Amfi Short Notes Final12 (autosaved).pdf

Mutual Fund (AMFI) PREFACE

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Mutual Fund (AMFI)

AMFI – MUTUAL FUND DISTRIBUTOR Exam Pattern

Test duration No. of Question Maximum Marks Pass% Negative Marking

120 Min. 100 100 50 25%

Key to Success 

Never attempt all question due to negative marking.



If any confusion in any question kindly leave the question.



Always attempt the question first in which you are confident.



The average question atttempted is around 85%.



Always get an confirmation that 75% question are attempted correctly



Before submit the paper get a retotal of the question attempted

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Mutual Fund (AMFI) INDEX 1. CONCEPT AND ROLE OF A MUTUAL FUND…………………………………4

2. FUND STRUCTURE AND CONSTITUTENTS…………………………………11

3. LEGAL AND REGULATORY ENVIRONMENT……………………………….15

4. OFFER DOCUMENT………………………………………………………………21

5. FUND DISTRIBUTION AND CHANNEL MANAGEMENT PRACTICE……24 6. ACCOUNTING, VALUATION AND TAXATION …………………………….27 7. INVESTOR SERVICES …………………………………………………………..34

8. RETURN, RISK AND PERFORMANCE OF FUND…………………………..42

9. SCHEME SELECTION…………………………………………………………...52

10. SELLING THE RIGHT INVESTMENT PRODUCTS………………………...55

11. HELPING INVESTORS WITH FINANCIAL PLANNING…………………..58

12. RECOMMENDING MODEL PORTFOLIO AND FINANCIAL PLAN…….61

13. MOCK TEST A. SAMPLE PAPER -1…………………………………………………………..64 B. SAMPLE PAPER -2…………………………………………………………..79 14. COURSES OFFERED……………………………………………………………91

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Mutual Fund (AMFI) CHAPTER 1 CONCEPT AND ROLE OF A MUTUAL FUND 1. Introduction a. Concept of Mutual Fund - Vehicle to mobilize moneys from investors - Invest in different markets and securities - Investment objectives agreed upon, between the mutual fund and the investors - Mutual funds can also act as a market stabilizer, in countering large inflows or outflows from foreign investors b. Why Mutual Fund Schemes? - Various investors have different investment preferences - Mutual funds mobilize different pools of money, Such pool of money is call a mutual fund scheme c. Advantages of Mutual Funds for Investors - Professional Management - Affordable portfolio Diversification - Economics of Scale - Liquidity - Tax deferral - Tax benefits - Convenient options - Investment comfort - Regulatory comfort - Systematic approach to investment d. Limitations of Mutual Fund - Lack of portfolio customization - Choice overload - No control over costs 2. Types of Funds a. Open –Ended Funds, Close –Ended Funds and Interval Funds - Open – Ended Fund: Open for investors to enter or exit at any time, even after the NFO - Ongoing entry and exit of investors implies that the unit capital in an open –ended fund would keep changing on a regular basis - Close –Ended Funds: have a fixed maturity. - Investor can buy units of a close –ended scheme, from the fund, only during its NFO - Interval Funds: largely close –ended, but become open –ended at pre –specified intervals - Open ended between January 1 to 15, and July 1 to 15, each year b. Actively Managed Funds and Passive Funds

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Mutual Fund (AMFI) -

Active managed funds: are funds where the fund manager has the flexibility to choose the investment portfolio - Investor expect actively managed funds to perform better than the market - Passive Funds: invest on the basis of a specified index, whose performance it seeks to track - A passive fund tracking the BSE Sensex would buy only the shares that are part of the composition of the BSE Sensex - Performance of these funds tends to mirror the concerned index - Such scheme also called Index Schemes c. Debt, Equity and Hybrid Funds - Equity Schemes: Invest largely in equity shares and equity –related investments like convertible debentures - Such schemes are called equity schemes - Debt Funds: Schemes with an investment objective that limits them to investments in debt securities like treasury Bills, Government Securities, Bonds and Debentures are called Debt Funds - Hybrid Funds: have an investment charter that provides for a reasonable level of investment in both debt and equity d. Types of Debt Funds ‘ I. Gilt Funds - Invest in only treasury bills and government securities, which do not have a credit risk II. Diversified debt funds - Invest in a mix of government and non –government debt securities III. Junk bond schemes or high yield bond schemes - Invest in companies that are of poor credit quality - Operate on the premise that the attractive returns offered by the investee companies makes up for the losses arising out of a few companies defaulting IV. Fixed Maturity Plans - A kind of debt fund where the investment portfolio is closely aligned to the maturity of the scheme V. Floating Rate Funds - Invest largely in floating rate debt securities - Debt securities where the interest rate payable by the issuer changes in line with the market VI. Liquid Schemes - Variant of debt schemes that invest only in debt securities where the money will be repaid within 91 –days e. Types of Equity Funds I. Diversified Equity Fund - Invest in a diverse mix of securities that cut across sectors II. Sector Funds

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Mutual Fund (AMFI) -

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f. g. h. i. -

Invest in only a specific sector For example a banking sector fund will invest in only shares of banking companies III. Thematic Funds Invest in line with an investment theme For example, an infrastructure thematic fund might invest in shares of companies that are into infrastructure construction, infrastructure toll –collection, cement, steel, telecom, power etc. IV. Equity Linked Savings Schemes (ELSS) Offer tax benefits to investors V. Equity Income / Dividend Yield Schemes Invest in securities whose shares fluctuate less and dividends represents a larger proportion of the returns on those shares VI. Arbitrage Funds Contrary positions in different markets/ securities, such that the risk is neutralized, but a return is earned Buying a share in BSE, and simultaneously selling the same share in the NSE at a higher price They take contrary positions between the equity market and the futures and options market Types of Hybrid Funds I. Monthly Income Plan Declare a dividend every month Invests largely in debt securities II. Capital Protected Schemes Close ended schemes, which are structures to ensure that investors get their principal back, irrespective of what happens to the market Gold Funds I. Gold Exchange Traded Fund An index fund that invests in gold NAV of such funds moves in line with gold prices in the market II. Gold Sector Funds Fund will invest in shares of companies engaged in gold mining and processing Shares are more closely linked to the probability and gold reserves of the companies Real Estate Funds Exposure to real estate Commodity Funds Commodities as an assets class includes; food crop, spices and fibers Investment objective of commodity funds would specify which of these commodities it proposes to invest in. Such funds can be called as commodity ETf or Commodity Sector Funds

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Mutual Fund (AMFI) j. International Funds - Funds that invest outside the country - One way for the fund to manage the investment is to hire the requisite people who will manage the funds - An alternative route would be to tie up with a foreign fund(called host fund) - In India, it will launch what is called a feeder fund - Local investors invest in rupees for buying the Units - The rupees are converted into foreign currency for investing abroad - They need to be re –converted into rupees when the moneys ae to be paid back to the local investors k. Fund of Funds - Funds can be structured to invest in various other funds, whatever in India or abroad, such funds are called Funds of Funds l. Exchange Traded Funds - They are open –ended index funds that are traded in a stock exchange - Facilitate such transaction in the stock market, the mutual fund appoints some intermediaries as market makers, whose job is to offer a price quote for buying and selling units at all times - A key benefit of an ETF is that investors can buy and sell their units in the stock exchange, at various prices during the day that closely track the market at the time 3. Key developments over the years - AUM of the industry, as of February 2010 has touched Rs 766,869 crore from 832 schemes offered by 38 mutual funds QUESTIONS 1. The number of mutual fund schemes in India is about: a. 100 b. 500 c. 800 d. 2000 2. Open –ended schemes generally offer exit option to investors through a stock exchange a. True b. False 3. Sector funds invest in a diverse range of sectors a. True b. False 4. High yield bond scheme invest in junk bonds a. True b. False 5. Investment objective is closely linked to

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Mutual Fund (AMFI) a. Scheme b. Option c. Plan d. SIP 6. Mutual Fund is -----------------------? a. A vehicle to mobilize money from investors b. Invest in different markets and securities c. Investment agreement between mutual fund and the investors d. All of the above 7. Mutual Fund act as a ------------------------? a. Government regulator b. Market stabilizer c. Investment Banker d. Agent 8. Mutual fund investments are according to the investment objectives. a. True b. False 9. Investors invest amount in mutual fund schemes and get ? a. Shares b. Commodity c. Interest d. Units 10. Truth value of the unit of the scheme is called? a. Value b. Return c. Interest d. Net Asset Value (NAV) 11. Which one are the advantages of mutual funds for investors? a. Professional Management b. Diversification c. Tax Benefits d. All of the above 12. Investors have easy entry or exit at any time a. Open ended Scheme b. Close Ended Schemes 13. Which kind of the scheme has fixed maturity? a. Open ended Scheme b. Close Ended Schemes 14. In close ended scheme investor buy the units from …..? a. Open market b. Fund Itself 15. Combinations of both open ended scheme & close ended scheme are….?

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Mutual Fund (AMFI) a. Active fund b. Passive fund c. Interval Fund d. Debt Fund 16. Actively funds are ……….? a. Fund manager have flexibility to choose the investment portfolio b. Investors expect actively managed funds to perform better that the markets c. Expenses for running the fund is higher d. All of the above 17. Invest on the basis of a specified index in which performance tends to mirror the concerned index. a. Actively Managed Fund b. Passively Managed Fund 18. Combination of both equity and debt is known as ………….? a. Growth Fund b. Hybrid Fund c. Gild Fund d. Diversified Fund 19. NAV of the scheme fluctuates lesser than debt funds that invest more in debt securities? a. Liquid scheme b. Gild fund scheme c. Floating rate funds d. Junk bond schemes 20. Invest in both government and non – government securities? a. Gilt Fund Schemes b. Hybrid Funds c. Diversified Funds d. Liquid Schemes 21. Which fund scheme invests in equities across all sectors? a. Sector Fund b. Diversified Equity Fund c. Hybrid Funds d. Thematic Funds 22. Equity Linked Saving Schemes duration of lock in period is……? a. 1 Year b. 5 year c. 3 year d. 10 year 23. Monthly Income Plan have following features….? a. Declare dividend every month b. Invest largely in debt securities

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Mutual Fund (AMFI) c. Invest in equities d. All of the above 24. Which scheme not pays regular interest but accumulates the interest and pay along with the principal at the time of maturity? a. Capital Protection Fund b. Liquid fund c. Hybrid fund d. Debt fund 25. Which fund invests in gold? a. Gold sector fund b. Gold Exchange Traded Fund c. Commodity Sector fund d. Commodity fund 26. Indian Mutual fund ties up for investment with a foreign fund, that foreign fund known as ……..? a. Host fund b. Feeder Fund c. International Fund d. None of the above 27. Exchange traded funds are ……? a. Open ended index funds b. Traded in stock exchange c. Real time prices of such ETF units d. All of the above

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Mutual Fund (AMFI) CHAPTER 2 FUND STRUCTURE AND CONSTITUENTS 1. Legal Structure of Mutual Funds in India - SEBI (Mutual Fund) Regulations, 1996 a. Key features of mutual fund - Establish as a trust - It raises money through sale of units to the public - Units are sold under one or more schemes - Schemes invest in securities or gold or gold related instruments or real estate assets Mutual Fund Trust SBI Mutual Fund Sponsor State Bank of India Trustee SBI Mutual Fund Trustee Company Private Limited AMC SBI Funds Management Private Limited Custodian HDFC Bank Limited, Mumbai CITI Bank N.A., Mumbai Stock Holding Corporation of India Ltd., Mumbai Bank of Nova Scotia (Custodian for Gold RTA Computer Age Management Services Pvt. Ltd. 2. Key Constituents of a Mutual Fund a. Sponsors - Application to SEBI for registration is made by sponsor‟s - Sponsors are the main people behind the mutual fund - Sponsor should have a sound track record and reputation of fairness and integrity in all business transaction - Carrying on business in financial service for 5 years - Latest net worth should be more than the amount that the sponsor contributes to the capital of the AMC - The sponsor should have earned profits in three of the previous five years, including the latest year - Sponsor should be a fit and proper person - Sponsor needs to have a minimum 40% share holding in the capital of the AMC b. Trustee - Ensuring that the mutual fund complies with all the regulations, and protects the interests of the unit –holders - Prior approval of SEBI needs to be taken, before a person is appointed as trustee - Sponsor will have to appoint at least 4 trustees, at least two –thirds of the trustees/ directors on the Board of the trustee company, would need to be independent trustees i.e. not associated with the sponsor in any way

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Mutual Fund (AMFI) c. AMC - Day to day operations of asset management are handled by the AMC - AMC has to take all reasonable steps and exercise due diligence to ensure that the investment of funds pertaining to any scheme is not contrary to the provisions of the SEBI regulations and the trust deed I. As per SEBI regulations - Directors of the asset management company need to be persons having adequate professional experience in finance and financial services related field - The directors as well as key personnel of the AMC should not have been found guilty or moral turpitude - Key personnel of the AMC should not have worked for any asset management company - At least 50% of the directors should be independent directors - AMC needs to have minimum net worth of Rs 10 crore - An AMC cannot invest in its own schemes, unless the intention to invest is disclosed in the offer document - Appointment of an AMC can be terminated by a majority of the trustees, or by 75% of the Unit –holders - Chief Investment Officer (CIO), who is responsible for overall investments of the fund - Security Analysts support the fund managers through their research inputs - Chief Marketing Officer (CMO), who is responsible for mobilizing money under the various schemes - Chief Operations Officer ( COO) handles all operational issues - Compliance Officer needs to ensure all the legal compliances 3. Other Service Providers a. Custodians - Custodian has custody of the assets of the fund - Custodians needs to accept and give delivery of securities for the purchase and sales transaction of the various schemes of the fund - Custodian is appointed by mutual fund - Custodial agreement is entered into between the trustees and the custodians - 50% or more of the shares of a custodian‟ - Represent the interest of the sponsor - Custodian cannot appointed for the mutual fund operation of the sponsor - Custodians also tracks corporate actions such as dividends, bonus and rights in companies where the fund has invested - All custodians need to register with SEBI b. RTA - RTA maintains investor records - Centers serve as Investor Service Centers(ISCs), which perform a useful role in handling the documentation of investors

