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A STUDY ON THE CUSTOMER ATTITUDE, PREFERENCE ANDSATISFACTION LEVEL TOWARDS INVESTMENT IN MUTUAL

FUNDSWITH REFERENCE TO

SHAREKHANFINANCIAL SERVICES PVT LTD, THIRUPUR.

A project report submitted in partial fulfillment of the

requirements of the award of the degree ofMASTER OF BUSINESS ADMINISTRATION

Submitted by

K.R.SRI SUDHARSANAGIRI(Reg no: - 620911631087)

Under the esteemed guidance ofMR.PONMUTHURAMALINGAM

Asst. Prof


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DECLARATION

I hereby declare that the project report title A STUDYON THE CUSTOMER ATTITUDE, PREFERENCE AND

SATISFACTION LEVEL TOWARDS INVESTMENT IN MUTUALFUNDS

is done and submitted by me is a genuine work. And it is notsubmitted to any other university or published at any time before.The project work is partial fulfillment of the requirements for the

award ofM.B.A Degree by the GNANAMANI INSTITUTE OFMANAGEMENT STUDIES .

Place:-THIRUPURDate:- / Signatureof the student K.R.SRISUDHA

RSANAGIRI

(620911631087)

GNANAMANI Institutions of Management Studies,Anna University, Chennai


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CERTIFICATE

This is to certify that the project report entitled Analysis of the

customer attitude, preference and satisfaction level

towards investments in mutual funds with reference to

Share khan Financial Services Pvt Ltd, Tirupur, is a

bonafied, work carried out by K.R.Srisudharsanagiri under my

guidance in partial fulfillment for the award of degree of MASTER

OF BUSINESS ADMINISTRATION during the period 2009-2011.

Place: - Namakkal .Date:- / /2013

Mr.Ponmuthuramalingam

Asst. Prof.GNANAMANI

INSTITUTE OF MANAGEMENT STUDIESANNA UNIVERSITY, CHENNAI


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PREFACE

Give a man a fish, he will eat it. Train a man to fish,

He will feed his family.

The above saying highlights the importance of Practical

knowledge. Practical training is an important part of the

theoretical studies. It is of an immense importance in the field

of management. It offers the student to explore the valuable

treasure of experience and an exposure to real work culture

followed by the industries and thereby helping the students to

bridge gap between the theories explained in the books and

their practical implementations.

Project plays an important role in future building of an individual

so that he/she can better understand the real world in which he

has to work in future. The theory greatly enhances our

knowledge and provides opportunities to blend theoretical with

the practical knowledge.

I have done my Project on Customer attitude, preference

and satisfaction level towards investment in mutual

fund. I have tried to cover each and every aspect related to

the topic with best of my capability.

I hope this study would help many people in the future.


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ACKNOWLEDGEMENT

I am thankful to Prof. K. Shiva Ramakrishna, Principalof GITAM Institute of Management, Prof. P. Sheela, Vice

Principal of GITAM Institute of Management, and Associate

Prof K. Uma Devi, Program Co-ordinator, GITAM Institute of

Management, GITAM University, Visakhapatnam, for

providing me the opportunity to do my project.

I express my sincere thanks to Ms. S. Anjani Devi, whose

supervision, valuable guidance and help, enabled me to

complete this project work.

This project is a result of the hard work and sincere effort

put by my hands. And I am grateful to Mr. Shivaram Pandey

(Sales head Andhra Pradesh) for giving me this opportunity

to do my project work in Franklin Templeton Investments

India Pvt Ltd, Visakhapatnam.

I convey my sincere thanks to Mr. Suresh Kumar Sela,

Pavan Patnaik and Sumitha Nair for the constant advice and

encouragement.

I also wish to express my sincere thanks to all the

customers of Franklin Templeton Investments India Pvt

Ltd, Visakhapatnam, who have directly or indirectly help me

in completing my project work.


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CONTENTS

Chapter 1

Page No.

Meaning of Mutual Funds 02 - 07

Classification of Mutual Fund 08 - 12

Performance of Mutual Funds in India 13

- 15

Other Important Concepts 16

- 33

Chapter 2

Need of the study 34

Objectives of the study 35

Scope of the study 36 Methodology 37

Presentation of the study 38

Limitation 39

Chapter 3

Profile

Industry Profile 40

- 47

Organization Profile 48 - 62

Product Profile at Franklin Templeton 62

- 82

Chapter 4

Analysis of Study 83 -

107


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Chapter 5

Findings 108 -

110 Suggestions 111 -

113

Conclusion 114 -

115

Bibliography 116

Annexure

List of Tables

No. TitlePage No.

1.1 Savings Plan 83

1.2 Investment plans 85

1.3 Age consideration 87

1.4 Period of investment 89

1.5 Interested in Mutual Fund 91

1.6 Anticipation of Risk 93

1.7 Primary Goal 95

1.8 Risk with Return Expected 97

1.9 Age combination 99

1.10 Factors to consider 1021.11 Service providers 104

1.12 Satisfaction Level 106

List of Graphs

2.1 Savings Plan 83

2.2 Investment plans 852.3 Age consideration 87


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2.4 Period of investment 89

2.5 Interested in Mutual Fund 91

2.6 Anticipation of Risk 93

2.7 Primary Goal 952.8 Risk with Return Expected 97

2.9 Age combination 99

2.10 Factors to consider 102

2.11 Service providers 104

2.12 Satisfaction Level 106

INTRODUCTION

Mutual funds are basically financial intermediaries, which collect the

savings of investors and invest them in a large and well-diversified

portfolio of securities such as money market instruments, corporate

and government bonds and equity shares of joint stock companies. A

mutual fund is a pool of common funds invested by different

investors, who have no contact with each other. Mutual funds

are conceived as institutions for providing small investors with

avenues of investments in the capital market. Since small investors

generally do not have adequate time, knowledge, experience and

resources for directly accessing the capital market, they have to rely

on an intermediary, which undertakes informed investment decisions

and provides consequential benefits of professional expertise. The

raison of mutual funds is their ability to bring down the transaction

costs. The advantages for the investors are reduction in risk, expert

professional management, diversified portfolios, liquidity of

investment and tax benefits. By pooling their assets through mutual

funds, investors achieve economies of scale. The interests of the

investors are protected by the SEBI, which acts as a watchdog.


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Mutual funds are governed by the SEBI (Mutual Funds) Regulations,

1996.

MUTUAL FUND OPERATIONS FLOW CHART

The flow chart below describes broadly the working of a MutualFund:

THE GOAL

OF

MUTUAL FUND

The goal of a mutual fund is to provide an individual to make money.

There are several thousand mutual funds with different investments

strategies and goals to chosen from. Choosing one can be over

whelming, even though it need not be different mutual funds have

different risks, which differ because of the funds goals fund

manager, and investment style. The fund itself will still increase in

value, and in that way you may also make money therefore the

value of shares you hold in mutual fund will increase in value when

the holdings increases in value capital gains and income or dividend

payments are best reinvested for younger investors Retires often


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seek the income from dividend distribution to augment their income

with reinvestment of dividends and capital distribution your money

increase at an even greater rate. When you redeem your shares

what you receive is the value of the share.

ORGANISATION OF A MUTUAL FUND

There are many entities involved and the diagram below

illustrates the organizational set up of a mutual fund:

HISTORICAL VIEW:

History and Structure of Indian Mutual Fund Industry

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 history of mutual funds in India can be broadly

divided into four distinct phases:

First Phase 1964-87:


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Unit Trust of India (UTI) was established on 1963 by an Act of

Parliament. It was set up by the Reserve Bank of India and

functioned under the Regulatory and administrative control of the

Reserve Bank of India. In 1978 UTI was de-linked from the RBI andthe Industrial Development Bank of India (IDBI) took over the

regulatory and administrative control in place of RBI. The first

scheme launched by UTI was Unit Scheme 1964. At the end of 1988

UTI had Rs.6, 700 crores of assets under management.

