A SUMMER TRAINING PROJECT

REPORT
ON
PRODUCT LINE OF RELIANCE
MUTUAL FUND

Department of Management
Studies(Bhimtal)
Submitted By:
DINESH KUMAR
M.B.A. 3th Sem.

Roll. No. 94077

Kumaun University, Nanital

1
CHAPTER ARRANGEMENT

Student Declaration ………………………………………………i

Acknowledgement………………………………………………..ii

Preface……………………………………………………………iii

CHAPTER-I

Introduction………………………………………………………….7

Objectives of the study………………………………………………8

Research methodology……………………………………………..8-9

Data Collection………………………………………………….10-11

Limitation of the study……………………………………………12

Scope of the study…………………………………………………13

CHAPTER-II

Company profile…………………………………………………….15-63

CHAPTER-III

Suggestions & Recommendation……………………………………..65

Conclusion…………………………………………………………….66

Biblography

2
 PREFACE

As a part of the partial fulfillment of the M.B.A. programme at DMS

(DEPARTMENT OF MANAGEMENT STUDIES), Bhimtal (Nanital), summer
Training was undertaken with the RELIANCE MUTUAL FUND, HALDWANI
NAINITAL

This project is specially designed to understand the subject matter of PRODUCT

LINE OF RELIANCE MUTUAL FUND of the company. This project gives us
information and report about company’s MUTUAL FUND. Throughout the
project the focus has been on presenting information and comments in easy and
intelligible manner.

The purpose of the training was to have practical experience of working in an

organization and to have exposure to the various management practices in the

field of Finance. This training has also given me an on the job experience of
Financial Management.

This project is very useful for those who want to know about company and
PRODUCT LINE OF RELIANCE MUTUAL FUND of the company A well-
designed format was given by the company the relative information. Then the
calculation was done with the help of data provide. The solution is used as the final
data and is used as a finding of the project and through these findings conclusion
has been made as – As a part of MBA DEGREE, SUMMER TRAINING has to be
conducted. The company has supported so immensely that without whom co-
operation the project has the not have been so successful.

3
 STUDENT DECLERATION

I hereby declare that I have under the guidance of Mr. YASHVEER KUMAR
CHAUHAN(BRANCH MANAGER).This report is being submitted in partial
fulfillment requirement of Master of Business Administration degree course of
KUMAUN UNIVERSITY.

The information and findings in this report are based on the data collected
by me.It is my original work.I have neither copied from any report meant for any
other degree/diploma course nor have submitted for award of any degree/diploma
or similar programme.

Name: DINESH KUMAR

Roll no: 94077

4
 ACKNOWLEDGEMENT

I am grateful to Mr. YASHVEER CHAUHAN (Branch Manager) for his

valuable suggestion, and guidance in solving the manuscript. Also, without

his initiation I would not have a chance to undertake this study work and

could explore the new sphere of knowledge.

Finally I am thankful to all those who have helped and encouraged me

towards the successful completion of project

5
CHAPTER
I

6
 INTRODUCTIOIN

As we know that in today’s competitive world it’s very tough for every
organization to compete to other. In any organization capital assets is most
important factor like human capital to compete to this situation .Financial condition
affects every part in an organization .So today every organization attention to
search the Consumer that what the consumer demand in the

Summer training is an activity where the person is trained for a present job. It
improved the performance of a person towards society and also towards the
organization .

I have taken this project to enhance or to gain knowledge in the field of Finance
management in an organization. I had completed my training from RELIANCE
MUTUAL FUND HALDWANI.

7
 Objective of study

Mutual fund is not at all predictable. It has separates research areas of study. Since
the past few decades Today’s companies are pouring in a lot of money, for
understanding research to have a better understanding of their behavior.

The objective of the study was to survey for the Finance potential of the Reliance
mutual fund and product pattern of mutual while a decision for a particular product
of investment

To study the psychological behavior of the consumer a separate questionnaire was

designed.

RESEARCH METHDOLOGY

Research is an ORGANIZED and SYSTEMATIC way of FINDING ANSWERS to

QUESTIONS.

SYSTEMATIC because there is a definite set of procedures and steps which you
will follow. There are certain things in the research process which are always done
in order to get the most accurate results.

8
ORGANIZED in that there is a structure or method in going about doing research.
It is a planned procedure, not a spontaneous one. It is focused and limited to a
specific scope.

FINDING ANSWERS is the end of all research. Whether it is the answer to a

hypothesis or even a simple question, research is successful when we find answers.
Sometimes the answer is no, but it is still an answer.

QUESTIONS are central to research. If there is no question, then the answer is of

no use. Research is focused on relevant, useful, and important questions. Without a
question, research has no focus, drive, or purpose.

RESEARCH DESIGN

Three Types of Research Design

1. Causal Research

When most people think of scientific experimentation, research on cause and effect
is most often brought to mind. Experiments on causal relationships investigate the
effect of one or more variables on one or more outcome variables. This type of
research also determines if one variable causes another variable to occur or change.
An example of this type of research would be altering the amount of a treatment
and measuring the effect on study participants.

2. Descriptive Research

Descriptive research seeks to depict what already exists in a group or population.

An example of this type of research would be an opinion poll to determine which
Presidential candidate people plan to vote for in the next election. Descriptive
studies do not seek to measure the effect of a variable; they seek only to describe.

9
3. Exploratory Research

Exploratory research is conducted into an issue or problem where there are few or
no earlier studies to refer to. The focus is on gaining insights and familiarity for
later investigation. Secondly, descriptive research describes phenomena as they
exist. Here data is often quantitative and statistics applied. It is used to identify and
obtain information on a particular problem or issue. Finally causal or predictive
research seeks to explain what is happening in a particular situation. It aims to
generalize from an analysis by predicting certain phenomena on the basis of
hypothesized general relationships

DATA COLLECTION

Dictionary defines data as facts or figures from which conclusions may be drawn.
Thus, technically, it is a collective or plural noun. Some recent dictionaries
acknowledge popular usage of the word data with a singular verb. However we
intend to adhere to the traditional "English" teacher mentality in our grammar usage
—sorry if "data are" just doesn't sound quite right!

Types of data

1. Primary Data

In primary data collection, you collect the data yourself using methods such as
interviews and questionnaires. The key point here is that the data you collect is
unique to you and your research and, until you publish, no one else has access to it.

10
There are many methods of collecting primary data and the main methods include:

• questionnaires

• interviews

• focus group interviews

• observation

• case-studies

• diaries

• critical incidents

rtfolios.

Secondary Data

All methods of data collection can supply quantitative data (numbers, statistics or
financial) or qualitative data (usually words or text). Quantitative data may often be
presented in tabular or graphical form. Secondary data is data that has already been
collected by someone else for a different purpose to yours. For example, this could
mean using:

• data collected by a hotel on its customers through its guest history system

• data supplied by a marketing organization

• annual company reports

• Government statistics.

11
Limitation of Study

1. The researchers have to accept the answers as they are provided in

the questionnaire. In case there is any inconsistency or ambiguity in
the answer, it will be difficult for the researcher to make use of such a
questionnaire.
2. While doing the survey many customers prefer to avoid filling the
questionnaire, which creates difficulty in the research.
3. The survey was also carried on competitor dealer showrooms, thus
the customer contacted there were in a restricted state of mind. Thus
the responses collected from the questionnaire were up a certain
degree biased.

4. In the study it5 is impossible to cover all the units in view of

complete coverage, which make the study limited.
5. The duration of my survey was 2 month, which acts as a time
constraint to my study. I was restricted to specific segment of
customer due to this limitation.

12
SCOPE OF STUDY

1- It provides useful information for the research and also introduces the
researcher to the particle problem face in a company .

2- This project work is very important to the management student to gain

experience .

3- This project work also provides useful information about the consumer
behavior.

4- This project is based on marketing management benefit for marketing

student.

13
CHAPTER
II

14
 Reliance Mutual Fund

COMPANY PROFILE

15
CORPORATE GOVERNANCE POLICY
Reliance Capital Asset Management Ltd. has a vision of being a leading player in
the Mutual Fund business and has achieved significant success and visibility in the
market. However, an imperative part of growth and visibility is adherence to Good
Conduct in the marketplace. At Reliance Capital Asset Management Ltd., the
implementation and observance of ethical processes and policies has helped us in
standing up to the scrutiny of our domestic and international investors.