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Mutual Fund (AMFI) c. -

Appointment of RTA is done by the AMC All RTAs need to register with SEBI Auditors Auditors are responsible audit of accounts Scheme auditor is appointed by the Trustees, the AMC auditor is appointed by the AMC d. Fund Accountants - Fund Accountants perform the role of calculating the NAV, by collecting information about the assets and liabilities of each schemes - AMC can either handle this activity in-house, or engage a service provider e. Distributors - They have a key role in selling suitable types of units to their clients i.e. the investors in the schemes - Distributors need to pass the prescribed certification test, and register with AMFI f. Collecting Bankers - Investor‟s moneys go into the bank account of the scheme they have invested in - Payment instruments against application handed over to branches of the AMC or the RTA need to be banked with the collecting bankers, so that the moneys are available for investment by the scheme QUESTIONS 1. The assets of the mutual fund are held by a. AMC b. Trustees c. Custodians d. Registrar 2. Minimum net worth requirement for AMC is a. Rs. 10 crore b. Rs. 5 crore c. Rs. 4 crore d. Rs. 2 crore 3. AMC directors are appointed with the permission of Trustees a. True b. False 4. Most investor service centers are offices of a. Trustees b. Registrar c. Custodian d. Fund accountant 5. Fund accounting activity of a scheme is to be compulsorily outsourced a. True

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Mutual Fund (AMFI) b. False 6. Mutual fund in India is regulated with…..? a. SEBI Act 1992 b. Depositories Act 1996 c. SEBI(Mutual Fund) Regulations,1996 d. SEBI(Mutual Fund)Act, 1992 7. Who are the key constituents of a mutual fund? a. Sponsors b. AMC c. Trustees d. RTA e. All of the above 8. Sponsor should earn profits from last…..? a. Last 3 years b. Last 3 Years out of 5 Years c. Latest year d. Last 5 years 9. Who should ensure that rules are complying in mutual fund? a. Sponsor b. Custodian c. Compliance Officer d. Trustees 10. Who handle day to day operation of asset under management? a. Sponsor b. Trustees c. RTA d. AMC 11. Who maintain the records of the investors in mutual fund? a. AMC b. RTA c. Custodian d. None of the above

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Mutual Fund (AMFI) CHAPTER 3 LEGAL & REGULATORY ENVIRONMENT 1. Role of Regulators in India a. SEBI - SEBI (Mutual Funds) Regulations, 1996 - Need to comply with RBIs regulations - Mutual Funds need to comply with the rules of the exchanges with which they choose to have a business relationship - Anyone who is aggrieved by a ruling of SEBI, can file an appeal with the Securities Appellate Tribunal b. Self Regulatory Organizations (SRO) - Self Regulatory Organizations, whose prime responsibility is to regulate their own members c. AMFI objectives - AMFI is not an SRO I. Objectives of AMFI - Maintain high professional and ethical standards - Recommend and promote best business practices and code of conduct - Interact with the Securities and Exchange Board of India and other bodies - To develop a cadre of well trained Agent Distributors - To undertake nationwide investor awareness program - To disseminate information on Mutual Fund Industry d. AMFI Code of Ethics (ACE) - AMFI Code of Ethics sets out the standards of good practices to be followed by the Asset Management Companies e. AMFI Guidelines & Norms for Intermediaries (AGNI) - A set of guidelines and code of conduct for intermediaries, consisting of individual agents, brokers, distribution houses and banks engaged in selling of mutual fund products Following sequence of steps is provided: - Write to intermediary and ask for an explanation within 3 weeks - If explanation is not received within 3 weeks, or if the explanation is not satisfactory, AMFI will issue a warning letter indicating that any subsequent violation will result in cancellation of AMFI registration - If there is a proved second violation by the intermediary, the registration will be cancelled and intimation sent to all AMCs - Intermediary has a right of appeal to AMFI 2. Investment Restrictions for Schemes a. Investment Objectives - To generate capital appreciation - To generate income by investing

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Mutual Fund (AMFI) - To achieve growth by investing in equity and equity related investments b. Investment Policy - Kind of portfolio that will be maintained c. Investment Strategy - Investment strategy is decided more frequently 3. Investor’s Rights & Obligations a. Service Standards Mandated for a Mutual Fund towards its investors - Allot units or refund moneys within 5 business days of closure of the NFO - Re –open for ongoing sale /re –purchase within 5 business days of allotment - Statement of accounts are to be sent to investors as follows:  In case of NFO – within 5 business days  In case of post –NFO investment – within 10 working days of the investment - Initial transaction – within 10 working days - Ongoing – within 10 working days of the end of the quarter  Investor within 5 working days  Statement of Account : investor who have not transacted during the previous 6 months  Portfolio Statement/ Annual Return, with the latest position on number and value of units held  If mandated by the investor, soft copy shall be emailed to investor every month - Investor can ask for a Unit Certificate for his Unit Holding - NAV has to be published daily, in at least 2 newspapers - NAV and re –purchase price are to be updated in the website of AMFI and the Mutual Fund  In case of Fund of Funds, by 10 am the following day  In case of other schemes, by 9 pm the same day - The investor‟s can appoint up to 3 nominees, who will be entitled to the units - Investor can also pledge the units - Dividend warrants have to be dispatched to investors within 30 days of declaration of the dividend - Redemption /re –purchase cheques would need to be dispatched to investors within 10 working days - Interest at the rate of 15% p.a. b. Other rights of investors - In case of unit –holding in demat form, the demat statement given by the depository participant would be treated as compliance with the requirement of Statement of Account - Mutual fund has to publish a complete statement of the scheme portfolio and the unaudited financial results, within 1 month from the close of each half year - Mutual fund may choose to send the portfolio statement to all Unit –holders

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Mutual Fund (AMFI) Debt –oriented, close –ended / interval, schemes / plans need to disclose their portfolio in their website every month, by the 3rd working day of the succeeding month - Unit –holders have the right to inspect key documents such as the Trust Deed, Investment management Agreement, Custodial Service agreement, R & T agent agreement and Memorandum and Articles of Association of the AMC - Scheme –wise annual Report, or an abridged summary has to be mailed to all unit holders within 6 months of the close of the financial year - Any issue with the AMC or scheme, the investor can first approach the investor service error - If the issue is not redressed, even after taking it up at senior levels in the AMC, then the investor can write to SEBI with the details c. Unclaimed Amounts - Mutual fund has to deploy unclaimed dividend and redemption amounts in the money market. - AMC can recover investment management and advisory fees on management of these unclaimed amounts, at a maximum rate of 0.50% p.a.  Investor claims the money within 3 years, then payment is based on prevailing NAV  If the investor claims the money after 3 years, then payment is based on the NAV at the end of 3 years - AMC is expected to make a continuous effort to remind the investors through letters to claim their dues d. Proceeds of liquid securities - If the amounts are substantial, and recovered within 2 years, then the amount is to be paid to the old investors‟ - The amount is to be transferred to the Investor Education Fund maintained by each mutual fund e. Investor’s Obligations - PAN No. and KYC documentation are compulsory for mutual fund investments. Only exception is micro –SIPs - Investors need to give their bank account details along with the redemption request 4. Can a Mutual Fund Scheme go bust? - Need to bring in some other sponsor, acceptable to SEBI - Event of a change in sponsorship that an investor is not comfortable with, the option of exiting from the scheme with the full NAV is available for a 30 –day period -

QUESTION

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Mutual Fund (AMFI) 1. SEBI regulates a. Mutual Funds b. Depositories c. Registrar & Transfer Agents d. All of the above 2. Investment objective defines the board investment charter a. True b. False 3. Statement of account is to be sent to investors within ……… days of NFO closure a. 3 b. 5 c. 7 d. 15 4. Within …….. days of dividend declaration, warrants will have to be sent to investors a. 7 b. 10 c. 15 d. 30 5. Unit holders can hold their units in demat form a. True b. False 6. Which one is not regulated by the SEBI? a. Depositories b. MCX c. RTA d. Custodians 7. What is the full name of AMFI? a. All mutual fund of India b. Association of mutual fund of India c. Alternate mutual fund of India d. None of the above 8. AMFI is governed by the act? a. True b. False 9. How many violations by the intermediaries is required for cancellation of registration? a. 1 b. 4 c. 3 d. 2

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Mutual Fund (AMFI) 10. In how many business days units are allotted or refund money of NFO? a. 1 b. 5 c. 3 d. 4 11. NAV published in at least ….. Newspaper? a. 1 b. 2 c. 3 d. None of the above 12. Investors appoint up to …… nominees? a. 1 b. 5 c. 3 d. 2 13. Redemption proceeds are dispatched by the mutual fund in …. Days? a. 5 b. 2 c. 10 d. 30 14. Interest on delayed payout …..% ? a. 5% Per Year b. 2.5 % Per Month c. 15% per year d. 11% per year 15. Mutual fund units are eligible for dematerialization? a. True b. False 16. Mutual fund provide the …….within ……months from the close of financial year. a. Profit & Loss Account & 12 Month b. Annual Report & 6 month c. Balance Sheet & 3 month d. NAV & 9 month 17. The appointment of the AMC for a mutual fund can be terminated by? a. trustees b. Majority of trustees or 75% of the unit holders c. Sponsors d. None of the above 18. Mutual funds invest unclaimed dividend or redemption in ……….? a. Equities b. Money markets

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Mutual Fund (AMFI) c. Commodities d. None of the above 19. Investors claim for unclaimed amount within ……. years? a. 5 Years b. 2 years c. 1 years d. 10 years 20. PAN no. & KYC norms are compulsory for mutual fund investment (except micro SIP‟s)? a. True b. False

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Mutual Fund (AMFI) CHAPTER 4 OFFER DOCUMENT 1. Offer Document – NFO, SID, SAI a. New Fund Offer (NFO) - Units in a mutual fund scheme are offered to investors for the first time through a NFO - AMC decides on a scheme to take to the market - AMC prepares the Offer Documents for the NFO - Documents are filled with SEBI - SEBI makes on the Offer Document need to be incorporated - AMC decides on a suitable time –table for the issue - AMC launches its advertising and public relations campaigns to make investors aware of the NFO - AMC holds events for intermediaries and the press to make them familiar with the scheme - Offer Documents and Application Forms are distributed to market intermediaries - Three dates are relevant for the NFO of an open –ended scheme:  NFO Open Date  NFO Close Date  Scheme Re –Opening Date - Investor can offer their units for re –purchasing to the scheme - Close ended schemes have an NFO open Date and NFO Close Date - NFOs other than ELSS can remain open for a maximum of 15 days - Allotment of units or refund of moneys within 5 business days of closure of the scheme open ended scheme have to reopen for sale /repurchase within 5 business days of the allotment b. The Role of Offer Documents - Investors get to know the details of any NFO through the Offer Document - Investors need to note that their investment is governed by the principal of caveat emptor i.e. let the buyer beware - Mutual Fund Offer Documents have two Parts  Scheme information Document (SID), which has details of the scheme  Statement of Additional Information (SAI) which has statutory information about the mutual fund that is offering the scheme c. Contents of SID - Open –ended / close-ended / interval - Equity / balanced/ income/ debt/ liquid/ ETF - Face value of the Units being offered, relevant NFO dates (Opening, closing, reopening), date of SID, name of the mutual fund, and name & contact information of the AMC 2. Key Information Memorandum (KIM)

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Mutual Fund (AMFI) a. b. -

Role of KIM Kim is essentially a summary of the SID and SAI. It is more easily and widely distributed in the market As per SEBI regulations, every application form is to be accompanied by the KIM Contents of KIM Name of the AMC, Mutual Fund, Trustee Dates of Issue Opening, Issue Closing & Re –opening Plans and Options under the scheme Risk profile of Scheme Price at which units are being issued and minimum amount / units for initial purchase, additional purchase and re –purchase - Bench mark - Dividend policy - Performance of scheme and benchmark over last 1 year, 3 years, 5 years and since inception - Loads and expenses c. Update of KIM - Kim is to be updated at least once a year QUESTION 1. NFOs other than ELSS can be open for a maximum of a. 7 days b. 10 days c. 15 days d. 30 days 2. Legally, SAI is part of the SID a. True b. False 3. Offer documents of mutual fund schemes are approved by SEBI a. True b. False 4. Application form is attached to a. SID b. SAI c. KIM d. None of the above 5. Kim has to be updated every 6 months a. True b. False 6. What is the full form of NFO?

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Mutual Fund (AMFI) a. b. c. d.

No Fund Offer New fund Option New Fund offer None of the above

7. NFO remains open for maximum ……. days. a. b. c. d.

10 days 1 month 15 days 7 days

8. Investor gets the details of NFO from ……….? a. b. c. d.

KIM KYC SID Offer Documents

9. Offer document included……..? a. b. c. d.

Nature of the scheme Investment Objectives It is a legal document All of the above

10. KIM known as ………………? a. b. c. d.

Key Inspection Memorandum Key Information Memorandum Key Initial Memorandum None of the above

11. KIM includes the summary of …….. & ……… ? a. b. c. d.

Application form & KYC SID & SAI P&L and Balance sheet Offer documents & risk profile

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Mutual Fund (AMFI) CHAPTER 5 FUND DISTRIBUTION & CHANNEL MANAGEMENT PRACTICE 1. Distribution Channels a. Traditional Distribution Channels I. Individual - Agents would approach investors to get application forms signed and collect their cheques II. Institutional Channels - Brokerage firms and other securities distribution companies - Banks, who started viewing distribution of financial products - Some operated within states; many went national - Distribution setup has got re –aligned towards a mix of: i. Independent Financial Advisors (IFAs), who are individual ii. Non –bank distributors, such as brokerages, securities distribution companies and non –banking finance companies iii. Bank distributors b. Newer Distribution Channels i. Internet - Direct transaction afforded scope to optimize on the commission costs involved in distribution - A large mass of investors in the market need advice ii. Stock Exchanges - Managed to ride on the equity cult in the country and the power of communication networks to establish a cost –effective all –India network of brokers and trading terminals - A successful initiative in the high –volume low –margin model of doing business, which is more appropriate and beneficial for the country - SEBI has facilitated buying and selling of mutual fund units through the stock exchanges - Close –ended schemes are required to be listed in a stock exchange - ETFs are bought and sold in the stock exchange c. Pre –requisites to become Distributor of a Mutual Fund - Pass the Certifying Examination prescribed by SEBI - Distributors. employees who were above the age of 50 years, and had at least 5 years experience as on September 30, 2003 were exempted - They need to attend a prescribed refresher course - After passing the examination, register with AMFI.. AMFI allots an AMFI Registration Number (ARN) - Armed with the ARN No., the IFA / distributor/stock exchange broker can get empanelled with any number of AMCs Employees who are into selling mutual funds needs to have an ARN

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Mutual Fund (AMFI) d. Condition for Empanelment - Personal information of applicant - Names and contact information - Business details, such as office area - Bank details - Preference regarding receiving information from the AMC - Nominee - Applicant also needs to sign a declaration - Undertake not to rebate commission back to investors 2. Channel Management practices a. Commission structure b. Multi –level Distribution Channel c. ACE & AGNI d. SEBI Regulations related to Sales Practices e. SEBI Advertising Code - Advertisements shall be truthful, fair and clear - All statements made and facts reported in sales literature of a scheme - Mutual fund investments are prone to risks of fluctuation in NAV - Use of exaggerated or unwarranted claims, superlatives and opinions - Hoardings / posters, the statement, “Mutual Fund investments are subject to market risks, read the offer document carefully before investing “ - Advertisements through audio media like radio, cassettes, CDs - Following information is prohibited from tombstone advertisements  Declaration of NAV and performance of the scheme  Promise of any returns except in case of assured returns schemes  Comparisons and usages of ranking given by a third party QUESTIONS 1. Institutional distributors build reach through a. Employees b. Agents c. Sub –brokers d. Any of the above 2. The maximum initial commission that an AMC can pay to distributor is a. Nil b. 0.05% c. 1% d. 2% 3. The distributor can charge a fee from the investor a. True b. False

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Mutual Fund (AMFI) 4. Stock exchanges brokers are permitted to distribute mutual funds without the requirement of passing the certifying test a. True b. False 5. Trail commissions are linked to valuation of portfolio in the market a. True b. False 6. ETFs are bought and sold in the …………….? a. b. c. d.