Second Phase 1987-1993 (Entry of Public Sector

Funds):

1987 marked the entry of non- UTI, public sector mutual funds set up

by public sector banks and Life Insurance Corporation of India (LIC)

and General Insurance Corporation of India (GIC). SBI Mutual Fund

was the first non- UTI Mutual Fund established in June 1987 followed

by Can-bank Mutual Fund (Dec 87), Punjab National Bank Mutual

Fund (Aug 89), Indian Bank Mutual Fund (Nov 89), Bank of India (Jun

90), Bank of Baroda Mutual Fund (Oct 92). LIC established its mutualfund in June 1989 while GIC had set up its mutual fund in December

1990. At the end of 1993, the mutual fund industry had assets under

management of Rs.47, 004 crores.

Third Phase 1993-2003 (Entry of Private Sector Funds):

With the entry of private sector funds in 1993, a new era started in

the Indian mutual fund industry, giving the Indian investors a wider

choice of fund families. Also, 1993 was the year in which the first

Mutual Fund Regulations came into being, under which all mutual

funds, except UTI were to be registered and governed. The erstwhile

Kothari Pioneer (now merged with Franklin Templeton) was the first

private sector mutual fund registered in July 1993. The 1993 SEBI

(Mutual Fund) Regulations were substituted by a more

comprehensive and revised Mutual Fund Regulations in 1996. The


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industry now functions under the SEBI (Mutual Fund) Regulations

1996. The number of mutual fund houses went on increasing, with

many foreign mutual funds setting up funds in India and also the

industry has witnessed several mergers and acquisitions. As at theend of January 2003, there were 33 mutual funds with total assets of

Rs. 1, 21,805 crores. The Unit Trust of India with Rs.44, 541

crores of assets under management was way ahead of other mutual

funds.

Fourth Phase since February 2003:

In February 2003, following the repeal of the Unit Trust of India Act

1963 UTI was bifurcated into two separate entities. One is the

Specified Undertaking of the Unit Trust of India with assets under

management of Rs.29, 835 crores as at the end of January 2003,

representing broadly, the assets of US 64 scheme, assured return

and certain other schemes. The Specified Undertaking of Unit Trust

of India, functioning under an administrator and under the rules

framed by Government of India and does not come under thepurview of the Mutual Fund Regulations. The second is the UTI

Mutual Fund Ltd, sponsored by SBI, PNB, BOB and LIC. It is registered

with SEBI and functions under the Mutual Fund Regulations. With the

bifurcation of the erstwhile UTI which had in March 2000 more than

Rs.76, 000 crores of assets under management and with the setting

up of a UTI Mutual Fund, conforming to the SEBI Mutual Fund

Regulations, and with recent mergers taking place among different

private sector funds, the mutual fund industry has entered its

current phase of consolidation and growth. As at the end of

September, 2004, there were 29 funds, which manage assets of

Rs.1, 53, 108 crores under 421 schemes.


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CLASSIFICATION OF MUTUAL FUND SCHEMES:

Any mutual fund has an objective of earning income for the investors

and/ or getting increased value of their investments. To achieve

these objectives mutual funds adopt different strategies and

accordingly offer different schemes of investments. On this basis the

simplest way to categorize schemes would be to group these into

two broad classifications:

OPERATIONAL AND PORTFOLIO CLASSIFICATION:Operational classification highlights the two main types of

schemes, i.e., open-ended and close-ended which are offered by the

mutual funds.

Portfolio classification projects the combination of investment

instruments and investment avenues available to mutual funds to

manage their funds. Any portfolio scheme can be either open ended

or close ended.

Operational Classification:

Open Ended Schemes: As the name implies the size of the

scheme (Fund) is open i.e., not specified or pre-determined.

Entry to the fund is always open to the investor who can

subscribe at any time. Such fund stands ready to buy or sell its

securities at any time. It implies that the capitalization of thefund is constantly changing as investors sell or buy their


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shares. Further, the shares or units are normally not traded on

the stock exchange but are repurchased by the fund at

announced rates. Open-ended schemes have comparatively

better liquidity despite the fact that these are not listed. Thereason is that investors can any time approach mutual fund for

sale of such units. No intermediaries are required. Moreover,

the realizable amount is certain since repurchase is at a price

based on declared net asset value (NAV). No minute to minute

fluctuations in rates haunt the investors. The portfolio mix of

such schemes has to be investments, which are actively traded

in the market. Otherwise, it will not be possible to calculate

NAV. This is the reason that generally open-ended schemes are

equity based. Moreover, desiring frequently traded securities,

open-ended schemes hardly have in their portfolio shares of

comparatively new and smaller companies since these are not

generally traded. In such funds, option to reinvest its dividend

is also available. Since there is always a possibility ofwithdrawals, the management of such funds becomes more

tedious as managers have to work from crisis to crisis. Crisis

may be on two fronts, one is, that unexpected withdrawals

require funds to maintain a high level of cash available every

time implying thereby idle cash. Fund managers have to face

questions like what to sell. He could very well have to sell his

most liquid assets. Second, by virtue of this situation such

funds may fail to grab favorable opportunities. Further, to

match quick cash payments, funds cannot have matching

realization from their portfolio due to intricacies of the stock

market. Thus, success of the open-ended schemes to a great

extent depends on the efficiency of the capital market and the

selection and quality of the portfolio.


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Close Ended Schemes: Such schemes have a definite period

after which their shares/ units are redeemed. Unlike open-

ended funds, these funds have fixed capitalization, i.e., their

corpus normally does not change throughout its life period.Close ended fund units trade among the investors in the

secondary market since these are to be quoted on the stock

exchanges. Their price is determined on the basis of demand

and supply in the market. Their liquidity depends on the

efficiency and understanding of the engaged broker. Their price

is free to deviate from NAV, i.e., there is every possibility that

the market price may be above or below its NAV. If one takes

into account the issue expenses, conceptually close ended fund

units cannot be traded at a premium or over NAV because the

price of a package of investments, i.e., cannot exceed the sum

of the prices of the investments constituting the package.

Whatever premium exists that may exist only on account of

speculative activities. In India as per SEBI (MF) Regulationsevery mutual fund is free to launch any or both types of

schemes.

Portfolio Classification of Funds:

Following are the portfolio classification of funds, which may be

offered. This classification may be on the basis of (A) Return, (B)

Investment Pattern, (C) Specialized sector of investment, (D)Leverage and (E) Others.

Return based classification:

To meet the diversified needs of the investors, the mutual fund

schemes are made to enjoy a good return. Returns expected are in

form of regular dividends or capital appreciation or a combination of

these two.


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1. Income Funds: For investors who are more curious for

returns, Income funds are floated. Their objective is to

maximize current income. Such funds distribute periodically the

income earned by them. These funds can further be spitted upinto categories: those that stress constant income at relatively

low risk and those that attempt to achieve maximum income

possible, even with the use of leverage. Obviously, the higher

the expected returns, the higher the potential risk of the

investment.

2. Growth Funds: Such funds aim to achieve increase in thevalue of the underlying investments through capital

appreciation. Such funds invest in growth oriented securities

which can appreciate through the expansion production

facilities in long run. An investor who selects such funds should

be able to assume a higher than normal degree of risk.

3. Conservative Funds:The fund with a philosophy of all thingsto all issue offer document announcing objectives as: (i) To

provide a reasonable rate of return, (ii) To protect the value of

investment and, (iii) To achieve capital appreciation consistent

with the fulfillment of the first two objectives. Such funds which

offer a blend of immediate average return and reasonable

capital appreciation are known as middle of the road funds.

Such funds divide their portfolio in common stocks and bonds

in a way to achieve the desired objectives. Such funds have

been most popular and appeal to the investors who want both

growth and income.

Investment Based Classification:


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Mutual funds may also be classified on the basis of securities in

which they invest. Basically, it is renaming the subcategories of

return based classification.

1. Equity Fund: Such funds, as the name implies, invest most oftheir investible shares in equity shares of companies and

undertake the risk associated with the investment in equity

shares. Such funds are clearly expected to outdo other funds in

rising market, because these have almost all their capital in

equity. Equity funds again can be of different categories

varying from those that invest exclusively in high quality blue

chip companies to those that invest solely in the new,

unestablished companies. The strength of these funds is the

expected capital appreciation. Naturally, they have a higher

degree of risk.

