

Investments is an international provider of financial services
and investment resources that help individuals and
institutions meet their financial objejectives.
COMPETITION IN MUTUAL FUNDS INDUSTRY
The most important trend in the mutual fund industry is

the aggressive expansion of the foreign owned mutual
fund companies and the decline of the companies floated
by nationalized banks and smaller private sector players.
Many nationalized banks got into the mutual fund
business in the early nineties and got off to a good start
due to the stock market boom prevailing then. These
banks did not really understand the mutual fund business
and they just viewed it as another kind of banking activity.
Few hired specialized staff and generally chose to transfer
staff from the parent organizations. The performance of
most of the schemes floated by these funds was not good.
Some schemes had offered guaranteed returns and their
parent organizations had to bail out these AMCs by paying
large amounts of money as the difference between the
guaranteed and actual returns. The service levels were
also very bad. Most of these AMCs have not been able to
retain staff, float new schemes etc. and it is doubtful
whether, barring a few exceptions, they have serious plans
of continuing the activity in a major way.
The experience of some of the AMCs floated by private

sector Indian companies was also very similar. They
quickly realized that the AMC business is a business,
which makes money in a long term and requires deep-
pocketed support in the intermediate years. Some have
sold out to foreign owned companies, some have merged
with others and there is general restructuring going on.
CATEGORIES OF MUTUAL FUND:
Mutual funds can be classified as follow :
Based on their structure:
• Open-ended funds: Investors can buy and sell the

units from the fund, at any point of time.
• Close-ended funds: These funds raise money from
investors only once. Therefore, after the offer
period, fresh investments can not be made into the
fund. If the fund is listed on a stocks exchange the
units can be traded like stocks (E.g., Morgan
Stanley Growth Fund). Recently, most of the New
Fund Offers of close-ended funds provided
liquidity window on a periodic basis such as
monthly or weekly. Redemption of units can be
made during specified intervals. Therefore, such
funds have relatively low liquidity.
Based on their investment objective:
Equity funds: These funds invest in equities and

equity related instruments. With fluctuating share
prices, such funds show volatile performance, even
losses. However, short term fluctuations in the
market, generally smoothens out in the long term,
thereby offering higher returns at relatively lower
volatility. At the same time, such funds can yield
great capital appreciation as, historically, equities
have outperformed all asset classes in the long
term. Hence, investment in equity funds should be
considered for a period of at least 3-5 years. It can
be further classified as:
i) Index funds- In this case a key stock market

index, like BSE Sensex or Nifty is tracked. Their
portfolio mirrors the benchmark index both in
terms of composition and individual stock
weightages.
ii) Equity diversified funds- 100% of the capital

is invested in equities spreading across different
sectors and stocks.
iii|) Dividend yield funds- it is similar to the

equity diversified funds except that they invest in
companies offering high dividend yields.
iv) Thematic funds- Invest 100% of the assets in

sectors which are related through some theme.
e.g. -An infrastructure fund invests in power,
construction, cements sectors etc.
v) Sector funds- Invest 100% of the capital in a

specific sector. e.g. - A banking sector fund will
invest in banking stocks.
vi) ELSS- Equity Linked Saving Scheme provides

tax benefit to the investors.
Balanced fund: Their investment portfolio

includes both debt and equity. As a result, on the
risk-return ladder, they fall between equity and
debt funds. Balanced funds are the ideal mutual
funds vehicle for investors who prefer spreading
their risk across various instruments. Following are
balanced funds classes:
i) Debt-oriented funds -Investment below 65%

in equities.
ii) Equity-oriented funds -Invest at least 65% in
equities, remaining in debt.
Debt fund: They invest only in debt instruments,

and are a good option for investors averse to idea of
taking risk associated with equities. Therefore, they
invest exclusively in fixed-income instruments like
bonds, debentures, Government of India securities;
and money market instruments such as certificates
of deposit (CD), commercial paper (CP) and call
money. Put your money into any of these debt
funds depending on your investment horizon and
needs.
i) Liquid funds- These funds invest 100% in