Mutual fund itself Open Market Stock Exchange None of the above

7. What is the full form of ARN? a. b. c. d.

Alternate registration number AMFI registration number Analyst registration number None of the above

8. …………commission calculated as a percentage of the net assets attributable to the units sold by the distributors. a. b. c. d.

Distributer Trail Agent None of the above

9. Which provision is covered in the SEBI Advertising Code? a. b. c. d.

Advertisement shall be truth, fair & clear Mutual fund investment is subject to market risk Contract details for further information and scheme literature. None of the above

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Mutual Fund (AMFI) CHAPTER 6 ACCOUNTING, VALUATION & TAXATION 1. Accounting and Expenses - Net Assets of Scheme - Investors have bought 20 crore units of a mutual fund scheme at Rs. 10 each , 200 crore its net assets - Net Asset Value (NAV) - (Total Asset _ Liabilities other than to Unit holders) ÷ No. of Units - Summation of these three parameters gave us the probability metric I. Interest Income II. + Dividend Income III. + Realized Capital Gains IV. + Valuation Gains V. – Realized Capital Losses VI. – Valuation Losses VII. – Scheme Expenses - Mark to Market - Process of valuing each security in the investment portfolio of the scheme at its market value is called „ mark to market‟ i.e. marking the securities to their market value - NAV is meant to reflect to true worth of each unit of the scheme, because investors buy or sell units on the basis of the information contained in the NAV - Sale price, re –purchase prices and losses - Position since August 1, 2009 is that  SEBI has banned entry loads. So sale price needs to be the same as NAV  Exit loads /Contingent Deferred Sales Charge (CDSC) in excess of 1% of the redemption proceeds have to be credited back to the scheme immediately  Exit load structure needs to be the same for all unit –holders representing a portfolio - Expenses I. Initial issue expenses - These are one –time expenses that come up when the scheme is offered for the first time (NFO). These need to be borne by the AMC - Schemes could charge initial issue expenses to the scheme, up to 6 % of the amount mobilized in the NFO. - If NFO Mobilized Rs. 500 crore, Rs 30 crore could be charged to the scheme as initial issue expenses - If the entire amount were treated as an expense, then NAV would go down to that extent II. Recurring Expenses

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Mutual Fund (AMFI) -

-

-

Recurring expenses drag down the NAV, SEBI has laid down the expenses, which can be charged to the scheme  Fees of various service providers  Selling expenses including scheme advertising and commission to the distributors  Expenses on investor communication  Listing fees and depository fees  Service tax Expenses cannot be charged  Penalties and fines  Interest on delayed payment  Legal, marketing, publication  Fund Accounting Fees  Expenses on Investment management  Expenses on general administration  Depreciation on fixed assets and software development expenses Recurring Expenses Limits Net asset (Rs. Crore) Equity scheme Debt scheme Upto Rs. 100 crore 2.50% 2.255 Next Rs. 300 crore 2.25% 2.00% Next Rs. 300 Crore 2.00% 1.75% Excess over Rs. 700 1.75% 1.50% Crore

-

Dividend & Distribution Reserves Dividend can be paid out of distribution reserves. In the calculation of distribution reserves:  All the profits earned are treated as available for distribution  Valuation gains are ignored but valuation losses need to be adjusted against the profits  Portion of sale price on new units, which is attributed to valuation gains, is not available as a distributable reserve - Key Accounting and Reporting Requirements - The accounts of the scheme need to be maintained distinct from the accounts of the AMC - Norms are prescribed on when interest, dividend, bonus issues, rights issues etc. - NAV is to be calculated up to 4 decimal places - NAV for equity and balanced funds is to be calculated up to at least 2 decimal places - Investor can hold their units even in a fraction of 1 unit. - Frequency of disclosures of NAV, Portfolio and Scheme accounts 2. Valuation - Valuation guidelines

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Mutual Fund (AMFI)  Traded in the market on the date of valuation, every security in the portfolio is to be valued  When not traded in the market, Valuation formula is based on the Earnings per share of the company, its Book Value, and the valuation of similar shares in the market (peer group)  Debt securities that not traded, valued on the basis of the yield matrix prepared by an authorized valuation agency  Security is to be treated as a Non –Performing Asset (NPA) at various points of time  Individual security that is not traded or represents more than 5% of the net assets of a scheme, an independent valuer has to be appointed 3. Taxation a. Taxability of Mutual Fund - Mutual fund trust is exempt from tax - SBI Mutual Fund Trustee Company however is liable to tax b. Securities transaction Tax (STT) I. On equity oriented schemes of mutual funds On purchase of equity share 0.125% On sale of equity shares 0.125% On sale of futures & options 0.017% II. On investors in equity oriented schemes of mutual fund On purchase of the units On sale of units On re –purchase of units (by AMC) -

-

0.125% 0.125% 0.017%

STT is not payable on transactions in debt or debt –oriented mutual funds units c. Additional Tax on Income Distributed Tax on dividend distributed by debt oriented mutual fund schemes I. Money market mutual Funds / Liquid Schemes’ 25% + Surcharge + Education Cess II. Other Debt Funds (investors who are individual / HUF) 12.5% + Surcharge + Education Cess III. Other debt funds (other investors) 20 % + Surcharge + Education Cess d. Capital Gains Tax Capital gain is the difference between sale price and acquisition cost of the investment I. Equity –Oriented Schemes Nil –on Long Term Capital Gains arising out of transactions, where STT has been paid 15 % + Surcharge + Education Cess – On short term capital gains (held for 1 year or less)

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Mutual Fund (AMFI) -

-

-

-

-

STT is not paid, taxation is similar to debt oriented schemes II. Debt oriented schemes Short term capital gains (for 1 year or less) are added to the income of the investor Long Term Capital gain ( for more than 1 year)  10% + Surcharge + Education Cess, with out indexation  20% + Surcharge + Education Cess, With Indexation e. Tax Deducted at Source (TDS) No TDS on the dividend distribution or re –purchase proceeds to resident investors f. Setting off gains and losses under income tax act One would expect that a loss in one head of income can be adjusted against gains in another head of income, since a person is liable to pay tax on the total income for the year  Capital loss, short term or long term , can not be set off against any other head of income  Short term capital loss can only be set off against long term capital gain  Long term capital loss can only be set off against long term capital gain  Long term capital gains arising out of equity –oriented mutual fund units is exempt from tax g. Limitation of set off When a dividend is paid , the NAV goes down Dividend is exempt from tax at the hands of investors Capital loss may be available for set off against capital gains Potential tax avoidance approach, called dividend stripping worked as follows: Investors would buy units, based on advance information that a dividend would be paid Receive the dividend as a tax –exempt income Receiving the dividend, sell the units. Since the ex –dividend NAV would be lower, they would book a capital loss If an investor buys units within 3 months prior to the record date for a dividend Sells those units within 9 months after the record date h. Limitation on set –off in case of Bonus Units Investor buys units of a schemes at Rs. 30 Declares a 1 :1 bonus issue Investor receives 1 new unit, for every unit that was bought earlier Such capital loss is not available for setting off against capital gains, if the original units were bought within a period of 3 months prior to the record date for the bonus issue and sold off within a period of 9 months after the record date Capital loss will be treated as the cost of acquisition of the bonus units i. Wealth tax Mutual funds units are exempt from wealth tax

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Mutual Fund (AMFI) QUESTION 1. Net assets of a scheme is nothing but its investment portfolio a. True b. False 2. The difference between NAV and re –purchase price is a. Entry load b. Exit load c. Expense d. Dividend stripping 3. NAV of income funds is to be calculated up to ……… decimals a. 4 b. 3 c. 2 d. 1 4. Securities Transaction Tax is applicable to Equity Scheme a. True b. False 5. Wealth tax is payable at the application rates on equity mutual fund units a. True b. False 6. NET ASSET VALUE (NAV) is referring as? a. Unit –holder’s funds in the scheme ‚ no of units b. Liabilities in the scheme ÷ no of units c. All assets in the scheme ÷ no of units d. Current asset in the scheme÷ no of units 7. When the market price of securities held in the portfoliogo up in the scheme then? a. b. c. d.

NAV decrease NAV increase No change in NAV None of the above

8. When the expenses are higher in the scheme than? a. b. c. d.

NAV decrease NAV increase No change in NAV None of the above

9. When higher the interest, dividend and capital gain on securities held in the portfolio in the scheme than? a. NAV decrease

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Mutual Fund (AMFI) b. NAV increase c. No change in NAV d. None of the above 10. Process of valuing each security in portfolio as its market value is called…….? a. b. c. d.

Accounting valuation Mark to market Final valuation None of the above

11. Difference between NAV and re-purchase price is called as…….? a. Entry load b. Exit Load 12. Difference between sale price and NAV is called as…….? a. Entry load b. Exit Load 13. Which expenses are not charged in the scheme? a. b. c. d.

Selling expenses Listing fees and depository fees Penalties and fines Service tax

14. Which expenses are charged in the scheme? a. b. c. d.

Depreciation on fixed asset Listing fees and depository fees Penalties and fines Fund accounting fees

15. What is the annual limit for equity schemes for recurring expenses limits for funds up to 100 crores? a. b. c. d.

1% 2% 2.5% 1.5%

16. What is the percentage in equity schemes for management fees limits for funds upto 100 crores? a. 1.25%

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Mutual Fund (AMFI) b. 2% c. 2.5% d. 1.5% 17. In calculation of distributable reserves which is not included? a. b. c. d.

All profit earned Valuation loss Valuation Gain All of the above

18. Accounts of the schemes need to be maintained separately from the accounts of the AMC. a. True b. False 19. Dividend distribution tax is not applicable on ………..scheme? a. Equity oriented b. Debt oriented 20. Long term capital tax in equity oriented scheme is not exempted? a. True b. False 21. Short term capital loss is set off from ………….? a. b. c. d.

All heads of income Only from short term capital gain Income from business & Professions None of the above

22. Potential tax avoidance approaches in dividend distribution, called …….? a. b. c. d.

Dividend payout Dividend striping STT payout None of the above

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Mutual Fund (AMFI) CHAPTER 7 INVESTOR SERVICES 1. Eligibility to Invest - Eligible to purchase units a. Individual Investors - Resident Indian adult individuals, above the age 18 - Minors, invest through their Parents / Lawful guardians - Hindu undivided families (HUFs), the head of the family (called karta) invests on behalf of the family - Non –Resident Indians (NRIs) / Persons of Indian origin (PIO), entities them to invest in mutual fund schemes on full repatriation or non –repatriation basis - Non –individual investors, individuals who sign the documents are invested on behalf of organizations - Following are not permitted to invest in mutual funds in India  An individual who is a foreign national  Any entity that is not an Indian resident  Overseas Corporate Bodies (OCBs) 2. KYC Requirements for Mutual Fund Investors - All investments of Rs. 50,000 and above to be complaint with the regulatory requirements - Mutual fund investors need the following documents  Pool of Identity  Proof of address  PAN Card  Photograph - Mutual funds have made an arrangement with CDSL Ventures Ltd. (CVL), a wholly owned subsidiary of Central Depository Services (India) Ltd. (CDSL), to make it convenient for mutual fund investors to comply with the documentation requirements - CVL provides a facility where the PoS, from their own office, can access CVL‟s system, enter the requisite data and generate an acknowledgement with a Mutual Fund Identification Number (MIN) - KYC documentation has to be done only once, with CVL acting through the PoS 3. PAN Requirements for Micro –SIPs - Exception has been made for Micro –SIPs i.e. SIPs where annual investment (12 month rolling or April –March financial year) does not exceed Rs. 50,000 - Investors (including joint holders) can submit any one of the Photo Identification documents along with Micro SIP applications - Documents must be current and valid - Documents copy shall be self attested by the investor/ attested by the ARN holder mentioning the ARN number

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Mutual Fund (AMFI) 4. Additional Documentation Requirements applicable for Institutional Investors - Eligibility for the investing institution to invest - Authorization for the investing institution to invest - Authorization for the official to sign the documents on behalf of the investing institution 5. Demat Account - Dematerialization is a process whereby an investor‟s holding of investments in physical form (paper), is converted into a digital record - Settlement of most transactions in the stock exchange needs to be compulsorily done in demat form - Investors can go to a Depository Participant and demat their investment holding i.e. convert their physical units into demat units - Investor‟s benefit from a demat account are as follows:  Less paperwork  Direct credit of bonus and rights  Change of address or other details need to be given only to the Depository Participant - Investor also has the option to convert the demat units into physical form, called re –materialization 6. Transaction with Mutual Funds a. Fresh purchase - Application forms are available with offices of AMCs, distributors and ISCs. - They are also downloadable from the websites of the AMCs concerned - Normal application form, with KIM attached, is designed for fresh purchase , and allot an investment folio in the name of the investor b. Additional Purchases - An investor has a folio with a mutual fund, subsequent investments with the same mutual fund do not call for the full application form and documentation - Only transaction slip needs to be filled, and submitted with the requisite payment - Investor needs to confirm that the investment is above the minimum investment limit set by the mutual fund for additional purchases in the scheme c. Online Transactions - Registrar would allot a user name and password (Personal Identification Number –PIN) - This can be used by the investor to make further purchases of units in the mutual fund, or to request re purchase of the units held in the mutual fund d. Payment Mechanism for purchase / additional purchase - Mutual funds do not accept cash - Cheque / Demand Draft (DD) - The payment instrument would need to be local

