HARI LIC MF

Project Report on SWOT analysis of

SynopsisC h a p t e r 1 : - i n t r o d u c t i o n t o p r o j e c t r e p o r t

g e n e r a l i n t r o d u c t i o n

o b j e c t i v e s o f t h e s t u d y

r e s e a r c h d e s i g n

C h a p t e r 2 : - t h e o r e t i c a l a s p e c t o f m u t u a l f u n d s

i n t r o d u c t i o n t o m u t u a l f u n d s

h i s t o r y o f m u t u a l f u n d i n d u s t r y

d i f f e r e n t s c h e m e s o f m u t u a l f u n d s

p l a y e r s o f m u t u a l f u n d i n d u s t r y

C h a p t e r 3 : - p r o f i l e o f l i c m u t u a l f u n d s

h i s t o r y o f l i c m u t u a l f u n d

d i f f e r e n t s c h e m e s o f l i c m f ’ s

C h a p t e r 4 : - a v a l u a t i o n o f N A V ’ s & s w o t a n a l y i s

v a l u a t i o n s o f n a v ’ s

b r i e f a b o u t s w o t a n a l y s i s

C h a p t e r 5 : - e v a l u a t i o n & s w o t a n a l y s i s o f l i c

m u t u a l f u n d

C h a p t e r 6 : - f i n d i n g s & s u g g e s t i o n s

SRI MAATA COLLEGE BELLARY HARINAGHU.C.K


B i b l i o g r a p h y

Q U E S T I O N E R I E

Chapter 1:- introduction to project report

general introduction

objectives of the study

research design



General introduct ion to mutual fund

T h e I n d i a n c a p i t a l m a r k e t h a s w i t n e s s e d

u n p r e c e d e n t e d d e v e l o p m e n t s a n d i n n o v a t i o n s

p a r t i c u l a r l y d u r i n g t h e d e c a d e s o f 8 0 s a n d 9 0 s .

T h e s e i n n o v a t i o n s , i n t e r - a l i a , r e l a t e t o n e w f i n a n c i a l

i n s t r u m e n t s , n e w f i n a n c i a l i n s t i t u t i o n s s u c h a s

m u t u a l f u n d s , a n d a v a r i e t y o f f i n a n c i a l s e r v i c e s l i k e

m e r c h a n t b a n k i n g , c r e d i t r a t i n g , f a c t o r i n g e t c . I n

t h e c h a n g e d e n v i r o n m e n t t h e m u t u a l f u n d s a r e

p l a y i n g a v i t a l r o l e i n f i n a n c i a l i n t e r m e d i a t i o n ,

d e v e l o p m e n t o f c a p i t a l m a r k e t s a n d t h e g r o w t h o f

t h e c o r p o r a t e s e c t o r . D e s p i t e t h e f a c t t h a t I n d i a n

m u t u a l f u n d i n d u s t r y i s r e l a t i v e l y n e w , i t h a s g r o w n

a t a r a p i d s p e e d , i n f l u e n c i n g v a r i o u s s e c t o r s o f t h e

f i n a n c i a l m a r k e t a n d t h e n a t i o n a l e c o n o m y . I n f a c t ,

m u t u a l f u n d s h a v e n o w b e c o m e a n i m p o r t a n t m e d i u m

o f i n v e s t m e n t f o r t h e a v e r a g e I n d i a n i n v e s t o r . B y

e n a b l i n g t h e i n v e s t o r t o i n d i r e c t l y p a r t i c i p a t e i n t h e

c a p i t a l m a r k e t s a n d t o r e a p t h e g a i n s o f a d e q u a t e

d i v e r s i f i c a t i o n a n d p r o f e s s i o n a l m a n a g e m e n t , m u t u a l

f u n d s h a v e b e c o m e a n i m p o r t a n t c o n s t i t u e n t o f t h e

I n d i a n f i n a n c i a l s y s t e m .

C o n c e p t u a l l y , a m u t u a l f u n d i s a s i n g l e l a r g e

p r o f e s s i o n a l l y m a n a g e d i n v e s t m e n t o r g a n i z a t i o n t h a t

c o m b i n e s t h e m o n e y o f m a n y i n d i v i d u a l i n v e s t o r s

h a v i n g s i m i l a r i n v e s t m e n t o b j e c t i v e s . I t i n v e s t s t h i s

m o n e y i n a w i d e v a r i e t y o f s e c u r i t i e s a n d i n d i v i d u a l

i n v e s t o r s s h a r e i t s i n c o m e a n d e x p e n s e s , i t s p r o f i t s



a n d l o s s e s , i t s c a p i t a l a p p r e c i a t i o n a n d g r o w t h i n

p r o p o r t i o n t o t h e i r s h a r e h o l d i n g s .

Objectives towards project report study;-

1. TO KNOW ABOUT THE MUTUAL FUND

INDUSTRY

2. TO KNOW ABOUT THE MUTUAL FUND

PERFORMANCE

3. TO KNOW ABOUT THE SWOT ANALYSIS OF

LIC MUTUAL FUND

4. TO KNOW ABOUT THE NAV’S OF MUTUAL

FUND



RESEARCH DESIGN

D e s c r i p t i v e r e s e a r c h d e s i g n i s u s e d f o r t h e s u r v e y .