EMPLOYEES

Reliance Capital Asset Management Ltd. has at present, a code of conduct for all its
officers. It has a clearly defined prohibition on insider trading policy and
regulations. The management believes in the principles of propriety and utmost
care is taken while handling public money, making proper and adequate
disclosures.

All personnel at Reliance Capital Asset Management Ltd are made aware of their
rights, obligations and duties as part of the Dealing Policy laid down in terms of
SEBI guidelines. They are taken through a well-designed HR program, conducted
to impart work ethics, the Code of Conduct, information security, Internet and e-
mail usage and a host of other issues.

One of the core objectives of Reliance Capital Asset Management Ltd. is to

identify issues considered sensitive by global corporate standards, and implement
policies/guidelines in conformity with the best practices as an ongoing process.
Reliance Capital Asset Management Ltd. gives top priority to compliance in true
letter and spirit, fully understanding its fiduciary responsibilities.

16
GIVEN BELOW IS A SUMMARY OF RCL’S FINANCIALS
Particulars
2009-10 2008-09 2007-08 2006-07
(Rs. in crores)
Total Income 883.86 652.02 295.69 356.79
Profit Before Tax 733.18 550.61 111.21 105.79
Profit After Tax 646.18 537.61 105.81 105.79
Reserves & Surplus 4915.07 3849.58 1310.08 1271.84
Net Worth 5161.23 4122.46 1437.92 1399.81
Earnings per Share28.39 29.74 8.31 8.31
(Rs.)
(Basic +Diluted) (Basic +Diluted) (Basic+ Diluted) (Basic + Diluted)
Book Value per210.12 112.95 112.95 109.96
Share (Rs.)
Dividend (%) 35% 30% 30% 29%
Paid up Equity246.16 223.40 127.84 127.84
Capital

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.

RELIANCE CAPITAL ASSET MANAGEMENT COMPANY

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 vide their letter no
IIMARP/1264/95 dated June 30, 1995. The Mutual Fund has entered into an
Investment Management Agreement (IMA) with RCAM dated May 12, 1995 and
was amended on August 12, 1997 in line with SEBI (Mutual Funds) Regulations,
1996. Pursuant to this IMA, RCAM is authorized to act as Investment Manager of

17
Reliance Mutual Fund. The net worth of the Asset Management Company
including preference shares as on September 30, 2007 is Rs.152.02 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.”

Reliance Capital Asset Management Limited (RCAM) was approved as the Asset
Management Company for the Mutual Fund by SEBI by their letter no.
IIMARP/1264/95 dated June 30, 1995. The Mutual Fund has entered into an
Investment Management Agreement (IMA) with RCAM dated May 12, 1995 and
was amended on August 12, 1997 in line with SEBI (Mutual Funds) Regulations,
1996. Pursuant to this IMA, RCAM is authorized to act as Investment Manager of
Reliance Mutual Fund.

MUTUAL FUNDS ASSET UNDER MANAGEMENT: TOP 10

COMPANIES LIST
Mutual Funds & Assets Under Management

(Rs.in crores)

Mutual Fund Name No. of Corpus Under management

Schemes*
As on Corpus As on Corpus Net
inc/dec in
corpus

AIG Global Investment Sep 30, Aug 31,

46 751.19 831.97 -80.78
Group Mutual Fund 2010 2010

Sep 30, Aug 31,

Axis Mutual Fund 57 3,960.86 4,290.78 -329.92
2010 2010

Baroda Pioneer Mutual May 29, Apr 30,

33 3,874.76 2,653.02 1221.74
Fund 2009 2009

Feb 29, Jan 31,

Benchmark Mutual Fund 18 4,954.72 5,611.00 -656.276
2008 2008

Bharti AXA Mutual Fund 45 Sep 30, 458.78 Aug 31, 613.53 -154.75

18
 2010 2010

Birla Sun Life Mutual Feb 28, Jan 31,

212 49,983.17 44,798.22 5184.95
Fund 2009 2009

Canara Robeco Mutual Sep 30, Aug 31,

87 6,186.31 7,628.11 -1441.8
Fund 2010 2010

Sep 30, Aug 31,

Deutsche Mutual Fund 120 6,470.68 7,207.39 -736.712
2010 2010

DSP Blackrock Mutual Sep 30, Aug 31,

109 23,508.26 24,040.90 -532.64
Fund 2010 2010

Sep 30, Aug 31,

Edelweiss Mutual Fund 38 222.58 194.59 27.99
2010 2010

Jun 30, May 31,

Escorts Mutual Fund 30 198.05 195.75 2.3
2010 2010

Aug 31, Jul 30,

Fidelity Mutual Fund 69 8,006.98 7,928.46 78.523
2010 2010

Sep 30, Aug 31,

Fortis Mutual Fund 109 4,639.81 5,109.42 -469.61
2010 2010

Franklin Templeton Sep 30, Aug 31,

170 39,271.03 42,274.85 -3003.82
Mutual Fund 2010 2010

Sep 30, Aug 31,

HDFC Mutual Fund 208 89,511.29 92,600.69 -3089.4
2010 2010

Sep 30, Aug 31,

HSBC Mutual Fund 85 4,612.60 4,706.42 -93.82
2010 2010

ICICI Prudential Mutual May 29, Mar 31,

354 68,324.06 51,456.11 16867.947
Fund 2009 2009

Aug 31, Jul 30,

IDBI Mutual Fund 12 3,045.73 2,020.44 1025.29
2010 2010

Aug 31, Jul 31,

IDFC Mutual Fund 184 24,002.59 24,214.88 -212.284
2009 2009

Apr 30, Mar 31,

ING Mutual Fund 90 57,575.02 8,608.29 48966.73
2008 2008

Sep 30, Aug 31,

JM Financial Mutual Fund 90 4,434.96 6,561.16 -2126.2
2010 2010

19
 Sep 30, Aug 31,
JPMorgan Mutual Fund 32 6,053.80 7,737.19 -1683.39
2010 2010

Kotak Mahindra Mutual Sep 30, Aug 31,

134 24,126.18 28,927.71 -4801.535
Fund 2010 2010

Sep 30, Aug 31,

L&T Mutual Fund 74 3,164.21 3,974.35 -810.14
2010 2010

Sep 30, Aug 31,

LIC Mutual Fund 62 16,229.64 18,018.47 -1788.83
2010 2010

Mar 31, Sep 30,

Mirae Asset Mutual Fund 34 215.25 250.36 -35.11
2010 2009

Morgan Stanley Mutual Sep 30, Aug 31,

11 2,336.39 2,273.66 62.73
Fund 2010 2010

Motilal Oswal Mutual Sep 30, Aug 31,

1 311.02 292.48 18.54
Fund 2010 2010

Jul 31, Jun 30,

Peerless Mutual Fund 23 1,653.19 748.22 904.97
2010 2010

Sep 30, Aug 31,

Pramerica Mutual Fund 10 504.80 665.45 -160.65
2010 2010

Sep 30, Aug 31,

PRINCIPAL Mutual Fund 69 5,093.79 5,421.47 -327.68
2010 2010

Sep 30, Aug 31,

Quantum Mutual Fund 11 118.45 114.48 3.97
2010 2010

Sep 30, Aug 31,

Reliance Mutual Fund 218 108,148.38 106,493.64 1654.74
2010 2010

Mar 31, Apr 30,

Religare Mutual Fund 98 9,418.36 8,618.52 799.84
2010 2009

Sep 30, Aug 31,

Sahara Mutual Fund 44 756.75 743.70 13.05
2010 2010

Sep 30, Aug 31,

SBI Mutual Fund 130 36,959.38 41,527.59 -4568.21
2010 2010

Sep 30, Aug 31,

Shinsei Mutual Fund 11 169.23 378.28 -209.05
2010 2010

20
 Sundaram BNP Paribas Sep 30, Aug 31,
143 13,912.12 13,544.70 367.422
Mutual Fund 2010 2010

Sep 30, Aug 31,

Tata Mutual Fund 181 19,605.71 22,080.49 -2474.782
2010 2010

Sep 30, Dec 31,

Taurus Mutual Fund 53 1,988.82 209.23 1779.585
2010 2008

Sep 30, May 31,

UTI Mutual Fund 225 61,790.45 73,277.52 -11487.07
2010 2010

SCHEMES
A. 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.