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Mutual Fund (AMFI) -

-

-

-

-

-

-

-

Remittance can also be made directly to the bank account of the scheme through Real Time Gross Settlement (RTGS) / National Electronic Funds Transfer (NEFT) transfers ( transfers within India) or SWIFT transfer (Transfer from abroad) Electronic Clearing services (ECS) Application Supported by Blocked Amount (ASBA): investment application is accompanied by an authorization to the bank to block the amount of the application money in the investor‟s bank account The benefit of ASBA is that the money goes out of the investor‟s bank account only on allotment ASBA, which was originally envisaged for public issues in the capital market, has now been extended to mutual fund NFOs e. Allotment of Units to the Investor Investment amount divided by Rs. 10 would give the number of units the investor has bought  In a rights issue: price at which the units are offered i.e. the rights price is clear at the time of investment. The investment amount divided by the rights price gives the number of units that the investor has bought  In a bonus issue: investor does not pay anything. The fund allots new units for free. Thus, in a 1:3 bonus issue, the investor is allotted 1 new unit (free) for every 3 units already held by the investor f. Repurchase of Units Investor in an open ended scheme can offer the units for repurchase to the mutual fund Transaction slip would need to be filled out to effect the re –purchase Re –purchase price is the applicable NAV less Exit Load g. Cut –off time Ensure fairness to investors, SEBI has prescribed cut –off timing to determine the applicable NAV h. Time stamping Mutual funds disclose official Points of Acceptance (PoAs) and their addresses in the SID and their websites. All transaction requests need to be submitted at the POAs Application for purchase of units is stamped with automatically generated location code, machine identifier, serial number, date and time The time as per the web server to which the instruction goes, used in determining the NAV for sale / re –purchase transaction i. Transaction through the Stock Exchange NSE, BSE have extended their trading platform to help the stock exchange brokers become a channel for investors to transact in Mutual Fund Units. NSE‟s platform is called NEAT MFSS. BSE‟s platform is BSE STAR Mutual Fund Platform Both Platform are open from 9 am to 3 pm on every working day

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Mutual Fund (AMFI) -

-

-

a. b. -

Transaction slip generated by the broking system Physical for, the stock exchange broker would need to arrange to send the documents to nearest RTA j. Investment Plans and services Dividend payout, Growth and Dividend Re- investment Options Dividend payout option, the fund declares a dividend from time to time. When a dividend is paid, the NAv of the units falls to that extent Debt schemes need to pay an income distribution tax on the dividend distributed The reduced NAV, after a dividend payout is called ex –dividend NAV A dividend payout option, the investor receives the dividends in his bank account, NAV goes down to reflect the impact of the dividend paid, if applicable, the income distribution tax A dividend re –investment option, dividend payout option, NAV declines to the extent of dividend and income distribution tax Resulting NAV is called ex –dividend NAV If dividend is Rs. 2 per unit on a Unit –holder‟s 100 units, the dividend would amount to Rs. 200. Assuming the ex –dividend NAV of the scheme is Rs. 20, Rs. 200 + Rs. 20 i.e. 10 units will be added to the unit –holder‟s portfolio Parameter Dividend Payout Dividend Re – Growth Option Option investment Option Dividend received Yes No No in bank account Income Yes, for debt Yes, , for debt No Distribution Tax schemes schemes Increase in number No Yes No of units on account of re –investment of dividend NAV change NAV declines to NAV declines to NAV captures the the extent of the extent of portfolio change dividend and dividend and entirely income income distribution tax distribution tax Systematic Investment Plan (SIP) SIP is an approach here the investor invests constant amounts at regular intervals Averages the unit –holder‟s cost of acquisition Systematic Withdrawal Plan Investors can therefore opt for the safer route of offering for re-purchase , a constant value of units An investor may opt for SWP for several reasons  Minimize the risk of redeeming all the units during a market trough  Meet liquidity needs for regular expenses

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Mutual Fund (AMFI)  Assuming the scheme is profitable  Debt scheme are subject to Income Distribution Tax c. Systematic Transfer plan - STP the amount which is withdrawn from a scheme is re –invested in some other scheme of the same mutual fund  Unit holder ends up waiting for funds during the time period that it takes to receive the re –purchase proceeds, and has idle funds, during the time it takes to re –invest in the second scheme  Unit –holder has do two sets of paper work d. Triggers - It is not uncommon for investors to rue missed opportunities of buying or selling because they could not give the requisite instruction in time - Addressed through the trigger option that is available for some schemes - An investor can set a trigger to transfer moneys into an equity scheme when the market goes down, say 20% - Increase his position in equities, when the market goes down 205 e. Pledge - NBFCs and other financiers often lend money against pledge of Units by the Unit –holder - Effected through a Pledge Form executed by the unit –holder‟s (pledger‟s) QUESTION 1. Foreign nationals are freely permitted to invest in Indian Mutual Funds a. True b. False 2. PAN Card is compulsory for all mutual fund investments above Rs. 50, 000 including SIPs a. True b. False 3. Investments in mutual fund can be made using a. Cheque / DD b. Remittance c. ASBA d. Any of the above 4. Cut –off timing guidelines are not applicable for a. NFOs b. International Funds c. Both of the above

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Mutual Fund (AMFI) d. None of these 5. STP is a combination of SIP and SWP a. True b. False 6. The age limit for investment in the mutual funds is……? a. 21 b. 19 c. No Age limit d. 18 7. Who are not invested in the mutual funds? a. FII‟s b. Individual who is a foreign national c. Companies d. Religious and charitable trusts 8. For all investment of Rs 50,000 and above to be compliant with the regulatory requirement prescribed by which …………act? a. SEBI act b. RBI act c. Anti-Money Laundering Act d. Income Tax Act 9. What is the full form of CVL? a. Central vigilance b. Central Voidance Limit c. CDSL Ventures Limited d. Central Violence Limit 10. PAN CARD is not compulsory for mutual fund investment (up to 50,000). a. True b. False 11. Dematerialization is a process in which investor holding investment in ……..form? a. b. c. d.

Physical form Digital form Paper form None of the above

12. Only one folio is allotted for all mutual fund schemes.

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Mutual Fund (AMFI) a. True b. False 13. Which payment mechanism is not accepted by mutual funds? a. b. c. d.

Cheque /Demand Draft Credit Card ASBA Cash

14. What is the full form of ASBA? a. b. c. d.

Application supported by base amount Application supported by blocked amount Application supported by black amount None of the above

15. For the repurchase of the units of the mutual fund then KIM is again required? a. True b. False 16. Reduced NAV, after a dividend payout is called as……….? a. b. c. d.

Cum Dividend NAV Ex dividend NAV Post NAV Pre NAV

17. In the Dividend reinvestment Option the investor gets? a. b. c. d.

Dividend Interest Additional Units None of the above

18. Increase in number of units on account of reinvestment of dividend. a. b. c. d.

Growth Option Dividend payout option Dividend Re-Investment Option None of the above

19. NAV declines up to the extent of dividend distribution tax. a. Dividend Re-investment option b. Dividend Payout option

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Mutual Fund (AMFI) c. Growth Option d. None of the above 20. Which approach where investors invests constant amount at regular intervals? a. b. c. d.

SIP SWP STP None of the above

21. In which approach where investor meet their liquidity needs for regular expenses. a. b. c. d.

SIP SWP STP None of the above

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Mutual Fund (AMFI) CHAPTER 8 RETURN, RISK & PERFORMANCE OF FUNDS 1. Drivers of Returns in a Scheme a. Equity Scheme Security Analysis Disciplines –Fundamental Analysis and Technical Analysis I. Earnings Per Share (EPS) Net profit after tax ÷ No. of equity shares II. Price to Earnings Ratio (P /E ratio) Market price ÷ EPS III. Book value Per Share Net Worth ÷ No. of Equity Share IV. Price to Book Value Market Price ÷ Book Value Per Share V. Investment Styles – Growth and Values Growth Investment Style entails investing in high growth stocks Valuation of these stocks tends to be on the higher side. Further, in the event of a market correction, these stocks tend to decline more Value investment style is an approach of picking up stocks which are valued lower, based on fundamental analysis Market recognizes the intrinsic value then the price would shoot up. Such stocks are also called value stocks Value investors maintain a portfolio of such value stocks VI. Portfolio building approach – Top down and Bottom up Top Down approach: the portfolio manager decides how to distributed the investible corpus between countries and sectors This approach minimizes the chance of being stuck with large exposure to a poor sector Bottom up approach: does not assign too much importance to the country – allocation and sector – allocation. The approach is therefore also called stock picking Investor can also hope for a secular growth in a diversified mix of equity stocks when the economy does well b. Debt Investment in a debt security Debt securities that are to mature within a year are called money market securities The return that an investor earns or is likely to earn on a debt security is called its yield

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Mutual Fund (AMFI) -

     -

-

-

-

c. -

Debt securities may be issued by Central Government, State Governments, Banks, Financial Institutions, Public Sector Undertakings (PSU), Private Companies, Municipalities etc Securities issued by the Government are called Government Securities or GSec or Gilt Treasury bills are short term debt instruments issued by the Reserve Bank of India on behalf of the Government of India Certificates of Deposits are issued by banks (for 91 days to 1 year) or Financial Institutions (for 1 to 3 years) Commercial Papers are short term securities (up to 1 year) issued by companies Bonds / Debentures are generally issued for tenors beyond a year, private sector companies issue debentures Government is unlikely to default on its obligations, Gilts are viewed as safe The possibility of a non –government issuer defaulting on a debt security i.e. its credit risk, is measured by Credit Rating companies like CRISIL, ICRA, CARE and Fitch Interest rate payable on a debt security may be specified as fixed rate, say 6% Interest rates on Floating rate securities (also called floaters) are specified as Base + Spread Returns in a debt portfolio are largely driven by interest rates and yield spreads I. Interest Rates Invested in a debt security that yields a return of 8% Yields in the market for similar securities rise to 9% It stands to reason that the security, which was bought at 8% yield No longer such an attractive investment Debt analysts work with a related concept called modified duration to assess how much a debt security is likely to fluctuate in response to changes in interest rates If the portfolio manager expects interest rates to rise, then the portfolio is switched towards a higher proportion of floating rate instruments II. Yield Spreads Credit rating improves, the value of debt security will increase in the market A debt portfolio manager explores opportunities to earn gains by anticipating changes in credit quality, and changes in yields spreads Gold Gold is truly international asset, whose quality can be objectively measured

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Mutual Fund (AMFI) -

The value of gold in India depends on the international price of gold Returns in gold as an asset class depends on:  Global price of gold  Strength of the Rupee d. Real Estate Real estate is a local asset, these factors are:  Economic scenario  Infrastructure development  Interest rates 2. Measure of returns a. Simple return =

𝒍𝒂𝒕𝒆𝒓 𝑽𝒂𝒍𝒖𝒆−𝑰𝒏𝒊𝒕𝒊𝒂𝒍 𝒗𝒂𝒍𝒖𝒆 ∗𝟏𝟎𝟎 𝑰𝒏𝒊𝒕𝒊𝒂𝒍 𝒗𝒂𝒍𝒖𝒆

b. Annualized Return 𝑺𝒊𝒎𝒑𝒍𝒆 𝑹𝒆𝒕𝒖𝒓𝒏∗𝟏𝟐

= 𝑷𝒆𝒓𝒊𝒐𝒅 𝒐𝒇 𝑺𝒊𝒎𝒑𝒍𝒆 𝑹𝒆𝒕𝒖𝒓𝒏

𝒊𝒏 𝒎𝒐𝒏𝒕𝒉𝒔

c. Compounded Return Year Opening Balance (Rs) 1 10,000 2 11,000 3 12,100 -

𝑳𝑽𝟏/𝒏 𝑰𝑽

Interest (10% Opening) 1,000 1,100 1,210

on Closing (Rs) 11,000 12,100 13.310

Balance

-1

LV = Later Value IV = Initial Value n = period in years d. Compounded Annual Growth Rate (CAGR) NAV at the beginning of the period is „IV‟ NAV at the end of the period id „LV‟ and Exact number of days during the period, divided by 365 is „n‟ Simple, Annualized and Compounded only for Growth Scheme Example: You invested Rs. 10,000 in a scheme at Rs. 10 per unit on June 30, 2008. On January 1, 2009, the scheme paid out a dividend of Rs. 1 per unit. The ex –dividend NAV was Rs. 12.50. on January 1, 2010, the scheme paid out another dividends of Rs. 1 per unit. . the ex- dividend NAV was Rs. 15 Here, Rs. 10,000 grew to Rs. 17,280 in 1.51 years, LV = 17,280; IV = Rs. 10,000: n = 1.51 years. CAGR is calculated by the formula: 𝟏

-

𝑹𝒔.𝟏𝟕,𝟐𝟖𝟎𝟏

.𝟓𝟏

𝑹𝒔.𝟏𝟎,𝟎𝟎𝟎

-1

= 43.65%

𝒆. SEBI Norms regarding representation of Returns by Mutual Funds in India

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Mutual Fund (AMFI) -

Mutual funds are not permitted to promise any returns, unless it is an assured returns scheme. Assured returns scheme call for a guarantor who is named in the offer document 3. Drivers of Risk in a scheme I. Risk in Mutual Funds Scheme a. Portfolio risk b. Portfolio liquidity c. Liquid assets in the scheme d. Liabilities in the scheme Risk involved in such leveraging, SEBI regulations stipulate that:  Mutual fund scheme cannot borrow more than 20% of its net assets  Borrowing cannot be for more than 6 months  The borrowing is permitted only to meet the cash flow needs of investors servicing viz. dividends payments or re –purchase payments e. Use of Derivatives f. Hedging against risk g. Re –balancing the portfolio h. Unit –holder churn II. Risk in Equity Funds a. Generic Real economy goes through cycles Long run, equity markets are a good barometer of the real economy Short run, markets can et over –optimistic of over –pessimistic b. Portfolio Specific  Sector funds: suffer from concentration risk – exposure is to a single sector  Diversified equity funds: exposure to multiple sector  Thematic funds: are variation of sector funds  Mid cap funds: which are less liquid and less researched in the market  Contra funds: has a high risk of misjudgments  Dividend yield funds: whose price fluctuate less, but offer attractive returns  Arbitrage funds: equity funds because they invest in equity III. Risk in Debt Funds a. Generic Despite the assured value on maturity, debt securities fluctuate in value , with changes in the overall market Debt market, especially the non-government segment, is not as vibrant and liquid as the equity market When the market turned illiquid, RBI has stepped in to make it easier for mutual funds to operate b. Portfolio Specific