2. Bond Funds: such funds have their portfolio consisted of

bonds, debentures, etc. this type of fund is expected to be very

secure with a steady income and little or no chance of capital

appreciation. Obviously risk is low in such funds. In this

category we may come across the funds called Liquid Funds

which specialize in investing short-term money market

instruments. The emphasis is on liquidity and is associated with

lower risks and low returns.

3. Balanced Fund: The funds, which have in their portfolio a

reasonable mix of equity and bonds, are known as balanced

funds. Such funds will put more emphasis on equity share

investments when the outlook is bright and will tend to switch

to debentures when the future is expected to be poor for

shares.

Sector Based Funds:


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There are number of funds that invest in a specified sector of

economy. While such funds do have the disadvantage of low

diversification by putting all their all eggs in one basket, the policy of

specializing has the advantage of developing in the fund managersan intensive knowledge of the specific sector in which they are

investing. Sector based funds are aggressive growth funds which

make investments on the basis of assessed bright future for a

particular sector. These funds are characterized by high viability,

hence more risky.

PERFORMANCE OF MUTUAL FUND IN INDIA

The performance of mutual funds in India from the day the concept

of mutual fund took birth in India. The year was 1963 Unit Trust of

India invited investors or rather to those who believed in savings, to

park their money in UTI Mutual Fund. For 30 years it ranked top

without a single second player. Though the 1988 year saw some new

mutual fund companies, but UTI remained in a monopoly position.

The performance of mutual funds in India in the initial phase was not

even closer to satisfactory level. People rarely understood, and of

course investing was out of question. But yes, some 24 million

shareholders was accustomed with guaranteed high returns by the

beginning of liberalization of the industry in 1992. This good record

of UTI became marketing tool for new entrants. The expectations ofinvestors touched the sky in profitability factor. However, people

were miles away from the preparedness of risks factor after the

liberalization.

The Assets under Management of UTI was Rs. 67bn. by the end of

1987. Let me concentrate about the performance of mutual funds in

India through figures. From Rs. 67bn. the Assets under Management


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rose to Rs. 470 bn. in March 1993 and the figure had a three times

higher performance by April 2004. It rose as high as Rs. 1,540bn.

The net asset value (NAV) of mutual funds in India declined when

stock prices started falling in the year 1992. Those days, the marketregulations did not allow portfolio shifts into alternative investments.

There were rather no choices apart from holding the cash or to

further continue investing in shares. One more thing to be noted,

since only closed-end funds were floated in market, the investors

disinvested by selling at a loss the in the secondary market.

The performance of mutual funds in India suffered qualitatively. The

1992 stock market scandal, the losses by disinvestments and of

course the lack of transparent rules in the whereabouts rocked

confidence among the investors. Partly owing to a relatively weak

stock market performance, mutual funds have not yet recovered,

with funds trading at an average discount of 1020 percent of their

net asset value.

The supervisory authority adopted a set of measures to create atransparent and competitive environment in mutual funds. Some of

them were like relaxing investment restrictions into the market,

introduction of open-ended funds, and paving the gateway for

mutual funds to launch pension schemes.

The measure was taken to make mutual funds the key instrument for

long-term saving. The more the variety offered, the quantitative will

be investors. At last to mention, as long as mutual fund companies

are performing with lower risks and higher profitability within a short

span of time, more and more people will be inclined to invest until

and unless they are fully educated with the dos and donts of mutual

funds


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MUTUAL FUNDS FOR WHOM?

These funds can survive and thrive only if they can live up to the

hopes and trusts of their individual members. These hopes and

trusts echo the peculiarities which support the emergence and

growth of such insecurity of such investors who come to the rescue

of such investors who face following constraints while making directinvestments:

Limited resources in the hands of investors quite often take

them away from stock market transactions.

Lack of funds forbids investors to have a balanced and

diversified portfolio.

Lack of professional knowledge associated with investment

business unable investors to operate gainfully in the market.

Small investors can hardly afford to have ex-pensive

investment consultations.

To buy shares, investors have to engage share brokers who are

the members of stock exchange and have to pay their

brokerage.

They hardly have access to price sensitive information in time.

It is difficult for them to know the development taking place in

share market and corporate sector.

Firm allotments are not possible for small investors on when

there is a trend of over subscription to public issues.


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WHY MUTUAL FUNDS?

Mutual Funds are becoming a very popular form of investment

characterized by many advantages that they share with other forms

of investments and what they possess uniquely themselves. The

primary objectives of an investment proposal would fit into one or

combination of the two broad categories, i.e., Income and Capital

gains. How mutual fund is expected to be over and above an

individual in achieving the two said objectives, is what attractsinvestors to opt for mutual funds. Mutual fund route offers several

important advantages.

Diversification: A proven principle of sound investment is

diversification, which is the idea of not putting all your eggs in one

basket. By investing in many companies the mutual funds can

protect themselves from unexpected drop in values of some shares.

The small investors can achieve wide diversification on his own

because of many reasons, mainly funds at his disposal. Mutual funds

on the other hand, pool funds of lakhs of investors and thus can

participate in a large basket of shares of many different companies.

Majority of people consider diversification as the major strength of

mutual funds.

Expertise Supervision: Making investments is not a full time

assignment of investors. So they hardly have a professional attitude

towards their investment. When investors buy mutual fund scheme,

an essential benefit one acquires is expert management of the

money he puts in the fund. The professional fund managers who

supervise funds portfolio take desirable decisions viz., what scrips

are to be bought, what investments are to be sold and more

appropriate decision as to timings of such buy and sell. They have


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extensive research facilities at their disposal, can spend full time to

investigate and can give the fund a constant supervision. The

performance of mutual fund schemes, of course, depends on the

quality of fund managers employed.Liquidity of Investment: A distinct advantage of a mutual fund

over other investments is that there is always a market for its unit/

shares. Moreover, Securities and Exchange Board of India (SEBI)

requires the mutual funds in India have to ensure liquidity. Mutual

funds units can either be sold in the share market as SEBI has made

it obligatory for closed-ended schemes to list themselves on stock

exchanges. For open-ended schemes investors can always approach

the fund for repurchase at net asset value (NAV) of the scheme.

Such repurchase price and NAV is advertised in newspaper for the

convenience of investors.

Reduced risks: Risk in investment is as to recovery of the principal

amount and as to return on it. Mutual fund investments on both

fronts provide a comfortable situation for investors. The expertsupervision, diversification and liquidity of units ensured in mutual

funds reduces the risks. Investors are no longer expected to come to

grief by falling prey to misleading and motivating headline leads

and tips, if they invest in mutual funds.

Safety of Investment: Besides depending on the expert

supervision of fund managers, the legislation in a country (like SEBI

in India) also provides for the safety of investments. Mutual funds

have to broadly follow the laid down provisions for their regulations,

SEBI acts as a watchdog and attempts whole heatedly to safeguard

investors interests.

Tax Shelter: Depending on the scheme of mutual funds, tax shelter

is also available. As per the Union Budget-2003, income earned

through dividends from mutual funds is 100% tax-free at the handsof the investors.


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Minimize Operating Costs: Mutual funds having large invisible

funds at their disposal avail economies of scale. The brokerage fee

or trading commission may be reduced substantially. The reduced

operating costs obviously increase the income available forinvestors.

Investing in securities through mutual funds has many advantages

like option to reinvest dividends, strong possibility of capital

appreciation, regular returns, etc. Mutual funds are also relevant in

national interest. The test of their economic efficiency as financial

intermediary lies in the extent to which they are able to mobilize

additional savings and channeling to more productive sectors of the

economy.

TYPES OF RETAIL INVESTORS

The Economic Times survey on retail equity investors in the

secondary market has identified different categories of investors

based on their characteristics. Many questions are raised about the

behavior of the small investor under different circumstances. The

answers to many of these questions and similar others is not difficult

to interpret once we identify the different types of retail investors in

the stock markets.


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The survey shows that there are five different kinds of retail

investors:

Intellectuals

Cavaliers

Reactivates

Opportunists

Gamblers

This classification is based on the attitudes of investors towards

secondary market investments. Lets explain each type of investor

and understand their investment psyche and behavioral patterns.