B. 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.

C. SECTOR SPECIFIC SCHEMESThese 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

21
 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.

PRODUCTS
FOLLOWING ARE SOME OF THE SCHEMES LAUNCHED BY RELIANCE MUTUAL
FUND:

Reliance Growth Fund Reliance Vision Fund

(September 1995) (September 1995)

Reliance Income Fund Reliance Liquid Fund

(December 1997) (March 1998)

Reliance Medium Term Fund Reliance Short Term Fund

(August 2000) (December 2002)

Reliance Gilt Securities Fund Reliance Banking Fund

(July 2003) (May 2003)

Reliance Monthly Income Plan Reliance Diversified Power Sector Fund

(December 2003) (March 2004)

Reliance Pharma Fund Reliance Floating Rate Fund

( May 2004) (August 2004)

Reliance Media & Entertainment Fund Reliance NRI Equity Fund

(September 2004) (October 2004)

Reliance NRI Income Fund Reliance Index Fund

(October 2004) (February 2005)

Reliance Equity Opportunities Fund Reliance Regular Savings Fund

(February 2005) (May 2005)

Reliance Liquidity Fund Reliance Tax Saver (ELSS) Fund

(June 2005) (July 2005)

Reliance Fixed Tenor Fund Reliance Equity Fund

(November 2005) (February 2006)

22
Reliance Fixed Horizon Fund I Reliance Fixed Horizon Fund

(August 2006) (April 2006)

Reliance Fixed Horizon Fund III Reliance Fixed Horizon Fund II

(March 2007) (November 2006)

Reliance Liquid Plus Fund Reliance Long Term Equity Fund

(March 2007) (November 2006)

Reliance Long Term Equity Fund Reliance Interval Fund

(Nov 2006) (March 2007)

Reliance Fixed Horizon Fund – IV Reliance Fixed Horizon Fund – V

(August 2007) (September 2007)

INVESTMENT OBJECTIVES

a) RELIANCE MONTHLY INCOME PLAN

It aims to generate regular income in order to make regular dividend payments to

unit holders and the secondary objective is growth of capital.

b) RELIANCE INCOME FUND

It aims 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 and Money Market
Instruments.

c) RELIANCE MEDIUM TERM FUND

It aims to generate regular income in order to make regular dividend payments to

unit holders and the secondary objective is growth of capital.

d) RELIANCE LIQUID FUND

23
It aims 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.

e) RELIANCE LIQUIDITY FUND

It aims 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.

f) RELIANCE SHORT TERM FUND

It aims to generate stable returns for investors with a short term investment horizon
by investing in fixed income securities of a short term maturity.

g) RELIANCE GILT SECURITIES FUND

It aims to generate optimal credit risk free returns by investing in a portfolio of

securities issued and guaranteed by the Central Government and State Governments

h) RELIANCE FLOATING RATE FUND

It aims 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).

i) RELIANCE REGULAR SAVINGS FUND DEBT OPTION

The primary investment objective of this plan 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 & Money Market Instruments.

j) RELIANCE REGULAR SAVINGS FUND EQUITY OPTION

The primary investment objective is to seek capital appreciation and or consistent

returns by actively investing in equity / equity related securities.

k) RELIANCE REGULAR SAVINGS FUND HYBRID OPTION

24
The primary investment objective is to generate consistent return by investing a
major portion in debt & money market securities and a small portion in equity &
equity related instruments.

l) RELIANCE GROWTH FUND

It aims to achieve long term growth of capital by investment in equity and equity
related securities through a research based investment approach.

m) RELIANCE VISION FUND

It aims to achieve long term growth of capital by investment in equity and equity
related securities through a research based investment approach.

n) RELIANCE EQUITY OPPORTUNITIES FUND

It aims to generate capital appreciation & provide long term growth opportunities
by investing in a portfolio constituted of equity securities & equity related
securities.

• o) RELIANCE BANKING FUND

It aims to generate continuous returns by actively investing in equity / equity

related or fixed income securities of banks.

p) RELIANCE DIVERSIFIED POWER SECTOR FUND

It seek to generate consistent returns by investing in equity / equity related or fixed

income securities of Power and other associated companies.

q) RELIANCE PHARMA FUND

It aims generate consistent returns by investing in equity / equity related or fixed

income securities of Pharma and other associated companies.

r) RELIANCE MEDIA & ENTERTAINMENT FUND

It aims to generate consistent returns by investing in equity / equity related or fixed

income securities of media & entertainment and other associated companies.

s) RELIANCE INDEX FUND-SENSEX PLAN

It aims to replicate the composition of the Sensex, with a view to endeavor to

generate returns, which could approximately be the same as that of Sensex.

25
t) RELIANCE INDEX FUND-NIFTY PLAN

It aims to replicate the composition of the Nifty, with a view to endeavor to

generate returns, which could approximately be the same as that of Nifty.

u) RELIANCE NRI EQUITY FUND AIMS

It to generate optimal returns by investing in equity and equity related instruments

primarily drawn from the Companies in the BSE 200 Index.

v) RELIANCE EQUITY FUND

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.

w) THE MUTUAL FUND

ABOUT RELIANCE MUTUAL FUND

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.

26
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.

MAIN OBJECTIVE OF THE TRUST

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 realize the effects
without any limitation.

SOCIAL RESPONSIBILITIES

“Organizations, like individuals, depend for their survival, sustenance and growth
on the support and goodwill of the communities of which they are an integral part,
and must pay back this generosity in every way they can.”This ethical standpoint,
derived from the vision of the founder, lies at the heart of the CSR philosophy of
the Reliance Group.

While they strongly believe that their primary obligation or duty as corporate
entities is to their shareholders – they are just as mindful of the fact that this
imperative does not exist in isolation; it is part of a much larger compact which
they have with their entire body of stakeholders: From employees, customers and
vendors to business partners, eco-system, local communities, and society at large.

They evaluate and assess each critical business decision or choice from the point of
view of diverse stakeholder interest, driven by the need to minimize risk and to pro-
actively address long-term social, economic and environmental costs and concerns.
For them, being socially responsible is not an occasional act of charity or that one-
time token financial contribution to the local school, hospital or environmental
NGO. It is an ongoing year-round commitment, which is integrated into the very
core of their business objectives and strategy.

27
Because they believe that there is no contradiction between doing well and doing
right. Indeed, “doing right is a necessary condition for doing well”.

CUSTOMER MOTIVATION PLAN

a) OBJECTIVES

Area wise Identifying Potential Prospective distributors, which leads to

increase the business.

b) The Prospects

The Starting point is every one who might conceivably buy the product that is
called suspects and from these the company determines the most likely prospects
which it hopes to convert into first time customers then repeat customers and then
clients.

Following figure shows the main steps of attracting and keeping

customers.

28
ACCOUNT STATEMENT:
A document issued by the mutual fund, giving details of transactions and holdings
of an investor.

ADJUSTED NAV (TOTAL RETURN):

The net asset value of a unit assuming reinvestment of distributions made to the
investors in any form.

ADVISOR:
Your financial consultant who gives professional advice on the fund’s investments
and who supervise the management of its assets.

ANNUAL RETURN:

The percentage of change in net asset value over a year’s time, assuming
reinvestment of distribution such as dividend payment and bonuses.

29
APPRECIATION:
When an investment increases in value, it appreciates. For example, a equity share
whose price goes from Rs. 20/- to Rs. 25/- has appreciated by Rs. 5/-.

APPLICATION FORM:

Form prescribed for investors to make applications for subscribing to the units of a
fund

ASSET:
Property and resources, such as cash and investments, comprise a person’s assets;
i.e., anything that has value and can be traded. Examples include stocks, bonds, real
estate, bank accounts, and jewellery.

ASSET ALLOCATION:

When you divide your money among various types of investments, such as stocks,
bonds, and short-term investments (also known as “instruments”), you are
allocating your assets. The way in which your money is divided is called your asset
allocation.

