EXECUTIVE
SUMMARY
EXECUTIVE SUMMARY
In the early days, savings were essentially diverted to the banks, post offices, national savings schemes, etc, as these instruments were considered safe and sound instead they had low return. There were no other options available which were safe, as safety was of primary concern to the investor. With the increase in salaries and surplus fund available in the hands of the people, the risk appetite of the people also underwent a sea change. People started looking for better options to invest their surplus fund even if it meant taking little risk. The urgency with which returns are expected led to people flocking the stocks market even without understanding the basics of such investment. The results were catastrophic with two stock scams destroying the hard earned savings of the people and shaking the confidence in the institution of stock market. This led to the development of the new concept of wealth management in India.
In the early stages, mutual funds were not treated as an investment option. Some of the funds which were in existence did not have the required clientele base and couldn't showcase their capabilities. However, with the advancement of the concept of wealth management, mutual fund has become an important investment option for the people.
The mutual fund industry in India started in 1963 with the formation of Unit trust of India, at the initiative of the reserve bank and the government of India. The main objective then was to attract the small investors and introduce them to market investments. Mutual funds have become extremely popular over the last 20 years. What was once just another obscure financial instrument is now a part of our daily lives. More than 80 million people, or one half of the households in America, invest in mutual funds. That means that, in the United States alone, trillions of dollars are invested in Mutual funds.
Originally, mutual funds were heralded as a way for the little guy to get a piece of the market. Instead of spending all your free time buried in the financial pages of the Wall Street Journal, all you had to do was buy a mutual fund and you'd be set on your way to financial freedom. As you might have guessed, it's not that easy. Mutual funds are an excellent idea in theory, but, in reality, they haven't always delivered. Not all mutual funds are created equal, and investing in mutual's isn't as easy as throwing your money at the first salesperson who solicits your business.
Reliance Capital Asset Management Limited (RCAM), a company registered under the Companies Act, 1956 was appointed to act as the Investment Manager of Reliance Mutual Fund. Reliance Capital Asset Management Limited (RCAM) was approved as the Asset Management Company for the Mutual Fund by SEBI vides their letter no IIMARP/1264/95 dated June 30, 1995. The net worth of the Asset Management Company as on March 31, 2008 is Rs 709.39 crores. Reliance Mutual Fund schemes are managed by Reliance Capital Asset Management Limited., a subsidiary of Reliance Capital Limited, which holds 93.37% of the paid-up capital of RCAM, the balance paid up capital being held by minority shareholders.
The major objective of the report is to understand and appreciate the role of asset Management Company in wealth management function with reference to mutual funds.
This report also gives us the insight picture of Reliance top fund and the top five AMC which is doing better in that fund. The debt funds of these AMC are selected and compared on the basis on their performance, risk and volatility, snapshot ,investment details, NAV'S, return, and the sectors into which the investment has been made. The fund's returns are compared with their indices and category averages to see if they are performing better than indices. In order to measure their volatility, measures such as Standard Deviation, Sharpe ratio,Treynors ratio,Jensons ratio,Alpha,Beta ,have been adopted.
Finally, the findings and recommendations and relative conclusions have been mentioned which tells us about the performance, and standard of the AMC company which will help them out in the near future.
CHAPTER -1
INTRODUCTION
INTRODUCTION
Internship is one of the phases of B- school life which gives a flavor of the corporate world. The program normally known as Student Internship Program (SIP) opened door for me to enter into the corporate world in Reliance Mutual Fund. I was fortunate to be a part of this company as it has a brand name and even in terms of business Reliance Mutual Fund heads the first rank. So it was a great feeling to work and contribute in number one AMC.
Our company work was divided into three teams. The corporate team, banking and retail team .I was interning at the corporate team which mainly specializes in debt funds. As in corporate the investors don't require any suggestions to invest in equity funds so our main job was to plan the portfolio for them in debt funds. Our suggestions were of prime importance to them. Studying for the debt funds made the task very interesting and challenging. Every day with new ideas, the work became enjoying.
The project of internship was "Comparative Analysis and Performance Evaluation of various Mutual Funds in different AMC. The time period to complete this task was two months from 15th May2009 to 15th July 2009.
I got lots of benefits being in this company and in this industry sector. I was totally unaware of the role of debt fund in the market and the importance of it, so by being there I came to know the significant role of debt market which goes hand to hand with equity funds also got an idea how the portfolio is being managed by the fund manager which may be helpful to the common man. The most important part was the risk and returns, regards to the funds. The best things about the debt funds are that it is made in such a way that the risk associated with it is very less.
The topic what I have chosen is all about the comparison of Reliance debt fund with the other AMC FUNDS. These funds are chosen on the basis of high return and rankings. The performance evaluation is taken into consideration in order to show that which fund in which sector is doing well .So in order to do analysis many statistical tools help was taken which were fruitful to give the answer.
Overall it was a great learning experience working at "Reliance Assets Management Limited".
CHAPTER -2
RESEARCH
DESIGN
2.1 TITLE OF THE PROJECT
The project is entitled "Comparative Analysis and Performance Evaluation of Various Mutual Funds in the AMC Company "
2.2 NEED/RELEVENCE OF THE STUDY
The purpose of study is to analyze and figure out the portfolio of the funds completely in order to know how the portfolio is constructed, what is the proportion of assets allocation, how does the fund stands in comparison with the other funds of different AMC .There is one more need to study, and that is to find out that which fund is doing best irrespective of the return it is generating.
2.3 OBJECTIVES OF THE STUDY
Mutual fund industry today, with about 34 players and more than five hundred schemes, is one of the most preferred investment avenues in India. However with a plethora of schemes to choose from, the retail investors faces problem in selecting funds. Factors such as investment strategy and management style are qualitative, but the funds records are important indicator too.
For any economy to grow it is necessary that savings of the masses are converted into investments. Mutual fund is one of the tools which allow amateur person to invest because the funds are managed by experienced fund managers. It has been predicted that if the investment becomes 77% of income in various avenues then only we would be able to maintain our GDP growth rate of 8-10%.
Here the objective of our study is to compare various reliance mutual funds schemes with the other AMC .To make the report more detailed the report also contains an extensive details on schemes from other fund houses like HDFC, Kotak, Birla,Tata, UTI,DWS ,etc.
The overall objective of the project is:-
* Gain fast trends about the characteristics of mutual fund industry.
* Get knowledge about the different AMC companies.
* Get knowledge about the debt funds.
* To evaluate and assess the popular schemes of reliance via its competitor.
* To assess investors preference towards Reliance mutual fund.
* To technically compute and analyze the performance of funds with each other.
* Observing the similarity in terms of assets allocation among the fund taken.
2.4 SOURCE OF DATA COLLECTION
There are two main source of collecting data. One is primary and the other is secondary data.
The primary sources of data were
* Open ended interaction with clients.
* Discussions with managers ,heads,
* Also interacting with other intermediaries.
The data used for analysis was mainly secondary in nature and were collected from the following sources.
* The factsheets of the Assets Managements Companies.
* The websites of the Assets Managements Companies.
* The total AUM and NAV were sourced from the website of the Association of Mutual Funds of India.
* Much information has been taken out by the magazines, books and mutual funds workbook.
2.5 SAMPLE DESIGN
First of all the top five funds were taken of Reliance in consulting with the relationship manager. Then on the basis of return the other AMC were brought into picture. The fund with the highest return was ranked first and so on.
2.6 STATICAL TOOLS
* In order to compare the funds descriptive analysis is been done.
* Systematic sampling was followed since the performance of the funds was easily traceable through company websites and monthly fact sheets.
* Tools like Sharpe ratio,Treynors ratio,Jensons ratio is been used to get the findings.
* The use of tabulations like mean has also been taken into consideration.
* The use of pie charts has been shown to show the clear picture of the funds.
2.7 Performance Evaluation Measures
Return alone should not be considered as the basis of measurement of the performance of a mutual fund scheme, it should also include the risk taken by the fund manager because different funds will have different levels of risk attached to them it. These fluctuations in the returns generated by a fund are resultant of two guiding forces. First, general market fluctuations, which affect all the securities, present in the market, called market risk or systematic risk and second, fluctuations due to specific securities present in the portfolio of the fund, called unsystematic risk. The Total Risk of a given fund is sum of these two and is measured in terms of Standard deviation of returns of the fund. Systematic risk, on the other hand, is measured in terms of Beta, which represents fluctuations in the NAV of the fund vis-à-vis market. The more responsive the NAV of a mutual fund is to the changes in the market; higher will be its beta. Beta is calculated by relating the returns on a mutual fund with the returns in the market. While unsystematic risk can be diversified through investments in a number of instruments, systematic risk cannot. By using the risk return relationship, we try to assess the competitive strength of the mutual funds vis-à-vis one another in a better way.
In order to determine the risk-adjusted returns of investment portfolios, several eminent authors have worked since 1960s to develop composite performance indices to evaluate a portfolio by comparing alternative portfolios within a particular risk class. The most important and widely used measures of performance are:
Ø The Trey nor Measure
Ø The Sharpe Measure
Ø Jenson Model
The Treynor Measure
Developed by Jack Treynor, this performance measure evaluates funds on the basis of Treynor's Index. This Index is a ratio of return generated by the fund over and above risk free rate of return (generally taken to be the return on securities backed by the government, as there is no credit risk associated), during a given period and systematic risk associated with it (beta). Symbolically, it can be represented as:
Treynor's Index (Ti) = (Ri - Rf)/Bi.
Where, Ri represents Avg return on fund, Rf is risk free rate of return and Bi is beta of the fund.
All risk-averse investors would like to maximize this value. While a high and positive Treynor's Index shows a superior risk-adjusted performance of a fund, a low and negative Treynor's Index is an indication of unfavourable performance.
The Sharpe Measure
In this model, performance of a fund is evaluated on the basis of Sharpe Ratio, which is a ratio of returns generated by the fund over and above risk free rate of return and the total risk associated with it. According to Sharpe, it is the total risk of the fund that the investors are concerned about. So, the model evaluates funds on the basis of reward per unit of total risk. Symbolically, it can be written as:
Sharpe Index (Si) = (Ri - Rf)/Si
Where, Si is standard deviation of the fund.
While a high and positive Sharpe Ratio shows a superior risk-adjusted performance of a fund, a low and negative Sharpe Ratio is an indication of unfavourable performance.
Rankings based on total risk (Sharpe measure) and systematic risk (Treynor measure) should be identical for a well-diversified portfolio, as the total risk is reduced to systematic risk. Therefore, a poorly diversified fund that ranks higher on Treynor measure, compared with another fund that is highly diversified, will rank lower on Sharpe Measure.
Jenson Model
Jenson's model proposes another risk adjusted performance measure. This measure was developed by Michael Jenson and is sometimes referred to as the Differential Return Method. This measure involves evaluation of the returns that the fund has generated vs. the returns actually expected out of the fund given the level of its systematic risk. The surplus between the two returns is called Alpha, which measures the performance of a fund compared with the actual returns over the period. Required return of a fund at a given level of risk (Bi) can be calculated as:
Ri = Rf + Bi (Rm - Rf)
Where, Rm is average market return during the given period. After calculating it, alpha can be obtained by subtracting required return from the actual return of the fund.
Higher alpha represents superior performance of the fund and vice versa. Limitation of this model is that it considers only systematic risk not the entire risk associated with the fund and an ordinary investor cannot mitigate unsystematic risk, as his knowledge of market is primitive.
The Risk-free Proxy
The study has used the on 91-day Treasury bills (T-bills) as a surrogate for the risk-free rate of return. Due care has been taken to take identical time periods and equal sample observations for each of the funds. The data have been adjusted for corporate actions to make the data comparable overtime. NAV data have been collected from Value Research online, While Treasury bill data has been collected from RBI site.
2.8 CHAPTERIZATION
The report work is completely divided into major five chapters.
* Chapter one deals with the introduction of internship, about organization working in, possible time period to complete and the benefits from the internship.
* Chapter two tells us about the research design,
* Chapter three tells us about the industry and company analysis.
* Chapter four describes all about the data analysis and interpretation part. This is one of the most important parts of the study.
* Last chapter five will describe about the major findings, recommendations and conclusions.
2.9 LIMITATIONS OF THE STUDY
The study was restricted due to non availability of certain data as Crisil index and % change for this index.
* In some fund categories, the data for the top five funds was unavailable and hence, others funds were taken.
* Most of the funds taken were on the downfall scene because of the recession and the bad market condition.
* The fund identified as best may not hold good for long period because performance of funds can change anytime according to the changes in the market with respect to the portfolio.
* The study is restricted to small time period of only one year.
* The data used are for the study are secondary data and thus subjected to the limitations of the secondary data.
* The study is restricted to few funds and few companies only.
* The total time period is very limited to study the mutual fund industry and come to a final conclusion.
CHAPTER-3
INDUSTRY
AND
COMPANY ANALYSIS
INTRODUCTION
OVERVIEW OF MUTUAL FUND INDUSTRY
3.1 INTRODUCTION TO MUTUAL FUNDS
Mutual fund is a trust that pools money from a group of investors (sharing common financial goals) and invest the money thus collected into asset classes that match the stated investment objectives of the scheme. Since the stated investment objectives of a mutual fund scheme generally form the basis for an investor's decision to contribute money to the pool, a mutual fund can not deviate from its stated objectives at any point of time.
Every Mutual Fund is managed by a fund manager, who using his investment management skills and necessary research works ensures much better return than what an investor can manage on his own. The capital appreciation and other incomes earned from these investments are passed on to the investors (also known as unit holders) in proportion of the number of units they own.
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 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 Funds 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.
WORKING OF MUTUAL FUNDS
3.2 HISTORY OF INDIAN MUTUAL FUND
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 of India. The history of mutual funds in India can be broadly divided into four distinct phases
First Phase - 1964-87
Unit Trust of India (UTI) was established on 1963 by an Act of Parliament. It was set up by the Reserve Bank of India and functioned under the Regulatory and administrative control of the Reserve Bank of India. In 1978 UTI was de-linked from the RBI and the Industrial 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)
987 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 Can bank 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 - 1993-2003 (Entry of Private Sector Funds)
With the entry of private sector funds in 1993, a new era started in the Indian mutual fund industry, giving the Indian investors a wider choice of fund families. Also, 1993 was the year in which the first Mutual Fund Regulations came into being, under which all mutual funds, except UTI were to be registered and governed. The erstwhile Kothari Pioneer (now merged with Franklin Templeton) was the first private sector mutual fund registered in July 1993.
The 1993 SEBI (Mutual Fund) Regulations were substituted by a more comprehensive and revised Mutual Fund Regulations in 1996. The industry now functions under the SEBI (Mutual Fund) Regulations 1996.
The number of mutual fund houses went on increasing, with many foreign mutual funds setting up funds in India and also the industry has witnessed several mergers and acquisitions. As at the end of January 2003, there were 33 mutual funds with total assets of Rs. 1,21,805 crores. The Unit Trust of India with Rs.44,541 crores of assets under management was way ahead of other mutual funds.
Fourth Phase - since February 2003
In February 2003, 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 2003, representing broadly, the assets of US 64 scheme, assured return and certain other schemes. The Specified Undertaking of Unit Trust of India, functioning under an administrator and under the rules framed by Government of India and does not come under the purview of the Mutual Fund Regulations.
The second is the UTI Mutual Fund, sponsored by SBI, PNB, BOB and LIC. It is registered with SEBI and functions under the Mutual Fund Regulations. With the bifurcation of the erstwhile UTI which had in March 2000 more than Rs.76,000 crores of assets under management and with the setting up of a UTI Mutual Fund, conforming to the SEBI Mutual Fund Regulations, and with recent mergers taking place among different private sector funds, the mutual fund industry has entered its current phase of consolidation and growth.
The graph indicates the growth of assets over the years.
GROWTH IN ASSETS UNDER MANAGEMENT
3.3 CLASSIFICATION OF MUTUAL FUNDS
Wide variety of Mutual Fund Schemes exists to cater to the needs such as financial position, risk tolerance and return expectations etc. thus mutual funds has Variety of flavors, Being a collection of many stocks, an investors can go for picking a mutual fund might be easy. There are over hundreds of mutual funds scheme to choose from. It is easier to think of mutual funds in categories, mentioned below.
BY STRUCTURE
Open-end fund
The term mutual fund is the common name for what is classified as an open-end investment company by the SEC. Being open-ended means that, at the end of every day, the fund issues new shares to investors and buys back shares from investors wishing to leave the fund.
Mutual funds must be structured as corporations or trusts, such as business trusts, and any corporation or trust will be classified by the SEC as an investment company if it issues securities and primarily invests in non-government securities. An investment company will be classified by the SEC as an open-end investment company if they do not issue undivided interests in specified securities (the defining characteristic of unit investment trusts or UITs) and if they issue redeemable securities. Registered investment companies that are not UITs or open-end investment companies are closed-end funds. Neither UITs nor closed-end funds are mutual funds (as that term is used in the US).
Close-ended Fund/ Scheme:
A close-ended fund or scheme has a stipulated maturity period e.g. 5-7 years. The fund is open for subscription only during a specified period at the time of launch of the scheme. 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 the units 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 i.e. either repurchase facility or through listing on stock exchanges. These mutual funds schemes disclose NAV generally on weekly basis
Interval Schemes:
Interval Schemes are that scheme, which combines the features of open-ended and close-ended schemes. The units may be traded on the stock exchange or may be open for sale or redemption during pre-determined intervals at NAV related prices .
The risk return trade-off indicates that if investor is willing to take higher risk then correspondingly he can expect higher returns and vise versa if he pertains to lower risk instruments, which would be satisfied by lower returns. For example, if an investors opt for bank FD, which provide moderate return with minimal risk. But as he moves ahead to invest in capital protected funds and the profit-bonds that give out more return which is slightly higher as compared to the bank deposits but the risk involved also increases in the same proportion.
