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    PRUDENTIALICICI MUTUAL

    FUND

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    Definition:

    A MF is a pool of money, collected from investors ,& is investedaccording to certain Investment Options

    Characteristics of a MF :

    1) Ownership of MF belongs to investors

    2) MF is managed by investment professionals who earn a feefor their services from the fund

    3) Pool of funds is invested in a portfolio of marketable

    investments. Value of portfolio is updated every day

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    Why Mutual Funds

    To address problems faced by retail investors;

    Lack of moneyto obtain spread

    Lack of personal expertise

    Lack oftimeto manage investments

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    Structure of MFs

    Governed by SEBI (Mutual Fund) Regulations, 1996 Mandatory for MFs to have a three tier structure

    Sponsor: Promoter of the MF, appoints the Trustees

    Trustees:Responsible to the Investors in the MF,appoints AMC

    AMC : Business face of MF, manages affairs of MF

    Sponsor TrusteeAsset Management

    Company

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    How Mutual Funds Work

    Money Pooled from Investors

    Unit Trust Fund/ Mutual Fund

    Trustee*A

    Portfolio of Authorised Investments

    Shares Government Securities Bonds Property Liquid Assets Derivatives

    Professional FundManager

    Trust Deed

    A: Custodian/Depository

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    Mutual Funds: Advantages

    Lower transaction costs due to economies of scale

    Tax benefit compared to most other investment options in India

    Professional fund management

    Diversification

    Systematic Investment Plans

    Regular Savings Plans

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    Mutual Funds - Types

    Open-ended:

    Investors can buy /sell units of fund,at NAV related prices,atany time directly from the fund.

    These funds are offered for sale at a pre-specified price,sayRs. 10 ,in the initial offer period. After a pre-specified period,

    say 30 days,the fund is declared opened for further sales &repurchases

    Pool of funds & units vary everyday

    Close-ended:

    Open for sale to investors for a specified period ,after whichfurther sales are closed. Any further transaction happens inthe secondary market where closed end funds are listed

    Pool of Funds technicallyconstant

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    Advantages of Mutual Funds

    Suit small or large investors.

    Flexibility - option to have Income Reinvested.

    Professional Fund Management.

    Cheaper dealing than for individual.

    Liquidity ease of purchase and sale of holdings

    Diversification spread of risk.

    Access to international markets

    Tax benefits in some jurisdictions.

    Regulated - investor protection.

    Wide spectrum of fund choice 50,000 funds worldwide.

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    Investment Pyramid: India

    Liquid Funds

    Short term funds

    Income Funds

    Equity FundsReward

    Risk

    Floating rate Funds

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    Investment objective

    Each fund :

    Stated Investment Objective

    Income / Growth

    Markets(s)

    Government SecuritiesMoney Markets

    Europe / USABlue ChipsGlobal

    Europe / USASmaller Cos.

    Emerging MarketsDerivatives

    Reward

    Risk

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    Applications of Mutual Funds

    Any mediumto long-terminvestment i.e. >3 years

    Investment Abroad

    exposure to overseasmarkets - appeals to bothsophisticated and unsophisticated investors

    Retirement Income Invest whileemployed- take income in retirement/ use

    capital as safety net.

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    Applications of Mutual Funds

    Achievement of long-term goals

    Housing

    Education

    Investment for children

    Parents / Grandparents set up investment account on

    behalfof children / grandchildren.

    Unit-Linked Life AssuranceProducts.

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    Regulatory Authority

    Securities Exchange Board of India

    Authorisation process

    Submit :

    Trust deed (Unit Trust)

    Instrument of Incorporation (Investment Company)

    Prospectus (or equivalent) Marketing Plan

    Evidence of financial standing

    Submission Fee

    Formal request

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    Offer Document

    Details of launche.g.

    length of initial offer period

    what will happen if launch targetsnotreached.

    Legal Document in language of country

    Purpose

    Provide Investors with key informationneeded to make informed decisions

    MFs are required to file with a SEBI the Offer Document/Prospectus,in a prescribed format that provides all information about the fund &

    the scheme

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    Offer Document / Prospectus

    Constitution of the fund,details of sponsor, trustee & AMC

    Standard & Specific risk factors

    Scheme attributes -Investment objective,pattern,terms withregards to liquidity

    Details of the scheme being offered

    Loads, fee structures & expenses

    Unit holder rights

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    Key Information Memorandum

    As the Offer document is very detailed, SEBI allowsMFs to summarize the key points in a summarydocument called as the Key Information Memorandum

    (KIM) It is mandatory that the KIM is made available to all

    investors alongwith the application forms

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    Initial offer at fixedprice

    Pressannouncements /Mailingsto potential investors- must conform to regulatory standards of jurisdiction.

    Launchbriefingsto advisers/agents.

    Some jurisdictions allow direct selling

    off the page

    .

    Usually, fundholdssubscriptions to see how muchraised before investing.

    Launching a Mutual fund