INTELLECTUALS:

This retail investor group forms around 17% of the total retail

investment class. They are the intelligent investors who follow an

intelligent, individualist approach to investment planning and a well-

defined and deliberate strategy for stock investment. These

investors are self reliant good stock pickers and try to monetize

market knowledge.

Giving proof of their intelligence, they consider low-risk; lowgain

guaranteed return avenues as pass. Also, they believe in and work

towards a well-planned. Asset allocation and seek the right mix of

stability and reliability of returns.The intellectuals are unaffected by shortterm fluctuations and

prefer longterm investments. Moreover, they are disciplined enough

to observe profit targets which they have set for themselves. And as

they invest for the long term, they are not concerned with short term

losses. They manager their money themselves and understand the

industry/sector before investing.

CAVALIERS:


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As high as 49% of the small retail equity investors are cavaliers.

They are those who have lost money in fly-by night schemes.

Therefore, much of their investments are driven by the desire to

recover past losses and make profits in the future. As such, theyinvest aggressively into equities, mostly in volatile sectors in order to

make big gains. However, they will also invest in FDs and insurance

as a precautionary measure. They get tempted to speculate in the

secondary market and once in a while, they actually speculate but

with smaller amounts. The cavaliers try to gather all available

information and compare it with opinions from experts in the media,

but will trust their own judgment before making decisions.

REACTIVISTS:

About 5% of the retail equity investors fall under this category.

These investors basically short-term investors, are impulsive info

addicts who are vulnerable to external influences and as such, they

have no specific investment patterns, They believe that dynamic and

ad hoc investments will result in better profits and are prompted toact on popular opinion rather than systematic planning. As they lack

in confidence, experience and expertise, they constantly rely on

advice from in the know people such as brokers and analysts. They

are extremely anxious about price fluctuations or short-term

declines. They are very skeptical and believe that small declines can

lead to larger losses if not reacted upon immediately. Therefore, the

reactivists constantly seek new information about stocks in which

they are currently invested in, to ensure a feeling of security.

Moreover, their investments apart from equities are solely for tax-

saving purposes.

OPPORTUNISTS:

This class of investors account for 10% of the retail equity investor

universe. This category is defensively pessimistic and prefers to takeonly familiar risks. As they have a low risk tolerance, they are wary


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of volatility in the equity market. They invest into equities by

imitating larger trends rather than with their individual analysis and

consider equity investment as a gamble. They want to be in the

black all the time and as such, prefer popular stocks with immediateprofit potential. Opportunists need positive price movements to

encourage their investments into equities and they will not hunt for

bargains of invest on price declines. But before investing into

equities. They prefer to build a critical mass of fixed income

instruments as they find fixed income options a reassuring way of

safe bets. The opportunistschoice of investments as they find fixed

income options a reassuring way of safe bets. The opportunists

choice of investment is biased towards well known and previously

owned securities, including equities. This investor class is wary of

investing into equities when the market has moved up too high too

soon. So, if you have not invested in the current market, you are

probably an opportunist.

GAMBLERS:19%the retail investor population is made up of not actual investors.

But gamblers. They are the typical thrill seeking traders who link

profitability to personal achievement. They experiment a lot, mostly

driven by instinct and self confidence; as such their stock selection is

more a random exercise that lacks rationale. This class perceives all

securities as tradable commodities to be bought and sold in the

short term. However, they know completely about the risk factors

and therefore, have a tendency to invest only as much as they are

willing to lose. As a part, of the game and this does not act as a

hindrance for future investments. They do not trust brokers, but will

secretly verify their suggestions for fear of missing an opportunity.

They ascertain fair value of stocks on gut feeling rather than any

financial analysis and use sudden downward fluctuations as buyingopportunities.


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MARKETING STRATEGIES ADOPTED BY THEMUTUAL FUNDS

The present marketing strategies of mutual funds can be divided into

two main headings:

Direct marketing

Selling through intermediaries.

Joint Calls

Direct Marketing:

This constitutes 20 percent of the total sales of mutual funds. Some

of the important tools used in this type of selling are:

Personal Selling: In this case the customer support officer or

Relationship Manager of the fund at a particular branch takes

appointment from the potential prospect. Once the appointment is

fixed, the branch officer also called Business Development Associate

(BDA) in some funds then meets the prospect and gives him all

details about the various schemes being offered by his fund. The

conversion rate in this mode of selling is in between 30% - 40%.

Telemarketing: In this case the emphasis is to inform the people

about the fund. The names and phone numbers of the people are


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picked at random from telephone directory. Some fund houses have

their database of investors and they cross sell their other products.

Sometimes people belonging to a particular profession are also

contacted through phone and are then informed about the fund.Generally the conversion rate in this form of marketing is 15% - 20%.

Direct mail: This one of the most common method followed by all

mutual funds. Addresses of people are picked at random from

telephone directory, business directory, professional directory etc.

The customer support officer (CSO) then mails the literature of the

schemes offered by the fund. The follow up starts after 3 4 days of

mailing the literature. The CSO calls on the people to whom the

literature was mailed. Answers their queries and is generally

successful in taking appointments with those people. It is then the

job of BDA to try his best to convert that prospect into a customer.

Advertisements in newspapers and magazines: The funds

regularly advertise in business newspapers and magazines besides

in leading national dailies. The purpose to keep investors awareabout the schemes offered by the fund and their performance in

recent past. Advertisement in TV/FM Channel: The funds are

aggressively giving their advertisements in TV and FM Channels to

promote their funds.

Hoardings and Banners: In this case the hoardings and banners of

the fund are put at important locations of the city where the

movement of the people is very high. The hoarding and banner

generally contains information either about one particular scheme or

brief information about all schemes of fund.

Selling through intermediaries:

Intermediaries contribute towards 80% of the total sales of mutual

funds. These are the people/ distributors who are in direct touch with

the investors. They perform an important role in attracting newcustomers. Most of these intermediaries are also involved in selling


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shares and other investment instruments. They do a commendable

job in convincing investors to invest in mutual funds. A lot depends

on the after sale services offered by the intermediary to the

customer. Customers prefer to work with those intermediaries whogive them right information about the fund and keep them abreast

with the latest changes taking place in the market especially if they

have any bearing on the fund in which they have invested.

Regular Meetings with distributors: Most of the funds conduct

monthly/bi-monthly meetings with their distributors. The objective is

to hear their complaints regarding service aspects from funds side

and other queries related to the market situation. Sometimes,

special training programs are also conducted for the new agents/

distributors. Training involves giving details about the products of

the fund, their present performance in the market, what the

competitors are doing and what they can do to increase the sales of

the fund.

Joint Calls:This is generally done when the prospect seems to be a high net

worth investor. The BDA and the agent (who is located close to the

HNIs residence or area of operation) together visit the prospect and

brief him about the fund. The conversion rate is very high in this

situation, generally, around 60%. Both the fund and the agent

provide even after sale services in this particular case.

Meetings with HNIs: This is a special feature of all the funds.

Whenever a top official visits a particular branch office, he devotes

at least one to two hours in meeting with the HNIs of that particular

area. This generally develops a faith among the HNIs towards the

fund.


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Advantages:Portfolio diversification: - Mutual Funds invest in a well-diversifiedportfolio of securities which enables investor to hold a diversifiedinvestment portfolio (whether the amount of investment is big orsmall)Professional management: - Fund manager undergoes throughvarious research works and has better investment managementskills which ensure higher returns to the investor than what he canmanage on his own.Less risk: - Investors acquire a diversified portfolio of securitieseven with a small investment in a Mutual Fund. The risk in adiversified portfolio is lesser than investing in merely 2 or 3securities.Low transaction cost: -Due to the economies of scale (benefits oflarger volumes), mutual funds pay lesser transaction costs. Thesebenefits are passed on to the investors.Liquidity: - An investor may not be able to sell some of the shares

held by him very easily and quickly, whereas units of a mutual fundare far more liquid.


