CASE STUDY RELIANCE MUTUAL FUND
TRIPTI YADAV
Regn No.: 200721594
SYMBIOSIS CENTRE FOR DISTANCE LEARNING, PUNE, 2010
1
INTRODUCTION
The Reliance group one of the India’s largest business houses with revenue of Rs.990 billion ($22.6billion) that is equal to 3.5 percent of the country’s gross domestic product was split into two. The group which claims to contribute nearly 10% of the country’s indirect tax revenues and over six percent of the India’s exports-was divided between Mukesh Ambani and his younger Anil on June 18, 2005. The group’s activities span exploration, production, refining and marketing of oil and natural gas, petrochemicals, textiles, financial services, insurance, power and telecom. The family also has interest in advertising agency and life sciences. Reliance Mutual Fund(RMF) is one of India’s leading Mutual Fund, with Average Assets Management(AAUM) of Rs.90,938 Crores(AAUM for Mar’08) and an investor base of over 66.87 lakhs. Reliance Mutual Fund, a part of 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 115 cities across the country. Reliance Mutual Fund constantly endeavors to launch innovative products and customer service initiatives to increase value to investors. “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 Ltd. is one of India’s leading and fastest growing private sector financial services companies, and ranks among the top 3 private sector financial services and banking companies, in terms of net worth. Reliance Capital Ltd. has interests in assets management, life and general insurance, private equity and proprietary investments, stock broking and other financial services. Reliance Mutual Fund has largest AUM in India, Reliance capital assets management is No.1 AMC 2
in India but the picture is not the same in Chhattisgarh. In Chhattisgarh they are No 2 AMC. Management of Reliance Mutual Fund wants to expand its feet in Chhattisgarh before taking any step they want to understand market & investors and distributors behavior f SME’s, so they may plan accordingly to capture Chhattisgarh market. In the research we have to analyze why, how, where, when and how much an investor invest and according do it, we have to make profile of investors. I this report I have endeavored to understand the factors affecting investment behavior of an investor in Chhattisgarh. This behavioral study consist of how any investor invest in CG.What factors they consider, why these factors they consider, Where do they invest, how do they invest, purpose behind investment, size of investment, timing of investment and duration of investment. The study gave up a basis to profile investors. VISION STATEMENT To be a globally respected wealth creator, with an emphasis on customer care and a culture of good corporate governance. MISION STATEMENT To create and nurture a world class, high performance environment aimed at delighting their customers. CORPORATE GOVERNANCE 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. MANAGEMENT The management at Reliance Capital Asset Management Ltd. is committed to good Corporate Governance, which includes transparency and timely dissemination of information to its investors and unit holders. The Board of Directors of RCAM is a professional body, including well-experienced and knowledgeable Independent Members. 3
Regular Audit Committee meetings are conducted to review the operations and performance of the company. 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. 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 Limited is one of the India’s leading and fastest growing financial services companies, and ranks among the top three private sector financial services and banking companies, in terms of net worth. 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. 5,161.23 crores as on March 31, 2007. 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. 4
THE AMC 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 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. The net worth of the Asset Management Company including preference shares as on March 31, 2005 is Rs.113.59 crores. 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 5
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 PRODUCTS FOLLOWING ARE SOME OF THE SCHEMES LAUNCHED BY RELIANCE MUTUAL FUND: Reliance Growth Fund (September 1995) Reliance Income Fund (December 1997) Reliance Medium Term Fund (August 2000) Reliance Gilt Securities Fund (July 2003) Reliance Monthly Income Plan (December 2003) Reliance Pharma Fund ( May 2004) Reliance Media & Entertainment Fund (September 2004) Reliance NRI Income Fund (October 2004) Reliance Equity Opportunities Fund (February 2005) Reliance Liquidity Fund (June 2005) Reliance Fixed Tenor Fund (November 2005) Reliance Fixed Horizon Fund I (August 2006) Reliance Fixed Horizon Fund III (March 2007) Reliance Liquid Plus Fund Reliance Vision Fund (September 1995) Reliance Liquid Fund (March 1998) Reliance Short Term Fund (December 2002) Reliance Banking Fund (May 2003) Reliance Diversified Power Sector Fund (March 2004) Reliance Floating Rate Fund (August 2004) Reliance NRI Equity Fund (October 2004) Reliance Index Fund (February 2005) Reliance Regular Savings Fund (May 2005) Reliance Tax Saver (ELSS) Fund (July 2005) Reliance Equity Fund (February 2006) Reliance Fixed Horizon Fund (April 2006) Reliance Fixed Horizon Fund II (November 2006) Reliance Long Term Equity Fund 6