S A M P L E D E S I G N : S a m p l e s a r e s e l e c t e d r a n d o m l y i n

B e l l a r y c i t y . 5 0 s a m p l e s a r e s u r v e y e d f o r t h e p u r p o s e o f

s t u d y f o r M U T U A L F U N D O F L I C M U T U A L F U N D a n d o t h e r

c o m p a n y ’ s d a t a w a s c o l l e c t e d f r o m w e b s i t e .

D A T A C O L L E C T I O N

T h e i n f o r m a t i o n i s b a s e d o n t h e p r i m a r y d a t a a n d

s e c o n d a r y d a t a

P R I M A R Y D A T A

I t i s c o l l e c t e d f r o m t h e i n v e s t o r s t h r o u g h

Q u e s t i o n n a i r e s a n d i n t e r v i e w s .

S E C O N D A R Y D A T A

I t i s o b t a i n e d f r o m t h e p a s t r e c o r d s a n d f i l e s o f t h e

o r g a n i z a t i o n j o u r n a l s , n e w s p a p e r , m a g a z i n e s a n d w e b

s i t e .

T h e i n f o r m a t i o n i s c l a s s i f i e d a n d t a b u l a t e d a n d

s u i t a b l e c h a r t s a r e d r a w n f o r t h e a n a l y s i s . T h e

i n f e r e n c e s a r e m a d e b a s e d o n t h e s e c h a r t s a n d f i g u r e s

a n d c o n c l u s i o n s a r e d r a w n .

S C O P E O F S T U D Y



T h e s t u d y c o v e r s t h o s e i n v e s t o r s w h o h a v e

i n v e s t e d i n M U T U A L F U N D S C H E M E S a s w e l l a s s o m e n o n -

i n v e s t o r s . I t i s r e s t r i c t e d t o B e l l a r y c i t y .

Chapter 2:- theoretical aspect of

mutual funds

introduction to mutual funds

history of mutual fund industry

different schemes of mutual funds

players of mutual fund industry



INTRODUCTION TO MUTUAL FUND

A Mutual Fund is a t rust that pools the savings

of a number of investors who share a common

f inancia l goal . The money thus co l lected is invested

by the fund manager in d i f ferent types of secur i t ies

depending upon the object ive of the scheme. These

could range f rom shares to debentures to money

market instruments. The income earned through

these investments and the capi ta l apprec iat ions

real ized by the scheme are shared by i ts uni t

ho lders in proport ion to the number of uni ts owned

by them (pro rata) . Thus a Mutual Fund is the most

su i table investment for the common man as i t o f fers

an opportuni ty to invest in a d ivers i f ied,

profess ional ly managed port fo l io at a re lat ive ly low

cost . Anybody with an invent ib le surplus of as l i t t le

as a few thousand rupees can invest in Mutual

Funds. Each Mutual Fund scheme has a def ined

investment object ive and strategy.

A mutual fund is the ideal investment vehic le

for today’s complex and modern f inancia l scenar io .

Markets for equi ty shares, bonds and other f ixed

income instruments, real estate, der ivat ives and

other assets have become mature and informat ion

dr iven. Pr ice changes in these assets are dr iven by

g lobal events occurr ing in faraway p laces. A typica l



ind iv idual is unl ike ly to have the knowledge, sk i l l s ,

inc l inat ion and t ime to keep track of events ,

understand their impl icat ions and act speedi ly . An

indiv idual a lso f inds i t d i f f icu l t to keep track of

ownership of h is assets , investments, brokerage

dues and bank transact ions etc .

A mutual fund is the answer to a l l these

s i tuat ions. I t appoints profess ional ly qual i f ied and

exper ienced staf f that manages each of these

funct ions on a fu l l t ime bas is . The large pool of

money col lected in the fund a l lows i t to h i re such

staf f at a very low cost to each investor . In ef fect ,

the mutual fund vehic le explo i ts economies of sca le

in a l l three areas - research, investments and

transact ion process ing. Whi le the concept of

indiv iduals coming together to invest money

col lect ive ly is not new, the mutual fund in i ts

present form is a 20th century phenomenon. In fact ,

mutual funds gained popular i ty only af ter the

Second Wor ld War. Global ly , there are thousands of

f i rms of fer ing tens of thousands of mutual funds

with d i f ferent investment object ives. Today, mutual

funds co l lect ive ly manage a lmost as much as or

more money as compared to banks.

A draft of fer document is to be prepared at the

t ime of launching the fund. Typica l ly , i t pre

speci f ies the investment object ives of the fund, the



r isk associated, the costs involved in the process

and the broad ru les for entry into and exi t f rom the

fund and other areas of operat ion. In India , as in

most countr ies , these sponsors need approval f rom

a regulator , SEBI (Secur i t ies exchange Board of

India) in our case. SEBI looks at t rack records of the

sponsor and i ts f inancia l s t rength in grant ing

approval to the fund for commencing operat ions.

