public sector mutual funds outshine foreign and private mutual fundsnews

8/7/2019 Public Sector Mutual Funds Outshine Foreign and Private Mutual Fundsnews

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Rs15,781 crore from Rs16,071 crore in the previous month, that of HDFC MF fell to Rs15,861

crore from Rs16,105 crore. Among the private players, Franklin Templeton and Standard

Chartered MF have seen growth in their assets.

There were fears that the inflows into MFs would be lower due to confusion over tax proposals

made by the finance minister in the union budget announced early last month. While the FM had

removed capital gains tax for stocks, he did not specify whether it would be applicable to equity

MFs also.

The Association of Mutual Funds in India had also submitted a memorandum to the finance

minister seeking extension of the new capital gains regime to mutual fund units as well. The

government later accepted the request and clarified that the same treatment will be applicable to

MF units as well.

Though there was confusion over the tax treatment announced in the budget, there were goodinflows in MFs during the month. However most of the fund flows were into liquid schemes and

floating rate funds. As there is volatility in debt market, most of the investors are moving out from

long-term bond funds to short-end products and floating rate funds in order to protect capital. Over

the last two months liquid funds have emerged as the largest assets group in fixed income products

overtaking income funds.

The total AUM of liquid funds stand at Rs67,079 crore, income funds have Rs56,236 crore.

Floating rate funds are also beginning to attract large inflows. It is estimated that floating rate

funds now have about Rs2,000 crore. Most of the fund houses have launched floating rate funds

over the last few months. Over Rs1,500 crore has come in through the IPO of three floating rate

funds from Standard Chartered MF, Kotak MF and SBI MF

SSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSS

SSSSSS


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Governments dithering over feed-in tariffs jeopardisesrenewables sector | Huw Irranca-Davies

February 10, 2011 by drjohnmcgowanFiled underGreen Energy

Leave a Comment

Early review threatens schemes hard-won successes in creating thousands of jobs and rolling out new technologies

Chris Huhnes shock announcement on Monday of an early review of feed-in tariffs (Fits) after just 10 months

jeopardises green jobs and economic growth in the key sector of small-scale renewable energy.

Huhnes decision comes at a time of rising unemployment, when we really need these green jobs. This part of

Labours green legacyis now under threat from a government that likes to talk green, but cant match words to

actions. Read more

Tags: Tags: tariffs, renewables, government's, dithering,jeopardises, feedin, irrancadavies, sector, over

Government to fund private sector renewable energy schemesfor Africa and Asia

November 18, 2010 by drjohnmcgowan

Filed underGreen Energy

Leave a Comment

The international development secretary, Andrew Mitchell, pledges to finance green energy projects proposed by

industry that could raise 9 for every 1 of government money

Britain today pledged to spend around 200m to finance a series of private sector green energy initiatives intended to

bring electricity to some of the poorest African and Asian households.

The international development secretary, Andrew Mitchell, said the money, which would come from funds promised

at the Copenhagen climate summit last year, would go to projects proposed by industry and could be expected to

raise 9 for every 1 comm itted by government.

In Africa, a potential new fund could see up to 500MW of renewable energy per year from 2015 enough to provide

for over 4 million rural households. In Asia the project could generate 5GW of new renewable energy and create

60,000 jobs, he said.

The projects or the countries have not been decided, but are expected to include wind, solar and hydro-electric

power. Companies will be invited to come forward with proposals.


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It is understood that rather than investing directly in renewable projects, British money will be funnelled in the form of

grants through private equity funds, creating a market that would then invest in low carbon private sector projects.

In Africa, it would go to buy renewable power at guaranteed prices to generate investment in renewable energy.

Payment would only be made on the delivery of contractually agreed energy supply.

But the intention to use grant money to invest in private sector companies was immediately questioned by the WorldDevelopment Movement (WDM).

Private sectorinvolvement secures profits for the companies involved not benefits for the poorest people. We have

seen this time and again, where corporations reap the rewards from delivering basic services in developing countries.

It is always the company that benefits not the people who need and use the services, said a spokesman.

He added that the great majority of Britains 1.1bn of climate funds so far announced were in the form ofloans , not

grants. We agree that a low carbon revolution is needed, but this is not the way to get there. The UK government is

pushing developing countries into further debt through providing loans to help developing countries cope with climate

change.

The source of money offered to developing countries to adapt to climate change will be one of the key issues raisedat the coming global climate summit, which opens in 10 days time in Cancun, Mexico.

Some of the worlds leading financiers last week suggested that the money could be raised from a mixture of public

and private sources. But developing countries are keen to see as much as possible from public funds, which they

argue is more certain than the markets.

Rich countries have committed to raising $ 30bn a year by 2012 for developing countries to adapt to climate change,

rising to $ 100bn a year from 2020.

Last week, the World Bank and the Asian Development Bank announced that they were lending Bangladesh nearly $

600m. More than $ 100m of this is expected to come in the form ofloans from the UK government.

