A five year close-ended equity mutual scheme from the stable of Axis Mutual Fund, which will focus on investing predominantly in stocks in the small cap domain.

Summary

Type	A five year close-ended equity scheme (with automatic conversion into open ended equity scheme on completion of 5 years)	Benchmark Index	CNX Small-cap Index
Min. Investment:	lump sum -> Rs 5,000 and in multiples of Re 1 thereafter Note: The option to invest vide the Systematic Investment Plan (SIP) is not available since it is a close-ended scheme	Additional purchase (available only upon conversion into an open-ended scheme):	Rs 100 and in multiples of Re 1 thereafter
Face Value	Rs 10 per unit	Options available:	Growth, Dividend Payout and Dividend Reinvestment
Entry Load	Nil	Exit Load:	Not applicable until conversion / maturity date After conversion / maturity date: 3% if units are redeemed/ switched out upto 6 months from the date of allotment 2% if units are redeemed/ switched out after 6 months and upto 12 months from the date of allotment 1% if units are redeemed/ switched out after 12 months and upto 24 months from the date of allotment
Issue Opens	November 11, 2013	Issue Closes:	November 25, 2013

Investment Objective*

The investment objective of the scheme is “to generate long-term capital appreciation from a diversified portfolio of predominantly equity & equity related instruments of small cap companies.”

*Source: Scheme Information Document

Is this fund for you?

Axis Small Cap Fund (ASCF) is a five year close-ended equity mutual scheme from the stable of Axis Mutual Fund, which will focus on investing predominantly in stocks in the small cap domain. Small cap stocks have a potential to generate super-normal returns. Smaller companies tend to grow faster than mid and large sized companies. But since they are placed at the lower end of market capitalisation, they are under-owned and as result of which, volumes and liquidity are generally low. Thus given this trait, ASCF is likely to command very high risk. Therefore before investing one’s hard earned money, it is imperative to take into account his / her risk appetite and risk tolerance.

Portfolio & Investment Strategy

ASCF while building its portfolio would adopt a bottom-up approach to stock picking, focusing on appreciation potential of individual stocks from a fundamental perspective. The fund house employs a ‘fair value’ based research process to analyse appreciation potential of each stock in its universe. It is noteworthy that ‘fair value’ is a measure of intrinsic worth of company. The universe of stocks is carefully selected to include companies having a robust business models and enjoying sustainable competitive advantages as compared to their competitors.

While following its mandate of investing mainly in small cap companies i.e. those whose market capitalisation is less than or equal to the largest market cap of CNX Small-cap Index & greater than or equal to the smallest market cap of the CNX Small-Cap Index; ASCF will employ the ‘fair value’ based research process and intends to identify strong growth companies within the small cap domain to take advantage of their future appreciation.

ASCF by utilising a holistic risk management strategy will endeavour to manage risks associated with investing in equity markets. The scheme has identified the following risks and designed risk management strategies, which are embedded in the investment process to manage the following risks:
 

• Quality Risk - Risk of investing in unsustainable / weak companies
• Price Risk - Risk of overpaying for a company
• Liquidity Risk - High Impact cost of entry and exit
• Volatility Risk - Volatility in price due to company or portfolio specific factors
• Event Risk - Price risk due to a company / sector specific or market event
   

As far as portfolio turnover is concerned, given the nature of the scheme and its market capitalisation bias of investing in small cap companies, ASCF may see high portfolio turnover which may consequently result in higher brokerage and transaction costs.

Under normal circumstances the asset allocation pattern of ASCF will be as under:

Instruments	Allocation Range (%)		Risk Profile High/Medium/Low
	Minimum	Maximum
Equity and equity related instruments of small cap companies*	80	100	High
Equity and equity related instruments of non-small cap companies	0	20	High
Debt and money market instruments	0	20	Low to Medium

Note: * Small Cap Companies are the Stocks whose market capitalization is less than or equal to the largest market cap of CNX Small-cap Index & greater than or equal to the smallest market cap of the CNX Small-Cap Index.
(Source: Scheme Information Document)

Moreover, ASCF may also use derivatives for such purposes as permitted by the regulations, including for the purpose of hedging and rebalancing the portfolio, based on the opportunities and available and subject to the guidelines issued by SEBI from time to time.

Fund Manager Profile

The fund’s investments will be managed by Mr Pankaj Murarka who has over 11 years of experience in the equity markets. Before joining Axis Mutual Fund as a senior fund manager in November 2009, Mr Murarka has worked with Pipal Capital Management Pvt. Ltd. (as a principal officer), DSP Merrill Lynch Ltd (as a portfolio manager), Rare Enterprises (as head of research & fund manager) and Motilal Oswal Securities Ltd. (in equity sales).

He has to credit, graduation in commerce and is a Chartered Accountant (CA) from the Institute of Chartered Accountants of India (ICAI). At Axis Mutual Fund he also manages Axis Equity Fund and Axis Midcap Fund.

Fund Outlook

ASCF’s proclivity to the small cap index along, would attract risk of investing (such as low volume and low liquidity), even though ASCF follows a bottom-up approach to stock picking and has identified the aforementioned risks and has designed risk management strategies thereto. Thus the fortune of ASCF would be closely linked with the performance of the small cap index and will always command to be a very high risk investment proposition. Moreover as mentioned earlier, given the nature of the scheme and its market capitalisation bias of investing in small cap companies, ASCF would see high portfolio turnover which may consequently result in higher brokerage and transaction costs.

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