A sponsor then h i res an asset management

company to invest the funds according to the

investment object ive. I t a lso h i res another ent i ty to

be the custodian of the assets of the fund and

perhaps a th i rd one to handle registry work for the

uni t ho lders (subscr ibers) of the fund.

In the Indian context , the sponsors promote the

Asset Management Company a lso, in which i t ho lds a

major i ty stake. In many cases a sponsor can hold a

100% stake in the Asset Management Company

(AMC). E .g. B i r la Global F inance is the sponsor of

the Bi r la Sun L i fe Asset Management Company Ltd. ,

which has f loated d i f ferent mutual funds schemes

and a lso acts as an asset manager for the funds

co l lected under the schemes.

Mutual funds refer to the funds ra ised by

f inancia l serv ice companies by pool ing the savings

of the publ ic and invest ing them in a d ivers i f ied



port fo l io . They provide investment avenues for smal l

investors who cannot part ic ipate in the equit ies of

b ig companies. Mutual funds have been f loated by

some sector banks, l ic , g ic and recent ly by pr ivate

sector a lso.

I t i s a capi ta l market intermediary under

organized sector & general ly a secondary market or

secur i t ies .

1. Organized market : In the organized markets ,

there are standardized ru les and regulat ions

governing their f inancia l deal ings. There is a lso a

h igh degree of inst i tut ional izat ion and

instrumental isat ion. These markets are subject to

str ict superv is ion and contro l by RBI or other

regulatory bodies.

These organized markets can be further c lass i f ied

into two. They are:

i . Capi ta l market

i i . Money market

2. Capi ta l market : The capi ta l market is a market for

f inancia l assets which have a long or indef in i te

matur i ty . General ly , i t deals with long term

secur i t ies which have a matur i ty per iod of above

one year . Capi ta l market may be further d iv ided

into three namely:

i . Industr ia l secur i t ies market



i i . Government secur i t ies market and

i i i . Long term loans market

3. Secondary market or secur i t ies : These are

secur i t ies issued by some intermediar ies ca l led

F inancia l Intermediar ies to the u l t imate

savers .eg, UTI , L IC and Mutual funds issue

secur i t ies in the form of uni ts to publ ic and the

money pooled is invested in companies.

Again these secur i t ies may be c lass i f ied on the

bas is of durat ion as fo l lows:

i . Short - term secur i t ies

i i . Medium term secur i t ies

i i i . Long-term secur i t ies



Mutual Funds Industry in India

The origin of mutual fund industry in India is with

the introduction of the concept of mutual fund by UTI in

the year 1963. Though the growth was slow, but it

accelerated from the year 1987 when non-UTI players

entered the industry.

In the past decade, Indian mutual fund industry

had seen a dramatic improvement, both qualities wise

as well as quantity wise. Before, the monopoly of the

market had seen an ending phase; the Assets Under

Management (AUM) was Rs.67bn. The private sector

entry to the fund family raised the AUM to Rs.470 bn in

March 1993 and till April 2004; it reached the height of

1,540bn.

Putting the AUM of the Indian Mutual Funds

Industry into comparison, the total of it is less than the

deposits of SBI alone, constitute less than 11% of the

total deposits held by the Indianbankingindustry.



The main reason of its poor growth is that the

mutual fund industry in India is new in the country.

Large sections of Indian investors are yet to be

intellectuated with the concept. Hence, it is the prime

responsibility of all mutual fund companies, to market

the product correctly abreast of selling.

The mutual fund industry can be broadly put into

four phases according to the development of the sector.

Each phase is briefly described as under.

F i rst Phase - 1964-87

Unit Trust of India (UTI) was established on 1963

by an Act of Parl iament. It was set up by the Reserve

Bank of India and functioned under the Regulatory and

administrative control of the Reserve Bank of India. In

1978 UTI was de-l inked from the RBI and the Industrial

Development Bank of India (IDBI) took over the

regulatory and administrative control in place of RBI.

The first scheme launched by UTI was Unit Scheme



1964. At the end of 1988 UTI had Rs.6,700 crores of

assets under management.

Second Phase - 1987-1993 (Entry of Publ ic Sector

Funds)

Entry of non-UTI mutual funds. SBI Mutual Fund

was the first followed by Canbank Mutual Fund (Dec 87),

Punjab National Bank Mutual Fund (Aug 89), Indian Bank

Mutual Fund (Nov 89), Bank of India (Jun 90), Bank of

Baroda Mutual Fund (Oct 92). LIC in 1989 and GIC in

1990. The end of 1993 marked Rs.47,004 as assets

under management.



Third Phase - 1993-2003 (Entry of Pr ivate Sector

Funds)

With the entry of private sector funds in 1993, a

new era started in the Indian mutual fund industry,

giving the Indian investors a wider choice of fund

families. Also, 1993 was the year in which the first

Mutual Fund Regulations came into being, under which

all mutual funds, except UTI were to be registered and

governed. The erstwhile Kothari Pioneer (now merged

with Franklin Templeton) was the first private sector

mutual fund registered in July 1993.

