motilal oswal most shares midcap 100 etf Directors report

Trustees

For the financial year ended March 31, 2013

Dear Unitholders,

We are hereby presenting our third annual report and the audited financial statements of the Schemes of Motilal Oswal Mutual Fund for the year ended March 31, 2013.

CONSTITUTION

Motilal Oswal Mutual Fund ("the Fund"), sponsored by Motilal Oswal Securities Ltd. ("the Sponsor") was set up as a Trust under the Indian Trust Act, 1882. The Fund has been registered with Securities and Exchange Board of India ("SEBI") vide registration number MF/063/09/04 dated December 29, 2009. The Sponsor is the Settlor of the Mutual Fund Trust. The Settlor has entrusted a sum of Rs. 1,00,000/- to the Trustee as the initial contribution towards the corpus of the Mutual Fund. Motilal Oswal Trustee Company Ltd. ("the Trustee") is the sole Trustee of the Fund. In accordance with Securities and Exchange Board of India (Mutual Funds) Regulations, 1996, Motilal Oswal Asset Management Company Ltd. (MOAMC) has been appointed as Asset Management Company ("the Investment Manager or AMC") to the Fund vide Investment Management Agreement dated May 21, 2009.

INVESTMENT OBJECTIVE AND PERFORMANCE REVIEW OF THE SCHEMES

1. Motilal Oswal MOSt Shares M50 ETF (MOSt Shares M50)

Motilal Oswal MOSt Shares M50 ETF (MOSt Shares M50) an innovative first of its kind scheme, is an open ended Exchange Traded Fund that invests in the same proportion of the underlying MOSt 50 Basket. MOSt 50 Basket is a fundamentally weighted basket based on CNX Nifty Index. MOSt Shares M50 is India’s first fundamentally weighted ETF based on Nifty. The investment objective of the Scheme is to seek investment return that corresponds (before fees and expenses) generally to the performance of the MOSt 50 Basket (underlying Basket), subject to tracking error. The New Fund offer of the Scheme was opened on June 30, 2010 and closed on July 19, 2010 and is listed on the National Stock Exchange of India Ltd. since July 30, 2010.

As per the investment pattern, MOSt Shares M50 invests at least 95-100% of its total assets in the securities constituting MOSt 50 Basket. The Scheme may invest upto 0-5% of its total assets in debt and money market instruments and cash at call.

The Performance Report of the Fund as on March 31, 2013 is as follows:

	Scheme	Benchmark
Performance	MOSt shares M50	MOSt 50 Basket	CNX Nifty Index
6 month	-5.09%	-4.55%	-0.36%
1 year	2.30%	3.33%	7.31%
2 year	-4.21%	-3.45%	-1.30%
Since Inception
(July 28, 2010)	-1.63%	-0.52%	1.95%

Total assets under management as on March 31, 2013 were Rs. 69.05 /- crores held by 9,521 investors.

Outperformance is inbuilt in the product because we study what kind of stocks have beaten the index in the past and remove the Fund Manager’s risk to automate the model.

As can be seen from the data, the basket of securities selected and the ETF tracking, the same has been underperforming the benchmark and the Management is in process of reviewing the same to address the underperformance vis-a-vis the index.

2. Motilal Oswal MOSt Shares Midcap 100 ETF (MOSt Shares Midcap 100)

Motilal Oswal MOSt Shares Midcap 100 ETF (MOSt Shares Midcap 100) is an open ended Index Exchange Traded Fund that tracks the CNX Midcap Index. MOSt Shares Midcap 100 is India’s first Midcap ETF based on CNX Midcap Index. The investment objective of the Scheme is to seek investment return that corresponds (before fees and expenses) to the performance of CNX Midcap Index (Underlying Index), subject to tracking error. The New Fund offer of the Scheme was opened on January 12, 2011 and closed on January 24, 2011 and is listed on the National Stock Exchange of India Ltd. since February 4, 2011.

As per the investment pattern, MOSt Shares Midcap 100 invests at least 95-100% of its total assets in securities constituting CNX Midcap Index. The Scheme may invest upto 0-5% of its total assets in debt and money market instruments and cash at call.

The Performance Report as on March 31, 2013 is as follows:

	Scheme	Benchmark
Performance	MOSt Shares Midcap 100	CNX Midcap Index
6 month	-5.75%	-5.60%
1 Year	-3.30%	-4.02%
2 year	-3.11%	-4.05%
Since Inception (January 31, 2011)	-2.10%	-3.11%

Total assets under management as on March 31, 2013 were Rs. 92.73 /- crores held by 7,096 investors.