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Choice of scheme: - Mutual funds provide investors with variousschemes with different investment objectives. Investors have theoption of investing in a scheme having a correlation between itsinvestment objectives and their own financial goals. These schemesfurther have different plans/optionsTransparency: -Funds provide investors with updated informationpertaining to the markets and the schemes. All material facts aredisclosed to investors as required by the regulator.Flexibility: - Investors also benefit from the convenience andflexibility offered by Mutual Funds. Investors can switch theirholdings from a debt scheme to an equity scheme and vice-versa.Option of systematic (at regular intervals) investment andwithdrawal is also offered to the investors in most open-endschemes.

Safety: - Mutual Fund industry is part of a well-regulated investmentenvironment where the interests of the investors are protected bythe regulator. All funds are registered with SEBI and completetransparency is forced.

Disadvantages:-Cost control not in the hands of Investors: -Investor has to payinvestment management fees and fund distribution costs as apercentage of the value of his investments (as long as he holds theunits), irrespective of the performance of the fund.

No customized portfolio: -The portfolio of securities in which afund invests is a decision taken by the fund manager. Investors haveno right to interfere in the decision making process of a fundmanager, which some investors find as a constraint in achievingtheir financial objectives.Difficulty in selecting a suitable fund scheme: - Many investorsfind it difficult to select one option from the plethora offunds/schemes/plans available. For this, they may have to takeadvice from financial planners in order to invest in the right fund toachieve their objectives.

Load structure:-Load FundsMutual Funds incur various expenses on marketing, distribution,advertising, portfolio churning, fund manager's salary etc. Manyfunds recover these expenses from the investors in the form of load.

These funds are known as Load Funds. A load fund may imposefollowing types of loads on the investors:

1. Entry Load -Also known as Front-end load, it refers to the loadcharged to an investor at the time of his entry into a scheme.

Entry load is deducted from the investor's contribution amountto the fund.


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2. Exit Load - Also known as Back-end load, these charges areimposed on an investor when he redeems his units (exits fromthe scheme). Exit load is deducted from the redemptionproceeds to an outgoing investor.

3. Deferred Load - Deferred load is charged to the scheme over aperiod of time.

4. Contingent Deferred Sales Charge (CDSC) - In some schemes,the percentage of exit load reduces as the investor stayslonger with the fund. This type of load is known as ContingentDeferred Sales Charge.

No-load FundsAll those funds that do not charge any of the above mentioned loadsare known as No-load Funds.

Tax exemption:Tax-exempt FundsFunds that invest in securities free from tax are known as Tax-exempt Funds. All open-end equity oriented funds are exempt from

distribution tax (tax for distributing income to investors). Long termcapital gains and dividend income in the hands of investors are tax-free.Non-Tax-exempt FundsFunds that invest in taxable securities are known as Non-Tax-exemptFunds. In India, all funds, except open-end equity oriented funds areliable to pay tax on distribution income. Profits arising out of sale ofunits by an investor within 12 months of purchase are categorized asshort-term capital gains, which are taxable. Sale of units of an equityoriented fund is subject to Securities Transaction Tax (STT). STT is

deducted from the redemption proceeds to an investor.


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Risk Hierarchy of Different Mutual Funds:-Thus, different mutual fund schemes are exposed to different levelsof risk and investors should know the level of risks associated withthese schemes before investing. The graphical representationhereunder provides a clearer picture of the relationship betweenmutual funds and levels of risk associated with these funds:


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LITERATURE REVIEW

Literature on mutual fund performance evaluation is enormous.

A few research studies that have influenced the preparation of

this paper substantially are discussed in this section.

Sharpe, William F. (1966) suggested a measure for the

evaluation of portfolio performance. Drawing on results

obtained in the field of portfolio analysis, economist Jack L.

Treynor has suggested a new predictor of mutual fund

performance, one that differs from virtually all those used

previously by incorporating the volatility of a fund's return in a

simple yet meaningful manner.

Michael C. Jensen (1967) derived a risk-adjusted measure of

portfolio performance (Jensens alpha) that estimates how mucha managers forecasting ability contributes to funds returns. As

indicated by Statman (2000), the e SDAR of a fund portfolio is

the excess return of the portfolio over the return of the

benchmark index, where the portfolio is leveraged to have the

benchmark indexs standard deviation.


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S.Narayan Rao, evaluated performance of Indian mutual funds

in a bear market through relative performance index, risk-

return analysis, Treynors ratio, Sharpes ratio, Sharpes

measure , Jensens measure, and Famas measure. The study

used 269 open-ended schemes (out of total schemes of 433) for

computing relative performance index. Then after excluding

funds whose returns are less than risk-free returns, 58 schemes

are finally used for further analysis. The results of performance

measures suggest that most of mutual fund schemes in the

sample of 58 were able to satisfy investors expectations by

giving excess returns over expected returns based on both

premium for systematic risk and total risk. Bijan Roy, et. al.,

conducted an empirical study on conditional performance of

Indian mutual funds. This paper uses a technique called

conditional performance evaluation on a sample of eighty-nine

Indian mutual fund schemes .This paper measures theperformance of various mutual funds with both unconditional

and conditional form of CAPM, Treynor- Mazuy model and

Henriksson-Merton model. The effect of incorporating lagged

information variables into the evaluation of mutual fund

managers performance is examined in the Indian context. The

results suggest that the use of conditioning lagged informationvariables improves the performance of mutual fund schemes,

causing alphas to shift towards right and reducing the number

of negative timing coefficients. Mishra, et al., (2002) measured

mutual fund performance using lower partial moment. In this

paper, measures of evaluating portfolio performance based on

lower partial moment are developed. Risk from the lower partial


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moment is measured by taking into account only those states in

which return is below a pre-specified target rate like risk-free

rate. Kshama Fernandes (2003) evaluated index fund

implementation in India. In this paper, tracking error of index

funds in India is measured .The consistency and level of

tracking errors obtained by some well-run index fund suggests

that it is possible to attain low levels of tracking error under

Indian conditions. At the same time, there do seem to be

periods where certain index funds appear to depart from the

discipline of indexation. K. Pendaraki et al. studied construction

of mutual fund portfolios, developed a multi-criteria

methodology and applied it to the Greek market of equity

mutual funds. The methodology is based on the combination of

discrete and continuous multi-criteria decision aid methods for

mutual fund selection and composition. UTADIS multi-criteria

decision aid method is employed in order to develop mutualfunds performance models. Goal programming model is

employed to determine proportion of selected mutual funds in

the final portfolios.


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NEED FOR THE STUDY

To study the investors intention with regard to the products in

mutual funds and their features.

To study awareness level of customers.

To study the preference and satisfaction level of investors.

To apprehend mutual funds movement in the market.

To analyze how it benefited to investors.

With the awareness that is increasing day by day regarding investing

in secondary market and speculation, the comfort and flexibility the

customers seeking, there is a definite requirement to study.

In the fast growing competitive market scenario it is always required

to have an idea of changes that are taking place in the market fromtime to time. Without which one cant serve their customers

properly.


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OBJECTIVES OF THE STUDY

1. To enhance our knowledge about the subject.

2. Evaluate Perception towards risk involved in mutual funds in

comparison to other financial avenues.3. How effectively investment houses are reaching their

customers.

4. To have a vivid picture of major players in Mutual Fund Industry

in India.

5. To study how the promotional activities of Mutual Fund

products in India.

6. To study the pattern of consumer behavior within the available

investment options and to test awareness among the consumer

about the various mutual fund houses.


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SCOPE OF THE STUDY

In today's complex financial environment, investors have unique

needs, which are derived from their risk appetite and financial goals.

Mutual funds (customized portfolios) recognize this, and

manage the investments professionally to achieve specific

investment objectives, and not to forget, relieving the investors from

the day-to-day hassles which investment require.

It is offers professional management of equity and debtdiversified investment of the investor with an aim to deliver

consistent return with an eye on risk.

Identify the key sectorial stocks in each portfolio.

To look out for new prospective customers who are willing to

invest in Mutual Funds of Franklin Templeton, Visakhapatnam.

To find out the Franklin Templeton Investments, Mutual Funds

effectiveness in the current market situation.

It also covers the scenario of the Investment Philosophy of a Fund

Manager.


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RESEARCH AND METHODOLOGY

COLLECTION OF DATA:

Primary data: - Employees and Customers of share khan financial

services Pvt Ltd, Tirupur, and other investor out of Share Khan

Limited (by personally in touch with them, and by asking queries to

them).