Thus investors choose mutual funds as their primary means of investing, as Mutual funds provide professional management, diversification, convenience and liquidity. That doesn't mean mutual fund investments risk free. This is because the money that is pooled in are not invested only in debts funds which are less riskier but are also invested in the stock markets which involves a higher risk but can expect higher returns. Hedge fund involves a very high risk since it is mostly traded in the derivatives market which is considered very volatile.
BY NATURE:
Equity (Stock or Income) Funds
Funds that invest in stocks represent the largest category of mutual funds. Generally, the investment objective of this class of funds is long-term capital growth with some income. There are, however, many different types of equity funds because there are many different types of equities. A great way to understand the universe of equity funds is to use a style box, an example of which is below.
The idea is to classify funds based on both the size of the companies invested in and the investment style of the manager. The term value refers to a style of investing that looks for high quality companies that are out of favour with the market. These companies are characterized by low P/E and price-to-book ratios and high dividend yields. The opposite of value is growth, which refers to companies that have had (and are expected to continue to have) strong growth in earnings, sales and cash flow. A compromise between value and growth is blend, which simply refers to companies that are neither value nor growth stocks and are classified as being somewhere in the middle.
Debt funds:
The objective of these Funds is to invest in debt papers. Government authorities, private companies, banks and financial institutions are some of the major issuers of debt papers. By investing in debt instruments, these funds ensure low risk and provide stable income to the investors. Debt funds are further classified as:
Gilt Funds:
Invest their corpus in securities issued by Government, popularly known as Government of India debt papers. These Funds carry zero Default risk but are associated with Interest Rate risk. These schemes are safer as they invest in papers backed by Government.
Income Funds:
Invest a major portion into various debt instruments such as bonds, corporate debentures and Government securities.
MIPs:
Invests maximum of their total corpus in debt instruments while they take minimum exposure in equities. It gets benefit of both equity and debt market. These scheme ranks slightly high on the risk-return matrix when compared with other debt schemes.
Short Term Plans (STPs):
Meant for investment horizon for three to six months. These funds primarily invest in short term papers like Certificate of Deposits (CDs) and Commercial Papers (CPs). Some portion of the corpus is also invested in corporate debentures.
Liquid Funds:
Also known as Money Market Schemes, These funds provides easy liquidity and preservation of capital. These schemes invest in short-term instruments like Treasury Bills, inter-bank call money market, CPs and CDs. These funds are meant for short-term cash management of corporate houses and are meant for an investment horizon of 1day to 3 months. These schemes rank low on risk-return matrix and are considered to be the safest amongst all categories of mutual funds.
Balanced funds:
As the name suggest they, are a mix of both equity and debt funds. They invest in both equities and fixed income securities, which are in line with pre-defined investment objective of the scheme. These schemes aim to provide investors with the best of both the worlds. Equity part provides growth and the debt part provides stability in returns.
Further the mutual funds can be broadly classified on the basis of investment parameter viz,
Each category of funds is backed by an investment philosophy, which is pre-defined in the objectives of the fund. The investor can align his own investment needs with the funds objective and invest accordingly.
BY INVESTMENT OBJECTIVE:
Growth Schemes:-Growth Schemes are also known as equity schemes. The aim of these schemes is to provide capital appreciation over medium to long term. These schemes normally invest a major part of their fund in equities and are willing to bear short-term decline in value for possible future appreciation.
Income Schemes
Income Schemes are also known as debt schemes. The aim of these schemes is to provide regular and steady income to investors. These schemes generally invest in fixed income securities such as bonds and corporate debentures. Capital appreciation in such schemes may be limited.
Balanced Schemes
Balanced Schemes aim to provide both growth and income by periodically distributing a part of the income and capital gains they earn. These schemes invest in both shares and fixed income securities, in the proportion indicated in their offer documents (normally 50:50).
Money Market Schemes
Money Market Schemes aim 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.
OTHER SCHEMES
Tax Saving Schemes:
Tax-saving schemes offer tax rebates to the investors under tax laws prescribed from time to time. Under Sec.88 of the Income Tax Act, contributions made to any Equity Linked Savings Scheme (ELSS) are eligible for rebate.
Index Schemes:
Index schemes attempt to replicate the performance of a particular index such as the BSE Sensex or the NSE 50. The portfolio of these schemes will consist of only those stocks that constitute the index. The percentage of each stock to the total holding will be identical to the stocks index weight age. And hence, the returns from such schemes would be more or less equivalent to those of the Index.
Sector Specific Schemes:
These are the funds/schemes which invest in the securities of only those sectors or industries as specified in the offer documents. e.g. Pharmaceuticals, Software, Fast Moving Consumer Goods (FMCG), Petroleum stocks, etc. The returns in these funds are dependent on the performance of the respective sectors/industries. While these funds may give higher returns, they are more risky compared to diversified funds. Investors need to keep a watch on the performance of those sectors/industries and must exit at an appropriate time.
3.4 ADVANTAGES OF INVESTING IN MUTUAL FUNDS
S. No.
Advantage
Particulars
.
Portfolio Diversification
Mutual Funds invest in a well-diversified portfolio of securities which enables investor to hold a diversified investment portfolio (whether the amount of investment is big or small).
2.
Professional Management
Fund manager undergoes through various research works and has better investment management skills which ensure higher returns to the investor than what he can manage on his own.
3.
Less Risk
Investors acquire a diversified portfolio of securities even with a ...
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3.4 ADVANTAGES OF INVESTING IN MUTUAL FUNDS
S. No.
Advantage
Particulars
.
Portfolio Diversification
Mutual Funds invest in a well-diversified portfolio of securities which enables investor to hold a diversified investment portfolio (whether the amount of investment is big or small).
2.
Professional Management
Fund manager undergoes through various research works and has better investment management skills which ensure higher returns to the investor than what he can manage on his own.
3.
Less Risk
Investors acquire a diversified portfolio of securities even with a small investment in a Mutual Fund. The risk in a diversified portfolio is lesser than investing in merely 2 or 3 securities.
4.
Low Transaction Costs
Due to the economies of scale (benefits of larger volumes), mutual funds pay lesser transaction costs. These benefits are passed on to the investors.
5.
Liquidity
An investor may not be able to sell some of the shares held by him very easily and quickly, whereas units of a mutual fund are far more liquid.
6.
Choice of Schemes
Mutual funds provide investors with various schemes with different investment objectives. Investors have the option of investing in a scheme having a correlation between its investment objectives and their own financial goals. These schemes further have different plans/options
7.
Transparency
Funds provide investors with updated information pertaining to the markets and the schemes. All material facts are disclosed to investors as required by the regulator.
8.
Flexibility
Investors also benefit from the convenience and flexibility offered by Mutual Funds. Investors can switch their holdings from a debt scheme to an equity scheme and vice-versa. Option of systematic (at regular intervals) investment and withdrawal is also offered to the investors in most open-end schemes.
9.
Safety
Mutual Fund industry is part of a well-regulated investment environment where the interests of the investors are protected by the regulator. All funds are registered with SEBI and complete transparency is forced.
3.5 DISADVANTAGES IN INVESTING IN MUTUAL FUNDS
* Professional Management - Some funds doesn't perform in neither the market, as their management is not dynamic enough to explore the available opportunity in the market, thus many investors debate over whether or not the so-called professionals are any better than mutual fund or investor himself, for picking up stocks.
* Costs - The biggest source of AMC income is generally from the entry & exit load which they charge from investors, at the time of purchase. The mutual fund industries are thus charging extra cost under layers of jargon.
* Dilution - Because funds have small holdings across different companies, high returns from a few investments often don't make much difference on the overall return. Dilution is also the result of a successful fund getting too big. When money pours into funds that have had strong success, the manager often has trouble finding a good investment for all the new money.
* Taxes - when making decisions about your money, fund managers don't consider your personal tax situation. For example, when a fund manager sells a security, a capital-gain tax is triggered, which affects how profitable the individual is from the sale. It might have been more advantageous for the individual to defer the capital gains liability.
*
3.6 MAJOR MUTUAL FUNDS COMPANIES IN INDIA
The concept of mutual funds in India dates back to the year 1963. The era between 1963 and 1987 marked the existence of only one mutual fund company in India with Rs. 67bn assets under management (AUM), by the end of its monopoly era, the Unit Trust of India (UTI). By the end of the 80s decade, few other mutual fund companies in India took their position in mutual fund market.
The new entries of mutual fund companies in India were SBI Mutual Fund, Can bank Mutual Fund, Punjab National Bank Mutual Fund, Indian Bank Mutual Fund.
The succeeding decade showed a new horizon in Indian mutual fund industry. By the end of 1993, the total AUM of the industry was Rs. 470.04 bn. The private sector funds started penetrating the fund families. In the same year the first Mutual Fund Regulations came into existence with re-registering all mutual funds except UTI. The regulations were further given a revised shape in 1996.Kothari Pioneer was the first private sector mutual fund company in India which has now merged with Franklin Templeton. Just after ten years with private sector player's penetration, the total assets rose up to Rs. 1218.05 bn. Today there are 33 mutual fund companies in India.
Major Mutual Fund Companies in India
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.
HDFC Mutual Fund
HDFC Mutual Fund was setup on June 30, 2000 with two sponsors 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. 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.
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's 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 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.
.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.
3.7 HOW DO WE CHOOSE THE MUTUAL FUNDS
. Draw down your investment objective. There are various schemes suitable for different needs. For example retirement plan, capital growth etc. Also get clear about your time frame for investment and returns. Equity funds are not advisable for short term because of their long term nature. You can consider money market and floating rate funds for short term gains. This equals asking - What kind of mutual fund is right for me?
2. Once you have decided on a plan or a couple of them, collect as much information as possible on them from different sources offering them. Funds' prospectus and advisors may help you in this.
3. Pick out companies consistently performing above average. Mutual funds industry indices are helpful in comparing different funds as well as different plans offered by them. Some of the industry standard fund indices are Nassau 100, Russel 2000, S&P fund index and DSI index with the latter rating the Socially Responsible Funds only. Also best mutual funds draw good results despite market volatility.
4. Get a clear picture of fees & associated cost, taxes (for non-tax free funds) for all your short listed funds and how they affect your returns. Best mutual funds have lower cost out go.
5. Best mutual funds maximize returns and minimize risks. A number called as Sharpe Ratio explains whether a fund is risk free based on its expected returns compared against a risk free money market fund.
6. Some funds have the advantage of low minimum initial investments. You can start investing even with $250 a month. This is advisable for building asset bases over a long period with small regular investments.
WHY SHOULD INVESTORS INVEST IN MUTUAL FUNDS
An investors avails of the services of experienced and skilled professionals who are 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.
* Mutual funds invest in a number of across a broad cross section of industries and sectors. This diversification reduces the risk because seldom all the stock's decline at the same time and same proportion.
* Investing in mutual funds reduces paper work and helps an investor avoid many problems such as bad deliveries, delayed payment and unnecessary follow up with brokers and companies. Mutual funds save your time and make investing easy and convenient.
* 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.
* Mutual funds are relatively less expensive way to invest compared to directly investing in capital markets because the benefits of scale in brokerage, custodial and other fees are translated into lower costs for investors.
* In open ended schemes , investors can get their money back at net assets value related price .an investor can sell the units on a stock exchange at the prevailing market price or avail of the fielding of direct repurchase at NAV related prices which some close ended and interval schemes offer an investor periodically.
* Investors get regular information on the value of investment in disclosure on the specific investments made by the investor's schemes.
* Investors can invest or withdraw funds according to their needs and convenience.
* All mutual funds are registered with SEBI and they function within the provisions of strict regulations designed to protect the interests of investors.
EFFICIENCY OF MUTUAL FUNDS
The efficiency of mutual funds should be judged by the following factors. The test of efficiency or a good mutual fund shall compromise of evaluation of a mutual fund on: 1) Stability - whether a mutual fund is stable or not so far as its schemes are concerned.
2) Liquidity - whether the schemes offer liquidity by way of their listing on stock exchange.
3) Growth - whether the mutual funds offer increase in net asset value, consistent growth in dividend and capital appreciation.
4) Credibility - previous track record of issuer.
5) Returns - assured or otherwise.
6) Management approach - risk -taking, portfolio, diversification, return maximization, bonus etc.
3.8 RISK INVOLVED IN MUTUAL FUNDS
Mutual fund investments are subject to market risks. Please read the offer document carefully before investing. There is no assurance or guarantee that all the objectives of the fund will be achieved. Past performance of the Sponsors/ Mutual fund/ Schemes/ Asset Management Company is not necessarily indicative of future results. The name of the fund/ scheme does not, in any manner, indicate either the quality of the fund, its future prospects or returns".
It may be interpreted that under there is greater amount of risk involved in the subject matter; even if the disclaimer statement(s) are not too lengthier. In fact, these disclaimers, directly or indirectly, give a clear message that investors should be informed, take adequate care and beware of the inherent risks before investing in the mutual fund. Now the issue is what those Risks are?
. Investor Psychology Risk:
The investor psychology is such that most of the investors, be it Mutual Fund Investors or Direct Capital Market Investors, behave like reactionaries. E.g. they enter the market when the share prices starts rising and they get panicky & exit as soon as share prices starts falling. Therefore, whether it is shares of company or mutual fund unit investors, investors resort to selling their investments when market starts looking down. Because of this, there will be more than normal demand on Mutual Fund manager to redeem the units. To honour the redemption demands of the exiting unit holders during the worst market times, Mutual Funds are forced to sell more stocks at the prevailing low prices. As a result of this, along with the redeeming unit holders, all the other unit holders who have invested in the fund suffer. This means, irrespective of one being a long-term buy and hold investor or not, he suffers because of investing in Mutual Fund.
2. Cost Risks:
Mutual Funds charge huge fees that they can get away with and that too in the most confusing manner possible. The fund managers never intend to make their costs clear to their clients. It would not be painful for the investors to pay for the expenses and costs of the funds when they derive satisfactory returns. But, the irony is that investors have to pay for the sales charges, annual fees and many other expenses irrespective of how the fund has performed.
3. Prediction Risks:
Nobody can predict the capital market perfectly and can always find good investments. Similarly, the fund manager's predictions of future actions and outcomes are, of necessity, subject to error.
4. Risk of Redemption Restrictions:
Whether informed in writing or not, normally the liquidity of schemes investments may be restricted by the trading volumes settlement period and transfer procedures.
5. Management Change Risks:
It is not uncommon for a Mutual Fund to have changes in its management. The change in the funds management may affect the achievement of the objectives of the fund. The fund company may, for various reasons, replace a fund manager or may be the fund manager himself may resign from his job for any reason. This change will be significant since the fund manager controls the fund investments.
6. Judgement Risks:
Investors may not know more than the fund manager about the investment strategy and whatever judgment the investor makes will not be fool proof.
7. Risks of Blind Diversification:
It may happen that a fund is heavily committed to a particular area of the economy at any given time. This is called blind diversification risk and any investor would like to invest in Mutual Fund that concentrate in asset classes that he himself has not invested at his own.
8. Risks of changes in the Regulatory Norms:
Mutual Funds are constantly regulated by SEBI and investors are subject to risk of the changes in the norms for the Mutual Funds.
Besides the above risks, Mutual Funds will also have the common risks that any investment has. In fact, risk is present in every decision made with regard to the investments in capital markets. Following is the list of some common risks involved while investing in the capital markets and particularly in the mutual funds:
* Country Risk: This risk arises from the possibility that political events such as war, national elections etc. and financial problems such as rising inflation or natural disasters such as an earthquake, a poor harvest etc. will weaken a country's economy and cause investments in that country to decline.
* Credit Risk: This is a risk that arises from the possibility that a bond issuer will fail to repay interest and principal in a timely manner. This risk is also called as default risk.
* Currency Risk: This risk arises from the possibility that returns could be reduced for Indians investing in foreign securities because of a rise in the value of the Indian rupee against dollar, euro or yen etc. This is also known as Exchange Rate Risk.
* Manager Risk : This risk arises from the possibility that an actively managed mutual fund's investment adviser will fail to execute the fund's investment strategy effectively, resulting in the failure of the sated objectives.
* Market Risk: This risk arises from the possibility that stock fund or bond fund prices overall will decline over short or even extended periods.
Risk Hierarchy of Different Mutual Funds
Thus, different mutual fund schemes are exposed to different levels of risk and investors should know the level of risks associated with these schemes before investing. The graphical representation hereunder provides a clearer picture of the relationship between mutual funds and levels of risk associated with these funds:
3.9 SOME IMPORTANT ASPECTS OF MUTUAL FUND
NET PRESENT VALUE
Net Asset Value (NAV) is the actual value of one unit of a given scheme on any given business day. The NAV reflects the liquidation value of the fund's investments on that particular day after accounting for all expenses. It is calculated by deducting all liabilities (except unit capital) of the fund from the realisable value of all assets and dividing it by number of units outstanding.
Sale Price
Is the price you pay when you invest in a scheme. Also called Offer Price. It may include a sales load.
Repurchase Price
Is the price at which units under open-ended schemes are repurchased by the Mutual Fund. Such prices are NAV related.
Redemption Price
Is the price at which close-ended schemes redeem their units on maturity. Such prices are NAV related.
Sales Load
Is a charge collected by a scheme when it sells the units. Also called, 'Front-end' load. Schemes that do not charge a load are called 'No Load' schemes.
Repurchase or 'Back-end' Load
Is a charge collected by a scheme when it buys back the units from the unit holders.