(March 2007) Reliance Long Term Equity Fund (Nov 2006) Reliance Fixed Horizon Fund – IV (August 2007) INVESTMENT OBJECTIVES
(November 2006) Reliance Interval Fund (March 2007) Reliance Fixed Horizon Fund – V (September 2007)
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 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
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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 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 8
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. 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. 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 9
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. Because they believe that there is no contradiction between doing well and doing right. Indeed, doing right is a necessary condition for doing well.
SWOT ANALYSIS
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A type of fundamental analysis of the health of a company by examining its strengths(S), weakness (W), business opportunity (O), and any threat (T) or dangers it might be exposed to.
I. STRENGTHS
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Brand strategy: as opposed to some of its competitors (e.g. HSBC), Reliance ADAG operates a multi-brand strategy. The company operates under numerous well-known brand names, which allows the company to appeal to many different segments of the market. Distribution channel strategy: Reliance is continuously improving the distribution of its products. Its online and Internet-based access offers a combination of excellent growth prospects and its retail direct business also saw growth of 27% in 2002 and 15% in 2003. Various sources of income: Reliance has many sources of income throughout the group, and this diversity within the group makes the company more flexible and resistant to economic and environmental changes. Large pool of installed capacities. Experienced managers for large number of Generics. Large pool of skilled and knowledgeable manpower. Increasing liberalization of government policies.
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II. WEAKNESS
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Emerging markets: since there is more investment demand in the United States, Japan and the rest of Asia, Reliance should concentrate on these markets, especially in view of low global interest rates. Mutual funds are like many other investments without a guaranteed return: there is always the possibility that the value of your mutual fund will depreciate. Unlike fixed income products, such as bonds and Treasury bills, mutual funds experience price fluctuations along with the stocks that make up the fund. When deciding on a particular fund to buy, you need to research the risks involved – just because a professional manager is looking after the fund, that doesn’t mean the performance will be stellar.
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Fees: In mutual funds, the fees are classified into two categories: shareholder fees and annual operating fees. The shareholder fees, in the forms of loads and redemption fees are paid directly by shareholders purchasing or selling the funds. The annual fund operating fees are charged as an annual percentage – usually ranging from 1-3%. These fees are assessed to mutual fund investors regardless of the performance of the fund. As you can imagine, in years when the fund doesn’t make money, these fees only magnify losses.
III. OPPORTUNITIES
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Potential markets: The Indian rural market has great potential. All the major market leaders consider the segments and real markets for their products. A senior official in a one of the leading company says foray into rural India already started and there has been realization that the rural market is both price and quantity conscious. Entry of MNCs: Due to multinationals are entering into market job opportunities are increasing day by day. Also India Mutual Fund majors are tie up with other financial institutions.
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IV. THREATS
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Increased Competition: With intense competition by so many local players causing headache to the current marketers. In addition to this though multinational brands are not yet established but still they will soon hit the mark. Almost 60 to 70% of the revenue is spending on the management and services. Hedge funds: sometimes referred to as hot money, are also causing a threat for mutual funds have gained worldwide notoriety for bringing the markets down. Be it a crash in the currency, A stock or A bond market, A usually a hedge fund prominently figures somewhere in the picture.