Methods: - Personal interaction.

Secondary data: - Web site of Share Khan Limited, brochures,

textbooks and other web sites etc..

Mainly the data was collected by interacting with people working atvarious levels in Share Khan Limited and outside investors and

websites.

RESEARCH METHODOLOGY:

Sample Method : Non-Probability Sampling

Sample Size : 100

Sources of Data

Primary Data : Structured Non-Disguised Questionnaire

Secondary Data : Reference from distributors.

The whole study is based upon primary and secondary data.

Therefore, information has been collected from interacting with

different investors and from various magazines, journals, websites,and bulletins.


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PRESENTATION OF THE STUDY:

The study has been presented in the organized structure or the

format which has been provided by the respective authority. In the

first chapter under the theoretical framework the concept of finance

has been described in detail with its meaning, definition, evolution

and the various modern and the traditional approaches in the field of

finance. In the column of topic related concepts there was a detailed

description about the topic of study, which is study oncustomer

attitude, preference and satisfaction level towards

investment in mutual fund. In its context it was detailed allot the

process and the importance of customer satisfaction in the

organization as well as industry. In the column of review of literature

the relation and the importance of the customer satisfaction with the

company, investors value, etc has been presented with the reviews

of the various scholars in the field of finance.

There was a clear description about the importance and the scope of

study and the main objectives for the purpose of conducting the

study were made clear. The research design adopted with different

methods and tables and there was clear presentation of the

limitations of the study.


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In chapter three the overview of the whole industry at global level

and also at the country level has been mentioned with actual facts

which were done same in the case of the company profile. Once the

topic profile in the organisation was made clear the study wassupported with clear analysis of data and the fair presentation of the

findings, suggestion and the conclusion at the end of the details

presented for the study.

LIMITATIONS

The study is limited to Thirupur city only.

The time constraint was one of the major problems.

The study is limited to the different schemes available under

the mutual funds selected.

All the customers are online so only a few customers were in

contact.

As all the information is given by the customers it may be

biased.

Most of the customers were not ready to reveal the data about

their investments.

Most of clients unaware of these options so that they didnt

responded well.

The lack of information sources for the analysis part.


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INDUSTRY PROFILE

The capital markets perform an important function in

mobilization of resources liquidity of the stock markets is an

important factor effecting growth. Many profitable projects

require long term finance; however investors do not relinquish

their savings for a long time. Capital market is a group of

interrelated markets in which capital is raised in financial form,

is lent and borrowed (or) raised in a varying time periods (such

as short term and long term). In a developing economy, the

business of capital market is the movement of capital to the

point of highest yield. A liquid stock market ensures a quick exit

without incurring heavy losses (or) costs. Stock market is a

vehicle through which long term finance is characterized for the

various needs of industry, commerce, government and local

authorities. Thus development of financial markets is necessary

for creating conductive climate for investment and economic

growth.


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The tone of capital market largely depends on the

economy of the country and therefore, depends on the

available savings and investments on one hand the

performances of the industry on the other. Among other factors

that would influence the tone of the capital and stock market

are the monsoon, the agriculture, the industry growth and in

particular the performance of the corporate sector, as they too

have a controlling effect on the economy of the country. In

particular the performance of the corporate sector, as they too

have a controlling effect on the economy of the country. In

particular the government policy, the psychological expectation

and host of other factors play a very prominent role in

influencing the capital markets.

The capital market in India can be categorized into

two types:

Organized

Unorganized

The funds for long term capital come from individual

investors, corporate savings, government savings, foreign

investments, banks, financial institutions, investments trusts,

Life Insurance Corporation and international financial agencies,

industry, government and semi government institutions are the

potential users in the organized sector itself. Since the supply of

funds for unorganized sector falls short of demand, the interest

rates are kept high.

The economic progress of a country is largely influenced

by the availability of savings for investment and hence there is

a need for the mobilization of the savings for investment and


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hence there is a need for the mobilization of savings for

investment and hence on a massive scale. Indigenous bankers

in town and money lenders in rural areas supply long term

finance in the UN organized sector. There is no link between the

organized and unorganized sector (or) within the unorganized

sector itself. There is a need for the mobilization savings on a

massive scale.

The economic progress of a country is largely influenced

by the availability of savings for investment and hence there is

need for the mobilization of savings for investment and hence

on a massive scale. Indigenous bankers in town and money

lenders in rural areas supply long term finance in the

unorganized sector. There is no link between the organized and

unorganized sector (or) within the unorganized sector itself.

There is a need for the mobilization savings on a massive scale.

In developing countries like India, there is a great set backin mobilization process due to various reasons. The attitude of

the public; their affiliation to traditional investment in land and

property, bullions and hoardings and above all the risk of

uncertainty are some of the reasons. The fiscal commission

(1949-50) recognized the fact that in India there is an acute of

long term capital for industrial ventures. But it was not until1954-55 that the central board of directors of the reserve bank

permitted established business house to raise their new capital

by issue of debentures at comparatively high rate of interest.

Since the capital market is a place where the private savings

are kept for a very long period, it is highly necessary to protect


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the interests of these investors, if the capital market has to

grow.

To safe guard the investors interest, government

has to enacted laws such as:

The securities act , 1938 ( together with the life

insurance corporation act 1956 )

The capital issues (control and regulation act, 1943).

The banking companies act, 1949.

The provident fund act and the rules, 1957.

The Indian companies act, 1956.

The deposit insurance scheme, 1960.

The monopolies and restrictive trade practices act,

1969.

A new era in the capital market in India was ushered inJuly, 1991 with the starting of a new process of financial and

economic deregulation. Beginning With the devaluation of

rupee by about 20% in July, 1991, industrial policy was totally

reshaped to dispense with licensing of all industries except 18

scheduled industrial groups. Further, removal MRPT limit on

assets of Companies, dilution of FERA (Foreign Exchange

Regulation Act). And foreign trade liberalization etc, were some

of the other reforms. Fiscal Policy was rationalized to reduce the

central budget deficit and public Sector under takings were

freed from government controls by professionalizing their

management , giving greater autonomy to them and by

disinvestment of their shares in favor of the public.


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ESTABLISHMENT OF SEBI

The Securities and Exchange Board of India was establishedon April 12, 1992 in accordance with the provisions ofthe Securities and Exchange Board of India Act, 1992.

PREAMBLE

The Preamble of the Securities and Exchange Board of Indiadescribes the basic functions of the Securities and ExchangeBoard of India as

..to protect the interests of investors insecurities and to promote the development of, and toregulate the securities market and for mattersconnected therewith or incidental thereto

BOMBAY STOCK EXCHANGES

The 'BSE SENSEX' is a value-weighted index composed of 30

stocks and was started on January 1, 1986. The Sensex is

regarded as the pulse of the domestic stock markets in India. It

consists of the 30 largest and most actively traded stocks,

representative of various sectors, on the Bombay Stock

Exchange. These companies account for around fifty per cent of

the market capitalization of the BSE. The base value of the

Sensex is 100 on April 1, 1979, and the base year of BSE-

SENSEX is 1978-79.

A governing board comprising of 9 elected directors, 2 SEBI

nominees, 7 public representatives and an executive director is

the apex body, which decides the policies and regulates the

affairs of the exchange.
http://www.sebi.gov.in/acts/act15ac.htmlhttp://en.wikipedia.org/wiki/Stock_market_indexhttp://www.sebi.gov.in/acts/act15ac.htmlhttp://en.wikipedia.org/wiki/Stock_market_index


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The BSE SENSEX consists of the following companies:

Bajaj Auto Limited, Bharti Airtel Ltd., Bharat Heavy Electricals

Ltd., Cipla Ltd., DLF Ltd., HDFC, HDFC Bank Ltd., Hero Honda

Motors Ltd., Hindalco Industries Ltd., Hindustan Unilever Ltd.,

ICICI Bank Ltd., Infosys Technologies Ltd., ITC Ltd., Jaiprakash

Associates Ltd., Jindal Steel & Power Ltd., Larsen & Toubro Ltd.,

Mahindra & Mahindra Ltd., Maruti Suzuki India Ltd., NTPC Ltd.,

ONGC Ltd., Reliance Industries Ltd., Reliance Communications

Ltd., Reliance Infrastructure Ltd., State Bank of India, Sterlite

Industries (India) Ltd., Tata Motors Ltd., Tata Power Company

Ltd., Tata Steel Ltd., Tata Consultancy Services Ltd., Wipro Ltd.