3.10 SEBI GUIDELINES FOR MUTUAL FUNDS
CODE OF CONDUCT FOR INTERMEDIARIES OF MUTUAL FUNDS
. Take necessary steps to ensure that the clients' interest is protected.
2. Adhere to SEBI Mutual Fund Regulations and guidelines related to selling, distribution and advertising practices. Be fully conversant with the key provisions of the offer document as well as the operational requirements of various schemes.
3. Provide full and latest information of schemes to investors in the form of offer documents, performance reports, fact sheets, portfolio disclosures and brochures, and recommend schemes appropriate for the client's situation and needs.
4. Highlight risk factors of each scheme, avoid misrepresentation and exaggeration, and urge investors to go through offer documents/key information memorandum before deciding to make investments.
5. Disclose all material information related to the schemes/plans while canvassing for business.
6. Abstain from indicating or assuring returns in any type of scheme, unless the offer document is explicit in this regard.
7. Maintain necessary infrastructure to support the AMCs in maintaining high service standards to investors, and ensure that critical operations such as forwarding forms and cheques to AMCs/registrars and despatch of statement of account and redemption cheques to investors are done within the time frame prescribed in the offer document and SEBI Mutual Fund Regulations.
8. Avoid colluding with clients in faulty business practices such as bouncing cheques, wrong claiming of dividend/redemption cheques, etc.
9. Avoid commission driven malpractices such as:
(a) Recommending inappropriate products solely because the intermediary is getting higher commissions there from.
(b) Encouraging over transacting and churning of mutual fund investments to earn higher commissions, even if they mean higher transaction costs and tax for investors.
0. Avoid making negative statements about any AMC or scheme and ensure that comparisons if any are made with similar and comparable products.
1. Ensure that all investor related statutory communications (such as changes in fundamental attributes, exit/entry load, exit options, and other material aspects) are sent to investors reliably and on time.
3.11 SWOT ANALYSIS OF MUTUAL FUNDS
STRENGTHS
> Large numbers of potential customers as base.
> Government support by way of tax concessions for MF investors.
> Sophisticated capital market.
> Volatility of bank interest rate.
> Vital source of capital information.
> Scope of accessing market information.
> Offer liquidity to investors at ant time.
> The size of the market is very large.
WEAKNESS
> Poor participation of retail investors.
> There is very high degree of discomfort along with uncertainty.
> Lack of focus.
> Leadership vacuum.
> Under performance.
> Inability to scale up.
> Unclear value proportion.
> Overemphasis on funds under management.
> Poor service conditions.
> Distribution network is confined only to metro cities.
> Increasing NPA in the portfolio.
OPPORTUNITIES
> Huge untapped market in semi urban and rural areas.
> High level of savings habit among the people.
> Liberalized business environment.
> Using online mode of trading system.
> Linkage of ATMs for cash withdrawal is ongoing.
> Consolidation in the industry is in progress.
> Investment opportunities abound in the international market.
> Failures of non bank financial company operations.
THREATS
> Increasing competition among the players.
> High level of volatility in the stock market.
> NAVs are highly sensitive to internal and market factors.
> Possibility of more stringent regulations by SEBI,AMFI etc in future.
3.12 MUTUAL FUNDS AND BUDGET 2008-2009
Mutual Funds
Fixed Income Markets to Benefit
Measures
"
Revenue deficit target reduced to 1% in FY09 from 1.4% in FY08; fiscal deficit target reduced to 2.5% in FY09 from 3.1% in FY08
"
Gross borrowings lower at Rs.1.45 trillion in FY09 from Rs.1.56 trillion in FY08; net borrowing also lower at Rs.1.01 trillion from Rs.1.11 trillion in FY08
"
Measures announced to develop bond, currency and derivatives markets that will include launching exchange-traded currency and interest rate futures and developing a transparent credit derivatives market with appropriate safeguards.
"
Measures announced to enhance tradability of domestic convertible bonds by putting in place a mechanism that will enable investors to separate embedded equity options from convertible bonds and trade them separately.
"
Measures announced to encourage development of a market-based system for classifying financial instruments based on their complexity and implicit risks.
"
Proposal announced to exempt from TDS, corporate debt instruments issued in demat form and listed on recognized stock exchanges.
Impact
"
Decision of expanding the corporate debt market will help in increased focus towards bond funds and in a scenario where interest rates are not expected to be adverse in the medium term, this would further assist in increasing the popularity of bond funds which have not been doing well in the last few years.
"
Development of the derivatives markets can in turn enhance the development of the structured products market.
Easing in Income Tax Slabs
Measures
"
Threshold limit of Income Tax exemption for individuals raised as follows -
Up to Rs.150,000 - NIL
Rs.150,001 to Rs.300,000 - 10%
Rs.300,001 to Rs.500,000 - 20%
Rs.500,001 and above - 30%
Impact
"
This is expected to increase the disposable income in the hands of the individuals to some extent which could translate into increased retail investments in mutual funds.
Increase in Short Term Capital Gains Tax
Measures
"
Short Term Capital Gains Tax raised from 10% to 15%
Impact
"
Since long term capital gains tax has been left unchanged, this hike in short-term capital gains tax could encourage long-term investments which augur well to the development of the concept of "long terms" in the Indian Mutual Fund industry, which is conspicuous by its absence but which is coveted by the fund industry given the greater flexibility that this provides in fund management.
"
At the same time since the short term capital gains tax is still lower than the income tax slabs of typical capital market investors, it is not expected to cause too many investors to turn away from mutual funds.
"
The fact that the dividend distribution tax structure has not changed would mean that dividend reinvestment plans in liquid schemes will continue to be popular and also the liquid plus category will continue to attract inflows as the tax rates there would continue to be lower than the liquid category.
3.13 GLOBAL SCENARIO IN MUTUAL FUNDS
Some basic facts :
> The money market mutual fund segment has a total corpus of $ 1.48 trillion in the U.S. against a corpus of $ 100 million in India.
> Out of the top 10 mutual funds worldwide, eight are bank- sponsored. Only Fidelity and Capital are non-bank mutual funds in this group.
> In the U.S. the total number of schemes is higher than that of the listed companies while in India we have just 277 schemes
> Internationally, mutual funds are allowed to go short. In India fund managers do not have such leeway.
> In the U.S. about 9.7 million households will manage their assets on-line by the year 2003, such a facility is not yet of avail in India.
> On- line trading is a great idea to reduce management expenses from the current 2 % of total assets to about 0.75 % of the total assets.
> 72% of the core customer base of mutual funds in the top 50-broking firms in the U.S. is expected to trade on-line by 2003.
(Source: The Financial Express September,)
COMPANY
OVERVIEW
3.14 INTRODUCTION:-RELIANCE CAPITAL
Reliance Capital has interests in asset management and mutual funds; life and general insurance; private equity and proprietary investments; stock broking; depository services; distribution of financial products; consumer finance; and other activities in financial services.
Reliance Mutual Fund is India's biggest Mutual Fund. Reliance Life Insurance is one of India's fastest growing life insurance company and among the top four private sector insurers. Reliance General Insurance is one of India's fastest growing general insurance company and among the top 3three private sector insurers. Reliance Money is one of the leading retail brokerage houses and distributors of financial products in India with over 3 million customers. Reliance Consumer finance has a loan book of over Rs. 8,600 crore at the end of March 2009.
Reliance Capital has a net worth of Rs. 7,491 crore (US$ 1.5 billion) and total assets of Rs. 24,260 crore (US$ 4.8 billion) as of March 31, 2009
CORPORATE GOVERNANCE
Reliance Capital Limited has maintained the highest standards of corporate governance principles and best practices by adopting the "Reliance Anil Dhirubhai Ambani Group - Corporate Governance Policies and Code of Conduct" as followed by all constituents in the group. These Policies and Code prescribe a set of systems, processes and principles conforming to the international standards and are reviewed periodically to ensure their continuing relevance, effectiveness and responsiveness to the needs of local and global investors and all other stakeholders.
Reliance Capital's philosophy on Corporate Governance envisages the attainment of the highest levels of transparency, accountability and equity, in all facets of its operations and in all interactions with its stakeholders, including shareholders, employees, the government, lenders and the society. The Company believes that all its operations and actions must serve the underlying goal of enhancing long-term shareholder value. In our commitment to practice sound governance principles, we are guided by the following core principles:
* Transparency
To maintain the highest standards of transparency in all aspects of our interactions and dealings.
* Disclosures
To undertake timely dissemination of all price sensitive information and matters of interest to our stakeholders.
* Empowerment and Accountability
To demonstrate the highest levels of personal accountability and to ensure that employees consistently pursue excellence in everything they do.
* Compliances
To comply with all the laws and regulations applicable to the company.
* Ethical conduct
To conduct the affairs of the company in an ethical manner.
3.15 COMMITTES
Audit Committees
* The Audit Committee comprises of four non-executive Directors, viz, Shri Rajendra P. Chitale, Shri Amitabh Jhunjhunwala, Shri C. P. Jain and Shri P. N. Ghatalia. Shri Rajendra P. Chitale, an Independent non-executive Director, is the Chairman of the Committee. All the members of Audit Committee have good knowledge of finance, accounts and company law. The Chairman of the committee is an eminent chartered accountant and has accounting and related financial management expertise. The committee held four meetings during the year. The audit committee also advises the management on the areas where internal audit can be improved. The minutes of the meetings of the audit committee are placed before the board.
The Company Secretary, Shri V. R. Mohan acts as the Secretary to the Committee.
* Shareholders' / investors' grievances committees
The shareholders'/investors' grievances committee of the Board currently comprises Shri Amitabh Jhunjhunwala and Shri Rajendra P. Chitale. The company has appointed M/s. Karvy Computershare Pvt. Ltd. to act as Registrar and Share Transfer Agent of the company. The committee also monitors redressal of investors' grievances. Particulars of investors' grievances received and redressed are furnished in the investor information section of this report.
Nomination / Remuneration Committees
The Nomination / Remuneration Committee of the Company comprises of Shri Rajendra P. Chitale, Non-Executive Independent Director as Chairman, and Shri Amitabh Jhunjhunwala and Shri C. P. Jain, Non-Executive Directors, as its members. The Company Secretary of the Company is the Secretary of the Committee.
The terms of reference of the Remuneration Committee, interalia, consist of reviewing the overall compensation policy and structure, service agreements and other employment conditions for the members of the board.
Risk Management Committees
The Risk Management Committee would oversee the establishment and operation of the risk management system, including reviewing the adequacy of risk management practices for the material risks, such as credit, market, liquidity, legal compliance regulatory and operational risks, on a regular basis.
Depending on the scale, nature and complexity of its business, the Board or the Risk Management Committee should establish a separate risk management function responsible for monitoring and managing the risks that the Financial Institution faces. The organisation and responsibilities of the risk management function should be documented.
Asset Liability Management Committees (ALCO)
The Company would constitute an ALCO Committee of the senior management executives of the company. The committee would manage the Asset Liability Gap and interest rate structures to address liquidity and interest rate risks.
The ALCO would maintain records of all its meetings, in particular records of discussions on key deliberations and decisions taken.
Company shall put in place necessary ALM strategy guidelines and charter of ALCO indicating the requirements including roles and responsibilities. Various support groups as may be necessary be formed to supplement the ALCO functions.
POLICIES
* Code of Conduct
* Code of Conduct For Directors And Senior Management
* Guidelines for NBFCs -
o Policy on interest rates
o Guidelines for demand/ call loan
o Guidelines on corporate governance
o Guidelines on exposure norms
o Guidelines on fair practice
o Guidelines on investment policy
o Norms on 'Know Your Client' (KYC)
Policy for purchasing and sale of non- performing financial assets.
3.16 COMPANY SRTUCTURE
RISK MANAGEMENT
Risk Management philosophy is to adopt an independent holistic approach to manage uncertainties from all quarters that is "enterprise-wide risk management".
Three critical elements on which the enterprise risk management framework is build; creating a clear direct line of sight from risk management to investor's value; implementing a process to protect investor's value; and building the organizational capability to ensure strategic risk management.
This ensures that risk management complements business objectives and strategies. The function assists in structuring technology, processes and assets in an advantageous manner, and the architecture so formed, is capable of tackling disruptions in the operational universe. It ensures that business development at all times is within parameters and regulations.
3.17 ABOUT RELIANCE MUTUAL FUND
Reliance Mutual Fund (RMF) is one of India's leading Mutual Funds, with Average Assets Under Management (AAUM) of Rs. 88,388 Crs (AAUM for 30th Apr 09 ) and an investor base of over 71.53 Lacs. Reliance Mutual Fund, a part of the Reliance - Anil Dhirubhai Ambani Group, is one of the fastest growing mutual funds in the country. RMF offers investors a well-rounded portfolio of products to meet varying investor requirements and has presence in 118 cities across the country. Reliance Mutual Fund schemes are managed by Reliance Capital Asset Management Limited., a subsidiary of Reliance Capital Limited, which holds 93.37% of the paid-up capital of RCAM, the balance paid up capital being held by minority shareholders. Reliance Mutual Fund (RMF) has been established as a trust under the Indian Trusts Act, 1882 with Reliance Capital Limited (RCL), as the Settler/Sponsor and Reliance Capital Trustee Co. Limited (RCTCL), as the Trustee.
RMF has been registered with the Securities & Exchange Board of India (SEBI) vide registration number MF/022/95/1 dated June 30, 1995. The name of Reliance Capital Mutual Fund has been changed to Reliance Mutual Fund effective 11th. March 2004 vide SEBI's letter no. IMD/PSP/4958/2004 date 11th. March 2004. Reliance Mutual Fund was formed to launch 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.
The main objectives of the Trust are:
* To carry on the activity of a Mutual Fund as may be permitted at law and formulate and devise various collective Schemes of savings and investments for people in India and abroad and also ensure liquidity of investments for the Unit holders;
* To deploy Funds thus raised so as to help the Unit holders earn reasonable returns on their savings and
* To take such steps as may be necessary from time to time to realise the effects without any limitation.
3.18 VISION STATEMENT
To be a globally respected wealth creator with an emphasis on customer care and a culture of good corporate governance
MISSION STATEMENT
To create and nurture a world-class, high performance environment aimed at delighting our customers
SPONSORS
"Reliance Mutual Fund schemes are managed by Reliance Capital Asset Management Limited., a subsidiary of Reliance Capital Limited, which holds 93.37% of the paid-up capital of RCAM, the balance paid up capital being held by minority shareholders.", the sponsor. Reliance Mutual Fund (RMF) has been sponsored by Reliance Capital Ltd (RCL). The promoter of RCL is AAA Enterprises Private Limited. Reliance Capital Limited is a Non Banking Finance Company.
Reliance Capital has interests in asset management and mutual funds, life and non-life insurance, private equity and proprietary investments, stock broking and other activities in the financial services sector. The net worth of RCL is Rs. 6086 crore as on March 31, 2008. Given below is a summary of RCL's financials:
Reliance Capital Ltd. has contributed Rupees One Lac as the initial contribution to the corpus for the setting up of the Mutual Fund. Reliance Capital Ltd. is responsible for discharging its functions and responsibilities towards the Fund in accordance with the Securities and Exchange Board of India (SEBI) Regulations.
The Sponsor is not responsible or liable for any loss resulting from the operation of the Scheme beyond the contribution of an amount of Rupees one Lac made by them towards the initial corpus for setting up the Fund and such other accretions and additions to the corpus.
CUSTODIAN
Deutsche Bank, AG
The Trustee has appointed Deutsche Bank, AG located at Kodak House, Ground Floor, 222 Dr. D.N.Road, Mumbai-400 001, as the Custodian of the securities that are bought and sold under the Scheme. A Custody Agreement has been entered with Deutsche Bank in accordance with SEBI Regulations. The Custodian is approved by SEBI under registration no. IN/CUS/003 to act as Custodian for the Fund.
Deutsche Bank AG, the Custodian shall, inter alia:
* Provide post-trading and custodial services to the Mutual Fund.
* Keep Securities and other instruments belonging to the Scheme in safe custody.
* Ensure smooth inflow/outflow of securities and such other instruments as and when necessary, in the best interests of the unitholders.
* Ensure that the benefits due to the holdings of the Mutual Fund are recovered and
* Be responsible for loss of or damage to the securities due to negligence on its part on the part of its approved agents.
REGISTRAR
Reliance Capital Asset Management Limited has appointed M/s. Karvy Computershare Pvt. Limited to act as the Registrar and Transfer Agent to the Schemes of Reliance Mutual Fund. M/s. Karvy Computershare Pvt. Limited (KCL) having their office at Karvy Plaza .21, Road No. 4, Street No.1, Adjacent to Rainbow Hospital, Banjara Hills, Hyderabad - 500 034, is a Registrar and Transfer Agent registered with SEBI under registration no. INR000000221.
Reliance Capital Asset Management Ltd. and the Trustee have satisfied themselves, after undertaking appropriate due diligence measures, that they can provide the services required and have adequate facilities, including systems facilities and back up, to do so. The Trustee has also laid down broad parameters for supervision of the Registrar. As Registrar to the Schemes, KCL will accept and process investor's applications, handle communications with investors, perform data entry services, despatch Account Statements and also perform such other functions as agreed, on an ongoing basis.
The Registrar is responsible for carrying out diligently the functions of a Registrar and Transfer Agent and will be paid fees as set out in the agreement entered into with it and as per any modification made thereof from time to time.
3.19 OUR SCHEMES
Equity/Growth Schemes
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 funds have comparatively high risks. These schemes provide different options to the investors like dividend option, capital appreciation, etc. and the investors may choose an option depending on their preferences. The investors must indicate the option in the application form. The mutual funds also allow the investors to change the options at a later date. Growth schemes are good for investors having a long-term outlook seeking appreciation over a period of time.