3. Motilal Oswal MOSt Shares NASDAQ-100 ETF (MOSt Shares NASDAQ 100)

Motilal Oswal MOSt Shares NASDAQ-100 ETF (MOSt Shares NASDAQ 100), an open ended Index Exchange Traded Fund that tracks the NASDAQ-100 Index. MOSt Shares NASDAQ 100 is India’s first US Equities based ETF tracking the NASDAQ-100 Index. The investment objective of the Scheme is to seek investment return that corresponds (before fees and expenses) generally to the performance of the NASDAQ-100 Index, subject to tracking error. The New Fund offer of the Scheme was opened on March 16, 2011 and closed on March 23, 2011 and is listed on the National Stock Exchange of India Ltd. and Bombay Stock Exchange Ltd. since March 31, 2011.

As per the investment pattern, MOSt Shares NASDAQ 100 invests at least 95-100% of its total assets in the Securities constituting NASDAQ-100 Index. The Scheme may invest upto 0-5% of its total assets in overseas debt and money market instruments and cash at call, units of mutual fund schemes or exchange traded funds based on NASDAQ-100 Index.

The Performance Report as on March 31, 2013 is as follows:

	Scheme	Benchmark
Performance	MOSt Shares NASDAQ 100	NASDAQ - 100 Index Returns in INR*
6 Month	2.32%	2.01%
1 year	7.62%	7.68%
2 year	20.69%	21.08%
Since Inception (March 29, 2011)	21.46%	21.65%

*NASDAQ -100 Index Returns in INR are based on RBI Reference rate given on the next day of March 31, 2013.

Total assets under management as on March 31, 2013 were Rs. 62.58 /- crores held by 2,671 investors.

The performance of the Fund is in line with the Index and the tracking error is less than what one would expect as a result of expense. This tells us that Management has been able to add some value by way of efficient execution and generating income by way of stock lending.

The Management has shown foresight in being one of the first to give investors an opportunity to diversify away from index equities amidst tough economic conditions in India. The Scheme has done well vis-a-vis index as well as tracking error/ expense management.

4. Motilal Oswal MOSt 10 Year Gilt Fund (MOSt 10 Year Gilt Fund)

Motilal Oswal MOSt 10 Year Gilt Fund (MOSt 10 Year Gilt Fund) is an open ended Gilt Scheme that tracks the 10 yr Benchmark Government Securities. MOSt 10 Year Gilt Fund is India’s first fund to give access to a 10 year benchmark government bond. The primary investment objective of the Scheme is to generate credit risk-free returns by investing in a portfolio of securities issued by the Central Government and State Governments. The New Fund offer of the Scheme was opened on November 21, 2011 and closed on December 5, 2011.

As per the investment pattern, MOSt 10 Year Gilt Fund invests at least 90-100% of its total assets in the 10 yr Benchmark Government Securities. The Scheme may invest upto 0-10% of its total assets in other Government Securities (7 to 12 years), T-Bills, Cash Management Bills, CBLO & Repo.

The Performance Report as on March 31, 2013 is as follows:

	Scheme	Benchmark
Performance	MOSt 10 Year Gilt Fund	10 Year Benchmark GOI Dated Security
6 Month	4.88%	5.35%
1 year	9.79%	11.25%
Since Inception (December 12, 2011)	11.48%	13.16%

Total assets under management as on March 31, 2013 were Rs. 174.76/-crores held by 838 investors.

5. Motilal Oswal MOSt Shares Gold ETF (MOSt Gold Shares)

Motilal Oswal MOSt Shares Gold ETF (MOSt Gold Shares) is an open ended Gold Exchange Traded Fund that tracks the Spot Domestic Gold Price. MOSt Gold Shares is India’s First Gold ETF to offer pure imported gold at a price lower than those under other options in the market by redeeming ETF Units for physical gold bars as low as 10 grams. The investment objective of the Scheme is to provide return by investing in Gold Bullion, subject to tracking error. The performance of the Fund will be benchmarked to the Spot Gold Price. The New Fund offer of the Scheme was opened on March 2, 2012 and closed on March 16, 2012 and is listed on the National Stock Exchange of India Ltd. and Bombay Stock Exchange Ltd. since March 26, 2012.

As per the investment pattern, MOSt Gold Shares invests at least 95-100% of its total assets in the gold bullion. The Scheme may invest upto 0-5% of its total assets in Government Securities, Money Market Instruments and cash at call.

The Performance Report as on March 31, 2013 is as follows:

	Scheme	Benchmark
Performance	MOSt Gold Shares	Spot Domestic Gold Price
6 Month	-5.81%	-5.24%
1 year	3.28%	4.89%
Since Inception (March 22, 2012)	5.14%	6.86%

Note: Return shown above are absolute return.

Total assets under management as on March 31, 2013 were Rs. 65.11/- crores held by 6,895 investors.

SIGNIFICANT ACCOUNTING POLICIES

The significant accounting policies form part of the notes to the accounts annexed to the Balance Sheet of the Schemes in the full Annual Report. The Accounting Policies are in accordance with Securities and Exchange Board of India (Mutual Funds) Regulations, 1996.