ASSET MANAGEMENT COMPANY / AMC / INVESTMENT MANAGER /

Reliance Capital Asset Management Ltd.:

It is the investment manager for the mutual fund. It is a company set up primarily
for managing the investment of mutual funds and makes investment decisions in
accordance with the scheme objectives, deed of Trust and other provisions of the
Investment Management Agreement.

AUTOMATIC INVESTMENT PLAN:

Under these plans, the investor mandates the mutual fund to allot fresh units at
specified intervals (monthly, quarterly, etc.) against which the investor provides
post-dated cheques. On the specified dates, the cheques are realized by the mutual
fund and on realization, additional units are allotted to the investor at the prevailing
NAV.

BACK END LOAD:

The difference between the NAV of the units of a scheme and the price at which
they are redeemed. The difference is charged by the fund.

30
BALANCE SHEET:

A financial statement showing the nature and amount of a company’s assets,

liabilities and shareholders’ equity.

BALANCED FUND:

A mutual fund that maintains a balanced portfolio, generally 40% bonds and 60%
equity.

BALANCE MATURITY TENURE OF A SCHEME:

In the case of close-ended schemes, the balance period till the redemption of the
scheme.

BENCHMARK:
A parameter with which a scheme can be compared. For example, the performance
of a scheme can be benchmarked against an appropriate index.

BOND:
An interest-bearing promise to pay a specified sum of money — the principal
amount — due on a specific date.

BOND FUNDS:

Registered investment companies whose assets are invested in diversified portfolios

of bonds primarily fixed income securities.

BROKER:
One who guides the investors on one or more investments and facilitates the
process of investment. A broker is a member of a recognized stock exchange who
buys and sells or otherwise deals in securities.

BROKERAGE:
The fee payable to a broker for acting as an intermediary in a transaction. For
example, brokerage is payable by a fund for getting fresh investments from
investors.

31
BULL MARKET:

Period during which the prices of stocks in the stock market keep continuously
rising for a significant period of time on the back of sustained demand for the
stocks.

CAPITAL:
This is the amount of money you have invested. When your investing objective is
capital preservation, your priority is trying not to lose any money. When your
investing objective is capital growth, your priority is trying to make your initial
investment grow in value.

CAPITAL APPRECIATION:
As the value of the securities in a portfolio increases, a fund’s Net Asset Value
(NAV) increases, meaning that the value of your investment rises. If you sell units
at a higher price than you paid for them, you make a profit, or capital gain. If you
sell units at a lower price than you paid for them, you’ll have a capital loss.

CAPITAL GAINS:

The difference between an asset’s purchased price and selling price, when the
difference is positive. A capital loss would be when the difference between an
asset’s purchase price and selling price is negative.

CAPITAL GROWTH:

A rise in market value of a mutual fund’s securities, reflected in its NAV per share.
This is a specific long-term objective of many mutual funds. Capital Loss realized
when an instrument or asset is sold at a price below its cost.

CAPITAL MARKET:

The market where capital funds, debt (bonds) and equity ( stocks) are traded.

32
CASH & OTHER CATEGORY: A mutual fund asset allocation theory that
includes net cash, short-term securities, and any other securities (such as options)
not included in other asset allocation categories.

CLOSED-ENDED MUTUAL FUND: They are schemes that have a pre-specified

maturity period generally ranging from 2 to 15 years. One can invest directly in the
scheme at the time for the initial issue and thereafter transact (buy or sell) the units
of the scheme on the stock exchanges where they are listed. The market price at the
stock exchanges could vary from the scheme’s net asset value (NAV) on account of
demand and supply situation, unitholders’ expectations and other market factors.
Some close-ended schemes provide an additional option of selling the units directly
to the Mutual Fund through periodic repurchase at NAV related prices. SEBI
Regulations ensure that at least one of the two exit routes are provided to the
investor.

COMMISSION:
The broker’s or agent’s fee for buying or selling securities for a client. The fee is
usually based on a percentage of the transaction’s market value.

CONVERTIBLE BOND:

A corporate bond, usually a junior subordinated debenture, which can be

exchanged for shares of the issuer’s common stock.

CORPUS:
The total amount of money invested by all the investors in a scheme.

CURRENT INCOME:

Monies paid during the period an investment is held. Examples include bond
interest and stock dividends.

CURRENT LOAD:

Load structure applicable currently. Funds keep revising the load structures from
time to time.

CURRENT MARKET VALUE:

33
The amount a willing buyer will pay for a bond today, which may be at a premium
(above face value) or a discount (below face value).

DEBT /INCOME FUNDS:

Funds that invest in income bearing instruments such as corporate debentures, PSU
bonds, gilts, treasury bills, certificates of deposit and commercial papers. These
funds are the least risky and are generally preferred by risk-averse investors.

DIVERSIFICATION:
Diversification is the concept of spreading your money across different types of
investments and/or issuers to potentially moderate your investment risk.

DIVIDEND:
Income distributed by the Scheme on the Units

DIVIDEND PLAN:

In a dividend plan, the fund pays dividend from time to time as and when the
dividend is declared.

34
DIVIDEND REINVESTMENT:

In a dividend reinvestment plan, the dividend is reinvested in the scheme itself.

Hence instead of receiving dividend, the unit holders receive units. Thus the
number of units allotted under the dividend reinvestment plan would be the
dividend declared divided by the ex-dividend NAV.

ENTRY LOAD:

It is the load charged by the fund when one invests into the fund. It increases the
price of the units to more than the NAV and is expressed as a percentage of NAV.

EQUITY SCHEMES:

Schemes where more than 50% of the investments are done in equity shares of
various companies. The objective is to provide capital appreciation over a period of
time.

EXPENSE RATIO:

Annual percentage of fund’s assets that is paid out in expenses. Expenses include
management fees and all the fees associated with the fund’s daily operations.

EXIT LOAD:

It is the load charged by the fund when one redeems the units from the fund. It
reduces the price of the units to less than the NAV and is expressed as a percentage
of NAV.

FACE VALUE:

The original issue price of one unit of a scheme

FII:
Foreign Institutional Investors, registered with SEBI under the Securities and
Exchange Board of India (Foreign Institutional Investors) Regulations, 1995.

FUND MANAGER:

Appointed by the AMC, he is the person who makes all the final decisions
regarding investments of a sche

35
GROWTH FUND:

A mutual fund whose primary investment objective is long-term growth of capital.

It invests principally in common stocks with significant growth potential. Growth
Stocks Stocks of companies that have shown or are expected to show rapid
earnings and revenue growth. Growth stocks have relatively more risk than other
conventional forms of investment.

INCOME FUND:

A mutual fund that primarily seeks current income rather than growth of capital. It
will tend to invest in stocks and bonds that normally pay high dividends and
interest.

INDEX FUND:

A type of mutual fund in which the portfolios are constructed to mirror a specific
market index. Index funds are expected to provide a rate of return over time that
will approximate or match, but not exceed, that of the market, which they are
mirroring.

INITIAL OFFER/INITIAL ISSUE:

Offer of Reliance Income Fund units during the initial offer period.

INITIAL OFFER PRICE:

The price at which units of a scheme are offered in its Initial Public Offer (IPO).

ISSUED SHARE CAPITAL: This is the total number of shares a company has
made publicly available multiplied by the total nominal value of the shares. A
company may have 10 million shares in issue, each with a nominal value of Re. 1.
So the issued share capital is Rs. 10 million.

LIQUIDITY:
The ability to buy or sell an asset quickly or the ability to convert to cash quickly

36
LIQUID FUNDS /MONEY MARKET FUNDS :

Funds investing only in short-term money market instruments including treasury

bills, commercial paper and certificates of deposit. The objective is to provide
liquidity and preserve the capital.

LOAD: A charge that may be levied as a percentage of NAV at the time of entry
into the Scheme/Plans or at the time of exiting from the Scheme/Plans.

LOCK IN PERIOD:

The period after investment in fresh units during which the investor cannot redeem
the units.

MANAGEMENT FEE:

Money paid by a mutual fund to its investment manager or advisor for overseeing
the portfolio. A management fee is usually between one-half and one percent of the
fund’s net asset value.