Environmental sustainability

Renewable energy

Climate change

Development

John Vidal

guardian.co.uk Guardian News & Media Limited 2010 | Use of this content is subject to ourTerms & Conditions |

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Tags: Tags: sector, renewable, energy, africa, government, asia, fund, schemes, private

Gas glut threatens investment in renewables sector, IEA warns

November 9, 2010 by drjohnmcgowan



5/28

Leave a Comment

Liquefied gas capacity will shoot up 47% by the end of 2013

Shell and Exxon-Mobil are repositioning as gas producers

A global gas glut which could last a decade will act as a major barrier to the development of renewable energy,

cleaner coal plants and nuclear power, according to the International Energy Agency (IEA).

The golden age of gas willlead to cheaper gas prices for consumers, particularly in Europe. But the IEA added that

it is also likely to result in a rush to build gas-fired power plants at the expense of much cleaner forms of electricity

generation.

The IEAs chief economist Fatih Birol also said that Big Oil oil majors such as Shell and Exxon-Mobil are

suffering an identity crisis because they find themselves increasingly shut out of regions like the Middle East where

most of the worlds remaining oil reserves lie. They are repositioning themselves as gas producers, which companies

like Shell are marketing as a cleaner form of energy, he said. In terms of climate change, gas is definitely a good

solution compared to coal and oil. But its not very innocent compared to renewables and nuclear.

The world faces a long term gas glut because of recent technical advances which have made possible the

exploitation of previously untapped shale gas, coal bed methane and tight gas deposits, mostly in the US, China and

Australia. The IEA, publishing its annual world energy outlook now estimates that 35% of the increase in global gas

production to 2035 will come from such unconventional projects. Last yearit estimated that unconventional gas

production would account for 20% of the growth, although this covered the period 2007 2030. Gas is also the only

fossil fuel for which it expects demand to grow by 2035.

The world is already awash with cheap gas because of a fallin demand after the global economic downturn and

unexpectedly high production of shale gas in the US, despite fears that the industry would be held back by

environmental regulations. This has coincided with a surge in the construction of new LNG facilities and equipment

which liquefies gas so it can be shipped by tankers from remote areas to market rather than having to build new

pipelines. LNG capacity will shoot up 47% by the end 2013, the IEA said. As a result of higher gas supplies and lower

demand, globally only about two thirds of pipelines and LNG facilities will be full this year. The figure will be even

lowerin Europe, which could prompt energy companies such as E.ON to try renegotiating theirlong term contracts

with exporters such as Russian firm Gazprom to get a cheaper deal.

The IEA said that the utilisation rate of pipelines and LNG facilities will still not have returned to 2007 levels by the

end of the decade. This assumes that no new infrastructure is commissioned, which it said was extremely unlikely. It

has cut its long term global gas price forecasts, by as much as 10% in the US after 2020.

There are environmental benefits to a gas glut because cheaper gas-fired plants are more likely to replace old coal

plants, which emit twice as much carbon. But gas plants low operating cost will make it harder for wind farms and

other renewables, including nuclear, to compete and attract investment. From the perspective of renewables and

nuclearits not good news, Birol said. He also said that despite the 1bn recently committed by the UK government

to develop a coal plant fitted with expensive carbon capture and storage technology (CCS), there may be less

appetite to invest in CCS.

The IEA report also spelt out the predicament faced by international oil companies. Opec, the body that protects the

interests ofleading oil-producing countries is forecasting to increase its global share of oil production from a third to


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more than a half by 2035. State controlled oil companies will account for all of the worlds increase in global oil

production in the next 25 years, while total non-Opec production will start falling after 2025.

Birol added: Big Oil face an identity crisis. They got used to being able to explore, produce and market oil. But

theyre not able to do this in the same way any more. Much of the worlds oil reserves are out of reach to them.

Therefore they have to redefine their business strategy. Gas becomes one alternative for them to redefine their

strategy.

Black gold and greens

The International Energy Agency is estimating that average oil prices will hit $ 113 a barrelin 2035. This is some way

short of the record of $ 147, set in 2008, and current prices are already close to $ 90. But the agency admitted that in

practice, short-term price volatility is likely to remain high in other words, prices could be much higher or much

lower than $ 113 in decades to come.

The organisation, which advises companies and governments on future energy trends, was also scathing about the

Copenhagen climate change summit last December.

It said that based on the extremely loose and uncertain commitments made, global oil production would peak soon

after 2035. If governments took firm action to prevent the earths temperature rising by more than 2C by 2050, it

reckoned, peak oil would be reached before 2020.

Gas

Commodities

Royal Dutch Shell

Oil and gas companies

Exxon Mobil

Oil

Gas

Energy Fossil fuels

Renewable energy

Tim Webb


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Tags: Tags: warns, investment, glut, renewables, threatens, sector

HSBC predicts bigger growth for low-carbon cars thanrenewables sector

September 6, 2010 by drjohnmcgowan


Leave a Comment


7/28

Low-carbon vehicles will be a bigger global market by 2020, according to the banks report for investors

Low-carbon vehicles, such as electric cars, will be a bigger global market by 2020 than renewable energy, such as

wind and solar power, according to a report by HSBC bank.