The 1993 SEBI (Mutual Fund) Regulations were

substituted by a more comprehensive and revised

Mutual Fund Regulations in 1996. The industry now

functions under the SEBI (Mutual Fund) Regulations

1996.

The number of mutual fund houses went on

increasing, with many foreign mutual funds setting up

funds in India and also the industry has witnessed



several mergers and acquisitions. As at the end of

January 2003, there were 33 mutual funds with total

assets of Rs.1, 21,805 crores. The Unit Trust of India

with Rs.44, 541 crores of assets under management was

way ahead of other mutual funds.

Fourth Phase - s ince February 2003

This phase had bitter experience for UTI. It was

bifurcated into two separate entities. One is the

Specified Undertaking of the Unit Trust of India with

AUM of Rs.29,835 crores (as on January 2003). The

Specified Undertaking of Unit Trust of India,

functioning under an administrator and under the rules

framed by Government of India and does not come

under the purview of the Mutual Fund Regulations.

The second is the UTI Mutual Fund Ltd, sponsored

by SBI, PNB, BOB and LIC. It is registered with SEBI and

functions under the Mutual Fund Regulations. With the

bifurcation of the erstwhile UTI which had in March



2000 more than Rs.76,000 crores of AUM and with the

setting up of a UTI Mutual Fund, conforming to the SEBI

Mutual Fund Regulations, and with recent mergers

taking place among different private sector funds, the

mutual fund industry has entered its current phase of

consolidation and growth. As at the end of September,

2004, there were 29 funds, which manage assets of

Rs.153108 crores under 421 schemes.



MEANING

A Mutual Fund is a t rust that pools the savings

of a number of investors who share a common

f inancia l goal . The money thus co l lected is then

invested in capi ta l market instruments such as

shares, debentures and other secur i t ies . The income

earned through these investments and the capi ta l

apprec iat ions real ized are shared by i ts uni t ho lders

in proport ion to the number of uni ts owned by them.

Thus a Mutual Fund is the most su i table investment

for the common man as i t o f fers an opportuni ty to

invest in a d ivers i f ied, profess ional ly managed

basket of secur i t ies at a re lat ive ly low cost . The

f low chart below descr ibes broadly the work ing of a

mutual fund:



Mutua l Fund Operat ion F low Char t



A Mutual Fund provides an opportunity to invest in

a diversified professionally managed basket of

securities at a relative low cost. It is an alternative

investment product, wherein investments in income

funds may offer better prospects in comparison to

fixed deposits /debentures/bonds. However, since

the portfolio of a growth oriented fund includes

substantial investments in equities, its exposure to

market risk is higher than that of a bank deposit.



ORGANISATION OF A MUTUAL FUND

There are many entities involved and the diagram below

illustrates the

Organizational set up of a mutual

fund:



ORGANIZATION OF A MUTUAL FUND



Several part ies are involved in the organizat ion

and operat ion of a mutual fund, including:

Mutual Fund Manager : Establ ishes one or more

mutual funds, markets them and oversees their

general administrat ion

Port fo l io Adv iser : The profess ional money manager

appointed by the Mutual Fund Manager to d i rect the

fund's investments. The Mutual Fund Manager a lso

often acts as the Port fo l io Adviser

Pr inc ipa l D istr ibutor : Coordinates the sa le of the

fund to investors , e i ther d i rect ly or through a

network of registered dealers

Custodian: The bank or t rust company appointed by

the Mutual Fund Manager to hold a l l o f the

secur i t ies owned by the fund

Transfer Agent and Registrar : The group responsib le

for mainta in ing a l is t of a l l investors in the fund

Auditor : The independent accountants reta ined by

the Mutual Fund Manager to audi t each year , and

report on the f inancia l s tatements of the fund

Trustee: The ent i ty that has t i t le to the secur i t ies

owned by the fund (when the fund is organized as a

t rust , instead of as a corporat ion) on behal f of the

uni tholders



A Mutual Fund is set up in the form of a t rust ,

which has Sponsor , Trustees, Asset Management

Company (AMC) and custodian .



The t rust i s establ ished by a sponsor or more

than one sponsor who is l ike promoter of a company.

The t rustees of the mutual fund hold i ts property for

the benef i t o f the uni t ho lders . Asset Management

Company (AMC) approved by SEBI manages the

funds by making investments in var ious types of

secur i t ies . Custodian , who is registered with SEBI ,

ho lds the secur i t ies of var ious schemes of the fund

in i ts custody. The trustees are vested with the

general power of super intendence and d i rect ion over

AMC. They monitor the performance and compl iance

of SEBI Regulat ions by the mutual fund. Regular

expenses l ike custodia l fees, cost of d iv idend

warrants , register fees, AMC Fee is borne by the

indiv idual schemes. However these regular expenses

cannot exceed 2.5% of the assets of a scheme in a

year in case of equi ty schemes and 2.25% of assets

in case of debt schemes.

SEBI Regulat ions require that at least two

th i rds of the d i rectors of Trustee company or board

of t rustees must be independent i .e . , they should

not be associated with the sponsors . A lso, 50% of

the d i rectors of AMC must be independent. A l l

mutual funds are required to register wi th SEBI

before they launch any scheme.