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doc_180256419.doc
TRIPTI YADAV
Regn No.: 200721594
SYMBIOSIS CENTRE FOR DISTANCE LEARNING, PUNE, 2010
1
INTRODUCTION
The Reliance group one of the India’s largest business houses with revenue of Rs.990 billion ($22.6billion) that is equal to 3.5 percent of the country’s gross domestic product was split into two. The group which claims to contribute nearly 10% of the country’s indirect tax revenues and over six percent of the India’s exports-was divided between Mukesh Ambani and his younger Anil on June 18, 2005. The group’s activities span exploration, production, refining and marketing of oil and natural gas, petrochemicals, textiles, financial services, insurance, power and telecom. The family also has interest in advertising agency and life sciences. Reliance Mutual Fund(RMF) is one of India’s leading Mutual Fund, with Average Assets Management(AAUM) of Rs.90,938 Crores(AAUM for Mar’08) and an investor base of over 66.87 lakhs. Reliance Mutual Fund, a part of 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 115 cities across the country. Reliance Mutual Fund constantly endeavors to launch innovative products and customer service initiatives to increase value to investors. “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 Ltd. is one of India’s leading and fastest growing private sector financial services companies, and ranks among the top 3 private sector financial services and banking companies, in terms of net worth. Reliance Capital Ltd. has interests in assets management, life and general insurance, private equity and proprietary investments, stock broking and other financial services. Reliance Mutual Fund has largest AUM in India, Reliance capital assets management is No.1 AMC 2
in India but the picture is not the same in Chhattisgarh. In Chhattisgarh they are No 2 AMC. Management of Reliance Mutual Fund wants to expand its feet in Chhattisgarh before taking any step they want to understand market & investors and distributors behavior f SME’s, so they may plan accordingly to capture Chhattisgarh market. In the research we have to analyze why, how, where, when and how much an investor invest and according do it, we have to make profile of investors. I this report I have endeavored to understand the factors affecting investment behavior of an investor in Chhattisgarh. This behavioral study consist of how any investor invest in CG.What factors they consider, why these factors they consider, Where do they invest, how do they invest, purpose behind investment, size of investment, timing of investment and duration of investment. The study gave up a basis to profile investors. VISION STATEMENT To be a globally respected wealth creator, with an emphasis on customer care and a culture of good corporate governance. MISION STATEMENT To create and nurture a world class, high performance environment aimed at delighting their customers. CORPORATE GOVERNANCE 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. MANAGEMENT The management at Reliance Capital Asset Management Ltd. is committed to good Corporate Governance, which includes transparency and timely dissemination of information to its investors and unit holders. The Board of Directors of RCAM is a professional body, including well-experienced and knowledgeable Independent Members. 3
Regular Audit Committee meetings are conducted to review the operations and performance of the company. 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. 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 Limited is one of the India’s leading and fastest growing financial services companies, and ranks among the top three private sector financial services and banking companies, in terms of net worth. 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. 5,161.23 crores as on March 31, 2007. 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. 4
THE AMC 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 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. The net worth of the Asset Management Company including preference shares as on March 31, 2005 is Rs.113.59 crores. 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 5
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 PRODUCTS FOLLOWING ARE SOME OF THE SCHEMES LAUNCHED BY RELIANCE MUTUAL FUND: Reliance Growth Fund (September 1995) Reliance Income Fund (December 1997) Reliance Medium Term Fund (August 2000) Reliance Gilt Securities Fund (July 2003) Reliance Monthly Income Plan (December 2003) Reliance Pharma Fund ( May 2004) Reliance Media & Entertainment Fund (September 2004) Reliance NRI Income Fund (October 2004) Reliance Equity Opportunities Fund (February 2005) Reliance Liquidity Fund (June 2005) Reliance Fixed Tenor Fund (November 2005) Reliance Fixed Horizon Fund I (August 2006) Reliance Fixed Horizon Fund III (March 2007) Reliance Liquid Plus Fund Reliance Vision Fund (September 1995) Reliance Liquid Fund (March 1998) Reliance Short Term Fund (December 2002) Reliance Banking Fund (May 2003) Reliance Diversified Power Sector Fund (March 2004) Reliance Floating Rate Fund (August 2004) Reliance NRI Equity Fund (October 2004) Reliance Index Fund (February 2005) Reliance Regular Savings Fund (May 2005) Reliance Tax Saver (ELSS) Fund (July 2005) Reliance Equity Fund (February 2006) Reliance Fixed Horizon Fund (April 2006) Reliance Fixed Horizon Fund II (November 2006) Reliance Long Term Equity Fund 6
(March 2007) Reliance Long Term Equity Fund (Nov 2006) Reliance Fixed Horizon Fund – IV (August 2007) INVESTMENT OBJECTIVES
(November 2006) Reliance Interval Fund (March 2007) Reliance Fixed Horizon Fund – V (September 2007)
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 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
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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 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 8
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. 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. 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 9
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. Because they believe that there is no contradiction between doing well and doing right. Indeed, doing right is a necessary condition for doing well.