The report predicts that 8.65m electric vehicles and 9.23m plug-in and hybrid electric vehicles will be sold globally in

2020, up from around 5,000 and 657,000 respect ively in 2009.

When fuel-efficiency measures and switches to lower-carbon transport such as trains and coaches are included, the

report forinvestors predicts that the market will be worth $ 677bn (440bn) a yearin 2020 up from $ 113m in 2009.

In contrast, HSBC predicts smaller growth in the renewable energy sector, from $ 203bn in 2009 to $ 544bn in 2020.

Nick Robins, head of the HSBC Climate Change Centre of Excellence and lead author of the report, said the

predicted rise of the transport sector stems from growing confidence in the area over the past year as major

manufacturers launched low-carbon cars. But he acknowledged that it has been a difficult year for the low-carbon

economy, with growing signs of what he terms carbon default, such as the US failure to deliver a clean energy bill;

Australias move away from climate change laws; and the economic crisis squeezing green spending. It is notunmitigated gloom, he said. But it is more disaggregated than last year. The US failure has been quite damaging to

sentiment among investors around the world, he added.

Angus McCrone, chief editor at Bloomberg New Energy Finance (BNEF) said: There is a dichotomy between what is

happening on the public front and behind that.. Clean energy shares, as tracked by the WilderHill New Energy

Global Innovation Index, has under-performed the US stock-market overall as measured by the Standard and

Poors 500 index by 20% so far this year, he points out. But he also notes that BNEF predicts 2010 will be a record

year for cleantech investment at between $ 180-200bn, a little higher than 2008s $ 173bn total. He also said that

microgeneration for example domestic solar panels is taking off on all sorts of places, including the UK.

The HSBC report predicts the overalllow-carbon energy market both generation and use will triple to $ 2.2tn in

2020, underits most likely scenario, but suggest it could be as low as $ 1.5tn if governments renege on existing

climate change and energy commitments or as high as $ 2.7 trillion if current commitments are exceeded. The report

argues that the European Union will remain the largest market but willlose market share from 33% now to 27% in

2020, while China will gain market share, from 17% to 24%, pushing the US into third place.

Officials in Shanghai yesterday underlined Chinas ambitions in green technology, announcing that they would invest

$ 2.8bn in electric vehicles and charging networks by 2012. China has recently overtaken the US as the worlds

biggest energy user, become the largest single investorin green energyin the G20 group and has been the biggest

emitter of greenhouse gases for several years.

The HSBC report predicts, unlike some other analysts, that the EU will meet its target of 20% renewable energy by

2020 but will fail to meet its 20% increase in energy efficiency by the same date. It plays down the promise of

biofuels, suggesting a market of $ 93bn by 2020, because of concerns over the ir sustainability. But McCrone says

that after two to three years of decline the biofuels market has bottomed out and that the rema ining companies can

take confidence from the mandated targets for biofuel use in the EU.

Finally, the amount of upfront capital required in the green economy will more than triple to $ 1.5tn a year in 2020,

according to HSBC. This may look large, said Robins, but not compared to the sums already needed to invest in

energy. For example, the International Energy Agency predicted in 2009 that investment of $ 1.1trn a year (PDF) was

needed until 2030 to ensure projected energy demand was met.


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Electric, hybrid and low-emission cars

Motoring

Travel and transport

Carbon emissions

Renewable energy

Energy

Solar power

Wind power

HSBC

Damian Carrington


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SECURITIES AND EXCHANGE BOARD OF INDIA

SEBI INVESTOR EDUCATION PROGRAMME

(INVESTMENTS IN MUTUAL FUNDS)

Introduction

Different investment avenues are available to investors. Mutual funds also offer goodinvestment opportunities to the investors. Like allinvestments, they also carry certain


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risks. The investors should compare the risks and expected yields after adjustment oftax on various instruments while taking investment decisions. The investors may seekadvice from experts and consultants including agents and distributors of mutual fundsschemes while making investment decisions.

With an objective to make the investors aware of functioning of mutual funds, anattempt has been made to provide information in question-answer format which mayhelp the investors in taking investment decisions.

What is a Mutual Fund?

Mutual fund is a mechanism for pooling the resources by issuing units to the investorsand investing funds in securities in accordance with objectives as disclosed in offerdocument.

Investments in securities are spread across a wide cross-section ofindustries andsectors 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.Mutualfundissues units to the investors in accordance with quantum of money invested bythem. Investors of mutual funds are known as unitholders.

The profits orlosses are shared by the investors in proportion to theirinvestments. Themutual funds normally come out with a number of schemes with different investmentobjectives which are launched from time to time. A mutual fund is required to beregistered with Securities and Exchange Board of India (SEBI) which regulatessecurities markets before it can collect funds from the public.