MATURITY OR MATURITY DATE:

The date upon which the principal of a security becomes due and payable to the
security holder.

MATURITY VALUE:

The amount (other than periodic interest payment) that will be received at the time
a security is redeemed at its maturity. On most securities the maturity value equals
the par value.

MUTUAL FUNDS:

37
An investment company that pools money from its unitholders and invests that
money into a variety of securities, including stocks, bonds, and money-market
instruments. This represents a way of investing money into a professionally
managed and diversified pool of securities that hopefully will provide a good return
on unitholders’ money.

MUTUAL FUND REGULATIONS:

Securities and Exchange Board of India (Mutual Funds) Regulations, 1996 as
amended up to date and such other Regulations, as may be in force from time to
time, to regulate the activities of the Mutual Fund.

NAV:
Net Asset Value of the Units in each plan of the Scheme is calculated in the manner
provided in this Offer Document or as may be prescribed by Regulations from time
to time. The NAV will be computed upto four decimal places. NAV Formula :

Market / Fair Value of Scheme’s investments (+) Receivables (+) Accrued Income
(+) Other Assets (-)
Accrued Expenses (-) Payables (-) Other Liabilities
—————————————————————————————————
——————————–
Number of Units Outstanding

NAV Change:

The difference between today’s closing net asset value (NAV) and the previous
day’s closing net asset value (NAV).

NAV Change %:

The percentage change between today’s closing net asset value (NAV) and the
previous day’s closing net asset value (NAV)

38
NET WORTH:

A person’s net worth is equal to the total value of all possessions, such as a house,
stocks, bonds, and other securities, minus all outstanding debts, such as mortgage
and revolving credit lines.

NET YIELD:

Rate of return on a security net of out-of-pocket costs associated with its purchase,
such as commissions or markups.

NON PERFORMING INVESTMENTS:

Part of the portfolio investment of a debt fund which is not making interest
payment or principal amount repayments in time.

OFFER DOCUMENT OR PROSPECTUS:

The official document issued by mutual funds prior to the launch of a fund
describing the characteristics of the proposed fund to all its prospective investors. It
contains information required by the Securities and Exchange Board of India, such
as investment objective and policies, services, and fees. Individual investors are
encouraged to read and understand the fund’s prospectus

OPEN-ENDED SCHEMES/ FUNDS:

Scheme of a mutual fund where purchase or sale of units is allowed on a continued

basis. Funds that do not have any fixed maturity and are continuously open for
subscription and redemption. The key feature is liquidity. One can conveniently
buy and sell the units held at the NAV related price.

39
OPENING NAV:

The NAV disclosed by the fund for the first time after the closure of an NFO.

PORTFOLIO:
It refers to the total investment holdings of the fund.

PORTFOLIO CHURNING:

It refers to the changes made to the portfolio keeping in view the market conditions.
It includes both buying and selling of holdings and is aimed at giving a better yield
to the investor.

REDEMPTION:
The paying off or buying back of units of a mutual fund / bond by the issuer.

REDEMPTION FEE:
A fee charged by a limited number of funds for redeeming, or buying back, fund
units.

REDEMPTION PRICE:
The price at which a mutual fund’s units are redeemed (bought back) by the fund.
The redemption price is usually equal to the current NAV per unit.

RETURNS:
The dividend and capital appreciation accruing to the investor on the investment
held by him.

SCHEME:
A mutual fund can launch more than one scheme. With different schemes, in spite
of there being a common trust, the assets contributed by the unit holders of a
particular scheme are maintained and managed separately from other schemes and
any profit/loss from the assets accrue only to the unit holders of that scheme.

SYSTEMATIC INVESTMENT PLAN (SIP):

Program that allows an investor to provide post-dated cheques to the mutual fund to
allot fresh units at specified intervals (usually monthly or quarterly). On the
specified dates, the cheques are realized by the mutual fund and additional units at
the prevailing NAV are allotted to the investor. This enables him to invest as little
as Rs 1000 a month and take advantage of rupee cost averaging.

SYSTEMATIC WITHDRAWAL PLANS (SWP):

40
A plan offered with some schemes under which post-dated cheques for fixed
amounts (as may be fixed by the fund) are issued to the investors for monthly, bi-
monthly or quarterly withdrawals. The withdrawals are as per the requirements of
the investor specified by him/ her at the time of investment.

TRANSACTION SLIP:

A brief form to be filled at the time of additional purchases or redemption.

TRUST FUND:

The corpus of the Trust, unit capital and all property belonging to and i or vested in
the Trustee

UNIT:
A Unit represents one undivided share in the assets of the Schemes.

UNIT HOLDER:

A person who holds Unit(s) under any plan of the Scheme.

VALUATION:
Calculation of the market value of the assets of a mutual fund scheme at any point
of time

VOLATILITY:
In investing, volatility refers to the ups and downs of the price of an investment.
The greater the ups and downs, the more volatile the investment

WEEK HIGH:

The highest market value of a unit (in terms of NAV) during the immediately
preceding 52 weeks.

WEEK LOW:

The lowest value of a unit (in terms of NAV) during the immediately preceding 52
weeks owns, the more volatile the investment.

41
YIELD:
Distributions form investment income, usually expressed as a percentage of net
asset value or market price. Unlike total return, yield has the single component of
investment income and does not include capital gains distributions or capital
appreciation of underlying shares.

ZERO-COUPON BOND:

A bond where no periodic interest payments are made. The investor purchases the
bond at a discounted price and receives one payment at maturity. The maturity
value an investor receives is equal to the principal invested plus interest earned
compounded semi-annually at the original rate to maturity. Interest income from
zero-coupon bonds is subject to taxes annually even though no payments will be
made.

Mutual Fund Industry

INDUSTRY BACKGROUND

The mutual fund industry started in India in a small way with the UTI Act creating
what was effectively a small savings division within the RBI. Over a period of 25
years this grew fairly successfully and gave investors a good return, and therefore
in 1989, as the next logical step, public sector banks and financial institutions were
allowed to float mutual funds and their success emboldened the government to
allow the private sector to foray into this area. The initial years of the industry also
saw the emerging years of the Indian equity market, when a number of mistakes
were made and hence the mutual fund schemes, which invested in lesser-known
stocks and at very high levels, became loss leaders for retail investors. From those
days to today the retail investor, for whom the mutual fund is actually intended, has
not yet returned to the industry in a big way. But to be fair, the industry too has
focused on bringing in the large investor, so that it can create a significant base
corpus, which can make the retail investor feel more secure.

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 the. The
history of mutual funds in India can be broadly divided into four distinct phases.

42
The history of mutual funds in India can be broadly divided into distinct phases.

PHASE 1 – (1964 – 1987) – GROWTH OF UTI

ü UTI sole player in the industry, created by an Act of Parliament ,1963

ü The first product launched by UTI was Unit Scheme 1964

ü UTI creates products such as ULIP (1971), MIP’s, Children Plans (1986),
Offshore Funds etc.

ü MASTERSHARE (1987) – 1st Diversified Equity Investment Scheme in

India.

ü INDIA Fund – 1st Indian offshore fund launched in August 1986.

PHASE 2 – (1987 – 1993) – ENTRY OF PUBLIC SECTOR FUNDS

ü In 1987 Public Sector Banks and FI’s got permission to set up MF.

ü SBI mutual fund was the first non -UTI mutual fund, set up in November 1987

ü This was followed by Canbank MF, LIC MF, Indian Bank MF, BOI MF, GIC
and PNB MF

ü In 1993, Mutual Fund Industry was open to private players.

ü SEBI got its regulatory powers in 1992

PHASE 3 – (1993-1996) – EMERGENCE OF PRIVATE FUNDS

ü In 1993, Mutual Fund Industry was open to private players.

ü SEBI’s first set of regulations for the industry formulated in 1993

ü Significant innovations, mostly initiated by private players

PHASE 4 – (1996-1999) – GROWTH AND SEBI REGULATION

ü Implementation of new SEBI regulations led to rapid growth

ü Bank mutual funds were recast as per SEBI guidelines

ü UTI came under voluntary SEBI supervision.