Reliance Natural Resources Fund:
(An Open Ended Equity Scheme) The primary investment objective of the scheme is to seek to generate capital appreciation & provide long-term growth opportunities by investing in companies principally engaged in the discovery, development, production, or distribution of natural resources and the secondary objective is to generate consistent returns by investing in debt and money market securities.
Reliance Equity Fund:
(An open-ended diversified Equity Scheme.) The primary investment objective of the scheme is to seek to generate capital appreciation & provide long-term growth opportunities by investing in a portfolio constituted of equity & equity related securities of top 100 companies by market capitalization & of companies which are available in the derivatives segment from time to time and the secondary objective is to generate consistent returns by investing in debt and money market securities.
Reliance Tax Saver (ELSS) Fund:
(An Open-ended Equity Linked Savings Scheme.) The primary objective of the scheme is to generate long-term capital appreciation from a portfolio that is invested predominantly in equity and equity related instruments.
Reliance Equity Opportunities Fund:
(An Open-Ended Diversified Equity Scheme.) The primary investment objective of the scheme is to seek to generate capital appreciation & provide long-term growth opportunities by investing in a portfolio constituted of equity securities & equity related securities and the secondary objective is to generate consistent returns by investing in debt and money market securities.
Reliance Vision Fund :
(An Open-ended Equity Growth Scheme.) The primary investment objective of the Scheme is to achieve long term growth of capital by investment in equity and equity related securities through a research based investment approach.
Reliance Growth Fund :
(An Open-ended Equity Growth Scheme.) The primary investment objective of the Scheme is to achieve long term growth of capital by investment in equity and equity related securities through a research based investment approach.
Reliance NRI Equity Fund :
(An open-ended Diversified Equity Scheme.) The Primary investment objective of the scheme is to generate optimal returns by investing in equity or equity related instruments primarily drawn from the Companies in the BSE 200 Index.
Reliance Regular Savings Fund:
(An Open-ended Scheme.) Equity Option : The primary investment objective of this option is to seek capital appreciation and/or to generate consistent returns by actively investing in Equity &Equity-related Securities.
Balanced Option : The primary investment objective of this option is to generate consistent returns and appreciation of capital by investing in mix of securities comprising of equity, equity related instruments & fixed income instruments.
Reliance Long Term Equity Fund:
(An close-ended Diversified Equity Scheme.) The primary investment objective of the scheme is to seek to generate long term capital appreciation & provide long-term growth opportunities by investing in a portfolio constituted of equity & equity related securities and Derivatives and the secondary objective is to generate consistent returns by investing in debt and money market securities.
Reliance Equity Advantage Fund:
(An open-ended Diversified Equity Scheme.) The primary investment objective of the scheme is to seek to generate capital appreciation & provide long-term growth opportunities by investing in a portfolio predominantly of equity & equity related instruments with investments generally in S & P CNX Nifty stocks and the secondary objective is to generate consistent returns by investing in debt and money market securities
DEBT/INCOME SCHEMES
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, Government securities and money market instruments. Such funds are less risky compared to equity schemes. These funds are not affected because of fluctuations in equity markets. However, opportunities of capital appreciation are also limited in such funds. The NAVs of such funds are affected because of change in interest rates in the country. If the interest rates fall, NAVs of such funds are likely to increase in the short run and vice versa. However, long term investors may not bother about these fluctuations.
Reliance Monthly Income Plan:
(An Open Ended Fund. Monthly Income is not assured & is subject to the availability of distributable surplus ) The Primary investment objective of the Scheme is to generate regular income in order to make regular dividend payments to unit holders and the secondary objective is growth of capital.
Reliance Gilt Securities Fund - Short Term Gilt Plan & Long Term Gilt Plan:
Open-ended Government Securities Scheme) the primary objective of the Scheme is to generate optimal credit risk-free returns by investing in a portfolio of securities issued and guaranteed by the central Government and State Government
Reliance Income Fund:
(An Open-ended Income Scheme) The primary objective of the scheme is to generate optimal returns consistent with moderate levels of risk. This income may be complemented by capital appreciation of the portfolio. Accordingly, investments shall predominantly be made in Debt & Money market Instruments.
Reliance Medium Term Fund:
(An Open End Income Scheme with no assured returns.) The primary investment objective of the Scheme is to generate regular income in order to make regular dividend payments to unit holders and the secondary objective is growth of capital
Reliance Short Term Fund:
(An Open End Income Scheme) The primary investment objective of the scheme is to generate stable returns for investors with a short investment horizon by investing in Fixed Income Securities of short term maturity.
Reliance Liquid Fund:
(Open-ended Liquid Scheme). The primary investment objective of the Scheme is to generate optimal returns consistent with moderate levels of risk and high liquidity. Accordingly, investments shall predominantly be made in Debt and Money Market Instruments.
Reliance Floating Rate Fund:
(An Open End Liquid Scheme) The primary objective of the scheme is to generate regular income through investment in a portfolio comprising substantially of Floating Rate Debt Securities (including floating rate securitized debt and Money Market Instruments and Fixed Rate Debt Instruments swapped for floating rate returns). The scheme shall also invest in Fixed rate debt Securities (including fixed rate securitized debt, Money Market Instruments and Floating Rate Debt Instruments swapped for fixed returns
Reliance NRI Income Fund :
(An Open-ended Income scheme) The primary investment objective of the Scheme is to generate optimal returns consistent with moderate levels of risks. This income may be complimented by capital appreciation of the portfolio. Accordingly, investments shall predominantly be made in debt Instruments.
Reliance Liquidity Fund:
(An Open - ended Liquid Scheme) The investment objective of the Scheme is to generate optimal returns consistent with moderate levels of risk and high liquidity. Accordingly, investments shall predominantly be made in Debt and Money Market Instruments.
Reliance Interval Fund
(A Debt Oriented Interval Scheme) The primary investment objective of the scheme is to seek to generate regular returns and growth of capital by investing in a diversified portfolio
Reliance Liquid plus Fund
(An Open-ended Income Scheme.) The investment objective of the Scheme is to generate optimal returns consistent with moderate levels of risk and liquidity by investing in debt securities and money market securities.
Sector Specific Schemes
These are the funds/schemes which invest in the securities of only those sectors or industries as specified in the offer documents. e.g. Pharmaceuticals, Software, Fast Moving Consumer Goods (FMCG), Petroleum stocks, etc. The returns in these funds are dependent on the performance of the respective sectors/industries. While these funds may give higher returns, they are more risky compared to diversified funds. Investors need to keep a watch on the performance of those sectors/industries and must exit at an appropriate time. They may also seek advice of an expert.
Sector Funds are specialty funds that invest in stocks falling into a certain sector of the economy. Here the portfolio is dispersed or spread across the stocks in that particular sector. This type of scheme is ideal for investors who have already made up their mind to confine risk and return to a particular sector.
Reliance Banking Fund
Reliance Mutual Fund has an Open-Ended Banking Sector Scheme which has the primary investment objective to generate continuous returns by actively investing in equity / equity related or fixed income securities of banks.
Reliance Diversified Power Sector Fund
Reliance Diversified Power Sector Scheme is an Open-ended Power Sector Scheme.
The primary investment objective of the Scheme is to seek to generate consistent returns by actively investing in equity / equity related or fixed income securities of Power and other associated companies.
Reliance Media & Entertainment Fund
Reliance Media & Entertainment Fund is an Open-ended Media & Entertainment sector scheme.
The primary investment objective of the Scheme is to generate consistent returns by investing in equity / equity related or fixed income securities of media & entertainment and other associated companies.
Our Service Providers
Registrar to the schemes of Reliance Capital Asset Management:
Karvy Computershare Pvt. Ltd
Custodians to the schemes of Reliance Capital Asset Management
Deutsche Bank AG
Bankers to the Schemes of Reliance Capital Asset Management
* HDFC Bank Limited
* ABN Amro Bank
* ICICI Bank Limited
* Citibank N. A.
* Deutsche Bank AG
* Standard Chartered Bank
* UTI Bank
* IDBI Bank
* HSBC Bank
* Ing Vysya Bank
* Kotak Mahindra Bank
* Yes Bank
* American Express Bank - only for online investors
3.20 AWARDS AND ACHIEVEMENT
* Reliance Mutual Fund (RMF) is one of India's leading Mutual Funds, with Assets Under Management (AUM) of Rs. 88,388 crore (AUM as on 30th Apr 2009) and an investor base of over 71.53 Lacs.
* Investor base of over 3.38 million as on March 31, 2007
* Rapid growth in Assets Under Management (AUM), 87.7% growth in AUM year on year. AUM of over Rs.46,306 crore ($10.62 billion) as on March 30, 2007 from Rs. 24,669 crore ($5.53 billion) as on March 31, 2006.
* Accelerated growth in investor base - 66.89% growth in investor base year on year. Over 3.38 million investors as on March 31, 2007
* Reliance Mutual Fund has over 10 years of extensive market experience, over 26 schemes combined with a strong performance track record.
* Reliance Equity Fund NFO (6th Feb -7th March 2006), the largest ever collection of Rs.5,759 crore ($1.29 billion) in the history of the Indian Mutual Fund industry.
* Footprint in over 100 cities in India
* Wide network of 130 collection points
* Wide portfolio of 26 well-rounded products to meet varying investor requirements.
* Reliance Mutual Fund is amongst the few mutual funds in the industry to offer Subscription, Redemption and Switch through Online Transactions.
* Lipper Fund Award India 2007
* Lipper Fund Award Gulf 2007 :
* CNBC TV18 - CRISIL Mutual Fund of the Year Awards 2006
* ICRA Mutual Funds Awards 2007
CHAPTER-4
DATA ANALYSIS
AND
INTERPRETATION
4.1 COMPARISON ON THE BASIS OF RETURN, PORTFOLIO, RISK AND
VOLATILITY, INVESTMENT AND NAV'S
MEDIUM TERM FUND
INVESTMENT OBJECTIVE:-The primary objective of the scheme is to generate regular income in order to make regular dividend payments to unit holders and the secondary objective is growth of capital.
TOP FIVE COMPANIES ON THE BASIS OF RETURN RATE
S.NO
COMPANY NAME
RETURN RATE
RANKINGS
.
Canara Robeco Income
30.28
/47
2.
ICICI Prudential Income
22.22
2/47
3.
Fortis Flexi Debt Reg
19.22
3/47
4.
IDFC Dynamic Bond Plan A
17.46
4/47
5.
Kotak Bond Regular
17.08
5/47
6.
Reliance Medium Term
07.99
32/47
COMPARISON ON THE BASIS OF SNAPSHOT
Fund Name
Launch Date
Category
Rating
Risk Grade
Return Grade
Year
Return
Expense
Ratio
Canara Robeco Income
2002-09Sep-2002
Debt: Medium-term
5 Star
Below Avg.
High
30.28
2.05
Fortis Flexi Debt Reg
2004-09Sep-2004
Debt: Medium-term
5 Star
Avg.
High
9.22
2.03
ICICI Prudential Income
998-06Jun-1998
Debt: Medium-term
4 Star
High
High
22.22
.67
IDFC Dynamic Bond Plan A
2002-06Jun-2002
Debt: Medium-term
4 Star
Avg.
High
7.46
2.02
Kotak Bond Regular
999-11Nov-1999
Debt: Medium-term
4 Star
Avg.
Above Avg.
7.08
.95
Reliance Medium Term
2003-03Mar-2003
Debt: Medium-term
3 Star
Low
Below Avg.
7.99
0.81
ON THE BASIS OF PORTFOLIO
Fund Name
Fund Style
P/E Ratio
P/B Ratio
Market Cap
(Rs Cr)
Turnover (%)
Assets
(Rs Cr)
Avg. Cred. Qual.
Average Maturity (Yrs)
Canara Robeco Income
3
--
--
--
--
000000041602416.02
AAA
3.71
Fortis Flexi Debt Reg
3
--
--
--
--
00000000966596.65
AAA
9.30
ICICI Prudential Income
3
--
--
--
86.47
000001,895761,895.76
AAA
8.97
IDFC Dynamic Bond Plan A
3
--
--
--
--
000000043543435.43
AAA
0.03
Kotak Bond Regular
3
--
--
--
--
000000044569445.69
AAA
0.77
Reliance Medium
3
--
--
--
--
000012,1855912,185.59
AAA
0.46
ON THE BASIS OF RISK AND VOLATILITY
Fund Name
Fund Risk Grade
Standard
Deviation
Beta
Alpha
R-Squared
Canara Robeco Income
Below Avg.
4.99
0.64
3.86
0.32
Fortis Flexi Debt Reg
Avg.
2.33
.05
6.90
0.15
ICICI Prudential Income
High
0.19
.09
7.30
0.23
IDFC Dynamic Bond Plan A
Avg.
9.86
.19
6.47
0.29
Kotak Bond Regular
Avg.
8.90
.05
4.83
0.28
Reliance Medium Term
Low
0.27
0.02
2.24
0.09
ON THE BASIS OF INVESTMENT DETAILS
Fund Name
Expense
Ratio %
Front-End
Load %
Back-End
Load %
CDSC
Mim Initial
Inv. (Rs)
Manager
Tenure (Yrs.)
Canara Robeco Income
2.05
0.00
0.00
Yes
0000000050005,000
Ritesh jain
Fortis Flexi Debt Reg
2.03
0.00
0.00
Yes
0000000050005,000
Alok Singh
ICICI Prudential Income
.67
0.00
0.00
Yes
0000000050005,000
Rahul Goswami
IDFC Dynamic Bond Plan A
2.02
0.00
0.00
Yes
0000000050005,000
Arjun Parthasarthy
Kotak Bond Regular
.95
0.00
0.00
Yes
0000005000005 lakh
Deepak Agrawal, Abhishek Bisen
, 1
Reliance Medium Term
0.81
0.00
0.00
No
0000000050005,000
Amit Tripathi
Fund Name
NAV
As on
Chg. from previous
52 Weeks High
As on
52 Weeks Low
As On
Canara Robeco Income-G
8.85
May 28, 2009
-0.03
9.08
Apr 22, 2009
4.44
May 29, 2008
Fortis Flexi Debt Reg-G
5.25
May 28, 2009
-0.03
5.44
Jan 2, 2009
2.78
Jun 25, 2008
ICICI Pru Income Plan-G
28.99
May 28, 2009
-0.06
30.02
Jan 5, 2009
23.35
Jul 11, 2008
IDFC Dynamic Bond Plan A-G
8.02
May 28, 2009
0.00
9.14
Jan 2, 2009
5.18
Jun 25, 2008
Kotak Bond Reg-G
25.32
May 28, 2009
-0.10
26.36
Jan 5, 2009
21.50
Jul 4, 2008
Reliance Medium Term-G
8.34
May 28, 2009
0.00
8.34
May 28, 2009
6.98
May 29, 2008
ON THE BASIS OF NAV's
INTERPRETATION
> On the basis of return rate Canarra Robecco heads the first position with the highest return rate of 30.28% where as Reliance seek 32th position with 7.99% return.
> On the basis of ratings Canarra Robecco again heads the first position with five rating star with Fortis Flexi reg-g, and ICICI, IDFC and Kotak manage to get the four rating star and Reliance with three ratings star. This ratings star are given by either by Crisil or ICRA.The more the ratings star the more better the performance of the funds .So it tells us in medium term fund Canarra Robeco is really doing well as compared to others.
> The risk is high in ICICI medium term and the return is also high. At one stage it's good for the fund because of the high return. But in case of reliance the risk is low and the return is below average. This does not sound good for the company.
> Higher the expense ratio, the more the company has to expend. So Canaraa Robecco has the highest expense ratio of 2.05 followed by Fortis with 2.03 and reliance having the least expense ratio which is 0.81.So the company has very little expense which is very good for the company.
> When we see the total assets of the company we find reliance heads other fund with a huge difference. Reliance tops with total assets of 12,185.99 cr followed by ICICI prudential with the total assets of 1895.76 cr. The total assets is six time the assets of ICICI prudential, and this is very bright for the fund, where as Fortis flexi holds the last position with only 96.65 cr.
> The standard deviation is quite low which is only 0.27 which is very good sign and shows that the fund is able to generate stable and good returns over the year, whereas the S.D for Fortis flexi debt is quite high which is 12.33 and is not able to generate good returns.
> Reliance has the lowest R-Square value which is 0.09, and a lower R square indicates that fund performance is significant affected by factors other than the market.
> Beta is the statically measure of a portfolio sensitivity to market movement ,if the beta is higher than it shows the fund is very sensitive to market and vice-versa.so here IDFC dynamic plan has the highest sensitivity with the highest value of beta which is 1.19 where as reliance having the lowest value of only 0.02.
> Alpha coefficient measures risk adjusted performance due to the specific security rather than the overall market. A high value for alpha implies that the stock or mutual fund has performed better. So here we see alpha value for Canarra Robecco is highest with 13.86 and reliance with the lowest value of 2.24.So this shows that Canarra Robecco has preformed much better than the others.
> As this is the open ended scheme so there is neither the entry load nor the exit load for any funds.
> The NAV of the fund differs because of the launch date and the risk and return provided by the fund company.
SHORT TERM FUNDS
INVESTMENT OBJECTIVE:-The primary objective of the scheme is to generate optimal returns consistent with moderate level of risk. This income may be complemented by capital appreciation of the portfolio. Accordingly, investments shall predominantly be made in Debt and Money market Instruments.
TOP FIVE COMPANIES ON THE BASIS OF RETURN RATE
S.NO
COMPANY NAME
RATE RETURNS
RANKINGS
.
DWS Short Maturity Reg
14.34
4/21
2.
HDFC Short-term
14.73
3/21
3.
ICICI Prudential Short-term
15.91
2/21
4.
JM Short-term Reg
16.11
1/21
5.