What is thehistory of Mutual Funds in Indiaand role of SEBI in mutual funds

industry?

Unit Trust of India was the first mutual fund set up in India in the year 1963. In early1990s, Government allowed public sector banks and institutions to set up mutual funds.

In the year 1992, Securities and exchange Board of India (SEBI) Act was passed. Theobjectives of SEBI are to protect the interest ofinvestors in securities and to promotethe development of and to regulate the securities market.

As far as mutual funds are concerned, SEBI formulates policies and regulates themutual funds to protect the interest of the investors. SEBI notified regulations for themutual funds in 1993. Thereafter, mutual funds sponsored by private sector entities

were allowed to enter the capital market. The regulations were fully revised in 1996 andhave been amended thereafter from time to time. SEBI has also issued guidelines tothe mutual funds from time to time to protect the interests ofinvestors.

All mutual funds whether promoted by public sector or private sector entities includingthose promoted by foreign entities are governed by the same set of Regulations. Thereis no distinction in regulatory requirements for these mutual funds and all are subject tomonitoring and inspections by SEBI. The risks associated with the schemes launched


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by the mutual funds sponsored by these entities are of similar type.

How is a mutual fund set up?

A mutual fund is set up in the form of a trust, which has sponsor, trustees, assetmanagement company (AMC) and custodian. The trust is established by a sponsor ormore than one sponsor who is like promoter of a company. The trustees of the mutualfund hold its property for the benefit of the unitholders. Asset Management Company(AMC) approved by SEBI manages the funds by making investments in various types ofsecurities. Custodian, who is registered with SEBI, holds the securities of variousschemes of the fund in its custody. The trustees are vested with the general power ofsuperintendence and direction over AMC. They monitor the performance andcompliance of SEBI Regulations by the mutual fund.

SEBI Regulations require that at least two thirds of the directors of trustee company or

board of trustees must be independent i.e. they should not be associated with thesponsors. Also, 50% of the directors of AMC must be independent. All mutual funds arerequired to be registered with SEBI before they launch any scheme.

What is Net Asset Value (NAV) ofa scheme?

The performance of a particular scheme of a mutual fund is denoted by Net AssetValue (NAV).

Mutual funds invest the money collected from the investors in securities markets. Insimple words, Net Asset Value is the market value of the securities held by the scheme.

Since market value of securities changes every day, NAV of a scheme also varies onday to day basis. The NAV per unit is the market value of securities of a schemedivided by the total number of units of the scheme on any particular date. For example,if the market value of securities of a mutual fund scheme is Rs 200 lakhs and themutual fund has issued 10 lakhs units of Rs. 10 each to the investors, then the NAV perunit of the fund is Rs.20. NAV is required to be disclosed by the mutual funds on aregular basis - daily or weekly - depending on the type of scheme.

What are the different types of mutual fund schemes?

Schemes according to Maturity Period:

A mutual fund scheme can be classified into open-ended scheme or close-endedscheme depending on its maturity period.

Open-ended Fund/ Scheme

An open-ended fund or scheme is one that is available for subscription and repurchaseon a continuous basis. These schemes do not have a fixed maturity period. Investorscan conveniently buy and sell units at Net Asset Value (NAV) related prices which are


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declared on a daily basis. The key feature of open-end schemes is liquidity.

Close-ended Fund/ Scheme

A close-ended fund or scheme has a stipulated maturity period e.g. 5-7 years. The fundis open for subscr

ipt

ion on

ly dur

ing a spec

ified per

iod at the t

ime of

launch of thescheme. 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 wherethe units are listed. In order to provide an exit route to the investors, some close-endedfunds give an option of selling back the units to the mutual fund through periodicrepurchase at NAV related prices. SEBI Regulations stipulate that at least one of thetwo exit routes is provided to the investori.e. either repurchase facility or through listingon stock exchanges. These mutual funds schemes disclose NAV generally on weeklybasis.

Schemes according to Investment Objective:

A scheme can also be classified as growth scheme, income scheme, or balancedscheme considering its investment objective. Such schemes may be open-ended orclose-ended schemes as described earlier. Such schemes may be classified mainly asfollows:

Growth / Equity Oriented Scheme

The aim of growth funds is to provide capital appreciation over the medium to long-term. Such schemes normally invest a major part of their corpus in equities. Such fundshave comparatively high risks. These schemes provide different options to the investorslike dividend option, capital appreciation, etc. and the investors may choose an option

depending on their preferences. The investors must indicate the option in theapplication form. The mutual funds also allow the investors to change the options at alater date. Growth schemes are good forinvestors having a long-term outlook seekingappreciation over a period of time.