UNCLAIMED DIVIDENDS & REDEMPTIONS

The summary of No. of Investors and corresponding amount Scheme wise for the year 2012-2013 is as follows:

	Unclaimed Dividends		Unclaimed Redemptions
Scheme	Amount (Rs.)	No. of Investors	Amount (Rs.)	No. of Investors
Most 10 Year Gilt Fund	23,318.40	5	0	0

As of publication of this report all queries and unclaimed dividend have been settled.

REDRESSAL OF INVESTOR COMPLAINTS

The details of investor complaints received by the Fund during the financial year 2012-13 are given in the Annexure.

CORPORATE GOVERNANCE IN PUBLIC LISTED COMPANIES

As the Funds/Schemes managed by Motilal Oswal Asset Management Company Limited (MOAMC) are passively managed and investments are not based on active research, For the present, as a general policy, MOAMC would abstain from voting on any matters with respect to companies in which its Schemes have invested.

STATUTORY DETAILS

The Sponsor is not responsible or liable for any loss or shortfall resulting from the operation of the Schemes beyond the initial contribution of Rs. 1,00,000/- made by it towards setting up of Motilal Oswal Mutual Fund.

The price and redemption value of the units and income from them can go up as well as down with the fluctuations in the market value of its underlying investments. On written request, present and prospective unitholder/investors can obtain a copy of the Trust Deed, the Annual Report and the text of the Schemes. Unitholders, if they so desire, may request for the Annual Report of the AMC.

LIABILITY AND RESPONSIBILITY OF TRUSTEE AND SPONSOR

The main responsibility of the Trustee is to protect the interest of Unitholders and inter alia ensure that the AMC functions in the interest of investors and in accordance with the Securities and Exchange Board of India (Mutual Funds) Regulations, 1996, the provisions of the Trust Deed, Statement of Additional Information (SAI) and Scheme Information Document (SID) of the Schemes. From the information provided to the Trustee, and the reviews the Trustee has undertaken, the Trustee believes that the AMC has operated in the interest of the Unitholders.

ACKNOWLEDGEMENTS

The Trustees wish to thank the Unitholders of the Schemes for their continued investment in the Schemes and also thank the Government of India, the Securities and Exchange Board of India (SEBI), the Reserve Bank of India (RBI) and the Association of Mutual Funds in India (AMFI) for the guidance provided by them. The Trustee also records and appreciates the satisfactory services provided by the Registrar and Transfer Agent, Fund Accountant, Custodian, Bankers, Distributors and Brokers during the year. The guidance and services provided by the Auditors and legal advisors as well as sincerity and dedication of the employees of the MOAMC is also appreciated.

For and on behalf of the Board of Directors

Motilal Oswal Trustee Company Limited

(Trustee to Motilal Oswal Mutual Fund)

Sd/-

Motilal Oswal

Chairman

Place: Mumbai

Date: June 25, 2013

ANNEXURE

Redressal of Complaints received during : 2012-2013 Name of the Mutual Fund : Motilal Oswal Mutual Fund Total Number of Folios : 27021

				Action on (a) and (b)
				Resolved					Pending
Complaint code	Type of Complaint #	(a) No. of complaints pending at the beginning of the year	(b) No. of complaints received during the year	Within 30 days	30-60 days	60-180 days	Beyond 180 days	Non Actionable*	0-3 months	3-6 months	6-9 months	9-12 months
I A	Non receipt of Dividend on Units	-	-	-	-	-	-	-	-	-	-	-
I B	Interest on delayed payment of Dividend	-	-	-	-	-	-	-	-	-	-	-
I C	Non receipt of Redemption Proceeds	-	-	-	-	-	-	-	-	-	-	-
ID	Interest on delayed payment of Redemption	-	-	-	-	-	-	-	-	-	-	-
II A	Non receipt of Statement of
	Account/Unit Certificate	-	-	-	-	-	-	-	-	-	-	-
II B	Discrepancy in Statement of Account	-	-	-	-	-	-	-	-	-	-	-
II C	Non receipt of Annual Report/Abridged Summary	-	-	-	-	-	-	-	-	-	-	-
III A	Wrong switch between Schemes	-	-	-	-	-	-	-	-	-	-	-
III B	Unauthorized switch between Schemes	-	-	-	-	-	-	-	-	-	-	-
III C	Deviation from Scheme attributes	-	-	-	-	-	-	-	-	-	-	-
III D	Wrong or excess charges/load	-	-	-	-	-	-	-	-	-	-	-
III E	Non updation of changes viz. address, PAN, bank details, nomination, etc.	-	-	-	-	-	-	-	-	-	-	-
IV	Others	-	4	4	-	-	-	-	-	-	-	-
	TOTAL	-	4	4	-	-	-	-	-	-	-	-

# including against its authorized persons/distributors/employees etc.

*Non actionable means the complaints that are incomplete/outside the scope of the mutual fund