At regular intervals, the Bombay Stock Exchange (BSE)

authorities review and modify its composition to be sure it

reflects current market conditions. The index is calculated

based on a free float capitalization method; a variation of the

market cap method. Instead of using a company's outstanding

shares it uses its float, or shares that are readily available for

trading. The free-float method, therefore, does not include

restricted stocks, such as those held by promoters, government

and strategic investors.

Initially, the index was calculated based on the full market

capitalization method. However this was shifted to the free

float method with effect from September 1, 2003. Globally, the

free float market capitalization is regarded as the industry best

practice.

As per free float capitalization methodology, the level of index

at any point of time reflects the free float market value of 30


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component stocks relative to a base period. The Market

Capitalization of a company is determined by multiplying the

price of its stock by the number of shares issued by the

company. This Market capitalization is multiplied by a free float

factor to determine the free float market capitalization. Free

float factor is also referred as adjustment factor. Free float

factor represent the percentage of shares that are readily

available for trading.

The Calculation of Sensex involves dividing the free float

market capitalization of 30 companies in the index by a number

called Index divisor. The Divisor is the only link to original base

period value of the Sensex. It keeps the index comparable over

time and is the adjustment point for all Index adjustments

arising out of corporate actions, replacement of scrips, etc.

The index has increased by over ten times from June 1990 to

the present. Using information from April 1979 onwards, the

long-run rate of return on the BSE Sensex works out to be

18.6% per annum, which translates to roughly 9% per annum

after compensating for inflation.

NATIONAL STOCK EXCHANGE:The NSE was incorporated in Now 1992 with an equity capital of Rs

25 crore. The International securities consultancy (ISC) of Hong Kong

has helped in setting up NSE. ISE has prepared the detailed business

plans and installation of hardware and software systems. The

promotions for NSE were financial institutions, insurances
http://en.wikipedia.org/wiki/Inflationhttp://en.wikipedia.org/wiki/Inflation


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companies, banks and SEBI capital market ltd, Infrastructure leasing

and financial services ltd and stock holding corporation ltd.

It has been set up to strengthen the move towards

professionalisation of the capital market as well as provide nationwide securities trading facilities to investors. NSE is not an exchange

in the traditional sense where brokers own and manage the

exchange. A two tier administrative set up involving a company

board and a governing aboard of the exchange is envisaged. NSE is

a national market for shares PSU bonds, debentures and government

securities since infrastructure and trading facilities are provided.

NSE-NIFTY:

The NSE on April 22, 1996 launched a new equity Index. The new

index, which replaces the existing NSE-100 index, is expected to

serve as an appropriate Index for the new segment of futures and

options.

Nifty means National Index for Fifty Stocks. The NSE-50 comprises50 companies that represent 20 broad Industry groups with an

aggregate market capitalization of around Rs. 1,70,000 crs. All

companies included in the Index have a market capitalization in

excess of Rs 500 crs each and should have traded for 85% of trading

days at an impact cost of less than 1.5%. The base period for the

index is the close of prices on Nov 3, 1995, which makes one year of

completion of operation of NSEs capital market segment. The base

value of the Index has been set at 1000.

ORGANIZATION PROFILE

Franklin Templeton Investments has grown from being

recognized as one of the best small companies in America to

being considered a premier global investment management


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organization. We offer clients a valuable perspective shaped by

our six decades of experience, investment expertise and

growing global reach.

Franklin Templeton GLOBAL

Franklin Resources, Inc. is a global investment management

organization known as Franklin Templeton Investments. We have an

extensive global presence, including offices in over 30 countries and

clients in more than 150. Our common stock is listed on the New

York Stock Exchange under the ticker symbol BEN and is included in

the Standard & Poor's 500

Index. As of December 31, 2010, wemanage over $670 billion in investment vehicles for individuals,

institutions, pension plans, trusts, partnerships and other clients.

A PREMIER GLOBAL INVESTMENT MANAGEMENTORGANIZATION

World-Class Investment Management

A pure investment management organization

Multi-manager structure encompassing well-known brands

across multiple asset classes

94% of U.S.-registered fund assets ranked in top two Lipper

quartiles for 10-year period ended December 31, 20101

Extensive Global Presence

A pioneer in global investing.

Clients in 150+ countries.

22 countries/regions with over U.S. $1 billion in AUM.

Largest cross-border fund manager.


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More than 500 investment professionals who speak over 25

languages.

Financial Strength

Diversified by investment objective, client type, and

geographical region

Strong balance sheet

Excellent credit ratings

Values-Based Culture

Put clients first

Build relationships

Work with integrity

Franklin Templeton INDIA

Franklin Templeton's association with India dates back to more t han

a decade as an investor. As part of the group's major thrust oninvesting in markets around the world, the India office was set up in

1996 as Templeton Asset Management India Pvt. Limited. It flagged

off the mutual fund business with the launch of Templeton India

Growth Fund in September 1996, and since then the business has

grown at a steady pace.

A Long term commitment:

Since starting its operations in India, Franklin Templeton has

invested a considerable amount of time, effort and resources

towards investor and distributor education, the belief being - to be

successful in the long term, the fundamentals need to be corrected,

at whatever cost! This has resulted in various advertising campaigns

aimed at educating investors, participation in seminars and

distributor training programs. Franklin Templeton has played a


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pivotal role in steering the industry to its current stage, and as long

term players, we continue to strive to achieve the objective of

'making mutual funds an investment of choice' for both individual

and institutional investors.

In July 2002, Franklin Templeton India acquired Pioneer ITI, another

leading fund house in India to create an organization with rich

investment experience over market cycles, one of the most

comprehensive product portfolios, footprint across the country and

an in-house shareholder servicing function. The huge synergies that

existed in the two organizations have helped the business grow at arapid pace, catapulting the company to among the top two fund

houses in India.

Our Vision

To be the premier global investment management organization by

offering high quality investment solutions, providing outstanding

service and attracting, motivating and retaining talented individuals.

Investment philosophy

Our investment philosophy that follows a disciplined approach to

investing with a strong focus towards process orientation is the

common thread running through all our schemes. The key guiding

principle to our investment philosophy is - maximize the risk-

adjusted returns for our investors in the respective asset classes,

and create wealth for them over the long-term. We have successfully

demonstrated the ability to achieve this in the past, and are

confident that our process-oriented investment approach will help us

sustain the same in the years to come.

Equity


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While broad economy and sector trends serve as a broad guideline,

Franklin Templeton portfolio managers are essentially 'bottom-up'

investors, focusing more on individual stocks and their potential to

deliver long term capital appreciation. While quantitative analysisusing proprietary research model serves as a first stage filter, the

research team and portfolio managers speak with key management

and observe operations onsite to get a meaningful insight into a

company's ability to translate vision into reality.

Debt

The overall objective is to minimize both liquidity and credit risk. Our

fixed income team looks to arrive at a general maturity/duration

range for the portfolio in relation to the market based on its interest

rate outlook, which is arrived after a rigorous and close monitoring of

various macro variables. The shifts within this range are thendetermined by short term cyclical trends in the economy. They look

to manage interest rate risk across different asset class and duration

buckets, in order to optimise risk-adjusted returns. All the

investment options are thoroughly analysed to ensure that credit risk

is kept at the minimum level. Any major shifts in portfolio strategy

are based on long-term trends, as opposed to short-term aberrations

in interest rates.


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ORGANIZATIN STRUCTURE

Name Designation

Charles B. Johnson Chairman of the Board

Rupert H. Johnson,Jr.

Vice Chairman

Gregory E.