43
ü Dividends made tax free in 1999.

ü Mutual funds assets in mid-2002 were app. 1,00,000 crore

ü During this phase, both SEBI and AMFI launched investor awareness
programmes.

PHASE 5 – (1999-2004) – EMERGENCE OF A LARGE AND UNIFORM

INDUSTRY

UTI ACT REPEALED IN FEBRUARY 2003.

ü AUM by end of 2005 app. INR 1,50,000 crore

ü Rapid growth, significant increase in corpus of private players

ü Tax break offered created arbitrage opportunities

ü Bond funds and liquid funds registered highest growth

PHASE 6 –FROM 2004 ONWARDS: CONSOLIDATION AND GROWTH

ü Mergers and Acquisitions witnessed

ü Alliance MF acquired by Birla Sunlife

ü Sun F&C by Principal PNB Mutual fund

ü Standard Chartered acquired by IDFC

THE FOLLOWING GRAPH INDICATES YHE GROWTH OF ASSETS

OVER THE
YEARS

INDUSTRY
PROFILE

The mutual fund

industry is a lot
like the film star of the
finance business.
Though it is
perhaps the
smallest segment

44
of the industry, it is also the most glamorous – in that it is a young industry where
there are changes in the rules of the game everyday, and there are constant shifts
and upheavals.

The mutual fund is structured around a fairly simple concept, the mitigation of risk
through the spreading of investments across multiple entities, which is achieved by
the pooling of a number of small investments into a large bucket. Yet it has been
the subject of perhaps the most elaborate and prolonged regulatory effort in the
history of the country.

The Indian mutual fund industry is one of the fastest growing sectors in the Indian
capital and financial markets. The mutual fund industry in India has seen dramatic
improvements in quantity as well as quality of product and service offerings in
recent years. Mutual funds assets under management grew by 96% between the end
of 1997 and June 2003 and as a result it rose from 8% of GDP to 15%.

The industry has grown in size and manages total assets of more than $30351
million. Of the various sectors, the private sector accounts for nearly 91% of the
resources mobilized showing their overwhelming dominance in the market.
Individuals constitute 98.04% of the total number of investors and contribute US
$12062 million, which is 55.16% of the net assets under management.

Steady growth of mutual fund business in India in the four decades from 1964,
when UTI was set up is given in the table on the next page:

Aggregate Investment Period Aggregate Investment

Period (Year) In Crores of In Crores of
Rupees (Year) Rupees
1964-69 65 1992-93 46988.02
1969-74 172 1993-94 61301.21
1974-79 402 1994-95 75050.21
1979-84 1261 1995-96 81026.52
1986-87 4563.68 1996-97 80539.00
1987-88 6738.81 1997-98 68984.00
1988-89 13455.65 1998-99 63472.00
1989-90 19110.92 1999-00 107966.10
1990-91 23060.45 2000-01 90587.00
1991-92 37480.20 2001-02 94571.00

Mutual Fund Industry in its true spirit rooted in a free market and oriented towards
competitive functioning with the dedicated goal of service to the investors can be
said to have settled in India only in 1993. However the industry took its roots much

45
earlier with the setting up of the Unit Trust in India (UTI) in 1964 by the
Government of India. During the last 36 years, UTI has grown to be a dominant
player in the industry with assets of over Rs.72, 333.43 Crores as on March 31,
2000. The UTI is governed by a special legislation, the Unit Trust of India Act,
1963. In 1987 public sector banks and insurance companies were permitted to set
up mutual funds and accordingly since 1987, 6 public sector banks have set up
mutual funds. Also the two Insurance companies LIC and GIC established mutual
funds. Securities Exchange Board of India (SEBI) formulated the Mutual Fund
(Regulation) 1993, which for the first time established a comprehensive regulatory
framework for the mutual fund industry. Since then several mutual funds have been
set up by the private and joint sectors.

WHAT ARE MUTUAL FUNDS?

CONCEPT

A Mutual Fund is a trust that pools the savings of a number of investors who share
a common financial goal. The money thus collected is then invested in capital
market instruments such as shares, debentures and other securities. The income
earned through these investments and the capital appreciations realized are shared
by its unit holders in proportion to the number of units owned by them. Thus, a
Mutual Fund is the most suitable investment for the common man as it offers an
opportunity to invest in a diversified, professionally managed basket of securities at
a relatively low cost.

46
DEFINITION

“Mutual funds are collective savings and investment vehicles where savings of
small (or sometimes big) investors are pooled together to invest for their mutual
benefit and returns distributed proportionately”. Pooling of money ensures that
small investors get the benefit of advice and expertise that is normally available
only to very large investors.

“A mutual fund is an investment that pools your money with the money of an
unlimited number of other investors. In return, you and the other investors each
own shares of the fund. The fund’s assets are invested according to an investment
objective into the fund’s portfolio of investments.

47
Aggressive growth funds seek long-term capital growth by investing primarily in
stocks of fast-growing smaller companies or market segments. Aggressive growth
funds are also called capital appreciation funds”.

“Mutual Funds are investment companies that make investments on behalf of

individuals and institutions that share common financial goals. The suitability of a
particular mutual fund for an individual investor depends on the type and nature of
the fund’s investments and amount of diversification.

Funds are rated widely as to risk and return, and such ratings can be used to
establish a match with investor goals and suitability”.

“Mutual Funds schemes are managed by respective Asset Management Companies

sponsored by financial institutions, banks, private companies or international firms.
The biggest Indian AMC is UTI while Alliance, Franklin Templeton etc are
international AMC’s.

A TYPICAL MUTUAL FUND HAS THE FOLLOWING CONSTITUENTS

ALL OF THE ABOVE CONSTITUENTS ARE EXPLAINED AS

FOLLWS:
1. 1. FUND SPONSOR

48
A ‘sponsor’ is any person who, acting alone or in combination with another body
corporate, establishes a MF. The sponsor of a fund is similar to the promoter of a
company. In accordance with SEBI Regulations, the sponsor forms a trust and
appoints a Board of Trustees, and ‘also generally appoints an AMC as fund
manager. In addition, the sponsor also appoints a custodian to hold the fund assets.
The sponsor must contribute at least 40% of the net worth of the AMC and possess
a sound financial track record over five years prior to registration.

1. TRUSTEES

The MF or trust can either be managed by the Board of Trustees, which is a body of
individuals, or by a Trust Company, which is a corporate body. Most of the funds
in India are managed by Board of Trustees. The trustees being the primary;
guardians of the unit holders’ funds and assets, a trustee has to be a person of high
repute and integrity. The trustees, however, do not directly manage the portfolio
securities. The portfolio is managed by the AMC as per the defined objectives,
accordance with Trust Deed and SEBI (Mutual Funds) Regulations.

1. 3. ASSET MANAGEMENT COMPANY (AMC)

The AMC, which is appointed by the sponsor or the trustees and approved by
SEBI, acts like the investment manager of the trust. The AMC functions under the
supervision of its own Board of Directors, and also under the direction of the
trustees and SEBI. AMC, in the name of the trust, floats and manages the different
investment ‘schemes’ as per the SEBI Regulations and as per the Investment
Management Agreement signed with the Trustees.

1. 4. OTHERS

Apart from these, the MF has some other fund constituents, such as custodians and
depositories, banks, transfer agents and distributors. The custodian is appointed
for safe keeping of securities and participating in the clearing system through
approved depository. The bankers handle the financial dealings of the fund.
Transfer agents a responsible for issue and redemption of units of MF. AMCs
appoint distributors of brokers who sell units on behalf of the Fund, and also serve
as investment advisers. Besides brokers, independent individuals are also appointed
as ‘agents’ for the purpose of selling fund schemes to investors. The regulations
require arm’s length relationship between the fund sponsors, trustees, custodians
and AMC.