Kotak Bond Short-term
12.45
6/21
6.
Reliance Short-term
13.89
5/21
ON THE BASIS OF SNAPSHOT
Launch Date
Category
Rating
Risk Grade
Return Grade
Fund Name
Year
Return
Expense
Ratio
2003-01Jan-2003
Debt: Short-term
2 Star
Above Avg.
Avg.
DWS Short Maturity Reg
4.34
.05
2002-02Feb-2002
Debt: Short-term
5 Star
Avg.
Above Avg.
HDFC Short-term
4.73
.42
2001-10Oct-2001
Debt: Short-term
2 Star
Above Avg.
High
ICICI Prudential Short-term
5.91
.00
2002-06Jun-2002
Debt: Short-term
3 Star
Above Avg.
High
JM Short-term Reg
6.11
0.83
2002-04Apr-2002
Debt: Short-term
2 Star
Avg.
Avg.
Kotak Bond Short-term
2.45
.54
2002-12Dec-2002
Debt: Short-term
4 Star
Below Avg.
Above Avg.
Reliance Short-term
3.89
0.64
ON THE BASIS OF PORTFOLIO
Fund Name
Fund Style
P/E Ratio
P/B Ratio
Market Cap
(Rs Cr)
Turnover(%)
Assets
(Rs Cr)
Avg. Cred. Qual.
Average Maturity (Yrs)
DWS Short Maturity Reg
3
--
--
--
--
00000000382638.26
AAA
2.29
HDFC Short-term
3
--
--
--
--
000001,613571,613.57
AAA
.44
ICICI Prudential Short-term
3
--
--
--
81.98
000000050053500.53
AAA
2.85
JM Short-term Reg
3
--
--
--
--
00000000177717.77
AAA
0.92
Kotak Bond Short-term
3
--
--
--
--
000000025531255.31
AAA
2.50
Reliance Short-term
3
--
--
--
--
000001,950431,950.43
AAA
.98
ON THE BASIS OF RISK AND VOLATILITY
Fund Name
Fund Risk Grade
Standard
Deviation
Beta
Alpha
R-Squared
DWS Short Maturity Reg
Above Avg.
3.22
-0.09
6.98
0.00
HDFC Short-term
Avg.
2.53
0.05
7.35
0.00
ICICI Prudential Short-term
Above Avg.
3.73
0.03
7.84
0.00
JM Short-term Reg
Above Avg.
2.99
-0.02
8.21
0.00
Kotak Bond Short-term
Avg.
2.28
-0.06
6.08
0.00
Reliance Short-term
Below Avg.
2.40
-0.05
6.94
0.00
ON THE BASIS OF INVESTMENT DETAILS
Fund Name
Expense
Ratio %
Front-End
Load %
Back-End
Load %
CDSC
Mim Initial
Inv. (Rs)
Portfolio Manager
Tenure (Yrs.)
DWS Short Maturity Reg
.05
0.00
0.00
Yes
0000000050005,000
Nitish Gupta
HDFC Short-term
.42
0.00
0.00
Yes
0000000050005,000
Anil Bamboli
5
ICICI Prudential Short-term
.00
0.00
0.00
Yes
0000000050005,000
Chaitanya Pande
4
JM Short-term Reg
0.83
0.00
0.00
No
0000000050005,000
Shalini Tibrewala
0
Kotak Bond Short-term
.54
0.00
0.00
Yes
0000000050005,000
Deepak Agrawal, Abhishek Bisen
2, 1
Reliance Short-term
0.64
0.00
0.00
No
00000005000050,000
Prashant R Pimple
ON THE BASIS OF NAV'S
Name
NAV
As on
Chg. from previous
52 Weeks High
As on
52 Weeks Low
As On
DWS Short Maturity Reg-G
5.79
May 28, 2009
-0.03
5.89
May 18, 2009
3.71
Jun 25, 2008
HDFC Short Term Plan-G
7.09
May 28, 2009
-0.05
7.19
May 18, 2009
4.88
Jun 25, 2008
ICICI Pru Short-term-G
8.21
May 28, 2009
-0.05
8.35
May 18, 2009
5.71
May 30, 2008
JM Short Term Reg-G
7.27
May 28, 2009
-0.01
7.28
May 27, 2009
4.67
Jul 31, 2008
Kotak Bond Short-term-G
6.88
May 28, 2009
-0.03
6.95
May 18, 2009
5.01
Jul 31, 2008
Reliance Short-term-G
6.59
May 28, 2009
-0.02
6.65
May 18, 2009
4.57
Jun 25, 2
INTERPRETATION
> On the basis of return rate JM heads the first position with the highest return rate of 16.11% where as Reliance seek 5th position with 13.89% return and Kotak heads 6th position.
> On the basis of ratings HDFC heads the first position with five rating star, and Reliance manage to get the four rating star. This ratings star are given by either by Crisil or ICRA.The more the ratings star the more better the performance of the funds ,so it tells us in short term fund HDFC is doing well as compared to others.
> Higher the expense ratio, the more the company has to expend. So Kotak has the highest expense ratio of 1.54 followed by HDFC with 1.42 and reliance having the least expense ratio which is 0.64.So the company has very little expense which is very good for the company and Reliance can easily more work on marketing strategy.
> When we see the total assets of the company we find Reliance heads other fund with a huge difference. Reliance tops with total assets of 1950.43 cr followed by HDFC with the total assets of 1613.57 cr, whereas JM have the least assets which is very low and is only 17.77 cr.
> The standard deviation for all the funds are nearly equal.SD is highest for ICICI and lowest for Kotak .
> The entire fund has equal R-square, this shows that all funds are equally affected by factors other than market condition.
> Beta is the statically measure of a portfolio sensitivity to market movement, if the beta is higher than it shows the fund is very sensitive to market and vice-versa. So here only HDFC and ICICI have the positive value whereas all the other funds have negative value.
> Alpha coefficient measures risk adjusted performance due to the specific security rather than the overall market. A high value for alpha implies that the stock or mutual fund has performed better. So here we see alpha value for JM is highest with 8.21 and reliance with the 2nd lowest value of 6.94.So this shows that JM has perfumed much better than the others funds.
> As this is the open ended scheme so there is neither the entry load nor the exit load for any funds.
> The NAV of the fund differs because of the launch date and the risk and return provided by the fund company
MONTHLY INCOME PLAN
INVESTMENT OBJECTIVE:-The primary objective of the scheme is to generate regular income in order to make regular dividend payments to unit holders and the secondary objective is growth of capital.
TOP 5 COMPANIES ON THE BASIS OF RETURN RATE
S.NO
COMPANY NAME
RETURN RATE
RANKINGS
1.
Reliance MIP
23.60
1/37
2.
Birla Sun Life MIP II Savings 5
19.94
2/37
3.
HDFC MIP Long-term
15.00
3/37
4.
Birla Sun Life Monthly Income
13.30
4/37
5.
UTI MIS-Advantage Plan
12.08
5/37
6.
Tata MIP
11.54
6/37
ON THE BASIS OF SNAPSHOT
Fund Name
Launch Date
Category
Rating
Risk Grade
Return Grade
Year
Return
Expense
Ratio
Birla Sun Life MIP II Savings 5
2004-04Apr-2004
Hybrid: Monthly Income
5 Star
Low
High
9.94
0.24
Birla Sun Life Monthly Income
999-07Jul-1999
Hybrid: Monthly Income
4 Star
Avg.
Above Avg.
3.30
2.20
HDFC MIP Long-term
2003-12Dec-2003
Hybrid: Monthly Income
3 Star
High
Above Avg.
5.00
.82
Reliance MIP
2003-12Dec-2003
Hybrid: Monthly Income
5 Star
Above Avg.
High
23.60
2.00
Tata MIP
997-04Apr-1997
Hybrid: Monthly Income
4 Star
Below Avg.
Avg.
1.54
2.00
UTI MIS-Advantage Plan
2003-12Dec-2003
Hybrid: Monthly Income
3 Star
Above Avg.
Avg.
2.08
.60
ON THE BASIS OF PORTFOLIO
Fund Name
Fund Style
P/E Ratio
P/B Ratio
Market Cap
(Rs Cr)
Turnover (%)
Assets
(Rs Cr)
Avg. Cred. Qual.
Average Maturity (Yrs)
Birla Sun Life MIP II Savings 5
5
0.49
.94
6,423.09
.00
00000000319031.90
AAA
2.07
Birla Sun Life Monthly Income
4
1.86
3.99
4,807.98
5.00
000000012260122.60
AAA
6.78
HDFC MIP Long-term
4
3.17
2.63
3,525.38
--
000000090717907.17
AAA
5.72
Reliance MIP
5
9.13
2.19
3,284.08
--
000000018569185.69
AA
7.66
Tata MIP
2
5.93
2.79
35,869.77
--
00000000221422.14
AAA
7.60
UTI MIS-Advantage Plan
5.30
3.10
20,383.16
0.58
00000000859185.91
AA
3.32
ON THE BASIS OF RISKS AND VOLATILITY
Fund Name
Fund Risk Grade
Standard
Deviation
Beta
Alpha
R-Squared
Birla Sun Life MIP II Savings 5
Low
0.52
0.43
2.03
0.13
Birla Sun Life Monthly Income
Avg.
8.08
0.69
3.51
0.56
HDFC MIP Long-term
High
0.54
0.93
3.86
0.60
Reliance MIP
Above Avg.
0.37
0.80
0.04
0.46
Tata MIP
Below Avg.
0.41
0.41
3.65
0.44
UTI MIS-Advantage Plan
Above Avg.
7.48
0.68
.44
0.64
ON THE BASIS OF INVESTMENT DETAILS
Name
Expense
Ratio %
Front-End
Load %
Back-End
Load %
CDSC
Mim Initial
Inv. (Rs)
Portfolio Manager
Tenure (Yrs.)
Birla Sun Life MIP II Savings 5
0.24
0.00
0.00
Yes
0000000050005,000
A Balasubramanian
2
Birla Sun Life Monthly Income
2.20
0.00
0.00
Yes
0000000050005,000
A Balasubramanian
2
HDFC MIP Long-term
.82
0.00
0.00
Yes
0000000050005,000
Prashant Jain, Shobhit Mehrotra
5, 2
Reliance MIP
2.00
0.00
0.00
Yes
00000001000010,000
Ashwani Kumar, Amit Tripathi
5, 1
Tata MIP
2.00
0.00
0.00
Yes
00000001000010,000
Raju Sharma
UTI MIS-Advantage Plan
.60
0.00
0.00
Yes
0000000050005,000
Amandeep Singh Chopra, Deb Bhattacharya
5, 1
ON THE BASIS OF NAV's
Fund Name
NAV
As on
Chg. from previous
52 Weeks High
As on
52 Weeks Low
As On
BSL MIP II Savings 5-G
5.63
Jun 3, 2009
-0.07
6.38
Jan 2, 2009
3.03
Jun 3, 2008
BSL Monthly Income-G
31.59
Jun 3, 2009
0.07
31.59
Jun 3, 2009
25.94
Oct 27, 2008
HDFC MIP Long-term-G
8.62
Jun 3, 2009
0.14
8.62
Jun 3, 2009
4.43
Oct 27, 2008
Reliance MIP-G
7.85
Jun 3, 2009
0.09
7.85
Jun 3, 2009
4.10
Jul 3, 2008
Tata MIP-G
7.69
Jun 3, 2009
0.07
7.74
May 20, 2009
5.36
Oct 27, 2008
UTI MIS - Advantage-G
7.50
Jun 3, 2009
0.06
7.50
Jun 3, 2009
4.34
Oct 27, 2008
INTERPRETATION
> On the basis of return rate Reliance heads the first position with the highest return rate of 23.60% where as Tata seek 6th position with 11.54% return.
> On the basis of ratings Reliance shares the first position with Birla Sun Life with five star rating, whereas UTI and HDFC settle with three star ratings. This ratings star are given by either by Crisil or ICRA.The more the ratings star the more better the performance of the funds .So it tells us in MIP fund Reliance is doing well as compared to others.
> Higher the expense ratio, the more the company has to expend. So Birla has the highest expense ratio of 2.20 followed by Reliance and Tata with 2.00 and BSL Savings 5 having the least expense ratio which is 0.24.So here one fund of Birla has high expense ratio where as the other has low expense ratio.
> Fund which has the highest P/B ratio and P/E ratio, shows that it is the most sought out find in the market than its competitors. So here we see that in the case of P/B ratio Birla heads and in the case of P/B ratio Tata heads.
> When we see market capitalization we see Tata seeks the first position than others and the value is ten times the value of HDFC and near eleven times the value of Reliance. So we can easily figure out that in this fund Tata has very good holdings in the market.
> The standard deviation is quite low for Tata which is only 0.41which is very less as compared to others and is very good sign and shows that the fund is able to generate stable and good returns over the year, whereas the S.D for HDFC is highest with 10.54 followed by Birla and Reliance holding the 3rd place.
> Birla has the lowest R-Square value which is 0.13,and a lower r square indicates that fund performance is significant affected by factors other than the market, whereas HDFC has the highest value for R-square which is 0.60.
> Beta is the statically measure of a portfolio sensitivity to market movement ,if the beta is higher than it shows the fund is very sensitive to market and vice-versa.so here HDFC has the highest sensitivity with the highest value of beta which is 0.93 followed by Reliance with 0.80.
> As this is the open ended scheme so there is neither the entry load nor the exit load for any funds.
LIQUID PLUS FUND
INVESTMENT OBJECTIVE:-The investment objective of the scheme is to generate optimal returns consistent with moderate levels of risk and liquidity by investing in Debt securities and money market securities.
TOP FIVE COMPANIES ON THE BASIS OF RETURN RATE
S.NO
COMPANY NAME
RETURN RATE
RANKINGS
1.
Fortis Money Plus Reg
9.55
1/29
2.
JM Money Manager Super
9.51
2/29
3.
DWS Cash Opportunities Cash 30 Days Plan
9.26
3/29
4.
Tata Treasury Manager Retail
9.18
4/29
5.
LICMF Income Plus
9.01
5/29
6.
Reliance Money Manager Retail
8.50
10/29
ON THE BASIS OF SNAPSHOT
Fund Name
Launch Date
Category
Rating
Risk Grade
Return Grade
Year
Return
Expense
Ratio
DWS Cash Opportunities Cash 30 Days Plan
2008-01Jan-2008
Debt: Liquid Plus
0Unrated
--
--
9.26
.69
Fortis Money Plus Reg
2005-10Oct-2005
Debt: Liquid Plus
3 Star
Above Avg.
Above Avg.
9.55
0.70
JM Money Manager Super
2007-07Jul-2007
Debt: Liquid Plus
5 Star
Low
Above Avg.
9.51
0.35
LICMF Income Plus
2007-05May-2007
Debt: Liquid Plus
2 Star
Above Avg.
Above Avg.
9.01
0.43
Reliance Money Manager Retail
2007-03Mar-2007
Debt: Liquid Plus
4 Star
Below Avg.
Avg.
8.50
.25
Tata Treasury Manager Retail
2007-07Jul-2007
Debt: Liquid Plus
2 Star
Above Avg.
High
9.18
0.50
ON THE BASIS OF PORTFOLIO
Name
Fund Style
P/E Ratio
P/B Ratio
Market Cap
(Rs Cr)
Turnover (%)
Assets
(Rs Cr)
Avg. Cred. Qual.
Average Maturity (Yrs)
DWS Cash Opportunities Cash 30 Days Plan
3
--
--
--
--
00000000540754.07
AAA
0.28
Fortis Money Plus Reg
3
--
--
--
--
000000016373163.73
AAA
0.29
JM Money Manager Super
3
--
--
--
--
00000000120412.04
AA
0.69
LICMF Income Plus
3
--
--
--
--
000004,335974,335.97
AAA
0.27
Reliance Money Manager Retail
3
--
--
--
--
000001,386841,386.84
AAA
0.45
Tata Treasury Manager Retail
3
--
--
--
--
0000000009759.75
AAA
0.41
ON THE BASIS OF RISK AND VOLATILITY
Fund Name
Fund Risk Grade
Standard
Deviation
Beta
Alpha
R-Squared
DWS Cash Opportunities Cash 30 Days Plan
--
--
--
--
--
Fortis Money Plus Reg
Above Avg.
0.21
0.01
3.58
0.01
JM Money Manager Super
Low
0.29
0.01
3.61
0.00
LICMF Income Plus
Above Avg.
0.24
0.01
3.65
0.00
Reliance Money Manager Retail
Below Avg.
0.15
0.01
3.13
0.01
Tata Treasury Manager Retail
Above Avg.
0.64
0.03
3.64
0.01
ON THE BASIS OF INVESTMENT DETAILS
Fund Name
Expense
Ratio %
Front-End
Load %
Back-End
Load %
CDSC
Min Initial
Inv. (Rs)
Portfolio Manager
Tenure (Yrs.)