Income / Debt Oriented Scheme

The aim ofincome funds is to provide regular and steady income to investors. Suchschemes generally invest in fixed income securities such as bonds, corporatedebentures, Government securities and money market instruments. Such funds areless risky compared to equity schemes. These funds are not affected because offluctuations in equity markets. However, opportunities of capital appreciation are also

limited in such funds. The NAVs of such funds are affected because of change ininterest rates in the country. If the interest rates fall, NAVs of such funds are likely toincrease in the short run and vice versa. However, long term investors may not botherabout these fluctuations.

Balanced Fund

The aim of balanced funds is to provide both growth and regularincome as such


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schemes invest both in equities and fixed income securities in the proportion indicatedin their offer documents. These are appropriate forinvestors looking for moderategrowth. They generally invest 40-60% in equity and debt instruments. These funds arealso affected because of fluctuations in share prices in the stock markets. However,NAVs of such funds are likely to be less volatile compared to pure equity funds.

Money Market or Liquid Fund

These funds are also income funds and their aim is to provide easy liquidity,preservation of capital and moderate income. These schemes invest exclusively insafer short-term instruments such as treasury bills, certificates of deposit, commercialpaper and inter-bank call money, government securities, etc. Returns on theseschemes fluctuate much less compared to other funds. These funds are appropriate forcorporate and individualinvestors as a means to park their surplus funds for shortperiods.

Gilt Fund

These funds invest exclusively in government securities. Government securities haveno default risk. NAVs of these schemes also fluctuate due to change in interest ratesand other economic factors as is the case with income or debt oriented schemes.

Index Funds

Index Funds replicate the portfolio of a particularindex such as the BSE Sensitiveindex, S&P NSE 50 index (Nifty), etc These schemes invest in the securities in thesame weightage comprising of an index. NAVs of such schemes would rise or fallinaccordance with the rise or fallin the index, though not exactly by the same percentage

due to some factors known as "tracking error" in technical terms. Necessary disclosuresin this regard are made in the offer document of the mutual fund scheme.

There are also exchange traded index funds launched by the mutual funds which aretraded on the stock exchanges.

What are sector specific funds/schemes?

These are the funds/schemes which invest in the securities of only those sectors orindustries as specified in the offer documents. e.g. Pharmaceuticals, Software, FastMoving Consumer Goods (FMCG), Petroleum stocks, etc. The returns in these fundsare 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 andmust exit at an appropriate time. They may also seek advice of an expert.

What are Tax Saving Schemes?

These schemes offer tax rebates to the investors under specific provisions of theIncome Tax Act, 1961 as the Government offers tax incentives forinvestment in


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specified avenues. e.g. Equity Linked Savings Schemes (ELSS). Pension schemeslaunched by the mutual funds also offer tax benefits. These schemes are growthoriented and invest pre-dominantly in equities. Their growth opportunities and risksassociated are like any equity-oriented scheme.

What is a Fund of Funds (FoF) scheme?

A scheme that invests primarily in other schemes of the same mutual fund or othermutual funds is known as a FoF scheme. An FoF scheme enables the investors toachieve greater diversification through one scheme. It spreads risks across a greateruniverse.

What is a Load or no-load Fund?

A Load Fund is one that charges a percentage of NAV for entry or exit. That is, eachtime one buys or sells units in the fund, a charge will be payable. This charge is usedby the mutual fund for marketing and distribution expenses. Suppose the NAV per unit

is Rs.10. If the entry as well as exit load charged is 1%, then the investors who buywould be required to pay Rs.10.10 and those who offer their units for repurchase to themutual fund will get only Rs.9.90 per unit. The investors should take the loads intoconsideration while making investment as these affect their yields/returns. However, theinvestors should also consider the performance track record and service standards ofthe mutual fund which are more important. Efficient funds may give higher returns inspite ofloads.

A no-load fund is one that does not charge for entry or exit. It means the investors canenter the fund/scheme at NAV and no additional charges are payable on purchase orsale of units.

Can a mutual fund impose freshload or increase theload beyond thelevelmentioned in the offer documents?

Mutual funds cannot increase the load beyond the level mentioned in the offerdocument. Any change in the load will be applicable only to prospective investmentsand not to the originalinvestments. In case ofimposition of fresh loads orincrease inexisting loads, the mutual funds are required to amend their offer documents so that thenew investors are aware ofloads at the time ofinvestments.

What is a sales or repurchase/redemption price?

The price or NAV a unitholderis charged while investing in an open-ended scheme iscalled sales price. It may include sales load, if applicable.

Repurchase or redemption price is the price or NAV at which an open-ended schemepurchases or redeems its units from the unitholders. It may include exit load, ifapplicable.


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What is an assured return scheme?

Assured return schemes are those schemes that assure a specific return to theunitholders irrespective of performance of the scheme.

A scheme cannot promise returns un

less such returns are fu

lly guaranteed by thesponsor or AMC and this is required to be disclosed in the offer document.

Investors should carefully read the offer document whether return is assured for theentire period of the scheme or only for a certain period. Some schemes assure returnsone year at a time and they review and change it at the beginning of the next year.