49
MUTUAL FUND CLASSIFICATION
1) OPEN ENDED AND CLOSE ENDED FUNDS

a) OPEN ENDED FUNDS

• In an open ended fund, investors can buy and sell units of the fund, at NAV
related prices, at any time, directly from the fund.
• Open ended scheme are offered for sale at a pre- specified price, say Rs. 10,
in the initial offer period. After a pre-specified period say 30 days, the fund
is declared open for further sales and repurchases
• Investors receive account statements of their holdings,
• The number of outstanding units goes up and down
• The unit capital is not fixed but variable.

b) CLOSE ENDED FUNDS

• A closed -end fund is open for sale to investors for a specified period, after
which further sales are closed.
• Any further transactions happen in the secondary market (stock exchange)
where closed-end funds are listed.
• The price at which the units are sold or redeemed depends on the market
prices, which are fundamentally linked to the NAV.
• The number of units of closed ended funds remains unchanged.
• The unit capital is fixed because of one time sale.

2) LOAD AND NO LOAD FUNDS

• Load is the one time fee payable by the investor to allow the fund to meet
initial issue expenses including brokers/agents’/distributors’ commissions,
advertising and marketing expenses.

50
 • Funds that charge front end (entry) load, back end (exit), or deferred loads
are called LOAD funds.

• IF the investors’ objective is to get the benefit of compounding his initial

investment by reinvesting and holding his investment for a very long term,
then, a no front load fund is preferable.

3) TAX EXEMPT AND NON EXEMPT FUNDS

• When a fund invests in tax exempt securities, it is called a tax exempt fund.

• In India any income received by mutual fund is tax free.

• After 1999 budget, all dividend income received from MF is tax free in
hands of the investor. But all funds other than open ended equity funds have
to pay a dividend distribution tax.

• So in India, open end equity oriented mutual fund schemes are tax exempt
Investment Avenue, while other funds are taxable for distributable income.
• After 2005 budget, repurchase transaction for equity oriented schemes are
subject to Securities Transaction Tax.

4) CLASSIFICATION ON THE BASIS OF INVESTMENT OBJECTIVE

51
i. EQUITY FUNDS

Those funds which invest only in equity shares and undertake the associated risk;

ii. INCOME FUNDS

Those funds which invest in securities which will earn high income;

iii. GROWTH FUNDS

Those funds which invest in growth oriented securities so as to assure appreciation

in their value in the long run;

iv. LIQUID FUNDS

Those funds which specialize in investing in short- term money market

instruments with emphasis on liquidity with a low rate of return;

52
 v. SPECIAL FUNDS

Those funds which invest only in specialized channels like (a) gold and silver, (b) a
specific country (Japan Fund, India Fund, etc.), (c) a specific category of
companies (Technology Fund);

vi. INDEX-LINKED FUNDS

Those funds which invest only in those shares which are included in the market
indices and in the same proportion. They move with the market index;

vii. LEVERAGED FUNDS

Leveraged funds are those which increase the size of the value of the portfolio and
benefit the shareholders by gains exceeding the cost of the borrowed funds;

viii. REAL ESTATE FUND

Such funds are meant for the real estate ventures.

ix. BALANCED FUNDS

Those which divide their investments between equity shares and bonds in order to
meet the objectives of safety, growth, and regularity of income;

x. HEDGE FUNDS

Funds that buy shares whose prices are likely to go up and sell short, shares whose
prices are expected to go down; and finally.

xi. OFFSHORE FUNDS

These specialize in investing in foreign companies.

WHAT IS NET ASSET VALUE (NAV)?

53
The share ice of the mutual fund is based on its net asset value (NAV) per share,
which is found by subtracting from the market value of the portfolio the mutual fun

liabilities and the dividing by the number of mutual fund shares issued.

That is:

In August 1994, SEBI had formed a six-member committee to suggest disclosure

practices and standardized procedures for computation of net asset values for
mutual fund schemes. The committee finalized its report on 12 December 1995 and
the same was released on 1 January 1996.

Reliance Systematic Investment Plan

No need to time the markets
Imagine, if you could always pick the right time to buy and sell.
However, timing the market is a time-consuming and risky task.

54
Through disciplined, regular investments you can stop worrying about when and
how much to invest.
In short, it eliminates the need to actively track the markets.

Lower cost per unit

Since your investments are spread regularly over a period of time, buying fewer
units during rising markets and buying more units during falling markets reduces
the average cost per unit of your investments
- this concept is known as Rupee Cost Averaging.

Illustration - Rupee Cost Averaging

Say you have opted for Reliance Systematic Investment Plan, investing Rs. 1000
every month from March 2009 to Feb 2010 in a diversified equity fund. Now check
the average purchase cost per unit of your investments. It would be lower than the
average NAV of your investment over 12 months.

Date NAV (Rs.) Units Amount (Rs.)

2/03/09 190.47 5.25 1000.00
13/04/09 233.32 4.29 1000.00
11/05/09 252.50 3.96 1000.00
10/06/09 339.27 2.95 1000.00
10/07/09 307.21 3.26 1000.00
10/08/09 343.02 2.92 1000.00
10/09/09 375.56 2.66 1000.00
12/10/09 392.46 2.55 1000.00
10/11/09 392.76 2.55 1000.00
10/12/09 416.48 2.40 1000.00
11/01/10 439.79 2.27 1000.00
10/02/10 412.21 2.43 1000.00
Total 4095.04 37.47 12000.00

Average Cost = Total Cash Outflow / Total Number of units = Rs. 12000/ 37.47 =
Rs. 320.24 Average Price = sum of all NAVs at which you have invested/Number
of months of investment = Rs. 4095.04/12 = Rs.
341.25 Average Cost < Average Price
Note: The above table considers the actual NAV of Reliance Growth Fund to
explain the concept of Rupee Cost Averaging. The NAV do not in any manner
indicate the future NAVs of the any of the schemes of Reliance Mutual Fund

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Achieve your financial goals
Reliance Systematic Investment Plan is an effective tool for financial planning. Be
it your child’s education, marriage or buying a home. With Reliance SIP, you can
choose a pertinent regime and achieve your goals, systematically. To see how you
can achieve your goals see the Reliance Vision Fund and Reliance Growth Fund
table along side.

SIP Return as on Jul 30, 2010 (Vision Fund)

Period 1 Year 3 Year 5 Year Since ince
SIP Start Date 40026 39295 38565 3498
Current NAV (As on 30/07/2010) 266.64 266.64 266.64 266.6
Total No. of units accumulated 49.47 181.96 345.39 7266.2
Total Amount Invested in Rs. 12000 36000 60000 17800
Market Value of Scheme in Rs. 13190.74 48517.13 92093.91 1937481
Market Value if invested in Benchmark in 45981.45 86183.49 698827
Rs. 12792.88
Return on SIP in Scheme 0.200024801 0.207633036 0.173503047 0.28522
Return on SIP in Benchmark (BSE 100) 0.13 0.17 0.15 0.17

Past performance may or may not be sustained in future.

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 SIP Return as on Jul 30, 2010 (Growth Fund)
Period 1 Year 3 Year 5 Year Since incep
SIP Start Date 40026 39295 38565 34980
Current NAV (As on 30/07/2010) 465.91 465.91 465.91 465.91
Total No. of units accumulated 28.81 111.83 221.48 6206.61
Total Amount Invested in Rs. 12000 36000 60000 178000
Market Value of Scheme in Rs. 13420.81 52104.21 103189.38 2891743.
Market Value if invested in Benchmark in 45981.45 86183.49 698827.5
Rs. 12792.88
Return on SIP in Scheme 0.23998242 0.260396296 0.220744258 0.3311559
Return on SIP in Benchmark (BSE 100) 0.13 0.17 0.15 0.17

Our Schems
Equity/Growth Schemes

stagin db 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.

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.

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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.

Exchange Traded Funds (ETFs)

Exchange Traded Funds (ETFs) are usually passively managed mutual fund
schemes tracking a benchmark index and reflect the performance of that index.
These schemes are listed on the stock exchange and therefore have the flexibility of
trading like a share on the stock exchange. It can also be looked as a security that
tracks an index, a commodity or a basket of assets like an index fund, but trades
like a stock on an exchange, thus experiencing price changes throughout the day as
it is bought and sold.

Fixed Maturity Plans (FMPs)

Fixed Maturity Plans (FMPs) are basically debt oriented investment schemes with a
pre-specified tenure offered by mutual funds. FMPs invest in a portfolio of debt
instruments whose maturity coincides with the maturity of the concerned FMP. The
primary objective of a FMP is to generate income while aiming to protect the
capital by investing in a portfolio of debt and money market securities. Since FMPs
are available with several maturity options, one can invest in the relevant plan
depending upon his investment horizon and the requirement of cash flows.