AMC gets an annual fee for managing the funds.

This fee is f ixed by SEBI at a maximum of 1.25% of



the funds managed. However for funds managed in

excess of Rs.100 crores th is fees can be maximum

of only 1%.

SEBI GUIDELINES FOR MUTUAL FUND

AUTHORISATION

To br ing transparencies in the matter of

author izat ion of mutual fund, the Secur i t ies and

Exchange Board of India (SEBI) has out l ined the

board f ramework of author izat ion process and

select ion cr i ter ia . Accordingly , the author izat ion for

the mutual fund wi l l be granted in two s teps.

1. The f irst s tep wi l l involve approval and e l ig ib i l i ty

of each of the const i tuents of the mutual fund

Sponsors, Trustees, Asset Management



Company (AMC) and custodian. For th is purpose

the interested part ies would required to submit

necessary informat ion only in formats which could

be obta ined f rom SEBI ’s of f ice on a wr i t ten

request .

2. The second s tage wi l l involve formal

author izat ion of the mutual funds for bus iness.

For th is the sponsor or the AMC would be required

to apply to SEBI in an appl icat ion form for

author izat ion a long with an appl icat ion fee to be

speci f ied later .

The author izat ion shal l be granted subject to

condit ions as may be considered necessary by SEBI

and payment of author izat ion fee as may be

speci f ied. I t shal l be SEBI ’s endeavour to advise an

appl icat ion with in 10 to 15 work ing days of receipt

of h is let ter /appl icat ion form regarding status of h is

appl icat ion.

The eligibi l ity of the sponsor wi l l be examined

with respect to the fo l lowing:

a) Sponsor could be a registered company,

scheduled bank or a l l Ind ia or state level f inancia l

inst i tut ion.

b) More than one registered company can a lso act as

sponsor for a mutual fund.

c) Jo int sponsorship with any of the ent i t ies in (a)

above wi l l a lso be e l ig ib le ,and



d) Sponsor ing registered companies could be pr ivate

or publ ic l imited companies e i ther l i s ted or

unl is ted.

Sponsor and where there is more than one

sponsor , each of the sponsor ing ent i t ies , must have

a sound track record as ev idenced by;

a) Audited balance sheet and prof i t loss account for

last f ive years;

b) A pos i t ive net worth and consistent record of

prof i tabi l i ty and a good f inancia l s tanding dur ing

the last f ive years;

c) Good credi t record with banks and f inancia l

inst i tut ions;

d) General reputat ion in market ;

e) Organizat ion and management, and

f) Fai rness in bus iness t ransact ions.

Sponsor or more than one sponsor put together

should have a 40 percent stake in the paid-up

equity of the AMC.

The AMC wi l l be author ized by SEBI on the bas is

of the cr i ter ia indicated in the guidel ines.



SEBI REGULATIONS

SEBI regulations clearly state that all funds and

schemes operational under them would be bound by

their regulations. SEBI has recently taken following

steps for the regulation of mutual funds:

1) Formation: Certain structural changes have also

been made in the mutual fund industry, as part of

which mutual funds are required to set up asset

management companies with fifty percent of

independent directors, separate board of trustee

companies, consisting of a minimum fifty percent of

independent trustees and to appoint independent

custodians. This is ensure an arm’s length

relationship between trustees, fund managers and

custodians, and is in contrast with the situation

prevailing earlier in which all three functions were

often performed by one body which was usually the

sponsor of the fund or a subsidiary of the sponsor.

Thus, the process of forming and floating mutual

funds has been made a tripartite exercise by

authorities. The trustees, the asset management

companies (AMCs) and the mutual fund shareholders

form the three legs. SEBI guidelines provide for the

trustees to maintain an arm’s length relationship with

the AMCs and do all those things that would secure

the right of investors.

With funds being managed by AMCs and custody of

assets remaining with trustees, an element of



counter-balancing of risks exists as both can keep

tabs on each other.

2) Registration : In January 1993, SEBI prescribed

registration of mutual funds taking into account track

record of a sponsor, integrity in business transactions

and financial soundness while granting permission.

This will curb excessive growth of the mutual funds

and protect investor’s interest by registering only the

sound promoters with a proven track record and

financial strength. In February 1993, SEBI cleared six

private sector mutual funds viz.20 th Century Finance

Corporation, Industrial Credit & Investment

Corporation of India, Tata Sons, Credit Capital

Finance Corporation, Ceat Financial Services and

Apple Industries.



3) Documents : The offer documents of schemes

launched by mutual funds and the scheme particulars

are required to be vetted by SEBI. A standard format

for mutual fund prospectuses is being formulated.

4) Code of advertisement : Mutual funds have been

required to adhere to a code of advertisement.

5) Assurance on returns : SEBI has introduced a

change in the Securities Control and Regulations Act

governing the mutual funds was. Now the mutual

funds were prevented from giving any assurance on

the kind of returns they would be providing. However,

under pressure from the mutual funds, SEBI revised

the guidelines allowing assurances on return subject

to certain conditions. Hence, only those mutual funds

which have been in the market format least five

years are allowed public sector mutual funds an

advantage against the newly set up private mutual

funds.