Can a mutual fund change theasset allocation while deploying funds ofinvestors?

Considering the market trends, any prudent fund managers can change the assetallocation i.e. he can invest higher orlower percentage of the fund in equity or debt

instruments compared to what is disclosed in the offer document. It can be done on ashort term basis on defensive considerations i.e. to protect the NAV. Hence the fundmanagers are allowed certain flexibility in altering the asset allocation considering theinterest of the investors. In case the mutual fund wants to change the asset allocationon a permanent basis, they are required to inform the unitholders and giving themoption to exit the scheme at prevailing NAV without any load.

How to invest in a scheme ofa mutual fund?

Mutual funds normally come out with an advertisement in newspapers publishing thedate oflaunch of the new schemes. Investors can also contact the agents and

distributors of mutual funds who are spread all over the country for necessaryinformation and application forms. Forms can be deposited with mutual funds throughthe agents and distributors who provide such services. Now a days, the post offices andbanks also distribute the units of mutual funds. However, the investors may please notethat the mutual funds schemes being marketed by banks and post offices should not betaken as their own schemes and no assurance of returns is given by them. The onlyrole of banks and post offices is to help in distribution of mutual funds schemes to theinvestors.

Investors should not be carried away by commission/gifts given by agents/distributorsforinvesting in a particular scheme. On the other hand they must consider the trackrecord of the mutual fund and should take objective decisions.

Can non-resident Indians (NRIs) invest in mutual funds?

Yes, non-resident Indians can also invest in mutual funds. Necessary details in thisrespect are given in the offer documents of the schemes.

How much should one invest in debt orequity oriented schemes?


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An investor should take into account his risk taking capacity, age factor, financialposition, etc. As already mentioned, the schemes invest in different type of securities asdisclosed in the offer documents and offer different returns and risks. Investors mayalso consult financial experts before taking decisions. Agents and distributors may alsohelp in this regard.

How to fill up theapplication form ofa mutual fund scheme?

An investor must mention clearly his name, address, number of units applied for andsuch otherinformation as required in the application form. He must give his bankaccount number so as to avoid any fraudulent encashment of any cheque/draft issuedby the mutual fund at a later date for the purpose of dividend or repurchase. Anychanges in the address, bank account number, etc at a later date should be informed tothe mutual fund immediately.

What should an investorlook into an offer document?

An abridged offer document, which contains very usefulinformation, is required to begiven to the prospective investor by the mutual fund. The application form forsubscription to a scheme is an integral part of the offer document. SEBI has prescribedminimum disclosures in the offer document. An investor, before investing in a scheme,should carefully read the offer document. Due care must be given to portions relating tomain features of the scheme, risk factors, initialissue expenses and recurring expensesto be charged to the scheme, entry or ex it loads, sponsors track record, educationalqualification and work experience of key personnelincluding fund managers,performance of other schemes launched by the mutual fund in the past, pendinglitigations and penalties imposed, etc.

When wi

llthe

inve

stor ge

t ce

rtifica

te

or stateme

nt ofaccount

after inv

esting in

amutual fund?

Mutual funds are required to despatch certificates or statements of accounts within sixweeks from the date of closure of the initial subscription of the scheme. In case ofclose-ended schemes, the investors would get either a demat account statement or unitcertificates as these are traded in the stock exchanges. In case of open-endedschemes, a statement of account is issued by the mutual fund within 30 days from thedate of closure ofinitial public offer of the scheme. The procedure of repurchase ismentioned in the offer document.

How long will it take for transfer of units after purchase from stock markets in

case of close-ended schemes?

According to SEBI Regulations, transfer of units is required to be done within thirty daysfrom the date oflodgment of certificates with the mutual fund.

As a unitholder, how much time will it take to receive dividends/repurchaseproceeds?


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A mutual fund is required to despatch to the unitholders the dividend warrants within 30days of the declaration of the dividend and the redemption or repurchase proceedswithin 10 working days from the date of redemption or repurchase request made by theunitholder.

In case of failures to despatch the redemption/repurchase proceeds within thestipulated time period, Asset Management Company is liable to pay interest asspecified by SEBI from time to time (15% at present).

Can a mutual fund change the nature of the scheme from the one specified in theoffer document?

Yes. However, no change in the nature or terms of the scheme, known as fundamentalattributes of the scheme e.g.structure, investment pattern, etc. can be carried outunless a written communication is sent to each unitholder and an advertisement isgiven in one English daily having nationwide circulation and in a newspaper publishedin the language of the region where the head office of the mutual fund is situated. The

unitholders have the right to exit the scheme at the prevailing NAV without any exit loadif they do not want to continue with the scheme. The mutual funds are also required tofollow similar procedure while converting the scheme form close-ended to open-endedscheme and in case of change in sponsor.

How willan investor come to know about the changes, ifany, which may occur inthe mutual fund?

