Concept, Overview

1
Concept, Overview Structure of MF

• Presented by
• Sundar Sankaran, Director
• Advantage-India Consulting Pvt. Ltd
• April 2002

2
AGENDA

• Concept of Mutual Funds
• Legal Structure
• Fund Mergers Scheme Takeovers
• Regulators
• Mutual Fund Types
• Benefits

3
Concept of Mutual Funds

• MF Scheme v/s Fixed Deposits

4
Concept of Mutual Funds

• Features
• Pooled Vehicle
• Professional Management
• Schemes, Options / Plans
• Units
• Money in Trust
• SEBI Mutual Fund Regulations, 1996

5

• Need to understand the mutual fund product
• To avoid mis-selling the product

6
AGENDA

• Concept of Mutual Funds
• Legal Structure
• Fund Mergers Scheme Takeovers
• Regulators
• Mutual Fund Types
• Benefits

7
Legal Structure

• Fund Constituents
• Sponsor
• Asset Management Company
• Trustees
• Distributors
• Custodian / Depository
• Registrar Transfer Agent

8

• Sponsor
• 5 year track record
• 3 year profitability
• Minimum 40 per cent stake in AMC

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• Trust
• Indian Trust Act, 1882
• Board of Trustees
• Trustee Company
• Trust Deed
• Minimum 4 trustees
• Two-thirds independent trustees

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• AMC
• Minimum net worth Rs10crore
• One-half independent directors
• Appointment can be terminated by
• majority of Trustees
• 75 of unit-holders

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• Fundamental Attributes Change
• Fundamental Attributes means change in
  investment objective and terms of scheme
• Requires permission of three-fourths of unit
  holders
• Option to dissenting unit-holders to exit
• Permission not required for open-end scheme,
  subject to conditions

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Legal Structure

•   

13

• Legal structure gives strength to mutual funds as
  an investment avenue
• Greater comfort for investors
• not a plantation scheme or
• fly-by-night NBFC

14
AGENDA

• Concept of Mutual Funds
• Legal Structure
• Fund Mergers Scheme Takeovers
• Regulators
• Mutual Fund Types
• Benefits

15
Mergers Scheme Takeovers

• SEBI Mutual Fund Regulations, 1996
• SEBI
• Companies Act, 1956
• SEBI Takeover Code

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• SEBI
• Consent of Unit-holders with 75 voting rights
• Precedents
• If more than 15 stake acquired, open offer for
  20 from public

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• Companies Act,1956
• Merger of Companies
• Special Resolution
• Permission of high courts

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Mergers Scheme Takeovers

• Scheme Takeover
• Apple Schemes Birla AMC
• 75 per cent unit-holder approval
• Exit option to dissenting holders
• Synchronisation of Trusteeship and AMC roles

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Mergers Scheme Takeovers

• Sponsor change
• Zurich-20th Century Finance Zurich-ITC
  Threadneedle Sun FC
• 75 per cent unit-holder approval
• Exit option to dissenting holders

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Mergers Scheme Takeovers

• Merger of AMCs
• HB - Taurus
• 75 per cent unit-holder approval
• Exit option to dissenting holders
• Special Resolution of shareholders
• High Court approval

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• Investor
• is
• well protected
• in the event of
• such material changes

22
AGENDA

• Concept of Mutual Funds
• Legal Structure
• Fund Mergers Scheme Takeovers
• Regulators
• Mutual Fund Types
• Benefits

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Regulators

• SEBI
• RBI
• Ministry of Finance
• Companies Act
• Company Law Board
• Department of Company Affairs
• Registrar of Companies
• Stock Exchange
• Office of Public Trustee

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• AMFI is not a Self-Regulatory Organisation
• Though it can choose to be a SRO

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AGENDA

• Concept of Mutual Funds
• Legal Structure
• Fund Mergers Scheme Takeovers
• Regulators
• Mutual Fund Types
• Benefits

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Mutual Fund Types

• Tenor
• Open End
• Closed End

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Mutual Fund Types

• Asset Class
• Securities
• Equity
• Debt / Income
• Balanced
• Physical Assets

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Mutual Fund Types

• Position Philosophy
• Sector Funds
• Index Funds
• Fixed Maturity Plans
• Derivatives
• Hedge Funds
• Option Income Funds

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Mutual Fund Types

• Geography
• Country / Region Funds
• Offshore Funds

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Mutual Fund Types
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• A
• scheme
• for
• every
• investor need

32
AGENDA

• Concept of Mutual Funds
• Legal Structure
• Fund Mergers Scheme Takeovers
• Regulators
• Mutual Fund Types
• Benefits

33
Benefits

• Legal Comfort
• Choice of Risk Position
• Professional Management
• Tax Efficiency
• Investment Convenience
• Liquidity
• Investment Lot
• Cost Economies

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• Mutual Funds
• have an
• important role
• in
• channeling funds
• into the
• capital market