money market instruments, a large portion being
invested in call money market.
ii) Gilt funds ST- They invest 100% of their

portfolio in government securities of and T-bills.
iii) Floating rate funds - Invest in short-term
debt papers. Floaters invest in debt instruments
which have variable coupon rate.
iv) Arbitrage fund- They generate income

through arbitrage opportunities due to mis-pricing
between cash market and derivatives market.
Funds are allocated to equities, derivatives and
money markets. Higher proportion (around 75%) is
put in money markets, in the absence of arbitrage
opportunities.
v) Gilt funds LT- They invest 100% of their

portfolio in long-term government securities.
vi) Income funds LT- Typically, such funds

invest a major portion of the portfolio in long-term
debt papers.
vii) MIPs- Monthly Income Plans have an
exposure of 70%-90% to debt and an exposure of
10%-30% to equities.
viii) FMPs- fixed monthly plans invest in debt

papers whose maturity is in line with that of the
fund.

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MUTUAL FUND BASICS

When an investor subscribes for the units of a

ADVANTAGES OF MUTUAL FUND

DISADVANTAGE OF MUTUAL FUND

• No control over Cost in the Hands of an Investor

HISTORY OF THE INDIAN MUTUAL FUND

The mutual fund industry in India started in 1963

In the past decade, Indian mutual fund industry

The Mutual Fund Industry is obviously growing at

First Phase – 1964-87

Unit Trust of India (UTI) was established on 1963

Second Phase – 1987-1993 (Entry of Public

1987 marked the entry of non- UTI, public sector

Third Phase – 1993-303 (Entry of Private

The 1993 SEBI (Mutual Fund) Regulations were

Fourth Phase – since February 303

In February 303, following the repeal of the Unit

The second is the UTI Mutual Fund Ltd, sponsored

STRUCTURE OF THE INDIAN MUTUAL

Mutual fund is a trust that pools the savings of a number of

Investments in securities are spread across a wide cross-

When an investor subscribes for the units of a mutual fund,

The largest categories of Mutual Funds are the ones floated

Earlier the Indian Mutual Fund industry was dominated by

The second largest categories of mutual funds are the ones

ABOUT MUTUAL FUNDS

A Mutual Fund is a trust that pools the savings of a number

• The structure of Mutual Funds in India is governed by

• It is mandatory to have a three tier structure of Sponsor –

• Asset Management Company (AMC) approved by SEBI is

• Custodian, who is registered with SEBI, holds the

WHY MUTUAL FUNDS?

• One can avail of the benefits of better returns with added

How are the Mutual Funds Structured?

• Company Form: These forms of mutual funds are

• Trust Form: In India, mutual funds are organized as

Unit Trusts – Constituents:

2.Mutual Fund as Trust

3.Asset Management Company

4.1. Custodian and Depositors

What a promoter is to a company, a sponsor is to a mutual

The Sponsor appoints the Trustees, Custodian and the AMC

In the days of assured return schemes, sponsors also had to

The Mutual Fund is constituted as a Trust in accordance

Trustees are like internal regulators in a mutual fund, and

Trustees appoint the AMC, which subsequently, seeks their

Rights of the Trustees:

 All Mutual Fund Schemes floated by the AMC have to

 Trustees can seek information from the AMC regarding

 Trustees can seek remedial actions from AMC, and in

 Trustees review and ensure that the net worth of the

Obligations of the Trustees:

 Trustees must ensure that the AMC has systems and

 Trustees must ensure due diligence on the part of AMC

 Trustees must furnish to the SEBI, on half yearly basis a

 Trustees must ensure compliance with SEBI

ASSET MANAGEMENT COMPANY (AMC)

An AMC is the legal entity formed by the sponsor to run a

Although these people are employed by the AMC, its you,

If an AMCs expenses for the year exceed what it earns as

Regulatory requirements for the AMC:

 Only SEBI registered AMC can be appointed as

 AMC must have a minimum net worth of Rs.10 crores