There may be changes from time to time in a mutual fund. The mutual funds arerequired to inform any material changes to their unitholders. Apart from it, many mutualfunds send quarterly newsletters to theirinvestors.

At present, offer documents are required to be revised and updated at least once in twoyears. In the meantime, new investors are informed about the material changes by wayof addendum to the offer document till the time offer document is revised and reprinted.

How to know the performance ofa mutual fund scheme?

The performance of a scheme is reflected in its net asset value (NAV) which isdisclosed on daily basis in case of open-ended schemes and on weekly basis in case ofclose-ended schemes. The NAVs of mutual funds are required to be published innewspapers. The NAVs are also available on the web sites of mutual funds. All mutualfunds are also required to put their NAVs on the web site of Association of Mutual

Funds in India (AMFI) www.amfiindia.com and thus the investors can access NAVs ofall mutual funds at one place

The mutual funds are also required to publish their performance in the form of half-yearly results which also include their returns/yields over a period of time i.e. last sixmonths, 1 year, 3 years, 5 years and s ince inception of schemes. Investors can alsolook into other details like percentage of expenses of total assets as these have an


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affect on the yield and other usefulinformation in the same half-yearly format.

The mutual funds are also required to send annual report or abridged annual report tothe unitholders at the end of the year.

Various stud

ies on mutua

lfund schemes

inc

lud

ing y

ields of d

ifferent schemes are be

ingpublished by the financial newspapers on a weekly basis. Apart from these, many

research agencies also publish research reports on performance of mutual fundsincluding the ranking of various schemes in terms of their performance. Investorsshould study these reports and keep themselves informed about the performance ofvarious schemes of different mutual funds.

Investors can compare the performance of their schemes with those of other mutualfunds under the same category. They can a lso compare the performance of equityoriented schemes with the benchmarks like BSE Sensitive Index, S&P CNX Nifty, etc.

On the basis of performance of the mutual funds, the investors should decide when to

enter or exit from a mutual fund scheme.

How to know where the mutual fund schemehas invested money mobilised fromthe investors?

The mutual funds are required to disclose full portfolios of all of their schemes on half-yearly basis which are published in the newspapers. Some mutual funds send theportfolios to their unitholders.

The scheme portfolio shows investment made in each security i.e. equity, debentures,money market instruments, government securities, etc. and their quantity, market value

and % to NAV. These portfolio statements also required to disclose illiquid securities inthe portfolio, investment made in rated and unrated debt securities, non-performingassets (NPAs), etc.

Some of the mutual funds send newsletters to the unitholders on quarterly basis whichalso contain portfolios of the schemes.

Is thereany difference between investing in a mutual fund and in an initial publicoffering (IPO) ofa company?

Yes, there is a difference. IPOs of companies may open at lower or higher price thanthe issue price depending on market sentiment and perception ofinvestors. However,in the case of mutual funds, the par value of the units may not rise or fallimmediatelyafter allotment. A mutual fund scheme takes some time to make investment insecurities. NAV of the scheme depends on the va lue of securities in which the fundshave been deployed.

If schemes in the same category of different mutual funds areavailable, shouldone choosea scheme withlower NAV?


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Some of the investors have the tendency to prefer a scheme that is available at lowerNAV compared to the one available at higher NAV. Sometimes, they prefer a newscheme which is issuing units at Rs. 10 whereas the existing schemes in the samecategory are available at much higher NAVs. Investors may please note that in case ofmutual funds schemes, lower or higher NAVs of similar type schemes of differentmutual funds have no relevance. On the other hand, investors should choose a schemebased on its merit considering performance track record of the mutual fund, servicestandards, professional management, etc. This is explained in an example given below.

Suppose scheme A is available at a NAV of Rs.15 and another scheme B at Rs.90.Both schemes are diversified equity oriented schemes. Investor has put Rs. 9,000 ineach of the two schemes. He would get 600 units (9000/15) in scheme A and 100 units(9000/90) in scheme B. Assuming that the markets go up by 10 per cent and both theschemes perform equally good and it is reflected in their NAVs. NAV of scheme Awould go up to Rs. 16.50 and that of scheme B to Rs. 99. Thus, the market value ofinvestments would be Rs. 9,900 (600* 16.50) in scheme A and it would be the sameamount of Rs. 9900 in scheme B (100*99). The investor would get the same return of

10% on his investment in each of the schemes. Thus, lower or higher NAV of theschemes and allotment of higher orlower number of units within the amount an investoris willing to invest, should not be the factors for making investment decision. Likewise, ifa new equity oriented scheme is being offered at Rs.10 and an existing scheme isavailable for Rs. 90, should not be a factor for decision making by the investor. Similaris the case with income or debt-oriented schemes.

On the other hand, it is likely that the better managed scheme with higher NAV maygive higher returns compared to a scheme wh ich is available at lower NAV but is notmanaged efficiently. Similaris the case of fallin NAVs. Efficiently managed scheme athigher NAV may not fall as much as inefficiently managed scheme with lower NAV.Therefore, the investor should give more weightage to the professional management ofa scheme instead oflower NAV of any scheme. He may get much higher number ofunits at lower NAV, but the scheme may not give higher returns ifit is not managedefficiently.