DWS Cash Opportunities Cash 30 Days Plan
.69
0.00
0.00
Yes
0000000050005,000
Dwijendra Srivastava, Kumaresh Ramakrishnan
, 1
Fortis Money Plus Reg
0.70
0.00
0.00
Yes
00000001000010,000
Alok Singh
2
JM Money Manager Super
0.35
0.00
0.00
Yes
0000000050005,000
Shalini Tibrewala
2
LICMF Income Plus
0.43
0.00
0.00
No
0000005000005 lakh
Ashish Kumar
2
Reliance Money Manager Retail
.25
0.00
0.00
No
0000001000001 lakh
Amit Tripathi
2
Tata Treasury Manager Retail
0.50
0.00
0.00
No
00000001000010,000
Chintan Mehta
0
ON THE BASIS NAV's
Fund Name
NAV
As on
Chg. from previous
52 Weeks High
As on
52 Weeks Low
As On
DWS Cash Opp Cash 30 D-G
1.31
May 28, 2009
0.00
1.31
May 28, 2009
0.35
May 29, 2008
Fortis Money Plus Reg-G
3.19
May 28, 2009
0.00
3.19
May 28, 2009
2.04
May 29, 2008
JM Money Manager Super-G
2.35
May 28, 2009
0.00
2.35
May 28, 2009
1.28
May 29, 2008
LICMF Income Plus-G
1.84
May 28, 2009
0.00
1.84
May 28, 2009
0.87
May 29, 2008
Reliance Money Manager Retail-G
,197.48
May 28, 2009
0.17
,197.48
May 28, 2009
,103.96
May 29, 2008
Tata Treasury Manager Retail-G
,173.54
May 28, 2009
0.18
,173.54
May 28, 2009
,075.10
May 29, 2008
INTERPRETATION
> On the basis of return rate Fortis Flexi heads the first position with the highest return rate of 9.55% where as Reliance seek 10th position with 8.50% return.
> On the basis of ratings JM Money heads the first position with five rating star, and reliance with four rating star and Fortis with three ratings star. This ratings star are given by either by Crisil or ICRA.The more the ratings star the more better the performance of the funds .So it tells us in Liquid plus fund JM is really doing well as compared to others.
> The risk is more over more or less same for all the funds. Most of the funds fall under above average category. This shows that most of the funds are on the average basis.
> Higher the expense ratio, the more the company has to expend. So DWS has the highest expense ratio of 1.69 followed by Reliance with 1.25and JM having the least expense ratio which is 0.35.So the company has very little expense which is very good for the company. So here Reliance should decrease its expense ratio to do well in the market.
> When we see the total assets of the company we find LICMF heads other fund. LICMF tops with total assets of 4,335.97cr followed by Reliance with the total assets of 1,386.84cr, where as Tata holds the last position with only 9.75cr.
> The standard deviation for Reliance is quite low which is only 0.15 which is very good sign and shows that the fund is able to generate stable and good returns over the year, whereas the S.D for Tata is high which 0.64 is and is not able to generate good returns..
> Three funds have the same R-square value which is 0.01, only JM have the R-square value of 0.00.
> Beta is the statically measure of a portfolio sensitivity to market movement ,if the beta is higher than it shows the fund is very sensitive to market and vice-versa.so here Tata has the highest sensitivity with the highest value of beta which is 0.03 where as all other fund have the value of 0.01.
> Alpha coefficient measures risk adjusted performance due to the specific security rather than the overall market. A high value for alpha implies that the stock or mutual fund has performed better. So here we see alpha value for LICMF is highest with 3.65 and reliance with the lowest value of 3.13.So this shows that LICMF has performed much better than the others.
> As this is the open ended scheme so there is neither the entry load nor the exit load for any funds.
> The NAV of the fund differs because of the launch date and the risk and return provided by the fund company.
FLOATING RATE FUND
INVESTMENT OBJECTIVE:-The primary investment objective of the schemes to generate regular income through investment in a portfolio comprising substantially of floating rate Debt securities. The scheme shall also invest in Fixed Rate Debt Securities (including floating rate securities debt, Money market instruments and fixed rate debt instruments swapped for fixed returns
TOP FIVE COMPANIES ON THE BASIS OF RETURN RATE
S.NO
COMPANY NAME
RETURN RATE
RANKINGS
1.
Escorts Floating Rate
9.83
1/16
2.
LICMF Floating Rate ST
9.16
2/16
3.
UTI Floating Rate ST
9.08
3/16
4.
Magnum Floating Rate ST
8.97
4/16
5.
Canara Robeco Floating Rate ST
8.85
5/16
6.
Reliance Floating Rate
8.60
7/16
ON THE BASIS OF SNAPSHOT
Fund Name
Launch Date
Category
Rating
Risk Grade
Return Grade
Year
Return
Expense
Ratio
Canara Robeco Floating Rate ST
2005-02Feb-2005
Debt: Floating Rate Short-te
4 Star
Below Avg.
Above Avg.
8.85
0.40
Escorts Floating Rate
2005-12Dec-2005
Debt: Floating Rate Short-te
0Unrated
--
--
9.83
0.50
LICMF Floating Rate ST
2004-03Mar-2004
Debt: Floating Rate Short-te
5 Star
Avg.
High
9.16
0.50
Magnum Floating Rate ST
2004-07Jul-2004
Debt: Floating Rate Short-te
Star
High
Avg.
8.97
0.60
Reliance Floating Rate
2004-08Aug-2004
Debt: Floating Rate Short-te
4 Star
Below Avg.
Avg.
8.60
.89
UTI Floating
2003-08Aug-2003
Debt: Floating Rate Short-te
5 Star
Avg.
High
9.08
0.20
Fund Name
Fund Style
P/E Ratio
P/B Ratio
Market Cap
(Rs Cr)
Turnover (%)
Assets
(Rs Cr)
Avg. Cred. Qual.
Average Maturity (Yrs)
Canara Robeco Floating Rate ST
3
--
--
--
--
000000010434104.34
AAA
0.26
Escorts Floating Rate
3
--
--
--
--
0000000000130.13
--
--
LICMF Floating Rate ST
3
--
--
--
--
000000083697836.97
AA
0.31
Magnum Floating Rate ST
3
--
--
--
--
00000000156315.63
AAA
0.32
Reliance Floating Rate
3
--
--
--
--
000000049582495.82
AAA
0.28
UTI Floating Rate ST
3
--
--
--
13.29
000000069301693.01
AAA
0.59
ON THE BASIS OF PORTFOLIO
ON THE BASIS OF RISK AND VOLATILITY
Fund Name
Fund Risk Grade
Standard
Deviation
Beta
Alpha
R-Squared
Canara Robeco Floating Rate ST
Below Avg.
0.19
0.34
2.75
0.36
Escorts Floating Rate
--
0.43
-0.06
3.81
0.00
LICMF Floating Rate ST
Avg.
0.22
0.44
3.16
0.47
Magnum Floating Rate ST
High
.43
-0.54
3.75
0.02
Reliance Floating Rate
Below Avg.
0.15
0.33
2.61
0.57
UTI Floating Rate ST
Avg.
0.19
0.38
3.05
0.46
Fund Name
Expense
Ratio %
Front-End
Load %
Back-End
Load %
CDSC
Mim Initial
Inv. (Rs)
Portfolio Manager
Tenure (Yrs.)
Canara Robeco Floating Rate ST
0.40
0.00
0.00
No
0000000050005,000
Akhil Mittal
Escorts Floating Rate
0.50
0.00
0.00
No
0000000010001,000
Sanjeev Sharma
LICMF Floating Rate ST
0.50
0.00
0.00
No
0000000050005,000
Ashish Kumar
5
Magnum Floating Rate ST
0.60
0.00
0.00
Yes
0000000020002,000
Ganti N. Murthy
2
Reliance Floating Rate
.89
0.00
0.00
No
00000002500025,000
Amit Tripathi
2
UTI Floating Rate ST
0.20
0.00
0.00
Yes
0000000050005,000
Amandeep Singh Chopra,
5, 1
ON THE BASIS OF INVESTMENT DETAILS
ON THE BASIS OF NAV's
Fund Name
NAV
As on
Chg. from previous
52 Weeks High
As on
52 Weeks Low
As On
Canara Robeco Floating Rate ST-G
3.71
Jun 1, 2009
0.00
3.71
Jun 1, 2009
2.60
Jun 2, 2008
Escorts Floating Rate-G
2.83
Jun 1, 2009
0.01
2.94
Mar 2, 2009
1.69
Jun 2, 2008
LICMF Floating Rate ST-G
4.47
Jun 1, 2009
0.00
4.47
Jun 1, 2009
3.26
Jun 2, 2008
Magnum Floating Rate ST-G
3.65
Jun 1, 2009
0.00
3.65
Jun 1, 2009
2.52
Jul 2, 2008
Reliance Floating Rate-G
3.95
Jun 1, 2009
0.00
3.95
Jun 1, 2009
2.85
Jun 2, 2008
UTI Floating
,444.93
Jun 1,
0.62
,444.93
Jun 1,
,325.53
Jun 2,
Source:-value research online
INTERPRETATION
> On the basis of return rate Escort fund heads the first position with the highest return rate of 9.83% where as Reliance seek 7th position with 8.60% return.
> On the basis of ratings LICMF and UTI heads the first position with five rating star and Reliance and Canarra Robecco manage to get the four rating. This ratings star are given by either by Crisil or ICRA.The more the ratings star the more better the performance of the funds .So it tells us in Floating Rate fund LICMF and UTI is really doing well as compared to others.
> Higher the expense ratio, the more the company has to expend. So Reliance is having the highest expense ratio which is 1.89 and is quite high as compared to others fund. Others funds have the expense ratio below 1.0 which is very good for the company. So Reliance should try to decrease the expense ratio by taking proper steps.
> When we see the total assets of the company we find LICMF holding the first rank, followed by UTI and Reliance taking the 3rd rank. Escort net assets are very less as compared to others.
> The standard deviation of Reliance is quite low which is only 0.15 which is very good sign and shows that the fund is able to generate stable and good returns over the year, whereas the S.D for Escorts fund is quite high which is 1.43and is not able to generate good returns..
> Reliance has the highest R-Square value which is 0.57, and a highest R square indicates that fund performance is not significant affected by factors other than the market. Escort fund has 0.00 R-square values.
> Beta is the statically measure of a portfolio sensitivity to market movement, if the beta is higher than it shows the fund is very sensitive to market and vice-versa. So here LICMF has the highest sensitivity with the highest value of beta which is 0.44 where as reliance having the 3rd highest value of only 0.33.
> Alpha coefficient measures risk adjusted performance due to the specific security rather than the overall market. A high value for alpha implies that the stock or mutual fund has performed better. So here we see alpha value for Escort is highest with 3.81 and reliance with the lowest value of 261.
> As this is the open ended scheme so there is neither the entry load nor the exit load for any funds.
> Only Reliance fund has the minimum investment of Rs.25000,others are either Rs.5000 or Rs.1000
> The NAV of the fund differs because of the launch date and the risk and return provided by the fund company.
4.2 FUNDS ON THE BASIS OF ASSETS ALLOCATION
MEDIUM TERM FUND
CANARA ROBECO INCOME SCHEME - GROWTH
Fund Size as on
May 29, 2009
Fund Size ( Rs. in crores)
364.65
Asset Allocation as on
May 29, 2009
Equity
0%
Debt
24.96%
Others
75.04%
FORTIS FLEXI DEBT- GROWTH
Fund Size as on
May 29, 2009
Fund Size ( Rs. in crores)
38.57
Asset Allocation as on
May 29, 2009
Equity
0%
Debt
93.89%
Others
6.11%
ICICI PRUDENTIAL INCOME-GROWTH
Fund Size as on
May 29, 2009
Fund Size ( Rs. in crores)
2539.05
Asset Allocation as on
May 29, 2009
Equity
0%
Debt
97.15%
Others
2.85%
IDFC DYNAMIC BOND FUND - PLAN A - GROWTH
Fund Size as on
May 29, 2009
Fund Size ( Rs. in crores)
459.12
Asset Allocation as on
May 29, 2009
Equity
0%
Debt
0%
Others
00%
KOTAK BOND REGULAR PLAN - GROWTH
Fund Size as on
May 29, 2009
Fund Size ( Rs. in crores)
535.68
Asset Allocation as on
May 29, 2009
Equity
0%
Debt
71.47%
Others
28.53%
RELIANCE MEDIUM TERM FUND - GROWTH
Fund Size as on
May 29, 2009
Fund Size ( Rs. in crores)
5455.41
Asset Allocation as on
May 29, 2009
Equity
0%
Debt
0%
Others
00%
OVERALL COMPARISON OF ALL THE FUNDS
Scheme Name
mth %
3 mths %
6 mths %
yr %
3 yrs %
NAV
Category
Structure
Canara Robeco Income Scheme - Growth
0.87
5.24
5.02
30.76
4.16
9.02
Debt
Open Ended
ICICI Prudential Income Fund -Growth
.14
6.68
-0.22
25.5
2.72
29.4
Debt
Open Ended
Fortis Flexi Debt Fund - Growth
0.7
7.02
.42
9.67
2.53
5.41
Debt
Open Ended
IDFC D B F- Plan A - Growth
0.55
4.46
-3.6
9.24
2.16
8.12
Debt
Open Ended
Kotak Bond Regular Plan - Growth
0.68
4.45
-1.56
8.72
1.14
25.55
Debt
Open Ended
Reliance Medium Term Fund - Growth
0.46
.42
3.31
8.11
7.14
8.42
Debt
Open Ended
Average performance of similar category funds
0.73
4.88
0.73
20.33
1.64
20.99
--
--
CRISIL Short-Term Bond Fund Index
0.94
.96
3.54
8.35
6.13
--
--
--
SHORT TERM FUND
ICICI PRUDENTIAL STP-GROWTH
Fund Size as on
May 29, 2009
Fund Size ( Rs. in crores)
3594.76
Asset Allocation as on
May 29, 2009
Equity
0%
Debt
56.66%
Others
43.34%
DWS SHORT MATURITY FUND - GROWTH
Fund Size as on
May 29, 2009
Fund Size ( Rs. in crores)
600.33
Asset Allocation as on
May 29, 2009
Equity
0%
Debt
64.65%
Others
35.35%
JM SHORT TERM FUND-GROWTH
Fund Size as on
May 29, 2009
Fund Size ( Rs. in crores)
70.05
Asset Allocation as on
May 29, 2009
Equity
0%
Debt
30.14%
Others
69.