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Mutual Fund (AMFI) -

Short maturity securities suffer lesser fluctuation in value, as compared to the ones with longer tenor Gilt scheme, which invest in only government securities, have hogher risk than liquid schemes because their NAV can fluctuate a lot more, on account of changes in yield in the market IV. Risk in Balanced Funds Balanced funds invest in mix of debt and equity Performance of the scheme is linked to the performance of these two distinct asset classes, the risk in the scheme is reduced Significant asset allocation flexibility to the fund manager Switch a large part of their portfolio between debt and equity, depending on their view on the respective markets. This kind of scheme called flexible asset allocation scheme V. Risk in Gold Funds Gold does well when the other financial markets are in turmoil. A country goes in to war, and its currency weakens, gold funds give excellent returns VI. Risk in Real Estate Funds Every real asset is different Real estate transactions suffer the curse of black money Real estate is a less liquid asset class Transaction costs Regulatory risk is high in real estate Transparency level is low even among the real estate development and construction companies 4. Measures of Risk Fluctuation in returns is used as measures of risk a. Variance Scheme 1: 5%, 4%, 5%, 6% average = 5% Scheme 2: 5%, - 10%, + 20%, 5% average = 5% Variance measure the fluctuation in periodic returns of a scheme, as compared to its own average return Variance as a measure of risk is relevant for both debt and equity schemes b. Standard deviation Its equal to the square root of variance \standard deviation as a measure of risk is relevant for both debt and equity schemes c. Beta Based on Capital Asset Pricing Model, which states that there are two kinds of risk in investing in equities – systematic risk, non systematic risk Systematic risk: integral to investing in the market

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Mutual Fund (AMFI) Non –systematic risk: unique to a company; the non –systematic risk in an equity portfolio can be minimized by diversification across companies Beta measures the fluctuation in periodic returns in a scheme, as compared to fluctuation in periodic returns of a diversified stock index over the same period d. Weighted Average Maturity Reasoned that longer the maturity of a debt security, higher would be its interest rate sensitivity e. Benchmarks and Performance I. Benchmarks An approach to assess the performance is to pre –define a comparable –a benchmark –against which the scheme can be compared A credible benchmark should meet the following requirements:  Synch with the investment objective of the scheme  Benchmark should be calculated by an independent agency in a transparaent manner, and published regularly Choice of benchmark is simplest for an index fund Other schemes, choice of benchmark is subjective Mutual fund research houses compare mutual fund scheme with a benchmark which is the average returns by all schemes in the category or the best performer in the category II. `Benchmarks for equity schemes  Scheme Type  Choice Of Investment Universe  Choice Of Portfolio Concentration  Underlying Exposure III. Benchmarks for debt scheme NSE‟s MIBOR (Mumbai Inter Bank Offered rate) is based on short term money market ICICI Securities Sovereign Bond Index (I –Bex) is again calculated based on government securities CRISIL gives out the values of CRISIL Gilt Bond Index IV. Benchmarks for other schemes  Balanced Funds : invest in a mix of debt and equity  Gold ETF: Gold price  Real Estate Funds: Real Estate services companies have developed real estate indices  International Funds: benchmark would depend on where the scheme proposes to invest 5. Quantitative Measures of Fund manager Performance a. Absolute & Relative Returns Focus was on absolute returns i.e. returns earned by the scheme -

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Mutual Fund (AMFI) Relative comparison viz. how did a scheme perform vis – a- vis its benchmark or peer group. Called relative return comparison b. Risk Adjusted Return s A fund manager, who has taken higher risk, ought to earn a better return to justify the risk taken A fund manager who has earned a lower return may be able to justify it through the lower risk taken , such evaluations are conducted through Risk –adjusted Returns  Sharpe Ratio An investor can invest with the government, and earn a risk –free rate of return (Rf) T –Bill index is a good measure of this risk –free Investment in a scheme, a risk is taken, and a return earned (Rs) Difference between the two returns i.e. RS –Rf is called risk premium Sharpe ratio uses Standard Deviation as a measure of risk (Rs –Rf) ÷ Standard Deviation  Trey nor Ratio It is a risk premium per unit of risk and uses beta (Rs –Rf) ÷ Beta If risk free return is 5% and a scheme with Beta of 1.2 earned a return of 8%, Trey nor Ratio = (8% - 5%) ÷ 1.2 i.e. 2.5%  Alpha Beta of the market, by definition is 1 Index scheme mirrors the index The difference between an index fund‟s return and the market return, as seen earlier, is the tracking error Non –index schemes too would have a level of return which is in line with its higher or lower beta as compared to the market Difference between a scheme‟s actual return and its optimal return is its Alpha -

QUESTION 1. Fundamental analysis is a evaluation of the strength of the company‟s price volume charts a. True b. False 2. In a top –down approach, sector allocation precedes stock selection a. True b. False

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Mutual Fund (AMFI) 3. Which of the following is a truly international asset class a. Real Estate b. Equity c. Debt d. Gold 4. Loads and taxes may account for the difference between scheme returns and investor returns a. True b. False 5. The most appropriate measure of returns for a scheme in existence for several years is a. Simple Return b. Dividend Return c. Annualized Return d. CAGR 6. Risk can be measured by a. Variance b. Standard Deviation c. Beta d. Any of the above 7. EPS (Earning per share) means…..? a. b. c. d.

Net profit ÷ no of equity shares Net profit before tax ÷ no of equity shares Net profit after tax ÷ no of equity shares Net profit after interest and depreciation ÷ no of equity shares

8. Low PE means that a share is …….. & higher PE means that share is…… a. Expensive, Cheaper b. Cheaper, Expensive 9. Book value per share means….? a. b. c. d.

Net profit÷ no of equity shares Net profit after tax ÷ no of equity shares All asset Net ÷ no of equity shares Net Worth ÷ no of equity shares

10. Technical analysis helps in decide when to implement the decision (Timing)

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Mutual Fund (AMFI) a. True b. False 11. Which approach of picking up stocks which are valued lower? a. Growth investment b. Value Investment 12 Stock selections is the key decision in which approach? a. Bottom –up Approach b. Top down Approach 13. Debt securities that mature within a year are called….? a. b. c. d.

Hybrid securities Money Market Securities Gilt securities None of the above

14. Return that an investor earns or is likely to earn on a debt security is called…..? a. b. c. d.

Net profit Capital gain Yield None of the above

15. In which debt security have lowest yield and have lowest defaulting risk? a. b. c. d.

Gilt securities Certificate of deposits Commercial paper Treasury bills

16. When portfolio manager is expects interest rates to rise, then he switched towards a higher proportion of ………….rate instruments a. Fixed b. Floating 17. When rupee stronger then gold prices are ……….? a. b. c. d.

No change Lower Higher None of the above

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Mutual Fund (AMFI) 18. Previous NAV was Rs 12 and current NAV has grown to Rs 15 .How much is your return? a. b. c. d.

10% 20% 25% 30%

19. Two investment options have indicated their returns since inception 5% & 6%. If first investment was in existence for 6 months and the second for 4 months, then what is the annualized return for both? a. b. c. d.

12 % and 15% 9% and 10% 10 % and 9% 10% and 10%

20. All risk factor belonging to the mutual fund scheme are mention in? a. b. c. d.

SID KIM Advertisements All of the above

21. Thematic funds are less risky than sector funds, but riskier than diversified equity fund. a. True b. False 22. In which fund invest in shares whose price is fluctuate less but offer attractive returns in the form of dividend. a. b. c. d.

Arbitrage fund Growth fund Dividend Yield Fund None of the above

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Mutual Fund (AMFI) CHAPTER 9 SCHEME SELECTION 1. How to choose between Scheme Categories? a. Equity Funds Long term, than in the short term Investing in equities with a horizon Active or Passive Open –ended or Close –ended Diversified, sector or thematic Large –cap v/s mid –cap / small cap funds Growth or value funds Fund size Portfolio Turnover Arbitrage Funds Domestic Equity v/s International Equity Funds b. Debt Funds Regular Debt Funds v/s MIPs Open –end funds v/s FMP Gilt Funds v/s Diversified Debt Funds Long Term Debt Fund v/s Short term debt fund Money market Funds / Liquid Schemes Regular Debt Funds v/s Floaters c. Balanced Scheme d. Gold funds e. Other funds 2. How to select a Scheme within a Scheme category? Fund age : long history has a track record Scheme Running Expenses: investors need to be particularly careful about the cost structure of debt schemes Tracking Error: a basis to select the better scheme Regular Income Yield in Portfolio: schemes income comes out of regular income and capital gains 3. Which is the better option within a Scheme? a. Dividend payout option It has the benefit of money flow to the investor and has the benefit of letting the money grow in the fund on gross basis Dividend re-investment option neither gives the cash flows nor allows the money grow in the fund on gross basis b. Re –purchase transaction Treated as a sale of units by the investor

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Mutual Fund (AMFI) They can be an element of capital gain, if the re –purchase price is higher than the cost of acquiring those units Re –purchase transactions in equity schemes are subject to SIT The dividend payout option seems attractive for investors wanting a regular income Monthly income plan, dividend declaration is a function of distributable surplus Dividend flows in a debt scheme come with the associated dividend distribution tax, which reduces the NAV Taxation and liquidity needs are a factor in deciding between the options 4. Sources of data to track Mutual Fund Performance Research by collecting daily NAV and dividend declaration information from the newspapers Distribution houses and mutual fund research houses offer free tools in their website Raw data of NAVs, dividends etc. in a systematic manner Mix of free and paid content is subject to change  Credence Analytics (www.credenceanalytics.com)  CRISIL (www.crisil.com)  Lipper (www.lipperweb.com)  Morning Star (www.morningstar.com)  Value Research (www.valueresearchonline.com) -

QUESTION 1. Equity markets are more predictable in the long term than the short a. True b. False 2. Arbitrage funds are meant to give better equity risk exposure a. True b. False 3. The comparable for a liquid scheme is a. Equity scheme b. Balanced scheme c. Gilt fund d. Saving bank account 4. Which of the following aspects of portfolio would an investor in a debt scheme give most importance a. Sector selection

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Mutual Fund (AMFI) b. Stock selection c. Weighted Average Maturity d. Number of Securities in Portfolio 5. Mutual fund ranking and rating amount to the same a. True b. False 6. Index Funds are …….funds? a. Active b. Passive 7. The difference between index schemes return and fund return due to….? a. b. c. d.

Interest rate Tracking error Time All of the above

8. Dividend payout option is better for investors wanting……? a. b. c. d.

Additional units Regular income Capital gain None of the above

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Mutual Fund (AMFI) CHAPTER 10 SELECTING THE RIGHT INVESTMENT PRODUCTS FOR INVESTORS 1. Financial and Physical Assets a. Concept An investor who buys land, building, a painting or gold can touch and feel them Such assets are called physical assets An investor who buys shares in a company is entitled to the benefits of the shareholding –but this entitlement cannot be touched or felt. Such assets are called Financial Assets b. Implication Comfort Unforeseen Events: Dematerialization makes these processes a lot simpler Economic Context: investor‟s money in land , or gold does not benefit the economy. Money invested in financial assets can be productive for the economy 2. Gold – Physical or Financial Gold suffers one of the highest risks of loss through theft Storage in bank lockers too costs money Exposure to gold as a financial asset  Gold ETF  Gold Sector Fund  Gold futures contracts are traded in commodity exchanges like the National Commodities Exchange (NCDEX) and Multi –Commodity Exchange (MCX)  Wealth Tax is applicable on gold holding  Mutual fund schemes and gold deposit schemes are exempted from Wealth Tax 3. Real Estate – Physical or Financial Risk of loss on account or fire and other hazards, real estate in Physical form  Disadvantages Ticket size i.e. the minimum amount required for investing in real estate is high Budget is very high, and the value of properties bought are very low Once purchased, vacant land can be encroached upon by others Real estate is an illiquid market Once a deal is executed, the transaction costs, such as stamp duty and registration charges, are also high Property is let out, there is a risk that the lessee may lay his own claim to the property

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Mutual Fund (AMFI) 4. Fixed Deposit or Debt Scheme Features where bank deposits clearly score over mutual funds a. A bank fails; deposit insurance scheme of the government comes to the rescue of small depositors. Up to Rs. 1 lakh per depositor in a bank b. Depositor can also prematurely close the deposit at any time c. Mutual fund debt schemes are superior to bank deposits d. Bank deposit, the depositor can never earn a return higher than he interest rate promised e. Interest earned in a bank deposit is taxable each year. If a unit holder allows the investment to grow in a mutual fund scheme, then no income tax is payable on year to year accretions f. Mutual funds offer various facilities to make it easy for investors to move their money between different kinds of mutual fund schemes 5. New Pension Scheme Pension Funds Regulatory & Development Authority (PFRDA) is the regulator for the NEW Pension Scheme Two kinds of pension  Tier I (Pension account), is non –withdraw able  Tier II (Saving account) is withdraw able to meet financial contingencies QUESTION 1. More than 50% of the wealth of Indians is held in physical assets a. True b. False 2. Gold Futures are superior to ETF Gold as a vehicle for lifelong investment in gold a. True b. False 3. As regards wealth tax, ETF Gold is superior to Physical Gold a. True b. False 4. The New Pension Scheme is regulated by a. SEBI b. IRDA c. PFRDA d. AMFI 5. An investor under the new pension scheme can choose which of the following asset classes a. Equities b. Corporate Debt c. Government Securities d. Any of the above

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Mutual Fund (AMFI) 6. Which is not the disadvantage of real estate? a. b. c. d.

Budget is very high Vacant land can be encroached Control over assets Transaction cost

7. When there is a possibility of lower interest rates in future which one is better option for investment? a. Bank deposits b. Debt mutual fund schemes 8. Gold ETFs are not better than gold future in which context? a. b. c. d.

Low leverage is required Riskier product Low cost of transaction None of the above

9. Which asset is not benefited the economy? a. Physical Asset b. Financial Asset 10. What is the full form of PFRDA? a. b. c. d.

