MUTUAL

FUND

Presented byIr. Subedi

SBL/Siddhartha Capital

The PresentationNature of Capital MarketMutual Fund BasicsMutual Fund in NepalCurrent Status

Nature of Capital Market

Nature of Capital Market

Investing in the market successfully requires; Financial knowledge Time to analyze financial statements Up to date financial data Financial tools required for analysis of the data Ability to interpret the analyzed data and relate it to market

price (over/under priced shares) Investable amount sufficient enough to diversify the

investment

Rationale for Mutual Funds

• Participation of greater number of people is required for the development of capital market

• Mutual funds increases investor participation and helps mobilize savings

• Therefore, governments in different countries, promote mutual funds through various means such as tax incentives

Rationale for Mutual Funds

• Since, general people lack the time and skills to manage their funds, it is very difficult for them to enter the market

• In this scenario, Mutual fund is the only alternative solution for native investors.

Mutual Fund Basics

Mutual Fund

• A form of collective investment scheme that pools funds from investors and invests it in various securities such as stocks, bonds, money market instruments etc.

• The investment proceeds are then passed on to the individual investors

Worldwide Scenario• India: Started by government in 1963 1993 onwards entry of private and foreign players Currently around 33 mutual fund companies with Rs. 7,00,000

cores assets under management. Major players are:-HDFC, Tata, SBI, Reliance, DSP, Black Rock

• U.S.A Around 15,000 types of mutual funds with $13.1 trillion assets under

management

• Worldwide $ 24.7 trillion assets under management

Types of Mutual Funds

Mutual fund schemes are mainly of Two (2) types; Open-ended schemes Close-ended schemes

Based on investment objective, risk and return of the fund, investment areas, it can further be categorized into; Growth fund Income fund Balanced fund Money market funds Infrastructure fund, index fund, real estate funds etc.

Close ended schemes

• Collective investment scheme with initial public offering of limited number of units with maturity period.

• Units are traded in the secondary market

• Unit price is based on Net Asset value(NAV)

• NAV is published by the fund manager on weekly, or other periodic basis as prescribed by the regulator.

• From the profit, dividends may be distributed to the unit holders on annual basis.

• Schemes are closed after it’s Maturity Period.

Open ended schemes

• Open for subscription/Redemption on an ongoing basis• Liquidity is the key feature of such schemes• Investors get annual returns• Buying and selling of units at prevailing NAV adding or

deducting entry and exit load.• No Maturity period for such scheme.

Benefits of Mutual fund to Investors

• Affordability • Professional Management• Convenience • Diversification and risk minimization• Cost effectiveness• Liquidity• Transparency• Tax saving

Benefits of Mutual fund to the Market

• Increased investor participation

• Motivates companies to issue securities

• Price stabilization in the market

• Enhance the transparency and credibility of security market

• Add new instrument to the market

Benefits to the Economy

• Saving Increases

• Increases investment in the productive sector

• Increases the economic activity and generates employment

• Participation of general people in the benefit from the industrial sector

MUTUAL FUNDS IN NEPAL

Regulatory Mechanism

• Legal framework Securities Act,2007

A collective investment scheme such as mutual fund should not be operated without obtaining permission from SEBON

Mutual Fund Regulation,2010This Regulation is based on section 116 of Securities

Act,2007Provision regarding registration of mutual fund, fund

manager, fund supervisor, depository.

Mutual Fund Guidelines,2012 Provision for issuance and management of schemeFormat of prospectus of the scheme

Introduction of Siddhartha Capital (SC)

• Siddhartha Capital Limited (SCL) is a subsidiary of Siddhartha Bank Limited, which holds 51 percent of the paid up capital of Siddhartha Capital Limited, the balance paid up being held by the institutions and individuals who are actively involved in different businesses in Nepal. SCL is licensed by Securities Board of Nepal as a Mutual Fund Manager and Depository as per the Mutual Fund Regulation, 2010.