HDFC SHORT TERM PLAN - GROWTH
Fund Size as on
May 29, 2009
Fund Size ( Rs. in crores)
3048.83
Asset Allocation as on
May 29, 2009
Equity
0%
Debt
48.15%
Others
51.85%
KOTAK BOND SHORT TERM PLAN - GROWTH
Fund Size as on
Jun 30, 2009
Fund Size ( Rs. in crores)
666.65
Asset Allocation as on
Jun 30, 2009
Equity
0%
Debt
69.76%
Others
30.24%
RELIANCE SHORT TERM FUND - GROWTH
Fund Size as on
May 29, 2009
Fund Size ( Rs. in crores)
3219.81
Asset Allocation as on
May 29, 2009
Equity
0%
Debt
40.62%
Others
59.38%
OVERALL COMPARISON OF THE FUNDS
Scheme Name
mth %
3 mths %
6 mths %
yr %
3 yrs %
NAV
Category
Structure
ICICI Prudential STP - Growth
.1
2.53
3.14
6.96
0.82
8.42
Debt
Open Ended
DWS Short Maturity Fund - Growth
.13
3.17
5.16
6.47
0.07
5.99
Debt
Open Ended
JM Short Term Fund - Growth
0.43
2.08
3.16
6.42
0.97
7.36
Debt
Open Ended
HDFC Short Term Plan - Growth
0.94
2.77
5.59
5.81
0.48
7.25
Debt
Open Ended
Reliance Short Term Fund - Growth
0.73
3.02
5.69
4.76
0.6
6.72
Debt
Open Ended
Kotak Bond Short Term Plan - Growth
0.93
3.08
5.9
3.6
9.98
7.05
Debt
Open Ended
Average performance of similar category funds
0.87
2.78
4.77
5.67
0.49
7.13
--
--
Crisil Liquid Fund Index
0.61
.58
2.95
7.49
6.08
--
--
--
LIQUID PLUS FUND
DWS CASH OPPORTUNITIES FUND - 30D - GROWTH
Fund Size as on
May 29, 2009
Fund Size ( Rs. in crores)
447.65
Asset Allocation as on
May 29, 2009
Equity
0%
Debt
20.09%
Others
79.91%
FORTIS MONEY PLUS FUND - GROWTH
Fund Size as on
May 29, 2009
Fund Size ( Rs. in crores)
4889.62
Asset Allocation as on
May 29, 2009
Equity
0%
Debt
33.95%
Others
66.05%
JM MONEY MANAGER FUND - SUPER PLAN - GROWTH
Fund Size as on
May 29, 2009
Fund Size ( Rs. in crores)
4.15
Asset Allocation as on
May 29, 2009
Equity
0%
Debt
0.71%
Others
99.29%
LIC MF INCOME PLUS FUND - GROWTH
Fund Size as on
Jun 30, 2009
Fund Size ( Rs. in crores)
3845.37
Asset Allocation as on
Jun 30, 2009
Equity
0%
Debt
53.87%
Others
46.13%
RELIANCE MONEY MANAGER FUND - RETAIL - GROWTH
Fund Size as on
May 29, 2009
Fund Size ( Rs. in crores)
20094.22
Asset Allocation as on
May 29, 2009
Equity
0%
Debt
25.49%
Others
74.51%
TATA TREASURY MANAGER FUND - RIP - GROWTH
Fund Size as on
Jun 30, 2009
Fund Size ( Rs. in crores)
98.4
Asset Allocation as on
Jun 30, 2009
Equity
0%
Debt
95.92%
Others
4.08%
OVERALL COMPARISON OF ALL THE FUNDS
Scheme Name
mth %
3 mths %
6 mths %
yr %
3 yrs %
NAV
Category
Structure
JM Money Manager Fund - Super Plan - Growth
0.6
.86
3.86
9.31
NA
2.43
Debt
Open Ended
Fortis Money Plus Fund - Growth
0.49
.58
3.83
9.27
8.47
3.26
Debt
Open Ended
DWS Cash Opportunities Fund - 30D - Growth
0.51
.69
3.93
8.95
NA
1.37
Short Term Debt
Open Ended
Tata Treasury Manager Fund - RIP - Growth
0.47
.47
3.26
8.9
NA
179.27
Debt
Open Ended
LIC MF Income Plus Fund - Growth
0.52
.43
3.35
8.7
NA
1.91
Debt
Open Ended
Reliance Money Manager Fund - Retail - Growth
0.45
.42
3.32
8.19
NA
203.08
Debt
Open Ended
Average performance of similar category funds
0.51
.57
3.59
8.89
8.47
405.22
--
--
Crisil Liquid Fund Index
0.61
.58
2.95
7.49
6.08
--
--
--
MONTHLY INCOME PLAN
HDFC MIP LONG TERM
Fund Size as on
May 29, 2009
Fund Size ( Rs. in crores)
932.94
Asset Allocation as on
May 29, 2009
Equity
25.47%
Debt
58.25%
Others
6.28%
BIRLA SUN LIFE MIP -II SAVINGS 5
Fund Size as on
May 29, 2009
Fund Size ( Rs. in crores)
31.9
Asset Allocation as on
May 29, 2009
Equity
7.89%
Debt
68.29%
Others
23.82%
UTI MIS ADVANTAGE PLAN
Fund Size as on
May 29, 2009
Fund Size ( Rs. in crores)
24.6
Asset Allocation as on
May 29, 2009
Equity
5.23%
Debt
57.57%
Others
27.2%
BIRLA SUN LIFE MONTHLY INCOME PLAN - GROWTH
Fund Size as on
May 29, 2009
Fund Size ( Rs. in crores)
22.6
Asset Allocation as on
May 29, 2009
Equity
5.79%
Debt
62.88%
Others
21.33%
TATA MIP
Fund Size as on
May 29, 2009
Fund Size ( Rs. in crores)
22.25
Asset Allocation as on
May 29, 2009
Equity
9.68%
Debt
75.32%
Others
5%
RELIANCE MONTHLY INCOME PLAN - GROWTH
Fund Size as on
May 29, 2009
Fund Size ( Rs. in crores)
201.3
Asset Allocation as on
May 29, 2009
Equity
0.26%
Debt
42%
Others
47.74%
OVERALL COMPARISON OF ALL THE FUNDS
Scheme Name
mth %
3 mths %
6 mths %
yr %
3 yrs %
NAV
Category
Structure
Reliance MIP - Growth
.36
1.06
8.54
28.33
2.72
8.09
Debt
Open Ended
HDFC MIP - LTP - Growth
2.34
7.68
8.44
23.71
2.31
9.06
Debt
Open Ended
Birla Sun Life MIP - Savings 5 - Growth
.28
5.89
-3.37
20.76
2.72
5.83
Debt
Open Ended
Birla Sun Life Monthly Income Plan - Growth
.01
9.79
9.06
8.68
0.98
31.91
Debt
Open Ended
UTI - MIS - Advantage Fund - Growth
.08
2.06
3.86
8.22
1.07
7.69
Debt
Open Ended
Tata Monthly Income Fund - Growth
0.06
4.66
5.68
3.85
8.61
7.71
Debt
Open Ended
Average performance of similar category funds
.19
0.19
8.7
20.59
1.4
20.05
--
--
Crisil MIP Blended Index
.11
3.93
7.25
2.56
0.90
--
--
--
FLOATING RATES FUND
CANARA ROBECO FLOATING RATE FUND - ST -G
Fund Size as on
May 29, 2009
Fund Size ( Rs. in crores)
69.27
Asset Allocation as on
May 29, 2009
Equity
0%
Debt
0%
Others
00%
ESCORTS FLOATING RATE FUNDS - GROWTH
Fund Size as on
Jun 30, 2009
Fund Size ( Rs. in crores)
0.13
Asset Allocation as on
May 29, 2009
Equity
0%
Debt
20.76%
Others
79.24%
LICMF FLOATING RATE FUND -ST-G
Fund Size as on
Jun 30, 2009
Fund Size ( Rs. in crores)
198.64
Asset Allocation as on
Jun 30, 2009
Equity
0%
Debt
22.53%
Others
77.47%
SBI MAGNUM INCOME FUND - FLOATING RATE PLAN - ST- G
Fund Size as on
Jun 30, 2009
Fund Size ( Rs. in crores)
4.69
Asset Allocation as on
Jun 30, 2009
Equity
0%
Debt
60.04%
Others
39.96%
RELIANCE FLOATING RATE FUND - GROWTH
Fund Size as on
May 29, 2009
Fund Size ( Rs. in crores)
767.17
Asset Allocation as on
May 29, 2009
Equity
0%
Debt
1.05%
Others
88.95%
UTI FLOATING RATE FUND - STP - GROWTH
Fund Size as on
May 29, 2009
Fund Size ( Rs. in crores)
206.6
Asset Allocation as on
May 29, 2009
Equity
0%
Debt
20.83%
Others
79.17%
OVERALL COMPARISON OF THE FUNDS
Scheme Name
mth %
3 mths %
6 mths %
yr %
3 yrs %
NAV
Category
Structure
SBI Magnum Income - FRP - ST - Growth
0.32
.28
2.86
9.35
7.41
3.7
Debt
Open Ended
Escorts Floating Rate Funds - Growth
0.66
2.16
4.54
9.25
8
2.93
Debt
Open Ended
LIC MF Floating Rate Fund - ST - Growth
0.51
.47
3.51
8.85
8.75
4.55
Debt
Open Ended
UTI Floating Rate Fund - STP - Growth
0.43
.49
3.52
8.69
7.7
452.16
Debt
Open Ended
Canara Robeco FRF - ST - Growth
0.43
.39
3.38
8.52
8.26
3.78
Debt
Open Ended
Reliance FRF - Growth
0.43
.42
3.35
8.28
8.23
4.02
Debt
Open Ended
Average performance of similar category funds
0.46
.53
3.53
8.82
8.06
253.52
--
--
Crisil Liquid Fund Index
0.61
.58
2.95
7.49
6.08
--
--
--
Source:-mutual fundsindia.com
4.3 PERFOMANCE EVALUATION ON THE BASIS OF SHARPE,
TREYNOR, JENSON'S MEASURE
MEDIUM TERM FUND
S.NO
FUND NAME
AVERAGE RETURN ON PORTFOLIO
AVERAGE RISK FREE RETURN
S.D
BETA
ALPHA
.
Canara Robeco Income
2.27289972
0.023142222
4.99
0.64
3.86
2.
ICICI Prudential Income
.805109563
0.023142222
0.19
.09
7.30
3.
Fortis Flexi Debt Reg
.5719715
0.023142222
2.33
.05
6.90
4.
IDFC Dynamic Bond Plan A
.526520014
0.023142222
9.86
.19
6.47
5.
Kotak Bond Regular
.430762099
0.023142222
8.90
.05
4.83
6.
Reliance Medium Term
0.6442766
0.023142222
0.27
0.02
2.24
S.NO
FUND
SHARPE RATIO
RANK
TREYNORS RATIO
RANK
JENSONS RATIO
RANK
.
Canara Robeco Income
0.450853
2
3.5152461
2
3.86
2.
ICICI Prudential Income
0.174874
3
.6348324
3
7.3
2
3.
Fortis Flexi Debt Reg
0.125615
6
.4750755
4
6.9
3
4.
IDFC Dynamic Bond Plan A
0.152472
5
.2633427
6
6.47
4
5.
Kotak Bond Regular
0.15816
4
.3405904
5
4.83
5
6.
Reliance Medium Term
2.300498
31.056719
2.24
6
SHORT TERM FUND
S.NO
FUND NAME
AVERAGE RETURN ON PORTFOLIO
AVERAGE RISK FREE RETURN
S.D
BETA
ALPHA
.
DWS Short Maturity Reg
.13773617
0.023142222
3.22
-0.09
6.98
2.
HDFC Short-term
.170343
0.023142222
2.53
0.05
7.35
3.
ICICI Prudential Short-term
.25925439
0.023142222
3.73
0.03
7.84
4.
JM Short-term Reg
.37712868
0.023142222
2.99
-0.02
8.21
5.
Kotak Bond Short-term
0.98582047
0.023142222
2.28
-0.06
6.08
6.
Reliance Short-term
.0973696
0.023142222
2.4
-0.05
6.94
S.NO
FUND NAME
SHARPE RATIO
RANK
TREYNORS RATIO
RANK
JENSONS RATIO
RANK
.
DWS Short Maturity Reg
0.346147
5
-12.384377
3
6.98
4
2.
HDFC Short-term
0.453439
22.944016
2
7.35
3
3.
ICICI Prudential Short-term
0.331397
6
41.203739
7.84
2
4.
JM Short-term Reg
0.452838
2
-67.699323
6
8.21
5.
Kotak Bond Short-term
0.422227
4
-16.044637
4
6.08
6
6.
Reliance Short-term
0.447595
3
-21.484548
5
6.94
5
MONTHLY INCOME PLAN
S.NO
FUND NAME
AVERAGE RETURN ON PORTFOLIO
AVERAGE RISK FREE RETURN
S.D
BETA
ALPHA
1.
Reliance MIP
.865362042
0.023142222
0.37
0.80
0.04
2.
Birla Sun Life MIP II Savings 5
.6179236
0.023142222
0.52
0.43
2.03
3.
HDFC MIP Long-term
.242103874
0.023142222
0.54
0.93
3.86
4.
Birla Sun Life Monthly Income
.075492137
0.023142222
8.08
0.69
3.51
5.
UTI MIS-Advantage Plan
0.968568189
0.023142222
7.48
0.41
3.65
6.
Tata MIP
0.9356033
0.023142222
0.41
0.41
3.65
S.NO
FUND NAME
SHARPE RATIO
RANK
TREYNORS RATIO
RATIO
JENSONS RATIO
RANK
1.
Reliance MIP
0.177649
2
2.3027748
3
0.04
2
2.
Birla Sun Life MIP II Savings 5
0.151595
3
3.7087939
1
2.03
1
3.
HDFC MIP Long-term
0.115651
6
.3107115
6
3.86
3
4.
Birla Sun Life Monthly Income
0.130241
4
.5251448
5
3.51
6
5.
UTI MIS-Advantage Plan
0.126394
5
2.305917
2
3.65
5
6.
Tata MIP
2.225515
1
2.2255148
4
3.65
4
LIQUID PLUS OR MONEY MANAGER FUND
S.NO
FUND NAME
AVERAGE RETURN ON PORTFOLIO
AVERAGE RISK FREE RETURN
S.D
BETA
ALPHA
1.
Fortis money plus reg
0.763266594
0.023142222
0.21
0.01
3.58
2.
JM Money manager
0.7584107
0.023142222
0.29
0.01
3.61
3.
DWS cash oppurtunities
30 days plan
0.741983974
0.023142222
nil
nil
Nil
4.
Tata treasury manager
Retail
0.731268423
0.023142222
0.64
0.03
3.64
5.
LICMF income plus
0.71499295
0.023142222
0.24
0.01
3.65
6.
Reliance money
manager retail
0.6779537
0.023142222
0.15
0.01
3.13
S.NO
FUND NAME
SHARPE RATIO
RANK
TREYNORS RATIO
RATIO
JENSONS RATIO
RANK
1.
Fortis money plus reg
3.524402
2
74.012437
1
3.58
4
2.
JM Money manager
2.535408
5
73.526846
2
3.61
3
3.
DWS cash oppurtunities
30 days plan
Nil
6
Nil
6
nil
6
4.
Tata treasury manager
Retail
.106447
5
23.604207
5
3.64
2
5.
LICMF income plus
2.882711
3
69.185073
3
3.65
1
6.
Reliance money
manager retail
4.36541
1
65.48115
4
3.13
5
FLOATING RATES FUNDS
S.NO
FUND NAME
AVERAGE RETURN ON PORTFOLIO
AVERAGE RISK FREE RETURN
S.D
BETA
ALPHA
1.
Escorts Floating Rate
0.787418119
0.023142222
0.43
-0.06
3.81
2.
LICMF Floating Rate ST
0.7367964
0.023142222
0.22
0.44
3.16
3.
UTI Floating Rate ST
0.715998761
0.023142222
0.19
0.38
3.05
4.
Magnum Floating Rate ST
0.725522998
0.023142222
.43
-0.54
3.75
5.
Canara Robeco Floating Rate ST
0.719478306
0.023142222
0.19
0.34
2.75
6.
Reliance Floating Rate
0.693401
0.023142222
0.15
0.33
2.61
S.NO
FUND NAME
SHARPE RATIO
RANK
TREYNORS RATIO
RATIO
JENSONS RATIO
RANK
1.
Escorts Floating Rate
.777386
5
-12.737932
6
3.81
1
2.
LICMF Floating Rate ST
3.243883
4
.6219413
4
3.16
3
3.
UTI Floating Rate ST
3.646613
3
.8233067
3
3.05
4
4.
Magnum Floating Rate ST
0.491175
6
-1.3007051
5
3.75
2
5.
Canara Robeco Floating Rate ST
3.664927
2
2.0480473
1
2.75
5
6.
Reliance Floating Rate
4.468392
1
2.0310872
2
2.61
6
INTERPRETATION
> The entire funds are one of the best and active funds of the Reliance Mutual Fund. On the basis of popularity the fund has been taken and even with consulting with the relationship manager.
> On the basis of return the other AMC funds have been taken .The highest return funds have been taken into consideration.
> Average return has been calculated to find out the Sharpe ratio,Treynors ratio.
> This average return has been calculated by taking the %change of the NAV value. Since it's a debt and open ended scheme so, its NAV is only the return for it.
> Average return on portfolio:- In short term the average return is highest for JM which is 1.377 and lowest for Kotak which is 0.985 see annexure 1.6,in medium term Canara Robeco has the highest average return which is 2.27 see annexure 1.7, in Monthly income plan Reliance has the highest average of 1.86 followed by Birla with 1.617 see annexure 1.3,and in liquid plus fund Fortis has the highest figure with o.76 and Reliance has the lowest value of 0.667 see annexure 1.4, in Floating rate fund Escorts have the highest average return and again Reliance has the lowest return, see annexure 1.5. This value of average return is dependent on the NAV'S value and also the launch period of the fund.
> Standard deviation:-Standard deviation is statistical tool for measuring the variation in NAV and helps us in identifying the consistency in performance of a fund. For this purpose standard deviation of the returns posted by the fund on a day to day basis is calculated using an appropriate formula.
Significance:- The lower the standard deviation is the better is the fund, because this shows that the deviation in the fund is less volatile. That is the returns are consistent and hence investing in the schemes which have lesser standard deviation carry less risk and give consistent returns over a period of time. Here we see in short term fund Kotak has the lowest value and ICICI the highest, where as in medium term Fortis has the highest and Reliance the lowest, in MIP HDFC the highest and Reliance the lowest; whereas in liquid plus and floating rate Reliance have the lowest standard deviation showing good performance.
> Beta:-Beta measures systematic risk. Risk refers to unique set of consequences for a given decision which can be assigned probabilities. Beta describes the movement in stocks or portfolios return in relation to that of the market returns.
>
Significance:-A fund with a higher beta is more risky than with lower beta if the market sentiment is bearish and vice versa.
In short term only HDFC and ICICI has the positive beta in which HDFC has the highest beta and all the others fund have negative beta, so HDFC is more risky but more prone to give high returns also in case of monthly income plan. In case of medium term all have positive beta but IDFC had the highest beta value. In Liquid plus fund all the schemes have nearby same beta value that's 0.01 but Tata has the highest value of 0.03.when we see Floating rate fund LICMF have the highest beta value where as Magnum and Escort have negative beta value.
> Alpha:-Alpha is the measure of performance on a risk -adjusted basis. Alpha takes the volatility (price risk) of a mutual fund and compares its risk -adjusted performance to a benchmark index. The positive alpha of 1.0 means the fund has outperformed its benchmark index by 1%.
Significance:-A fund with a higher value of alpha is always preferred as it indicates the percentage by which the fund has out formed the benchmark.
In short term fund JM, in medium term fund Canarra Robeco, in MIP Birla, in Liquid plus LICMF and in Floating fund Escorts have out formed the benchmark.
> Sharpe Ratio:-Sharpe ratio is a risk to reward ratio, which helps in comparing the return given by fund with the risk that the fund has taken i.e. it calculate the risk adjusted return. Higher the Sharpe ratio, the lower the risk in relation to reward.
In short term fund HDFC has done better and has got the ranking one, where as in medium term, Liquid plus and Floating rate fund Reliance heads with all the other funds. In case of MIP Tata heads the first position .This ranking is because of the direct impact of low standard deviation and high average returns rate.
4.4 FINAL EVALUATION OF FUNDS BY COMPARING SHARPE RATIO WITH CRISIL INDEX
MEDIUM TERM FUND
COMPARISON OF SHARPE RATIO WITH CRISIL SHORT TERM BOND FUND INDEX
S.NO
FUND NAME
SHARPE RATIO
BENCHMARK
RANK
Canara Robeco Income
0.45473942
0.12796106
2
2
ICICI Prudential Income
0.17677719
0.12796106
3
3
Fortis Flexi Debt Reg
0.12718747
0.12796106
6
4
IDFC Dynamic Bond Plan A
0.15443915
0.12796106
5
5
Kotak Bond Regular
0.16033844
0.12796106
4
6
Reliance Medium Term
2.37232074
0.12796106
NOTE: refer annexure 1.1
INTERPRETATION
> When we compare the Sharpe ratio with benchmark we find that all the funds except Fortis flexi is more than the the benchmark. This shows that Fortis flexi fund is not up to the mark.
> Reliance fund has the highest Sharpe ratio and is quite high when compared with the benchmark. So this fund is able to maintain the first position when taken total risk into consideration.