SWOT ANALYSIS
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A type of fundamental analysis of the health of a company by examining its strengths(S), weakness (W), business opportunity (O), and any threat (T) or dangers it might be exposed to.
I. STRENGTHS
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Brand strategy: as opposed to some of its competitors (e.g. HSBC), Reliance ADAG operates a multi-brand strategy. The company operates under numerous well-known brand names, which allows the company to appeal to many different segments of the market. Distribution channel strategy: Reliance is continuously improving the distribution of its products. Its online and Internet-based access offers a combination of excellent growth prospects and its retail direct business also saw growth of 27% in 2002 and 15% in 2003. Various sources of income: Reliance has many sources of income throughout the group, and this diversity within the group makes the company more flexible and resistant to economic and environmental changes. Large pool of installed capacities. Experienced managers for large number of Generics. Large pool of skilled and knowledgeable manpower. Increasing liberalization of government policies.
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II. WEAKNESS
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Emerging markets: since there is more investment demand in the United States, Japan and the rest of Asia, Reliance should concentrate on these markets, especially in view of low global interest rates. Mutual funds are like many other investments without a guaranteed return: there is always the possibility that the value of your mutual fund will depreciate. Unlike fixed income products, such as bonds and Treasury bills, mutual funds experience price fluctuations along with the stocks that make up the fund. When deciding on a particular fund to buy, you need to research the risks involved – just because a professional manager is looking after the fund, that doesn’t mean the performance will be stellar.
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Fees: In mutual funds, the fees are classified into two categories: shareholder fees and annual operating fees. The shareholder fees, in the forms of loads and redemption fees are paid directly by shareholders purchasing or selling the funds. The annual fund operating fees are charged as an annual percentage – usually ranging from 1-3%. These fees are assessed to mutual fund investors regardless of the performance of the fund. As you can imagine, in years when the fund doesn’t make money, these fees only magnify losses.
III. OPPORTUNITIES
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Potential markets: The Indian rural market has great potential. All the major market leaders consider the segments and real markets for their products. A senior official in a one of the leading company says foray into rural India already started and there has been realization that the rural market is both price and quantity conscious. Entry of MNCs: Due to multinationals are entering into market job opportunities are increasing day by day. Also India Mutual Fund majors are tie up with other financial institutions.
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IV. THREATS
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Increased Competition: With intense competition by so many local players causing headache to the current marketers. In addition to this though multinational brands are not yet established but still they will soon hit the mark. Almost 60 to 70% of the revenue is spending on the management and services. Hedge funds: sometimes referred to as hot money, are also causing a threat for mutual funds have gained worldwide notoriety for bringing the markets down. Be it a crash in the currency, A stock or A bond market, A usually a hedge fund prominently figures somewhere in the picture.
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