As per basic tenets of investment, it can be

justifiably argued that investments in the capital

market carried a certain amount of risk, and any

investor investing in the markets with an aim of

making profit from capital appreciation, or otherwise,

should also be prepared to bear the risks of loss.

6) Minimum corpus : The current SEBI guidelines on

mutual funds prescribe a minimum start-up corpus of



Rs.50 crore for an open-ended scheme, and Rs.20

crore corpuses for closed-ended scheme, failing

which application money has to be refunded.

The idea behind forwarding such a proposal to SEBI

is that in the past, the minimum corpus requirements

have forced AMC’s to solicit funds from corporate

bodies, thus reducing mutual funds into quasi-

portfolio management outfits. In fact, the Association

of Mutual Funds in India (AMFI) has repeatedly

appealed to the regulatory authorities for scrapping

the minimum corpus requirements.

7) Institutionalization : The efforts of SEBI have, in

the last few years, been to institutionalization the

market introducing proportionate allotment and

increasing the minimum deposit amount to Rs.5000

etc. These efforts are to channel the investment of

individual investors into the mutual funds.

8) Investment of funds mobilized : In November

1992, SEBI increased the time limit from six months

to nine months within which the mutual funds have to

invest resources raised from the latest tax saving

schemes. The guidelines was issued or protect the

mutual funds from the disadvantage of investing

funds in the bullish market at very high prices and

suffering from poor NAV thereafter.



9) Investment in money market : SEBI guidelines

say that mutual funds can invest a maximum of 25

percent of resources mobilized into money-market

instruments in the first six months after closing the

funds and a maximum of 15 percent of the corpus

after six months to meet short term liquidity

requirements. Private sector mutual funds, for the

first time, were allowed to invest in the call money

market after this year’s budget.

As SEBI regulations limit their exposure to money

markets, mutual funds are not major players in the

call money market. SEBI also conclude that mutual

funds were not responsible for the unprecedented

shooting up of call money rates.

Some funds exceeded their limits in an effort to

improve their sagging net asset values (NAVs).

Usually, funds can early only about 9-12 percent.

Thus, the prospect of earning more than 40

percent may have been tempting.

10) Valuation of investment : SEBI should work in

tandem with the Institute of Chartered Accounts of

India (ICAI) to take up a fresh look at mutual fund

regulations enacted in 1993. The valuation of

investments a key aspect of fund accounting, an on

balance sheet date, need review. SEBI regulations

1993, give discretionary powers to the fund

managers as far as the valuation of the investment

portfolio on the balance sheet date is concerned.



There are no accounting standards or guidelines

prescribed by the ICAI for the valuation of a mutual

fund’s investment portfolio.

The mutual funds are clearly taking advantage of

this situation and valuing the portfolio at cost of

acquisition. The subsequent depreciation in the

investment portfolio are not accounted for. Thus, the

mutual funds may be able to show profits in balance

sheet even if there is severe erosion in the value of

the investment portfolio. This as on the balance

sheet date. But the accounts of the mutual funds do

not reveal the same.

The objective of the accounting in case of a

mutual fund should be besides showing details of

income, expenses, assets and liabilities, has to reveal

the true value of the fund. The value of the fund is

already reflected in its NAV and the balance sheet is

expected to be in consonance with this values. This

requires that the investment portfolio be calculated

at market values, providing for any depreciation or

appreciation.

The transparent and well understood declaration

or Net Asset Values (NAVs) of mutual fund schemes is

an important issue in providing investors with

information as to the performance of the fund. SEBI

had warned some mutual funds earlier of unhealthy



market practices, and is currently working on a

common format for calculating the net asset values

(NAVs) of mutual funds, which are done in various

ways by them at present.

11) Inspection : SEBI inspect mutual funds every year.

A full SEBI inspection of all the 27 mutual funds was

proposed to be done by the March 1996 to streamline

their operations and protect the investor’s interests.

Mutual funds are monitored and inspected by SEBI to

ensure compliance with the regulations.



12) Underwriting : In July 1994, SEBI permitted

mutual funds to take up under writing of primary

issues as a part of their investment activity. This step

may assist the mutual funds in diversifying their

business.

13) Conduct : In September 1994, it was clarified by

SEBI that mutual funds shall not offer buy back

schemes or assured returns to corporate investors.

The regulations government Mutual Funds and

Portfolio Managers ensure transparency in their

functioning.

Voting rights : In September 1993, mutual funds

were allowed to exercise their voting rights.

Department of Company Affairs has reportedly

granted mutual funds the right to vote as full-

fledged shareholders in companies where they

have equity investments.



TYPES OF MUTUAL FUND SCHEMES

Wide variety of Mutual Fund Schemes exists to

cater to the needs such as financial position, risk

tolerance and return expectations etc. The table below

gives an overview into the existing types of schemes in

the Industry.



Types of Mutual Fund:-

Mutual fund schemes may be c lass i f ied on the bas is

of i ts structure and i ts investment object ive.