> The average return is very less that is 0.644 but the standard deviation is quite low that is only 0.27, which is very less compared to others. So because of this low standard deviation the Sharpe ratio tends to increase.
> The top performers are reliance followed by Canarra Robeco.
> So in medium term fund reliance is the best not only in account to return, NAV, but also when compared to Sharpe ratio.
SHORT TERM FUND
COMPARISON OF SHARPE RATIO WITH CRISIL LIQUID FUND INDEX
S.NO
FUND NAME
SHARPE RATIO
BENCHMARK
RANK
DWS Short Maturity Reg
0.34614719
0.08014656
5
2
HDFC Short-term
0.45343904
0.08014656
3
ICICI Prudential Short-term
0.33139736
0.08014656
6
4
JM Short-term Reg
0.45283828
0.08014656
2
5
Kotak Bond Short-term
0.4222273
0.08014656
4
6
Reliance Short-term
0.44759474
0.08014656
3
See annexure 1.1
INTERPRETATION
> Out of six funds taken all the funds have outperformed when compared to benchmark.
> HDFC fund has the highest Sharpe ratio and is quite high when compared with the benchmark. So this fund is able to maintain the first position when taken total risk into consideration. This is because the average return was high for HDFC and even the SD was low as compared to others.
> The top performers are HDFC followed by JM and reliance holding the third position..
> So in short term fund HDFC is the best not only in account to return, NAV, but also when compared to Sharpe ratio.
MONTHLY INCOME PLAN
COMPARISON OF SHARPE RATIO WITH CRISIL BLENDED INDEX
S.NO
FUND NAME
SHARPE RATIO
BENCHMARK
RANK
Reliance MIP
0.17764897
0.15138177
2
2
Birla Sun Life MIP II Savings 5
0.15159519
0.15138177
3
3
HDFC MIP Long-term
0.11565101
0.15138177
4
4
Birla Sun Life Monthly Income
0.13024133
0.15138177
5
5
UTI MIS-Advantage Plan
0.12639385
0.15138177
6
6
Tata MIP
2.22551482
0.15138177
See annexure 1.2
INTERPRETATION
> Out of six funds three funds have performed better and three funds have underperformed when compared with benchmark.
> Tata, reliance and Birla (one fund) have done better where as UTI, HDFC and Birla has not performed better.
> Tata fund has the highest Sharpe ratio 0f 2.25 followed by reliance with 0.177. So this shows that Tata has a very good position against the total risk. The value for Sharpe ratio is high for Tata because even the average return is less the standard deviation is also quite less as compared to others. So this makes the Sharpe ratio very less, as Sharpe ratio is dependent on standard deviation.
> So the top performers are Tata followed by Reliance. So we can see that Tata holds a good position in monthly income plan fund, and Reliance is also not so far. So we can have a chance that sometimes later Reliance can make Tata group back.
LIQUID PLUS OR MONEY MANAGER FUND
COMPARISON OF SHARPE RATIO WITH CRISIL LIQUID FUND INDEX
S.NO
FUND NAME
SHARPE RATIO
BENCHMARK
RANK
Fortis money plus reg
3.52440177
0.08014656
2
2
JM Money manager
2.53540849
0.08014656
4
3
DWS cash opportunities 30 days plan
nil
0.08014656
6
4
Tata Treasury Manager Retail
.10644719
0.08014656
5
5
LICMF income plus
2.88271137
0.08014656
3
6
Reliance money manager retail
4.36540998
0.08014656
See annexure 1.1
> Out of six funds taken all the funds have outperformed when compared to benchmark except DWS.
> Reliance fund has the highest Sharpe ratio and is quite high when compared with the benchmark. So this fund is able to maintain the first position when taken total risk into consideration. This is because the average return was high for Reliance even the SD was low as compared to others.
> The top performers are Reliance followed by JM and LICMF holding the third position..
> So in Liquid fund Reliance is best not only in account to return, NAV, but also when compared to Sharpe ratio.
FLOATING RATES FUND
COMPARISON OF SHARPE RATIO WITH CRISIL LIQUID INDEX
S.NO
FUND NAME
SHARPE RATIO
BENCHMARK
RANK
Escorts Floating Rate
.77738581
0.08014656
5
2
LICMF Floating Rate ST
3.24388263
0.08014656
4
3
UTI Floating Rate ST
3.64661336
0.08014656
3
4
Magnum Floating Rate ST
0.49117537
0.08014656
6
5
Canara Robeco Floating Rate ST
3.66492676
0.08014656
2
6
Reliance Floating Rate
4.46839185
0.08014656
See annexure 1.1
INTERPRETATION
> Out of six funds taken all the funds have outperformed when compared to benchmark except Magnum and Escorts.
> Reliance fund has the highest Sharpe ratio and is quite high when compared with the benchmark. So this fund is able to maintain the first position when taken total risk into consideration.
> The top performers are Reliance followed by Canarra Robeco and UTI holding the third position.
> So in Floating rate fund Reliance is best.
So at last after evaluating everything we can easily figure out that out of five funds taken Reliance tops in three funds and shows good result in others two, so we can say that Reliance funds are the best and its heads in the Assets Management Company, not only because of its total net worth but because of its performance. So in hypothesis we prove that reliance is the best fund to invest.
CHAPTER -5
MAJOR FINDINGS,
RECOMENDATIONS,
LEARNING OUTCOME
AND CONCLUSION.
5.1 FINDINGS
* In Medium term fund on the basis of return Canarra Robeco heads the first position.
* Reliance fund have the least expense ratio and the highest market capitalization which is good for the company.
* The Standard Deviation of most of the fund is high except Reliance indicating a greater potential for volatility factor.
* All funds have the positive Sharpe ratio which indicates their superior risk adjusted performance, but in all that Reliance shows the highest Sharpe ratio.
* Out of six funds only two funds Reliance and Canarra Robecco have Beta less than 1 showing less risk factor involvement.
* The Alpha of all funds has value on higher positive side .This highlights the relative higher performance except Reliance which has the lowest Alpha value among the other funds.
* In Assets Allocation ICICI Prudential have the highest share in Debt Allocation with 97.15%.
* After comparing Sharpe ratio with Benchmark we find in Medium term Reliance is the best fund.
* In Short term funds on the basis of return JM heads the first position with 16.11 % return.
* Reliance has the least expense ratio of 0.64 which indicates less expense generated by the fund and the highest market capitalization of 1950.43 Cr.
* The Standard Deviation for most of the funds are high which signifies the high risk for all the fund but out of that Kotak has the lowest S.D which is 2.28 which indicates low risk and a good performer on volatility as compared to its peers.
* The higher the funds Sharpe ratio, the better is the fund's performance on the risk adjusted return front. So here HDFC has the highest Sharpe ratio with 0.453 followed by JM with 0.452.
* Most of the funds have negative Beta value and only two funds have positive value which are HDFC and ICICI in which HDFC has the highest value of 0.05 which shows HDFC is aggressive than others.
* The Alpha value which shows the relative higher performance, in that JM heads.
* In Assets Allocation Kotak have the highest share in Debt Allocation with 69.76%.
* After comparing Sharpe ratio with Benchmark we find in Short term HDFC is the best fund
* In Monthly Income Plan on the basis of return Reliance heads the first position with 23.60 % return..
* Birla has the least expense ratio of 0.24 which indicates less expense generated by the fund.
* HDFC has the highest Market Capitalization of Rs.907.17 Cr.
* The portfolio P/E ratio of most of the funds is on the higher side, indicating the funds are relatively risky but yielding high returns.
* The portfolio P/B ratio of all funds is greater than 1, indicating the higher returns and good performance of the funds.
* The Standard Deviation for most of the funds are high which signifies the high risk for all the fund but out of that Tata has the lowest S.D which 0.41 and is very less compared with other funds which indicates low risk and a good performer on volatility as compared to its peers.
* The higher the funds Sharpe ratio, the better is the fund's performance on the risk adjusted return front. So here Tata has the highest Sharpe ratio with 2.225.
* All the funds have positive Beta value and out of which HDFC has the highest value of 0.93.
* The Alpha value which shows the relative higher performance in that Birla heads with 12.03.
* Tata launched this fund in 1997 even could not create a good market for it .It was the first company to launch this fund among others.
* In Assets Allocation Tata have the highest share in Debt Allocation with 75.32%.
* After comparing Sharpe ratio with benchmark we find in MIP Tata is the best fund.
* In Liquid plus fund, on the basis of return Fortis heads the first position with 9.26% return..
* JM has the least expense ratio of 0.35 which indicates less expense generated by the fund.
* The Market Capitalization is highest for LICMF which is 4335.97Cr.
* The Standard Deviation for most of the funds are low which signifies the lower risk for all the fund but out of that Reliance has the lowest S.D which is only 0.15 which indicates low risk and a good performer on volatility as compared to its peers.
* The higher the funds Sharpe ratio, the better is the fund's performance on the risk adjusted return front. So here Reliance again has the highest Sharpe ratio with 4.36 followed by Fortis with 3.52.
* All the funds have equal Beta value of 0.01 except Tata which shows Tata is less aggressive than others.
* The Alpha value which shows the relative higher performance in that LICMF heads.
* Fortis was the first company to launch this fund and there was the gap of two years with the peers group.
* In Assets Allocation Tata have the highest share in Debt allocation with 95.92%.
* After comparing Sharpe ratio with benchmark we find in Liquid fund Reliance is the best fund.
* In Floating rate fund, on the basis of return Escorts heads the first position with 9.83% return..
* UTI has the least expense ratio of 0.20 which indicates less expense generated by the fund.
* The Market Capitalization is highest for LICMF which is 836.97Cr.
* The Standard Deviation for most of the funds are low which signifies the lower risk for all the fund but out of that Reliance has the lowest S.D which is only 0.15 which indicates low risk and a good performer on volatility as compared to its peers.
* The higher the funds Sharpe ratio, the better is the fund's performance on the risk adjusted return front. So here reliance again has the highest Sharpe ratio with 4.446 followed by Canarra Robeco with 3.66.
* All the funds have positive Beta value except Magnum who is having negative Beta value..
* The Alpha value which shows the relative higher performance in that Escorts heads.
* In Assets Allocation SBI have the highest share in debt allocation with 60.04%.
* After comparing Sharpe ratio with Benchmark we find in Floating rate fund Reliance is the best fund.
5.2 RECOMMENDATIONS
The key to the success of the Mutual fund industry is the perceived confidence of the investors in the organization in total. And this is to take into account both the historical quality of the product in terms of return as well as the way accounts are perceived to be managed in terms of concern along with the technical ability for savings mobilization and customer servicing. The major recommendations which are based on the observations that were made while working with Reliance are as follows.
* The marketing strategy which they follow should be segment wise. They should not waste their time on reaching students, who are unaware of investing and have insufficient cash supply.
* In times of growing macroeconomic concerns like inflation and the RBI measures to curb it and to regulate the liquidity, one should be careful before investing in debt funds as their yield fluctuates in such situation.
* Buy that portfolio which is doing very well in the market because that fund has the chance of increment.
* It's good to pick funds which have the higher Beta and Sharpe ratio that justifies the additional risk taken by those funds in terms of better return.
* An investor with a long term investment horizon may select funds with value style of investing as they are expected to give good returns when market realizes the potential of their portfolios stocks.
* While investing in sect oral funds, the sector specific risk should be analysed along with the returns from the sector.
* The past return should be viewed to get the record performance of the funds.
* The expense ratio should be preferably low and should be checked and compared with returns.
* In India less than 5% of an individual savings is invested in mutual fund, therefore it is advisable to make more effort to communicate the benefits, investment pattern and reward associated to it.
* The advisors should be given proper training so that they can easily influence the clients and also the motivation power should be given to them.
* Lock in period for the scheme should be minimized so that the investors can liquidate their money whenever they want.
* There should be no entry and exit load for the schemes.
5.3 LEARNING OUTCOME
It was indeed a privilege and opportunity to do the internship in Reliance Mutual fund. During internship, I learnt about the Mutual funds industry, present market and the future potential of this investment sector. The other major learning of my internship was as follows.
* I got lot of exposure in the corporate world and I also got some good links in corporate market.
* Investment pattern of corporate in various funds.
* Risk involved while investing in mutual funds.
* The effect of market fluctuations on the yield of these funds.
* The best learning was on what basis we can suggest the investors the required portfolio.
* The marketing strategy followed by Reliance Company.
* The statement is very important part for clients, so came to know how to generate it and read all the important things.
* The different schemes which come under debt funds.
* How mutual funds can be used as a financial planning tools.
* The practical knowledge how the mutual fund industry works and the culture of this industry.
Finally I would say that the period of internship had been a value addition for me in terms of in -depth knowledge of the mutual fund industry as a whole.
5.4 CONCLUSIONS
The end of millennium marks 44 years of existence of Mutual funds in this country. The ride over these 44 years has not been smooth. Investor's opinion is still divided. While some are for Mutual funds others are against it .The securities and exchange board of India (SEBI), which was granted statutory status in 1992has been given the brief to protect the interests of investors and promote the development and regulations of the securities market. An important ingredient of regulations is to ensure that fair competition exists in the mutual fund industry.
Mutual fund is an Investment avenue and as an asset class has gain immense popularity among the salaried financially working professional via; Indian investors in the last decade due to the variety of factors like objective based investment, professional management, strict regulatory control and investor protection ,transparency and disclosure norms ,tax efficiency, investment convenience ,liquidity etc. Increasing number of AMC and various investment schemes and products, this sector is regarded as the perfect substitute for direct investment in capital market and considered as surrogate investments in equity and debt markets for the small, medium and large investors. Today this sector is witnessing lot of innovative changes and growth and this will continue in the years to come.
Mutual funds have the potential to beat inflation on a consistent basis and therefore, more and more investors are likely to include in their portfolios. On their part, Mutual Fund will have to ensure that investors realize the direct correlation between risk and reward. Mutual funds are on the verge of expanding its product line investing in gold and real estate, which will allow mutual funds to tap the booming real estate sector in the economy.
However, as the industry grows so will its challenges. Some of the major challenges that the industry has faced have been dominance of institutional investors, making investors aware of mutual fund investing, mismatch between reality and returns, growth interns of assets under management, improving the advice quality and most important tapping the rural market. While some of the challenges have been tackled properly, some are still threats to the society.
BIBLIOGRAPHY
BIBLIOGRAPHY
www.valuereserchonline.com
www.moneycontrol.com
www.mutualfundsindia.com
www.investopedia.com
www.amfindia.com
www.reliancemutualfund.com
www.rbi.org.in
www.crisil.com
www.finance.bixee.com
www.banks.com
www.hdfcmutualfund.com
www.iciciprudential.com
www.kotakmutualfund.com
www.dwsmutualfund.com
www.jmmutualfund.com
www.canarrarobeccomutualfund.com
www.fortismutualfund.com
www.idfcmutualfund.com
www.birlamutualfund.com
www.utimutualfund.com
www.tatamutualfund.com
www.licmf.com
www.escortmutualfund.com
www.sbimutualfund.com
TEST BOOKS
Nalini Prava Tripathy "Mutual Funds in India"
Prasanna Chandra "Investment Analysis and Portfolio Management"
C.R.Kothari "Research Methodology- Methods and Techniques".
Mutual Fund Insight
OTHERS
Reliance Monthly Fact Sheet, May 2009.
ANNEXURE
COMPUTATION OF BENCHMARK WITH THE HELP OF CRISIL INDEX
CRISIL LIQUID INDEX
MONTHS
INDEX
RETURN
May-08
408.14224
0.64
Jun-08
417.99924
0.7
Jul-08
427.92523
0.71
Aug-08
438.0635
0.71
Sep-08
448.27375
0.8
Oct-08
459.85994
0.49
Nov-08
467.01326
0.67
Dec-08
476.84225
0.74
Jan-09
487.77088
0.6
Feb-09
496.6975
0.53
Mar-09
504.63
0.55
Apr-09
515.84612
0.42
May-09
521
0.34
BENCH MARK
0.08014656
CRISIL SHORT TERM BOND FUND INEX
MONTHS
INDEX
RETURN
May-08
392.719
0.45
Jun-08
396.757
-0.29
Jul-08
406.255
0.29
Aug-08
415.677
0.68
Sep-08
423.747
0.67
Oct-08
438.126
0.57
Nov-08
486.016
.01
Dec-08
498.35
3.33
Jan-09
512.285
0.83
Feb-09
514.251
0.93
Mar-09
541.81
0.13
Apr-09
556.303
.82
May-09
570.932
0.94
BENCH MARK
0.127961
ANNEXURE -1.1
CRISIL MIP BLENDED INDEX
MONTHS
INDEX
RETURN
May-08
563.79234
-0.68
Jun-08
578.96112
-4.15
Jul-08
591.43492
0.97
Aug-08
576.47543
0.79
Sep-08
516.09642
-0.94
Oct-08
524.58656
-3.83
Nov-08
620.94043
0.56
Dec-08
607.32453
6.32
Jan-09
605.39574
-0.84
Feb-09
623.53671
-0.12
Mar-09
700.33
.13
Apr-09
780.75561
4.73
May-09
800.522
.11
BENCH MARK
0.15138177
COMPUTATION OF TREASURY BILLA -91 DAYS
Months
91-days treasury bill
-Jun-08
7.4768
0.024923
-Jul-08
0.024923
-Aug-08
0.024923
-Sep-08
9.0227
0.030076
-Oct-08
0.030076
-Nov-08
0.030076
-Dec-08
6.6048
0.022016
-Jan-09
0.022016
-Feb-09
0.022016
-Mar-09
4.6663
0.015554
-Apr-09
0.015554
-May-09
0.015554
AVERAGE
0.023142
ANNEXURE - 1.2
Page 1