Debt/Liquid Schemes
Reliance Income Fund (An Open-ended Income Scheme): The primary
investment 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 &
Money Market Instruments.

Reliance Liquid Fund (An Open-ended Liquid Scheme): The primary

58
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 Medium Term Fund (An Open-ended 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 unitholders and the
secondary objective is growth of capital.

Reliance Short Term Fund (An Open-ended Income Scheme): The primary
investment objective of the scheme is to generate stable returns for investors with a
short term investment horizon by investing in fixed income securities of a short
term maturity.
Reliance Gilt Securities Fund (An Open-ended Govt. Securities Scheme): The
primary investment 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 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 unitholders and the secondary objective is growth of
capital.

Reliance Floating Rate Fund - Short Term Plan (Formely Reliance Floating
Rate Fund )(An Open-ended Liquid Scheme):: The primary investment
objective of the scheme is to generate regular income through investment in a
portfolio comprising substantially of Floating Rate Debt Securities (including
floating rate securitised debt, 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 securitised debt, Money Market
Instruments and Fixed Rate Debt Instruments swapped for fixed returns).

Reliance Dynamic Bond Fund ( Formely 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 and money market instruments.

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Reliance Money Manager Fund (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.

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 Regular Savings Fund (An open ended Scheme) Debt Option: The
primary investment objective of this Option 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 & Money Market Instruments.

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Close Ended Schemes/ Fixed Maturity Plan/ Interval Fund

Reliance Interval Fund (A Debt Oriented Interval Scheme): The investment

objective of the scheme is to seek to generate regular returns and growth of capital
by investing in a diversified portfolio of Central and State Government securities
and other fixed income/ debt securities normally maturing in line with the time
profile of the plan with the objective of limiting interest rate volatility.

Reliance Fixed Horizon Fund Plan C (A close-ended 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 of Central and State
Government securities and other fixed income/ debt securities normally maturing in
line with the time profile of the scheme with the objective of limiting interest rate
volatility.

Reliance Fixed Horizon Fund - IV (A close–ended income 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 of Central and State
Government securities and other fixed income/ debt securities normally maturing in
line with the time profile of the scheme with the objective of limiting interest rate
volatility.

Reliance Fixed Horizon Fund - V (A closed-ended income 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 of Central and State
Government securities and other fixed income/ debt securities normally maturing in
line with the time profile of the plan with the objective of limiting interest rate
volatility.

Reliance Fixed Horizon Fund - VII (A closed-ended income 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 of Central and State
Government securities and other fixed income/ debt securities normally maturing in
line with the time profile of the plan with the objective of limiting interest rate
volatility.

Reliance Fixed Horizon Fund - VIII (A closed-ended income 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 of Central and State
Government securities and other fixed income/ debt securities normally maturing in

61
line with the time profile of the plan with the objective of limiting interest rate
volatility.

Reliance Fixed Horizon Fund - IX (A closed-ended income 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 of Central and State
Government securities and other fixed income/ debt securities normally maturing in
line with the time profile of the plan with the objective of limiting interest rate
volatility.

Reliance Fixed Horizon Fund – X (A closed-ended income 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 of Central and State
Government securities and other fixed income/ debt securities normally maturing in
line with the time profile of the plan with the objective of limiting interest rate
volatility.

Reliance Fixed Horizon Fund – XII (A closed-ended income 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 of Central and State
Government securities and other fixed income/ debt securities normally maturing in
line with the time profile of the plan with the objective of limiting interest rate
volatility.

Reliance Fixed Horizon Fund – XIII (A closed-ended income 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 of Central and State
Government securities and other fixed income/ debt securities normally maturing in
line with the time profile of the plan with the objective of limiting interest rate
volatility.

Distributor Centre

How to become a Distributor?

In order to join our successful Distributor community you will need to get yourself
empanelled as an authorized Distributor of Reliance Mutual Fund.

The following are the simple steps for becoming a Distributor of Reliance Mutual
Fund.

62
 • Get yourself certified (if not previously certified) by National Institute of
Securities Markets (NISM), by taking the NISM Mutual Fund Distributors
Certification Examination. National Institute of Securities Markets (NISM) is
a public trust, established by the Securities and Exchange Board of India
(SEBI), the regulator for securities markets in India. NISM seeks to add to
market quality through educational initiatives. It is an autonomous body
governed by its Board of Governors. Clearing the NISM test has been made
mandatory by the Securities and Exchange Board of India (SEBI) and can be
taken at different cities. The certification examination consists of 100
questions of 1 mark each and should be completed in 2 hours. The passing
score for the examination is 50%. There shall be negative marking of 25% of
the marks assigned to a question. Registration is done through NSE, BSE or
MCX-SX. All other details including the new study material is available on
the website of NISM i.e. www.nism.ac.in
• After becoming NISM certified by clearing the test, you will have to fill up
an empanelment form which can be downloaded from this website, or simply
contact any of the Reliance Capital Asset Management Ltd. offices in order
to obtain an empanelment form by mail.
A copy of the empanelment form, duly filled, along with the attached ARN
Certificate (AMFI Registration Number) should be sent to any of the branch
offices of Reliance Capital Asset Management Ltd, from where the
Distributor proposes to operate.
• Reliance Capital Asset Management Ltd. will review the form and within a
week the prospective Distributor will receive an empanelment letter and code
number, along with all necessary material (forms, fact sheets, marketing
material etc). This means that he is now a full-fledged Distributor of
Reliance Mutual Fund.
• As part of an online support programme a Distributor can order Point-of-
Purchase (POP) material, application forms, offer documents, scheme
information, etc., by simply sending us an email or calling our Call Centre on
30301111 or our Toll Free number 1800- 300-11111. Alternatively, you
could write to customer_care@reliancemutual.com to order Distributor
assistance material. Kindly mention the distributor ARN number and
specifics of material required.

Please note that as part of the regulations governing Distributors you should be well
versed with the SEBI guidelines and AMFI guidelines for intermediaries.

63
CHAPTE
R III

SUGGESTION

64
The company’s sales strategy is good but to increase the efficiency more it should
emphasis the following suggestions.

1. The company should make his customer aware from to this about the
changes in the existing preference that is about the features etc. So that
the customers could make a benefit out of it.
2. The company should upgrade its various tiles eg. Wall, floor, vitrified,
and other’s version as cope up with competition.
3. While surveying people commented that it is costly and packing is not
very well done. So work should be done in this field.
4. The customer recommended that the dealer should treat the customer,
as other retail salesman do inspite like showroom’s sales person.
5. The company must design their advertisement strategies which
provide information on the competitive framework, target market, and
messages to be used in an advertising campaign. Advertising
objectives help to fix advertisement expenditure, type of
advertisements to be used, most suitable media, frequency of the ad
campaign, method for evaluating the effectiveness of advertisements,
etc. Various methods of budgeting like percentage of sales method,
competitive level method, task method, and the breakeven method.
6. The service network of the company must further be extended to other
parts of the country so as to better serve the customer.
7. The company should open the showroom in many cities like as
Newport.

CONCLUSION

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Today market is characterized by rapid change of style & fashion, which the
company is focusing.

The latest fashion & style by which the consumer are influenced while making a
decision for wall and floor tiles and other items of Kajaria so it becomes necessary
to understand the psychological behavior of customer. While he is purchasing
particular concept. Middle class plays a vital role for influenced the decision power
of the consumer it includes several factors.

1. Family member.
2. Friends.
3. Environment in which they are living.

Thus the company must adopt such a strategy which attracts these middle class. So
as to convert the suspective customer in to prospective one.

The company should focus to reduce the cost of tiles because most of the people
thought that Kajaria tiles are bit expensive in comparison to others.

BIBLIOGRAPHY

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Magazines

-India Today

Newspapers

-Economics Times

-Times of India

-Financial Express

Websites Used

www.wikipedia.org

www.hinduonnet.com/businessline

www.economictimes.com

www.financialexpress.com

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