By Structure:-

Open-ended Funds

An open-end fund is one that is avai lable for

subscr ipt ion a l l through the year . These do not have

a f ixed matur i ty . Investors can convenient ly buy and

sel l uni ts at Net Asset Value ("NAV") re lated pr ices.

The key feature of open-end schemes is l iqu id i ty .

Closed-ended Funds

A c losed-end fund has a st ipulated matur i ty per iod

which general ly ranging f rom 3 to 15 years . The

fund is open for subscr ipt ion only dur ing a speci f ied

per iod. Investors can invest in the scheme at the

t ime of the in i t ia l publ ic issue and thereafter they

can buy or se l l the uni ts of the scheme on the stock

exchanges where they are l is ted. In order to provide

an exi t route to the investors , some c lose-ended

funds g ive an opt ion of se l l ing back the uni ts to the

Mutual Fund through per iodic repurchase at NAV

re lated pr ices. SEBI Regulat ions st ipulate that at

least one of the two exi t routes is provided to the

investor .



Interval Funds

Interval funds combine the features of open-ended

and c lose-ended schemes. They are open for sa le or

redemption dur ing pre-determined intervals at NAV

re lated pr ices.



By Investment Objective:

Growth Funds

The a im of growth funds is to provide capi ta l

apprec iat ion over the medium to long- term. Such

schemes normal ly invest a major i ty of thei r corpus

in equi t ies . I t has been proven that returns f rom

stocks, have outperformed most other k ind of

investments held over the long term. Growth

schemes are ideal for investors having a long-term

out look seeking growth over a per iod of t ime.

Income Funds

The a im of income funds is to provide regular and

steady income to investors . Such schemes general ly

invest in f ixed income secur i t ies such as bonds,

corporate debentures and Government secur i t ies .

Income Funds are ideal for capi ta l s tabi l i ty and

regular income.

Balanced Funds

The a im of balanced funds is to provide both growth

and regular income. Such schemes per iodica l ly

d istr ibute a part of thei r earning and invest both in

equi t ies and f ixed income secur i t ies in the

proport ion indicated in thei r of fer documents. In a

r is ing stock market , the NAV of these schemes may



not normal ly keep pace, or fa l l equal ly when the

market fa l ls . These are ideal for investors looking

for a combinat ion of income and moderate growth.

Money Market Funds

The a im of money market funds is to provide easy

l iqu id i ty , preservat ion of capi ta l and moderate

income. These schemes general ly invest in safer

short - term instruments such as t reasury b i l l s ,

cert i f icates of deposi t , commercia l paper and inter-

bank cal l money. Returns on these schemes may

f luctuate depending upon the interest rates

prevai l ing in the market . These are ideal for

Corporate and indiv idual investors as a means to

park their surp lus funds for short per iods.

Load Funds

A Load Fund is one that charges a commiss ion for

entry or ex i t . That is , each t ime you buy or se l l

uni ts in the fund, a commiss ion wi l l be payable.

Typica l ly entry and exi t loads range f rom 1% to 2%.

I t could be worth paying the load, i f the fund has a

good performance h istory.

No-Load Funds

A No-Load Fund is one that does not charge a

commiss ion for entry or ex i t . That is , no commiss ion



i s payable on purchase or sa le of uni ts in the fund.

The advantage of a no load fund is that the ent i re

corpus is put to work.

OTHER SCHEMES:

Tax Saving Schemes

These schemes of fer tax rebates to the investors

under speci f ic provis ions of the Indian Income Tax

laws as the Government of fers tax incent ives for

investment in speci f ied avenues. Investments made

in Equi ty L inked Savings Schemes (ELSS) and

Pension Schemes are a l lowed as deduct ion u/s 88 of

the Income Tax Act , 1961. The Act a lso provides

opportuni t ies to investors to save capi ta l ga ins u/s

54EA and 54EB by invest ing in Mutual Funds.



Special Schemes

Industry Specific Schemes

Industry Speci f ic Schemes invest only in the

industr ies speci f ied in the of fer document. The

investment of these funds is l imited to speci f ic

industr ies l ike InfoTech, FMCG, and Pharmaceut ica ls

etc .

Index Schemes

Index Funds attempt to repl icate the performance of

a part icu lar index such as the BSE Sensex or the

NSE 50

Sectoral Schemes

Sectora l Funds are those, which invest exc lus ively in

a speci f ied industry or a group of industr ies or

var ious segments such as 'A ' Group shares or in i t ia l

publ ic of fer ings.



Association of Mutual Funds in India

(AMFI)

With the increase in mutual fund players in India, a

need for mutual fund association in India was generated

to function as a non-profit organization. Association of

Mutual Funds in India (AMFI) was incorporated on 22nd

August, 1995.

AMFI is an apex body of all Asset Management

Companies (AMC) which has been registered with SEBI.

Till date all the AMCs are that have launched mutual

fund schemes are its members. It functions under the

supervision and guidelines of its Board of Directors.