Structure of Mutual Fund

Fund Sponsor

• Qualification A body corporate performing financial business for last

five years Paid up capital equal to one billion rupees

In profit for last three years

Positive Net Worth

Siddhartha Bank Limited(SBL) is the Fund Sponsor of Siddhartha Mutual Fund which was registered at SEBON

Fund Supervisor

• Qualification Group of minimum five reputed professionals

Holding at least masters degree

Minimum 10 years of work experience

• To supervise the work of Fund Manager and Depository and act in the interest of the unit holder

• Informing Fund Sponsor or SEBON regarding the performance of the schemes

Fund Manager

• Qualification A body corporate established for working as a fund manager to

manage different schemes under mutual fund

Having minimum paid up capital of hundred million rupees

Should have net worth equal to minimum 75% of paid up capital

Should have at least 51% shareholding of concerned sponsor

Siddhartha Capital Limited(SCL) is the Fund Manager of Siddhartha Mutual Fund.

Depository

• Qualification

A body corporate established to act as a depository

Having minimum paid up capital of hundred million rupees

• Maintain detailed information regarding the unit holders, transfer of units & distribution of dividend from the scheme

• Fund Manager can also perform the functions of Depository

• Siddhartha Capital Limited acts as the depository of Siddhartha Mutual Fund

Areas of Investment

Fund managers can invest in following areas:

Listed shares IPO Debentures Treasury bills Bank deposits Foreign securities Money market instruments Other areas taking approval of SEBON

• Before any IPO is launched 5% of that must be allocated for mutual funds• Maximum up to 25% of any scheme can be invested in foreign securities market

Further Information

Limitations on Investment

• 10% of fund in general shares of a company. • 20% on right share and debentures issued by individual company• 10% in a single issuance• 20% under other mutual fund schemes• 10% on bank deposits• 10% on market instruments• One shall not invest in securities of other schemes under the same

Mutual Fund• Restriction on investment on securities issued by the sponsor or

Depository.

Rights of Unit Holders

• Receive unit certificates or statements of accounts confirming your title.

• Receive information about the investment policies, investment objectives, financial position and general affairs of the scheme.

• Receive dividend declared

• Right to sell/purchase units through stock exchange.

• Vote in accordance with the Regulations to:– change the Asset Management Company; – wind up the schemes.

• Right of unit holder to solve their grievance through fund manager/supervisor/SEBON

• Right of unit holder to be informed about NAV & financial position of schemes timely.

Current Status

Siddhartha Investment Growth Scheme-I (SIGS-I)

• Operating SIGS-I successfully• Brief Highlights of Scheme

Scheme Highlights Scheme’s Name : Siddhartha Investment Growth Scheme -I

Type of Scheme : Close-end Maturity : 5 Years Liquidity : Scheme shall be listed in NEPSE Base Size : NPR. 400 million Minimum Size : NPR. 200 million Maximum Size : NPR. 500 million Scheme Approval : Approval from SEBON 14th October, 2012)

Monthly NAV of SIGS-IMONTH NAV

 Date  NAV

 End of Magh, 2070  16.220

 End of Poush, 2070  16.330

 End of Mangsir, 2070  15.010

 End of Kartik, 2070  12.870

 End of Ashwin, 2070  12.450

 End of Bhadra, 2070  11.870

 End of Shrawan, 2070  11.789

Monthly NAV Figure of SIGS-I

Weekly NAV of SIGS-I

Coming Scheme-Siddhartha Equity Oriented Growth Scheme

• Brief Highlights of Scheme Scheme Highlights

Scheme’s Name : S-Equity Oriented Growth Scheme –I Type of Scheme : Close-end

Maturity : 5 Years Liquidity : Scheme shall be listed in NEPSE Base Size : NPR. 800 million Minimum Size : NPR. 1 Billion Maximum Size : NPR. 400 million Scheme Approval : Under Launching

Government Initiatives for MFs Through Finance Ordinance 2070, Government has

provided following incentives:

Tax exemption on income of the scheme

Tax exemption on interest and dividend income of scheme

No capital gain tax on sale and purchase of units

Other Mutual funds are also in market and some are in

pipeline….

Further Inquiry…????

Siddhartha Capital Limited

PO Box 21200, Third Floor, Siddhartha Insurance Complex,

Babar mahal, Kathmandu, NepalTelephone: 00977-1-4257767, 4257768

Fax: 00977-1-4257764Email: scl@siddharthacapital.com

Website: http://www.siddharthacapital.com