Private Funds Regulatory and Development Authority Perfect Funds Regulatory and Development Authority Pension Funds Regulatory and Development Authority None of the above

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Mutual Fund (AMFI) CHAPTER 11 HELPING INVESTORS WITH FINANCIAL PLANNING 1. Introduction to Financial Planning a. Financial Planning Financial planning is an approach to building long term relationships with clients Financial planning is planned and systematic approach to provide for the financial goals that will help people realize their needs and aspirations, and be happy b. Assessment of Financial Goals Cost in today‟s terms, need to be translated into the rupee requirement in future A = P * (1 + i)n Here A = Rupee requirement in future P= cost in today‟s terms I= inflation n = number of years into the future, when the expenses will be incurred c. Investment Horizon The investor would have some regular income out of which part of the expenses can be met d. Financial Planning Objectives and Benefits Objective of financial planning is to ensure that the right amount of money is available at the right time to meet the various financial goals of the investor Advance information available through financial planning, timely corrective actions can be taken such as  Reviewing what is a “need” and what is “desire” that can be postponed for the more desirable objective  Moving to a smaller house, or a house in a less expensive locality, to release more capital  Improving the future annual savings by economizing on expense  Financial planning thus helps investors realize their aspirations and feel happy e. Need for Financial Planners A Financial Planner‟s service is invaluable in helping people realize their needs and aspirations Financial planner thus steps in to help the investor select appropriate financial products and invest in them Financial planners can also help investors in planning for contingencies 2. Alternate Financial Planning Approaches

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Mutual Fund (AMFI) An alternate approach is a “comprehensive Financial plan” where all the financial goals of a person are taken together, and the investment strategies worked out on the basis Comprehensive financial plan, as proposed by the Certified Financial Planner – Board of Standards (USA) A comprehensive financial plan calls for significantly more time commitment on the part of both the investor and the financial planner 3. Life cycle and wealth cycle in Financial Planning a. Life cycle  Childhood  Young Unmarried  Young Married  Married with Young Children  Married with Older Children  Pre –Retirement  Retirement b. Wealth cycle  Accumulation  Transition  Inter –Generational Transfer  Reaping / Distribution  Sudden Wealth -

QUESTION 1. Today‟s costs can be translated into future requirement of funds using the formula a. A = P * (1 + i) n b. A = P / (1 + i) n c. P = An * (1 + i) d. P = An / (1 + i) 2. Providing funds for daughter‟s marriage is an example of a. Goal –oriented Financial Plan b. Comprehensive financial plan c. Financial goal d. None of these 3. According to the Certified Financial Planner – board of Standards (USA), the first stage in financial planning is a. Analyses and evaluation client‟s Financial status b. Establish and define the client –planner relationship c. Gather client data, define client goals d. Develop, Present Financial Planning Recommendations and / or options

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Mutual Fund (AMFI) 4. Investor can get into long term investment commitments in a. Distribution Phase b. Transition Phase c. Inter –Generational Phase d. Accumulation Phase 5. Distribution phase of Wealth Cycle is a Parallel of Retirement Phase of Life Cycle a. True b. False 6. Financial planning is a systematic approach to provide for the ……… that will help to realize? a. b. c. d.

Financial Asset Financial Goals Financial liability None of the above

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Mutual Fund (AMFI) CHAPTER 12 RECOMMENDING MODEL PORTFOLIOS AND FINANCIAL PLANS 1. Risk Profiling a. Need for risk Profiling Risk Profiling is an approach to understand the risk appetite of investor – an essential pre –requisite to advise investors on their investments Investment advice is dependent on understanding both aspects of risk:  Risk appetite of the investor  Risk level of the investment option being considered b. Factors that influence the Investor‟s Risk Profiling  Family information Factor Influence of Risk Appetite Earning members Risk appetite increases as the number of earning members increases Dependent Risk appetite decreases as the number of dependent members members increases Life expectancy Risk appetite is higher when life expectancy is longer  Personal Information Age Lower the age, higher the risk that can be taken Employability Well qualified and multi skilled professionals can afford Nature of Job Those with steady jobs are better positioned to take risk Psyche Daring and adventurous people are better positioned mentally, to accept the downside that come with risk  Financial Information Capital Base Higher the capital base, better the ability to financially take the downsides that come with risk Regularity of People earning regular income can take more risk than Income those with unpredictable income streams c. Risk profiling tools AMCs and securities research houses provide risk profiling tools in their websites Risk profile surveys suffer from the investor trying to “guess”the right answer, when in fact there is no right answer Risk profiling is a tool that can help the investor Service providers can assess risk profile based on actual transaction record of their regular clients Financial planner needs to use them judiciously 2. Asset allocation

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Mutual Fund (AMFI) a. Role of Asset Allocation „Don‟t put all your eggs in one basket‟ is an old proverb Distribution of an investor‟s portfolio between different asset classes is called asset allocation Prudent asset allocation, the investor does not end up in the unfortunate situation of having all the investments in an asset class that performs poorly b. Asset Allocation Types  Strategic Asset Allocation Risk profiling is key to deciding on the strategic asset allocation As the person grows older, the debt component of the portfolio keeps increasing  Tactical Asset Allocation It is the decision that comes out of calls on the likely behavior of the market Tactical asset allocation is suitable only for seasoned investors operating with large investible surpluses 3. Model portfolios Financial planners often work with model portfolios –the asset allocation mix that is most appropriate for different risk appetite levels QUESTION 1. Risk appetite of investor is assessed through a. Risk Appetizers b. Asset Allocators c. Risk Profilers d. Financial Plan 2. The objective of asset allocation is risk management a. True b. False 3. The asset allocation that is worked out for an investor based on risk profiling is called a. Tactical Asset Allocation b. Fixed Asset Allocation c. Flexible Asset Allocation d. Strategic Asset Allocation 4. Risk profiling is an approach to understand the risk ………. of the investors? a. Appetite

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Mutual Fund (AMFI) b. Approach c. Asset d. Level 5. The distribution of investor‟s portfolio between different classes is called…….…? a. b. c. d.

Asset risk Asset profiling Asset allocation Asset investment

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Mutual Fund (AMFI) SAMPLE PAPER – 1 1. An investor who is conservative in his risk taking ability should avoid which of the following funds? a. Liquid funds b. Monthly income plans c. Diversified equity funds d. Sector equity funds 2. Which one of the following can change, without changing the fundamental attribute of a fund? a. Investment Objective b. Fund manager c. Asset allocation d. Lock-in period 3. The NAV for an equity fund purchase transaction will be applied based on: a. Date of realization of cheque b. Date on the time stamp c. Date of the application d. Date of the cheque 4. Which one of the following is NOT appointed by the AMC? a. The R&T agent b. The custodian c. The banker d. The distributor 5. A fund of fund derives its NAV from other funds. Therefore it can publish its NAV by a. 9 pm of the same day. b. 8 pm of the same day. c. 9 am of the next day. d. 8 am of the next day. 6. Which of the following is NOT found in an offer document? a. Key personnel of the fund b. Features of competing funds c. Existing schemes of the fund d. Fees and expenses of the scheme 7. Securities transaction tax (STT) is payable by mutual fund investors on: a. Repurchase of all units b. Sale of equity-oriented units c. Sale and repurchase of all units

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Mutual Fund (AMFI) d. Re-purchase of equity-oriented units 8. An investor transaction is completed using the online facility of a mutual fund at 11:30 AM. It is processed at 4:00 PM. What is the applicable cut-off time for the transaction? a. 4:00 PM b. Cut-off time does not apply to such transactions c. 3:00 PM d. 11:30 AM 9. Which of the following NAVs of an equity fund is as per minimum regulatory requirement? a. Rs.12 b. Rs. 12.45 c. Rs.12.4525 d. Rs.12.452 10. Which of the following entities actually represents the mutual fund? a. The trust b. The custodian c. The AMC d. The sponsor 11. If a distributor invests his own funds in a mutual fund, which of the following is true? a. He can invest but only in a joint name b. He cannot invest as a individual c. He cannot earn commission on his investments d. He cannot invest his own funds 12. Alpha refers to: a. Excess return b. Beta c. Sharpe ratio d. Tracking error 13. An investor in NPS chooses the life cycle option. This means his asset allocation will be based on: a. Age b. Holding period c. Amount invested d. Risk profile 14. A value-based fund is likely to choose which type of stocks? a. High dividend value stocks b. High growth stocks

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Mutual Fund (AMFI) c. High PE stocks d. Higher priced stocks 15. Money market securities have a maturity period of: a. Less than 182 days b. Less than 91 days c. Less than or equal to 364 days d. Equal to 364 day 16. An asset allocation that is not frequently revised is called: a. Flexible allocation b. Floating allocation c. Tactical allocation d. Fixed allocation 17. An application for a gilt fund is received with a cheque for Rs. 2 crore at 11:00 AM. What is the applicable NAV? a. Previous day b. Day of cheque realization c. Next day d. Same day 18. The assets of a fund are Rs. 200 cr. The current liabilities are Rs. 20 cr. The unit capital is Rs. 50 cr. and the face value per unit is Rs. 10. what is the NAV of the fund? a. Rs.32 b. Rs.44 c. Rs.40 d. Rs.36 19. A company investing in a mutual fund is required to submit along with the application: a. A copy of the profit and loss account b. A copy of the tax returns c. A copy of the balance sheet d. A copy of the board resolution 20. The limitation of investing in real estate, to a small investor is that a. Meets only income needs b. The holding period is short c. Requires higher investment outlay d. The liquidity is high 21. What is the maximum number of AMCs with whom a mutual fund distributor can be empanelled?

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Mutual Fund (AMFI) a. 10 b. There is no maximum limit c. 5 d. 20 22. Which of the following constituents is responsible for executing the trades of the fund manager on the stock exchange? a. Banker b. Custodian c. R&T agents d. Brokers 23. The price of gold in the spot markets is Rs. 20,000 per 10 gms. It is expected to go up to Rs.21,000. What is likely to happen to the price of gold futures? a. Go down b. Go up c. increased volatility d. Do not change 24. An important benefit of SIPs is: a. Lower lock-in period b. Lower fund expenses c. High rates of return d. Rupee cost averaging 25. Which of the following is a eligible for specific tax concessions? a. Company deposits b. PPF c. Corporate bonds d. Post office deposits 26. Asset class G in the NPS is suitable for investors who like to invest in: a. Bank deposits b. Equity Shares c. Debentures of companies d. Government securities 27. n the asset allocation decision, which step is the last one? a. Asset allocation b. Financial goal determination c. Return objective d. Scheme selection 28. Investments in equity funds can be expected to be: a. Risky in the long term

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Mutual Fund (AMFI) b. Risky in the short term c. Riskless in the short term d. Riskless in the long term 29. The interest on bank deposits is: a. Fully exempt from tax b. Exempt from tax up to a limit c. Taxable up to a certain limit d. Fully taxable 30. A transaction slip can be used in a mutual fund transaction if: a. The value of the transaction is less than Rs.50000 b. It is a transaction in an existing folio c. It is a non-financial transaction d. It is a first time transaction 31. Return from equity depends on: a. Company factors b. Industry factors c. Economy factors d. All of the given options 32. Which of the following entities cannot be sued by the investor? a. Trust b. Custodian c. Sponsor d. AMC 33. CAGR is used to measure the returns from mutual funds for periods of ____________. a. equal to one year b. less than one year c. more than one year d. more than five years 34. An individual investor chooses a dividend reinvestment option in a debt fund. What is the DDT applicable to the dividends that are reinvested? a. DDT applies only for dividend payout option b. DDT does not apply c. DDT applies at 20% d. DDT applies at 12.5% 35. The correct indicator of return to the investor would be: a. Return after expenses, load and tax b. Return after expenses and load

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Mutual Fund (AMFI) c. Portfolio return d. Return after expenses 36. The fund manager in a fund of fund scheme selects: a. Sectors b. Bonds c. Funds d. Stocks 37. When investors buy units in an NFO, the amount mobilized by the fund is called: a. Unit capital b. Average AUM c. Managed capital d. Initial AUM 38. When the interest rates are going down, the prices of debt securities are likely to: a. Go down b. Go up c. Remain unchanged d. Cannot say 39. If units: a. b. c. d.

an investor uses the ASBA facility in NFO transactions, he makes the payment for Without making an application Upfront in advance In installments Only on allotment of units

40. The component that is common between offer documents of two schemes of the same mutual fund is: a. KIM b. MIN c. SID d. SAI 41. The investment objective of an investor is to earn steady income. Which of the following funds is most likely to meet that objective? a. Equity index fund b. Dynamic Bond Fund c. Sector equity fund d. Diversified equity fund

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Mutual Fund (AMFI) 42. An investor sells his units in an equity-oriented fund after 6 months, for a profit. What is the taxability of this gain? a. Taxable at 10% b. Taxable at marginal rates c. Taxable at 20% d. Taxable at 15% 43. If an investor conducts a mutual fund transaction on a stock exchange platform, which of the following is NOT true? a. The transaction may have to be sent to the R&T agent b. The transaction has be conducted online c. The transaction can be settled using a demat account d. The transaction will be put through by a broker 44. The track record of a fund can be used in evaluating funds that are: a. Large b. Small c. In existence for a short period d. In existence for a long period 45. Trail commission is paid on the basis of: a. Market value of the invested amount b. Face value of the invested amount c. Original invested amount d. Minimum value of the invested amount 46. In order to be appointed as a constituent of a mutual fund, it is compulsory to be: a. Approved by RBI b. Listed by Ministry of Company Affairs c. Certified by AMFI d. Registered with SEBI 47. The primary objective of creating a mutual fund trading platform on a stock exchange is to a. Increase the reach of mutual fund products b. Increase the number of products c. Increase the number of investors d. Increase the cost of distribution 48. Which of the following funds will not be chosen by an investor who seeks liquidity? a. Equity-linked saving schemes b. Open ended income funds c. Diversified equity funds d. Liquid funds

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Mutual Fund (AMFI) 49. If you had to choose the lowest risk option for your investor, which one of the following would you choose? a. Balanced funds based on fixed allocation b. Equity funds c. Balanced funds based on flexible allocation d. Sector funds 50. If you receive an application for investing in a mutual fund, which one of the following investors would you reject? a. HUFs b. PIOs c. NRIs d. OCBs 51. Which of the following is a physical asset? a. Equity shares b. Title to property c. Bank deposits d. Corporate bonds 52. Which of the following risks is not borne by FMP, who holds to maturity? a. Liquidity risk b. Default risk c. Market risk d. Credit risk 53. A purchase request for an equity fund was accepted at an AMC office on Wednesday, March 11 at 2:30 pm. What is the applicable NAV for the transaction? a. NAV of March 10 b. NAV of March 1 c. NAV of March 9 d. NAV of March 12 54. If flexible asset allocation is chosen, the ratio between the asset classes is likely to: a. Change every year b. Remain equal c. Change with market changes d. Remain fixed 55. Investments in mutual funds enable investors to reduce the risk in their portfolios through: a. Stock selection b. Diversification

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Mutual Fund (AMFI) c. Market timing d. Sector selection 56. An investor has sold his investments in a mutual fund two years after buying the units. The profits he earns are taxable ________. a. as dividends b. as short term capital gains c. as long term capital gains d. at a rate of 10% 57. Which of the following investment exhibits higher volatility in its value? a. Equity shares b. Bonds c. Deposits d. PPF 58. If a scheme has a lock-in period, such information can be found in: a. SID b. SAI c. KYC d. MIN 59. The NAV of a fund is Rs. 40. The exit load is 1%. What is the re-purchase price per unit? a. Rs.40 b. Rs. 39.40 c. Rs.40.40 d. Rs.39.60 60. If the PE ratio is very high, it is likely that growth stocks would be a. Fairly valued b. Undervalued c. Illiquid d. Overvalued 61. The primary data used in fundamental analysis of equity is a. Trading volume b. Financial information c. Shareholding pattern d. Stock prices 62. The risk appetite of an investor can be expected to: a. Change with new events b. Change every year c. Remain unchanged