Johnson

Chief Executive Officer President

Vijay C. Advani Executive Vice President - Global AdvisoryServices

Jennifer M.Johnson

Executive Vice President Chief OperatingOfficer

Kenneth A. Lewis Executive Vice President Chief FinancialOfficer

John M. Lusk Executive Vice President - InvestmentManagement

Craig S. Tyle Executive Vice President General Counsel

William Y. Yun Executive Vice President - AlternativeStrategies

Sharekhan Financial Services Pvt. Ltd

Name and addressShare Khan Financial Services India pvt ltd.

569,N no.342 opp canara bankThattan thottam, thirupur-641604


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Name and designation:Kathiresan.M (Business Partner)

No of Persons employed: Two

Name of the industry: Mutual FundsWhether seasonal: NoDate of Opening: 30th Aug 2002.Details of Head Offices/branches:Franklin Templeton Asset management India pvt ltdLevel 4, wockhardt towers, Bandra-Kurla complex,Bandra East, Mumbai 400051.No of employees: 424Person responsible to receive the notice on behalf of employees

under payment of gratuity act 1972 and the rules framed thereunder.Authorized personKaran KapadiaVP & Regional sales head.

HISTORY AND OVERVIEW OF FRANKLIN

TEMPLETON

In the year 1940:

The company was founded in 1947 in New York by Rupert H.

Johnson, Sr., who ran a successful retail brokerage firm from an

office on Wall Street. He named the company for U.S. founding

father Benjamin Franklin because Franklin epitomized the ideas of

frugality and prudence when it came to saving and investing. Thecompany's first line of mutual funds, Franklin Custodian Funds, was a


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series of conservatively managed equity and bond funds designed to

appeal to most investors.

In the year 1950:

After Rupert Sr. retired, his son, Charles B. Johnson (Charlie), tookover as president and chief executive officer in 1957 at age 24.

There were only a handful of employees at that time and the funds

had total assets under management of $2.5 million. Franklin was

swimming against the tide because insurance companies dominated

the middle class investing markets, but Charlie was convinced that

he had a good story to tell.

In the year 1960:

By the early 1960s Charlie and his team's persistence was paying off

and the company was growing albeit slowly. It was a struggle to

keep up with the day-to-day demands of the business and Charlie

continued to wear many hatsmutual fund manager, wholesaler

accountant. Rupert Johnson, Jr., Charlie's brother, joined the

company in 1965 and also took on multiple roles.

In the year 1970:

Franklin went public in 1971, which gave Charlie and team the

capital needed to grow the business and position it for the future. In

1973, the company acquired Winfield & Company, a San Mateo,

California-based investment firm, and moved Franklin's offices from

New York to California. The combined organization had close to $250

million in assets under management and approximately 60

employees. In 1979, Franklin Money Fund began a growth surge that

made it Franklin's first billion-dollar fund and launched the

company's tremendous asset growth in the 1980s.

In the year 1980:

Starting in 1980, the company's total assets under management

doubled (or nearly doubled) every year for the next six years. The


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company's stock began trading on the New York Stock Exchange in

1986 under the ticker symbol "BEN". In the same year, the company

opened its first office outside North America in Taiwan. In 1988,

Franklin acquired L.F. Rothschild Fund Management Company.Assets under management for Franklin grew from just over $2 billion

in 1982 to more than $40 billion in 1989 (the crash of 1987 had little

impact on Franklin's income and bond funds). Not one to rest on

their laurels, management was concerned about Franklin's heavy

emphasis on fixed income investments that had become the

company's bread and butter.

In the year 1990:

Strategic acquisitions in the 1990s helped Franklin diversify its

investment management capabilities beyond fixed income and also

expand its global footprint throughout Europe and Asia. In 1992,

after striking a deal with famed global investor Sir John Templeton

for acquisition of Templeton, Galbraith & Hansberger Ltd., Charlie

was named Fund Leader of the Year for spearheading what was then

the largest merger of an independent mutual fund company in

history. Templeton gave the company a strong portfolio of

international equity funds as well as the expertise of emerging

markets guru Dr. Mark Mobius, who currently leads a team of

emerging markets analysts and manages emerging markets

portfolios. Dr. Mobius has spent more than 30 years working in

emerging markets all over the world. Then in 1996, in an effort to

broaden its line of domestic equity products, Franklin Templeton

bought Heine Securities Corporation, investment advisor to Mutual

Series Fund, Inc., from Wall Street icon Michael Price.

In the year 2000:


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Several more key acquisitions solidified the company's position as a

premier global investment management organization: Bissett in

2000, Fiduciary Trust in 2001 and Darby in 2003. In 2005, Gregory E.

Johnson (Greg), Charlie's son, became chief executive officer,assuming overall responsibility for leading Franklin Templeton

Investments. Greg had grown up in the business and worked his way

through the organization beginning on the trading desk at age 24 in

1985.

Fundamental Approach

Our investment decisions are guided more by what we believe in,

less by what the market thinks. That is the reason once we buy into

a stock, or take a maturity position in a debt portfolio based on our

fundamental research and analysis, we stick to our position without

paying heed to market rumours and whisper estimates. We believe

that while technical can rule the roost in the short term, it is the

fundamentals that prove rewarding over time.

Long Term Orientation

Franklin Templeton's portfolio managers are strong believers in

consistently delivering good performance. The key word is

consistency. We believe that it is not important to be top performer

at any time and we attach more importance to being among the topquartile in the peer group consistently, and this requires taking a

long-term view, even at the cost of temporary underperformance.

Team Approach

While individual portfolio managers are the ultimate decision makers

for the scheme they manage, the belief is that working together can

achieve greater results than acting alone. That is why every stock


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that is researched by the analysts is discussed intensively at regular

investment team meetings, and the analysis is available to all

investment team members on a common platform. Moreover, the

high degree of interaction between investment team membersacross the globe helps share and learn from each other's experience

and expertise. The regular awards and top ratings accorded to

Franklin Templeton schemes are recognition of their consistently

superior performance across asset classes, and through market and

economic cycles. They also reflect Franklin Templeton's long

cherished values of choosing the long-term, disciplined and team

approach to managing its funds and business.


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Highlights of the Quarter

Record assets under management of $670.7 billion and long-

term sales of $54.9 billion.

Long-term net new flows of $3.4 billion, net of the previously

announced advisory account redemption of $12.0 billion.

Tax-free fixed-income funds experienced net outflows of $2.0

billion, but almost half of that was exchanged into other

Franklin Templeton funds.

Announced a new strategic relationship with Pelagos Capital

Management and the acquisition of Rensburg Fund

Management, a U.K. equity manager.

Earning per share

CORPORATE GOVERNANCE GUIDELINESThese Corporate Governance Guidelines (the Guidelines) havebeen adopted by the Board of Directors (the Board) of Franklin

Resources, Inc. (the Company or Corporation) in connection withits oversight of the Companys management and business affairs.


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Independence of Directors: A majority of directors must be

independent directors in accordance with the corporate

governance listing standards.

Director Qualifications and Selection: The CorporateGovernance Committee of the Board is responsible for

establishing a policy setting forth the specific, minimum

qualifications that the Corporate Governance Committee

believes must be met by a nominee recommended by the

Corporate Governance Committee for a position on the Board.

Term Limits: The Board does not believe that it should establish

term limits for its members. The Board recognizes the value of

continuity of directors who have experience with the Companyand who have gained over a period of time a level of

understanding about the Company and its operations

Meetings and Preparation: Directors are expected to regularly

attend Board meetings and meetings of committees on which

they serve, to spend the time needed in preparation for such

meetings and to meet as frequently as they deem necessary to

properly discharge their responsibilities.

Meeting Agendas: The Chairman of the Board and theCorporate Secretary will establish and disseminate the agenda

for each Board meeting. Each Board member is free to suggest

the inclusion of items on the agenda. Each Board member is

free to raise at any Board meeting subjects that are not on the

agenda for that meeting.

Annual Performance Evaluation: The Board, through its

delegation of oversight to the Corporate Governance

Committee, shall annually review its own performance in such

manner as it deems appropriate to determine whether the

Board and its committees are functioning effectively.

Review of Corporate Governance Guidelines: The Corporate

Governance Committee, as appropriate, shall periodically

review and reassess the adequacy of these Guidelines to

determine whether any changes are appropriate and

recommend to the Board any such changes for the Boards

approval.

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