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	What is a Mutual Fund?
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What is a Mutual Fund?

A mutual fund is an entity that pools money from many investors - its unit holders - to invest in different securities depending on the type of fund. Investment may be in shares, debt securities (bonds), money market securities or a combination of these. Those securities are professionally managed on behalf of the unit-holders, and each investor holds a pro-rata share of the portfolio i.e. entitled to any profits when the securities are sold, but subject to any losses in value as well.

Shares and their prices

When you make an investment in a mutual fund you purchase shares. The number of shares you buy depends on the amount of your investment and upon the price of a fund share (this price follows from the fund's Net Assets Value per one share).

Let's assume that you decide to subscribe a fund with fees payable at the time of the purchase of shares. If the price of one unit (share) of the fund is RUB 100, and the subscription fee charged is 1%, and you make a purchase worth RUB 500,000 of these units,. The subscription fee of RUB 5,000 will be debited from your account; net investment amount will be 495,000 and the number of shares purchased will be 4,950 (RUB 495,000 : 100)* The net assets value of the fund (NAV) are calculated on a daily basis as the value of these assets may change daily, depending on current events in the stock, money, or bond markets.

Unlike a purchase of stocks in a certain company, investment in a mutual fund usually allows you to own fractions of a share.

Types of Mutual Funds

Bond Funds
Bond funds invest mainly in bonds; i.e. debt instruments issued by companies and governments. The bond funds may pay out regular dividends and are suitable for investors who are looking for regular income. As with the monetary funds, the amount of paid-out incomes will vary according to market conditions.

Bond funds differ from money market funds in two aspects: they tend to yield more profit (thanks to their longer maturity periods and variable quality of its investments) and to undergo greater fluctuations (due to price fluctuations).

The fluctuation presents a risk of losing a part of your deposit which depends on the difference between the purchase (subscription) price of a share and its sale (redemption) price (naturally, the price of a share may be favorable for you as well).

Equity (growth) Funds
Equity funds invest in stocks which represent ownership shares in the companies which issue them. As a rule, these funds are more suitable for those who wish to make a long-term investment for a minimum of five years.

The main idea behind equity funds is the fact that the prices of shares can show marked decreases over a short time. However, history has proven that over a long-term period the same shares bring greater profit than bond or money market investments. This means that, on a daily basis, the value of your investment in an equity fund may rise or fall, but your long-term returns are likely to be greater than those you could expect from investments in a money market or bond fund. However, you should never forget that the greater the profit potential, the greater the risks. Equity funds usually show a higher fluctuation in the price of a share than other types of funds.

Balanced Funds
Balanced funds hold their securities in all investment categories: stocks, bonds, and short-term securities. In this way balanced funds attempt to reduce risks, as well as fluctuations, of all types of investment instruments. These funds are specific in that they can regulate the individual types of investment instruments held according to the current changes in economic and market estimates of the respective managers.

There are various types of balanced funds. Some of them are more aggressive and make their main investments in stocks. Others are more conservative and focus on the income from bonds and short-term securities.

Balanced funds can be used for the same purposes as standard growth or dividend funds because this approach permits the inclusion of the various types of securities in the fund.

Sector funds
Equity funds can be focused on securities of companies operating in the particular sector of economy (oil and gas, electricity,telecommunications, metallurgy etc.)

Index funds
Index funds - are mutual funds that construct their portfolio in accordance with the structure of certain stock index. The purpose of investment strategy of these funds - to increase customers' wealth by passive management of the fund, investing in securities in proportions, they are presented in stock indices, such as RTS or MICEX. These funds are targeted to achieve investment results, similar to the changes of these indices, which are one of the main indicators of Russian stock market.

Money market funds
Money market funds are funds that invest in the most reliable and liquid, primarily short-term instruments, including cash accounts in commercial banks and highly liquid bonds. The purpose of the investment policy of the Fund - a permanent increase in customers' wealth with a minimum level of risk and necessary level of liquidity.

Investment Products: Not government insured. Not a bank deposit. No bank guarantee. May lose value, including the possible loss of principal invested.

Mutual Fund shares are not bank deposits and do not constitute the obligations of ZAO Citibank, Citigroup Inc. or their affiliates. Past performance of any fund is not a guarantee of its future performance and the price of the mutual fund shares may go down as well as up, and all operations with the mutual fund shares, in particular, their purchase and redemption, are carried out in accordance with the current laws. Mutual fund shares are held at customers' sole risk and that ZAO Citibank, Citigroup Inc. and their affiliates shall not be liable for any damage or loss occurred as a result of such investments. ZAO Citibank may disclose any information relating to customers operations with the mutual fund shares to Citigroup, Inc., any of its affiliates and to any third parties involved by ZAO Citibank in order to procure or facilitate the performance of its obligations to customers under the agreements that may be executed between customers (to the extent it is required for the performance of these third parties' functions) and government authorities in cases stipulated by law. Mutual fund shares may not be held or transferred to investors who are "United Stated persons". Customers must inform ZAO Citibank immediately if their statuses change to "United States person" at any time.