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Mutual Fund (AMFI) d. Change with age 63. A mutual fund scheme was launched on October 15. 2010. When is the SID due for the first regular update? a. March-12 b. January-12 c. March-11 d. January-11 64. A company that intends to invest in a mutual fund scheme needs to take approval from: a. Board of Directors b. Company Law Board c. SEBI d. Registrar of Companies 65. An investor likes to assume high risks for higher returns. Which of the following funds would he prefer? a. Small cap growth fund b. Large cap fund c. Income fund d. Diversified equity fund 66. The AMFI code of conduct is: a. Applicable only on voluntary basis b. Part of the SEBI Mutual fund regulation c. Implemented only by AMFI d. Not approved by SEBI 67. Profiling is done to ensure that investment options are chosen according to the ability of the investor to: a. Bear risks b. Save c. Expect returns d. Accumulate 68. Money is paid by the insurer on the death of an insured person, to the ____________. a. children of the deceased b. nominees of the deceased c. wife of the policy holder d. proposer of the policy 69. The AMC's expenses to pay salaries to employees is borne by: a. Distributors, not unit holders

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Mutual Fund (AMFI) b. Unit holders, not the AMC c. Trustees, not sponsors d. AMC, not unit holders 70. Risk factors needs not be carried in which of the following advertisements? a. Advertisement of existing products b. NFO advertisement c. Tombstone advertisements d. Awards advertisement 71. A financial goal, to be actionable has to be defined in terms of: a. Needs and desires b. Amount and need c. Amount and time d. Need and time 72. Which of the following is NOT required to be disclosed to the investors in a mutual fund? a. Annual report of the AMC b. NAV of the schemes c. Annual report of the scheme d. Portfolio of the scheme 73. The amount of money remaining with a fund as unclaimed redemption is: a. Managed by the fund until it is claimed. b. Transferred to SEBI. c. Managed by the fund for a specified period. d. Transferred to a trust immediately. 74. A fund? a. b. c. d.

mutual fund has been set up by a bank. Who is the regulator of the sponsor of such a RBI SEBI AMFI Ministry of Finance

75. The return to the investor in a short term debt fund can be impacted by __________. a. expense ratios b. cash risk c. liquidity risk d. market risk 76. According to the investment management agreement, what is the power the trustee holds with respect to an AMC? a. Trustee can recapitalize the AMC

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Mutual Fund (AMFI) b. Trustee can deny fees to the AMC c. Trustee can change the AMC for non-performance d. Trustee can change the staff of the AMC 77. Which of the following funds is likely to have a high level of volatility in the NAV? a. 91-day FMP b. Short term debt fund c. Liquid fund d. Long term gilt fund 78. The risk in an equity fund can arise from the portfolio that holds: a. Non-index stocks b. Less than 10% in a single stock c. Higher proportion in a few sectors d. Stocks from several sectors 79. An investor in mutual funds faces the disadvantage of: a. High cost of operations b. Overload of choices c. Low flexibility in investing d. Lock-in period 80. Which of the following cannot be a appointed as a distributor of a mutual fund? a. Individuals b. Banks c. AMC employees d. Sponsor 81. A loan can be taken to buy an asset provided: a. Rate of loan is greater than rate of return on the asset b. Rate of loan is unrelated to rate of return on the asset c. Rate of loan is less than rate of return on the asset d. Rate of loan is equal to rate of return on the asset 82. PAN is required for: a. Purchase transactions above Rs50,000 b. All mutual fund transactions c. Re-purchase transactions d. NFO transactions 83. Which of the following is an appropriate benchmark for a large cap equity fund? a. BSE 500 index b. S&P CNX Nifty index c. S&P CNX IT index

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Mutual Fund (AMFI) d. BSE 200 Index 84. When an investor plans to will his wealth to his heirs, financial planning is: a. Required for the investor b. Required for the beneficiaries c. Not required d. Required only for tax purposes 85. If an investor redeems units from a fund, he is likely to receive an updated statement of account within: a. 10 days b. 15 days c. 7 days d. 30 days 86. If unit holders seek a change in AMC, they should get the support of investors holding __ a. 75% of the unit capital. b. 40% of the unit capital. c. 50% of the unit capital. d. 25% of the unit capital. 87. An investor earns long term capital losses from his debt fund investments. He also makes a long term gain from his MIP investments. Which of the following is true? a. The loss can be set off b. The loss cannot be set-off c. The loss can be set off only against short term gains d. Only short term gains are available for set-off 88. A fund manager has sold his holdings while the markets are still going up and is holding cash as a defensive measure. How is the portfolio likely to perform if the markets correct? a. Outperform b. Match the market c. Underperform d. Correlated to the market 89. AMFI has the powers with respect to registered ARN-holding distributors to: a. All of the given options b. Impose penalties c. Cancel registration d. Issue notices 90. An investor who is unwilling to invest in equity due to the perceived high risk may benefit from:

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Mutual Fund (AMFI) a. b. c. d.

A small proportion in a diversified equity fund A large proportion in a sector fund A complete allocation to an all-debt portfolio A small proportion to a quick-gain trading portfolio

91. When a fund launches a new scheme, it first takes the approval of a. Sponsors b. AMFI c. Trustees d. SAT 92. The focus on building a retirement corpus should be high ____. a. closer to retirement b. much before retirement c. at retirement d. after retirement 93. If an investor in a closed end fund seeks liquidity, he can: a. not redeem units before maturity b. Sell the units on a stock exchange c. Redeem units with the fund d. Redeem units at ISCs 94. The price of a closed end fund that is listed on a stock exchange tends to be: a. Different from the NAV b. Higher than the NAV c. Equal to the NAV d. Unrelated to the NAV 95. A greater allocation to equity can be recommended to an investor in the: a. Distribution phase b. Reaping phase c. Transition phase d. Accumulation phase 96. KYC norms have to be complied for which of the following mutual fund transactions? a. All transactions b. All transactions of Rs.50,000 or more in value c. All purchase transactions d. All purchase transactions of Rs.50,000 or more in value 97. If there is a loss from sale of mutual funds, this cannot be set off against ___________. a. any other head of income b. income from residential property

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Mutual Fund (AMFI) c. income from dividends and interest d. income from salary 98. An investor buying mutual fund units for the first time uses the: a. Application form b. Switch form c. Transaction slip d. Statement of account 99. The primary objective of financial planning is to provide for: a. Retirement b. Tax saving c. Financial goals d. Creating wealth 100. An investor who saves for a large expense in a short period of time is likely to choose: a. A ULIP b. A term policy c. A money back policy d. An endowment policy

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Mutual Fund (AMFI) SAMPLE PARPER – 2 1. The number of mutual fund schemes in India is about: a. 100 b. 500 c. 800 d. 200 2. Open –ended schemes generally offer exit option to investors through a stock exchange a. True b. False 3. Mutual Fund is -----------------------? a. A vehicle to mobilize money from investors b. Invest in different markets and securities c. Investment agreement between mutual fund and the investors d. All of the above 4.

Mutual Fund act as a ------------------------? a. Government regulator b. Market stabilizer c. Investment Banker d. Agent

5. Truth value of the unit of the scheme is called? a. Value b. Return c. Interest d. Net Asset Value (NAV) 6. Investors have easy entry or exit at any time a. Open ended Scheme b. Close Ended Schemes 7. In close ended scheme investor buy the units from …..? a. Open market b. Fund Itself 8. Combinations of both open ended scheme & close ended scheme are….? a. Active fund b. Passive fund c. Interval Fund d. Debt Fund 9. NAV of the scheme fluctuates lesser than debt funds that invest more in debt securities? a. Liquid scheme

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Mutual Fund (AMFI) b. Gild fund scheme c. Floating rate funds d. Junk bond schemes 10. Invest in both government and non – government securities? a. Gilt Fund Schemes b. Hybrid Funds c. Diversified Funds d. Liquid Schemes 11. Equity Linked Saving Schemes duration of lock in period is……? a. 1 Year b. 5 year c. 3 year d. 10 year 12. Which fund invests in gold? a. Gold sector fund b. Gold Exchange Traded Fund c. Commodity Sector fund d. Commodity fund 13. Exchange traded funds are ……? a. Open ended index funds b. Traded in stock exchange c. Real time prices of such ETF units d. All of the above 14. Minimum net worth requirement for AMC is a. Rs. 10 crore b. Rs. 5 crore c. Rs. 4 crore d. Rs. 2 crore 15. Most investor service centers are offices of a. Trustees b. Registrar c. Custodian d. Fund accountant 16. Mutual fund in India is regulated with…..? a. SEBI Act 1992 b. Depositories Act 1996 c. SEBI (Mutual Fund) Regulations,1996 d. SEBI (Mutual Fund)Act, 1992 17. Sponsor should earn profits from last…..? a. Last 3 years b. Last 3 Years out of 5 Years www.ptajaipur.com

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Mutual Fund (AMFI) c. Latest year d. Last 5 years 18. Who maintain the records of the investors in mutual fund? a. AMC b. RTA c. Custodian d. None of the above 19. SEBI regulates a. Mutual Funds b. Depositories c. Registrar & Transfer Agents d. All of the above 20. Within …….. days of dividend declaration, warrants will have to be sent to investors a. 7 b. 10 c. 15 d. 30 21. Which one is not regulated by the SEBI? a. Depositories b. MCX c. RTA d. Custodians 22. What is the full name of AMFI? a. All mutual fund of India b. Association of mutual fund of India c. Alternate mutual fund of India d. None of the above 23. In how many business days units are allotted or refund money of NFO? a. 1 b. 5 c. 3 d. 4 24. NAV published in at least ….. Newspaper? a. 1 b. 2 c. 3 d. None of the above 25. Investors appoint up to …… nominees? a. 1 b. 5 c. 3 www.ptajaipur.com

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Mutual Fund (AMFI) d. 2 26. Interest on delayed payout …..% ? a. 5% Per Year b. 2.5 % Per Month c. 15% per year d. 11% per year 27. Mutual fund provide the …….within ……months from the close of financial year. a. Profit & Loss Account & 12 Month b. Annual Report & 6 month c. Balance Sheet & 3 month d. NAV & 9 month 28. Investors claim for unclaimed amount within ……. years? a. 5 Years b. 2 years c. 1 years d. 10 years 29. Offer documents of mutual fund schemes are approved by SEBI a. True b. False 30. Application form is attached to a. SID b. SAI c. KIM d. None of the above 31. What is the full form of NFO? a. No Fund Offer b. New fund Option c. New Fund offer d. None of the above 32. NFO remains open for maximum ……. days. a. 10 days b. 1 month c. 15 days d. 7 days 33. Offer document included……..? a. Nature of the scheme b. Investment Objectives c. It is a legal document d. All of the above 34. KIM known as ………………? a. Key Inspection Memorandum

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Mutual Fund (AMFI) b. Key Information Memorandum c. Key Initial Memorandum d. None of the above 35. KIM includes the summary of …….. & ……… ? a. Application form & KYC b. SID & SAI c. P&L and Balance sheet d. Offer documents & risk profile 36. The maximum initial commission that an AMC can pay to distributor is a. Nil b. 0.05% c. 1% d. 2% 37. Trail commissions are linked to valuation of portfolio in the market a. True b. False 38. What is the full form of ARN? a. Alternate registration number b. AMFI registration number c. Analyst registration number d. None of the above 39. ETFs are bought and sold in the …………….? a. Mutual fund itself b. Open Market c. Stock Exchange d. None of the above 40. Which provision is covered in the SEBI Advertising Code? a. Advertisement shall be truth, fair & clear b. Mutual fund investment is subject to market risk c. Contract details for further information and scheme literature. d. None of the above 41. The difference between NAV and re –purchase price is a. Entry load b. Exit load c. Expense d. Dividend stripping 42. NAV of income funds is to be calculated up to ……… decimals a. 4 b. 3 c. 2 d. 1

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Mutual Fund (AMFI) 43. NET ASSET VALUE (NAV) is referring as? a. Unit –holder’s funds in the scheme ‚ no of units b. Liabilities in the scheme ÷ no of units c. All assets in the scheme ÷ no of units d. Current asset in the scheme÷ no of units 44. When the expenses are higher in the scheme than? a. NAV decrease b. NAV increase c. No change in NAV d. None of the above 45. Difference between sale price and NAV is called as…….? a. Entry load b. Exit Load 46. Which expenses are not charged in the scheme? a. Selling expenses b. Listing fees and depository fees c. Penalties and fines d. Service tax 47. What is the annual limit for equity schemes for recurring expenses limits for funds up to 100 crores? a. 1% b. 2% c. 2.5% d. 1.5% 48. Short term capital loss is set off from ………….? a. All heads of income b. Only from short term capital gain c. Income from business & Professions d. None of the above 49. Potential tax avoidance approaches in dividend distribution, called …….? a. Dividend payout b. Dividend striping c. STT payout d. None of the above 50. PAN Card is compulsory for all mutual fund investments above Rs. 50, 000 including SIPs a. True b. False 51. Cut –off timing guidelines are not applicable for a. NFOs

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Mutual Fund (AMFI) b. International Funds c. Both of the above d. None of these 52. The age limit for investment in the mutual funds is……? a. 21 b. 19 c. No Age limit d. 18 53. Who are not invested in the mutual funds? a. FII‟s b. Individual who is a foreign national c. Companies d. Religious and charitable trusts 54. What is the full form of CVL? a. Central vigilance b. Central Voidance Limit c. CDSL Ventures Limited d. Central Violence Limit 55. PAN CARD is not compulsory for mutual fund investment (up to 50,000). a. True b. False 56. Dematerialization is a process in which investor holding investment in ……..form? a. Physical form b. Digital form c. Paper form d. None of the above 57. Which payment mechanism is not accepted by mutual funds? a. Cheque /Demand Draft b. Credit Card c. ASBA d. Cash 58. What is the full form of ASBA? a. Application supported by base amount b. Application supported by blocked amount c. Application supported by black amount d. None of the above 59. Reduced NAV, after a dividend payout is called as……….? a. Cum Dividend NAV b. Ex dividend NAV c. Post NAV d. Pre NAV

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Mutual Fund (AMFI) 60. Increase in number of units on account of reinvestment of dividend. a. Growth Option b. Dividend payout option c. Dividend Re-Investment Option d. None of the above 61. NAV declines up to the extent of dividend distribution tax. a. Dividend Re-investment option b. Dividend Payout option c. Growth Option d. None of the above 62. In which approach where investor meet their liquidity needs for regular expenses. a. SIP b. SWP c. STP d. None of the above 63. Which of the following is a truly international asset class a. Real Estate b. Equity c. Debt d. Gold 64. The most appropriate measure of returns for a scheme in existence for several years is a. Simple Return b. Dividend Return c. Annualized Return d. CAGR 65. EPS (Earning per share) means…..? a. Net profit ÷ no of equity shares b. Net profit before tax ÷ no of equity shares c. Net profit after tax ÷ no of equity shares d. Net profit after interest and depreciation ÷ no of equity shares 66. Book value per share means….? a. Net profit÷ no of equity shares b. Net profit after tax ÷ no of equity shares c. All asset Net ÷ no of equity shares d. Net Worth ÷ no of equity shares 67. Which approach of picking up stocks which are valued lower? a. Growth investment b. Value Investment 68. Debt securities that mature within a year are called….? a. Hybrid securities

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Mutual Fund (AMFI) b. Money Market Securities c. Gilt securities d. None of the above 69. When rupee stronger then gold prices are ……….? a. No change b. Lower c. Higher d. None of the above 70. Previous NAV was Rs 12 and current NAV has grown to Rs 15 .How much is your return? a. 10% b. 20% c. 25% d. 30% 71. Two investment options have indicated their returns since inception 5% & 6%. If first investment was in existence for 6 months and the second for 4 months, then what is the annualized return for both? a. 12 % and 15% b. 9% and 10% c. 10 % and 9% d. 10% and 10% 72. Thematic funds are less risky than sector funds, but riskier than diversified equity fund. a. True b. False 73. The comparable for a liquid scheme is a. Equity scheme b. Balanced scheme c. Gilt fund d. Saving bank account 74. Mutual fund ranking and rating amount to the same a. True b. False 75. Index Funds are …….funds? a. Active b. Passive 76. Dividend payout option is better for investors wanting……? a. Additional units b. Regular income c. Capital gain d. None of the above 77. The difference between index schemes return and fund return due to….?