How to choosea scheme for investment from a number of schemes available?

As already mentioned, the investors must read the offer document of the mutual fundscheme very carefully. They may also look into the past track record of performance ofthe scheme or other schemes of the same mutual fund. They may also compare theperformance with other schemes having similarinvestment objectives. Though pastperformance of a scheme is not an indicator ofits future performance and good

performance in the past may or may not be sustained in the future, this is one of theimportant factors for making investment decision. In case of debt oriented schemes,apart from looking into past returns, the investors should also see the quality of debtinstruments which is reflected in their rating. A scheme with lower rate of return buthaving investments in better rated instruments may be safer. Similarly, in equitiesschemes also, investors may look for quality of portfolio. They may also seek advice ofexperts.


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Are the companies having names like mutual benefit the sameas mutual fundsschemes?

Investors should not assume some companies having the name "mutual benefit" asmutual funds. These companies do not come under the purview of SEBI. On the otherhand, mutual funds can mobilise funds from the investors by launching schemes onlyafter getting registered with SEBI as mutual funds.

Is thehigher net worth of the sponsora guarantee for better returns?

In the offer document of any mutual fund scheme, financial performance including thenet worth of the sponsor for a period of three years is required to be given. The onlypurpose is that the investors should know the track record of the company wh ich hassponsored the mutual fund. However, higher net worth of the sponsor does not meanthat the scheme would give better returns or the sponsor would compensate in case theNAV falls.

Where can an investorlook out for information on mutual funds?

Almost all the mutual funds have their own web sites. Investors can also access theNAVs, half-yearly results and portfolios of all mutual funds at the web site of

Association of mutual funds in India (AMFI) www.amfiindia.com. AMFI has also publishedusefulliterature for the investors.

Investors can log on to the web site of SEBI www.sebi.gov.in and go to "MutualFunds"section forinformation on SEBI regulations and guidelines, data on mutual funds, draftoffer documents filed by mutual funds, addresses of mutual funds, etc. Also, in theannual reports of SEBI available on the web site, a lot ofinformation on mutual funds is

given.

There are a number of other web sites which give a lot ofinformation of variousschemes of mutual funds including yields over a period of time. Many newspapers alsopublish usefulinformation on mutual funds on daily and weekly basis. Investors mayapproach their agents and distributors to guide them in this regard.

Can an investorappoint a nominee forhis investment in units ofa mutual fund?

Yes. The nomination can be made by individuals applying for / holding units on theirown behalf singly or jointly. Non-individuals including society, trust, body corporate,partnership firm, Karta of Hindu Undivided Family, holder of Power of Attorney cannot

nominate.

If mutual fund scheme is wound up, what happens to money invested?

In case of winding up of a scheme, the mutual funds pay a sum based on prevailingNAV after adjustment of expenses. Unitholders are entitled to receive a report onwinding up from the mutual funds which gives all necessary details.


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How can the investors redress their complaints?

Investors would find the name of contact person in the offer document of the mutualfund scheme whom they may approach in case of any query, complaints or grievances.Trustees of a mutual fund monitor the activities of the mutual fund. The names of thedirectors of asset management company and trustees are also given in the offerdocuments. Investors should approach the concerned MutualFund / Investor ServiceCentre of the MutualFund with their complaints,

If the complaints remain unresolved, the investors may approach SEBI for facilitatingredressal of their complaints. On receipt of complaints, SEBI takes up the matter withthe concerned mutual fund and follows up with it regularly. Investors may send theircomplaints to:

Securities and Exchange Board of India

Office of Investor Assistance and Education (OIAE)

Plot No.C4-A , G Block, 1stFloor,

Bandra-Kurla Complex,

Bandra (E), Mumbai 400 051.

Phone: 26449199-88-77

What is the procedure for registering a mutual fund with SEBI ?

An applicant proposing to sponsor a mutual fund in India must submit an application inForm A along with a fee of Rs.25,000. The application is examined and once thesponsor satisfies certain conditions such as being in the financial services business andpossessing positive net worth for the last five years, having net profit in three out of thelast five years and possessing the general reputation of fairness and integrity in allbusiness transactions, it is required to complete the remaining formalities for setting upa mutual fund. These include inter alia, executing the trust deed and investmentmanagement agreement, setting up a trustee company/board of trustees comprisingtwo- thirds independent trustees, incorporating the asset management company (AMC),contributing to at least 40% of the net worth of the AMC and appo inting a custodian.Upon satisfying these conditions, the registration certificate is issued subject to thepayment of registration fees of Rs.25.00 lacs For details, see the SEBI (MutualFunds)Regulations, 1996.

public sector mutual funds outshine foreign and private mutual fundsnews

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