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Mutual Fund (AMFI) a. b. c. d.

Interest rate Tracking error Time All of the above

78. The New Pension Scheme is regulated by a. SEBI b. IRDA c. PFRDA d. AMFI 79. Which is not the disadvantage of real estate? a. Budget is very high b. Vacant land can be encroached c. Control over assets d. Transaction cost 80. Gold ETFs are not better than gold future in which context? a. Low leverage is required b. Riskier product c. Low cost of transaction d. None of the above 81. What is the full form of PFRDA? a. Private Funds Regulatory and Development Authority b. Perfect Funds Regulatory and Development Authority c. Pension Funds Regulatory and Development Authority d. None of the above 82. Which asset is not benefited the economy? a. Physical Asset b. Financial Asset 83. Today‟s costs can be translated into future requirement of funds using the formula a. A = P * (1 + i) n b. A = P / (1 + i) n c. P = An * (1 + i) d. P = An / (1 + i) 84. Providing funds for daughter‟s marriage is an example of a. Goal –oriented Financial Plan b. Comprehensive financial plan c. Financial goal d. None of these 85. According to the Certified Financial Planner – board of Standards (USA), the first stage in financial planning is a. Analyses and evaluation client‟s financial status b. Establish and define the client –planner relationship c. Gather client data, define client goals

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Mutual Fund (AMFI) d. Develop, Present Financial Planning Recommendations and / or options 86. Financial planning is a systematic approach to provide for the ……… that will help to realize? a. Financial Asset b. Financial Goals c. Financial liability d. None of the above 87. Risk appetite of investor is assessed through a. Risk Appetizers b. Asset Allocators c. Risk Profilers d. Financial Plan 88. The asset allocation that is worked out for an investor based on risk profiling is called a. Tactical Asset Allocation b. Fixed Asset Allocation c. Flexible Asset Allocation d. Strategic Asset Allocation 89. Risk profiling is an approach to understand the risk ………. of the investors? a. Appetite b. Approach c. Asset d. Level 90. Which one of the following can change, without changing the fundamental attribute of a fund? a. Investment Objective b. Fund manager c. Asset allocation d. Lock-in period 91. A fund of fund derives its NAV from other funds. Therefore it can publish its NAV by a. 9 pm of the same day. b. 8 pm of the same day. c. 9 am of the next day. d. 8 am of the next day. 92. Which of the following is NOT found in an offer document? a. Key personnel of the fund b. Features of competing funds c. Existing schemes of the fund d. Fees and expenses of the scheme 93. An investor transaction is completed using the online facility of a mutual fund at 11:30 AM. It is processed at 4:00 PM. What is the applicable cut-off time for the transaction? a. 4:00 PM

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Mutual Fund (AMFI) b. Cut-off time does not apply to such transactions c. 3:00 PM d. 11:30 AM 94. Alpha refers to: a. Excess return b. Beta c. Sharpe ratio d. Tracking error 95. Money market securities have a maturity period of: a. Less than 182 days b. Less than 91 days c. Less than or equal to 364 days d. Equal to 364 day 96. An asset allocation that is not frequently revised is called: a. Flexible allocation b. Floating allocation c. Tactical allocation d. Fixed allocation 97. Which of the following constituents is responsible for executing the trades of the fund manager on the stock exchange? a. Banker b. Custodian c. R&T agents d. Brokers 98. Which of the following is a eligible for specific tax concessions? a. Company deposits b. PPF c. Corporate bonds d. Post office deposits 99. The interest on bank deposits is: a. Fully exempt from tax b. Exempt from tax up to a limit c. Taxable up to a certain limit d. Fully taxable 100. An individual investor chooses a dividend reinvestment option in a debt fund. What is the DDT applicable to the dividends that are reinvested? a. DDT applies only for dividend payout option b. DDT does not apply c. DDT applies at 20% d. DDT applies at 12.5%

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Mutual Fund (AMFI) MBA GUARANTEED PLACEMENT PROGRAM PTA provides a Guaranteed Placement Program for MBA’s those want to become a Stock Market Professional or wish to choose financial sector as a career option. In this program 40 % fees charge after the placement. TERM -I (BASICS)  Overview of Capital Market  Fundamental of Finance  Financial Products & Services  Investment Opportunities  Market Operations TERM-II (CERTIFICATIONS) · NSE Certification In Capital Market (Dealer) Module (Professional Training Academy provides the Short notes; In house develop Question bank, Mock test) TERM-III (PRACTICAL ASPECT)  Online simulated  Online Test Practice trading  Professional Skills o Sales & Marketing  Live Case Studies o Operation  Risk Management · Software Training Strategies o In House Software  Technical Analysis o ODIN  Fundamental o NEAT Analysis · Stress Management  Trading Psychology (Professional Training Academy gives the projects & assignments to the students on various topics & then student also provide the presentation on their respective projects) TERM-IV (CERTIFICATIONS) · NSE Certification in Derivatives Market (Dealers) Module (Professional Training Academy provides the Short notes; In- house develop Question bank, Mock test) TERM-V (INTERNSHIP & DEVELOPMENT) · Corporate Internship – 45 Days · Personality Development · Interview Skills · Client Handling & Soft Skill · Professional Communication Skills KNOWLEDGE BANK · Daily Business Newspaper Discussions · Weekly Business Magazine Discussions · Financial Portals · In-house Developed Financial Library DURATION: 6 Months ELIGIBILITY: MBA‟s Fees: 15,500/- (paid in equal 3 installments) 10,000/- (after the placement) (Including all Exam, Registration Fees,& Taxes)

Full time internship available during the course 9:00 am to 5:00 pm (all specialization)

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Mutual Fund (AMFI) CERTIFIED CURRENCY PROFESSIONAL TERM-1 (BASICS)  Introduction to Foreign Exchange Market & Currency Future  Regulatory Framework  Factor Effecting Currency Movement  Indian & US Economic Data Analysis  USD – INR Future Pricing TERM-II (CERTIFICATIONS)  NISM – Currency Derivative Professional (Professional Training Academy provides the Short notes; in house develop Question bank, Mock test) TERM-III (PRACTICAL ASPECT)  Online Simulated  Online Test Practice Trading  Professional skills  Live Case Studies Sales & Marketing  Risk Management Operation Strategies  Stress Management  Technical Analysis   Jobbing Strategies  Fundamental Analysis  Spread Strategies (Professional Training Academy gives the projects & assignments to the students on various topics & then student also provide the presentation on their respective projects) TERM-IV (INTERNSHIP & DEVELOPMENT)  Industrial Training – 45 Days  Personality Development  Interview Skills  Client Handling & Soft Skill  Professional Communication Skills KNOWLEDGE BANK  Daily Business Newspaper Discussions  Weekly Business Magazine Discussions  Financial Portals  In-house Developed Financial Library DURATION: 3 Months ELIGIBILITY: Under graduates, Graduates, MBA‟s, Investors, and Professionals etc. Fees: 14,500/- (paid in equal 3 installments) (Including all Exam, Registration Fees, and Taxes)

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Mutual Fund (AMFI) CERTIFIED MARKET PROFESSIONAL TERM -I (BASICS)  Overview of Capital Market  Fundamental Of Finance  Financial Products & Services  Investment Opportunities  Market Operations TERM-II (CERTIFICATIONS)  NSE Certification In Capital Market (Dealer) Module (Professional Training Academy provides the Short notes, In house develop Question bank, Mock test) TERM-III (PRACTICAL ASPECT) o Sales & Marketing  Online Simulated Trading o Operation  Live Case Studies  Software Training  Risk Management Strategies o In House Software  Technical Analysis o ODIN  Fundamental Analysis o NEAT  Trading Psychology  Stress Management  Online Test Practice  Professional Skills (Professional Training Academy gives the projects & assignments to the students on various topics & then student also provide the presentation on their respective projects) TERM-IV (CERTIFICATIONS)  NSE Certification In Derivatives Market (Dealers) Module (Professional Training Academy provides the Short notes; In- house develop Question bank, Mock test) TERM-V (INTERNSHIP & DEVELOPMENT)  Corporate Internship – 45 Days  Personality Development  Interview Skills  Client Handling & Soft Skill  Professional Communication Skills KNOWLEDGE BANK  Daily Business Newspaper Discussions  Weekly Business Magazine Discussions  In-house Developed Financial Library DURATION: 6 Months ELIGIBILITY: Under graduates, Graduates, MBA‟s, Investors, and Professionals etc. Fees: 24,500/- (paid in equal 6 installments) (Including all Exam, Registration Fees, and Taxes)

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Mutual Fund (AMFI) CERTIFIED COMMODITIES PROFESSIONAL TERM-I (BASICS)  Overview Of Commodity Market  Knowledge Of Fundamental Of Commodities  Commodities Products & Services  Macro Economic Data Releases  Market Operation TERM-II  MCX – Certified Commodity Professional (Professional Training Academy provides the Short notes, In house develop Question bank, Mock test) TERM-III (PRACTCAL ASPECT) o Pair Trading  Online Simulated Trading  Professional skills  Live Case Studies o Sales & Marketing  Risk Management o Operation Strategies  Software Training  Technical Analysis o In House Software  Fundamental Analysis o ODIN  Online Test Practice o NEAT  Practical Strategies  Stress Management o Jobbing o Spread Trading (Professional Training Academy gives the projects & assignments to the students on various topics & then student also provide the presentation on their respective projects) TERM-IV  NCFM – Commodity Market Module (Professional Training Academy provides the Short notes, In house develop Question bank, Mock test) TERM –V  Industrial Training – 45 Days  Personality Development  Interview Skills  Client Handling & Soft Skill  Professional Communication Skills KNOWLEDGE BANK  DAILY Business Newspaper Discussion  Weekly Business Magazines Discussions  In House Developed Financial Industries DURATION: 6 Months ELIGIBILITY: Undergraduate, Graduate, MBA‟s, Investors, and Professionals etc Fees: 24,500/- (paid in equal 6 installments) (Including all Exam, Registration Fees, and Taxes)

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Mutual Fund (AMFI) TECHNICAL ANALYSIS INTRODUCTION Given the volatile nature of capital markets in contemporary times, it is imperative to be equipped with every possible tool available to trade or invest successfully. Technical Analysis is an effective methodology which, if understood well can allow one to be in a „comfort zone‟ in every kind of market environment. The subject, as we are aware, deals with the pricing and chartical parameters of a given asset class, be it equity, commodities or precious metals. But, there is a lot more to just pricing and that is where the need for a course on Technical Analysis arises. ABOUT TECHNICAL ANALYSIS This course has been prepared after a very meticulous review of market behavior and volatility. Both play a very significant role in sensing the direction of an asset class. It will be an insightful experience to test various methods and tools to detect the pulse of the markets. The course also includes training sessions during market hours so as to put into practice the knowledge acquired. It covers various dimensions - from the detection of good, high quality trades to money management skills needed for capital protection and risk assessment. COURSE CONTENT • Philosophy of Technical Analysis • Definition of Technical Analysis, Advantage & Disadvantages • Basic Tenets of Dow Theory • Types of Charts (Line Chart, Candlestick Chart, Bar Chart, P & F Chart etc) • Basic Concepts of Trend • Support & Resistance – Psychology of Support & Resistance) • Channel Technique • How to study Candlestick Pattern (Continuation & Reversal pattern) • How to study Chart Pattern (Continuation & reversal pattern) • Volumes & Open Interest Analysis • Moving Averages – How to use moving Averages to find out Support, Resistance and to initiating Trade • Technical Indicators (Leading & Lagging Indicators, Bollinger Band, Other Stock Market Indicators) • Sentiment Analysis • How to Read Charts by pulling it all together – Top down Approach & Bottom up Approach • Triple Screen Trading System • Fibonacci Analysis – Trading with Fibonacci • Elliot Wave Analysis – Elliot wave applied to Stock versus Commodities • Time Cycle Analysis • How to set your Price & Time Target by using your Elliot Wave, Fibonacci and Cycle • Inter-market Analysis – How to co-relate between equity, Commodity, Bond and Forex markets • Sectoral Study – How to find opportunities in different sectors • Relative Strength Analysis • Study of Behavioral Finance/Psychology & Money management DURATION: 7 weeks – 2 days a week (Total 15 Classes) Fees : 8000/Full time internship available during the (Including all fees and taxes) course 9:00 am to 5:00 pm

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Mutual Fund (AMFI) PREPARATORY COURSES 

AMFI Certification (All Moudules)

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NISM Certification (All Modules)

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NCFM Certification (All Modules)

Fees: 4000/-(for each module) (Including all Exam, Registration Fees, and Taxes)

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