Association of Mutual Funds India has brought down the

Indian Mutual Fund Industry to a professional and

healthy market with ethical lines enhancing and

maintaining standards. It follows the principle of both

protecting and promoting the interests of mutual funds

as well as their unit holders.

The objectives of Association of Mutual Funds in

India

The Association of Mutual Funds of India works with 30

registered AMCs of the country. It has certain defined

objectives which juxtaposes the guidelines of its Board

of Directors. The objectives are as follows:



This mutual fund association of India maintains a

high professional and ethical standard in all areas of

operation of the industry.

It also recommends and promotes the top class

business practices and code of conduct which is

followed by members and related people engaged in

the activities of mutual fund and asset management.

The agencies who are by any means connected or

involved in the field of capital markets and financial

services also involved in this code of conduct of the

association.

AMFI interacts with SEBI and works according to

SEBIs guidelines in the mutual fund industry.

Associations of Mutual Fund of India do represent the

Government of India, the Reserve Bank of India and

other related bodies on matters relating to the

Mutual Fund Industry.

It develops a team of well qualified and trained Agent

distributors. It implements a programme of training

and certification for all intermediaries and other

engaged in the mutual fund industry.

AMFI undertakes all India awareness programme for

investor’s in order to promote proper understanding

of the concept and working of mutual funds.

At last but not the least association of mutual fund of

India also disseminate information’s on Mutual Fund

Industry and undertakes studies and research either

directly or in association with other bodies.



The sponsor of Association of Mutual Funds in

India

Bank Sponsored

SBI Fund Management Ltd.

BOB Asset Management Co. Ltd.

Canbank Investment Management Services Ltd.

UTI Asset Management Company Pvt. Ltd.

Institutions

GIC Asset Management Co. Ltd.

Jeevan Bima Sahayog Asset Management Co. Ltd.



Private Sector

Indian:-

BenchMark Asset Management Co. Pvt. Ltd.

Cholamandalam Asset Management Co. Ltd.

Credit Capital Asset Management Co. Ltd.

Escorts Asset Management Ltd.

JM Financial Mutual Fund

Kotak Mahindra Asset Management Co. Ltd.

Reliance Capital Asset Management Ltd.

Sahara Asset Management Co. Pvt. Ltd

Sundaram Asset Management Company Ltd.

Tata Asset Management Private Ltd.

Predominantly India Joint Ventures:-

Birla Sun Life Asset Management Co. Ltd.

DSP Merrill Lynch Fund Managers Limited

HDFC Asset Management Company Ltd.

Predominantly Foreign Joint Ventures:-

ABN AMRO Asset Management (I) Ltd.

Alliance Capital Asset Management (India) Pvt. Ltd.

Deutsche Asset Management (India) Pvt. Ltd.

Fidelity Fund Management Private Limited

Franklin Templeton Asset Mgmt. (India) Pvt. Ltd.

HSBC Asset Management (India) Private Ltd.

ING Investment Management (India) Pvt. Ltd.

Morgan Stanley Investment Management Pvt. Ltd.

Principal Asset Management Co. Pvt. Ltd.



Prudential ICICI Asset Management Co. Ltd.

Standard Chartered Asset Mgmt Co. Pvt. Ltd.



Association of Mutual Funds in India Publications

AMFI publishes mainly two types of bulletin. One is on

the monthly basis and the other is quarterly. These

publications are of great support for the investors to

get intimation of the know how of their parked money.

The mailing address of Association of Mutual

Funds in India

Association of Mutual Funds in India

106, Free Press House,

Free Press Journal Marg,

Nariman Point,

Mumbai - 400 021,

India.

Telephone : 91-22-5637 39 07 / 5637 39 08



Fax : 91-22-5637 3909

Website:-http://www.amfiindia.com/

The ac t i v i t i es o f the assoc ia t ion a re

genera l l y ca r r i ed out by var ious

commit tees : -

L I S T O F C O M M I T T E E S A N D I T S M E M B E R S : -

C O M M I T T E E O N V A L U A T I O N : -

M i l i n d B r a v e C H A I R M A N

A m a n d e e p M E M B E R

D h a w a l D a l a l M E M B E R

A s h i s h K u m a r M E M B E R

A . B a l a s u b r a m a n i a n M E M B E R

S a n t o s h K a m a t h M E M B E R

R a j i v A n a n d M E M B E R

S a n d e s h K i r k i r e M E M B E R

N i l e s h M E M B E R


http://www.amfiindia.com/


C O M M I T T E E O N B E S T P R A C T I C E S : -

M r . S V P r a s a d C H A I R M A N

M r . A K S r i d h a r M E M B E R

M r . M i l i n d B r a v e M E M B E R

M r . N a v a l B K u m a r M E M B E R

M r . P a n k a j R a z d a n M E M B E R

M r . R a v i M e h r o t r a M E M B E R

M r . T P R a m a n M E M B E R

C O M M I T T E E O N R B I R A L A T E D M A T T E R S : -

C H A I R M A N A M F I C H A I R M A N

M i l i n d B r a v e M E M B E R

N i l e s h S h a h M E M B E R

C O M M I T T E E O N R E G I S T R A T I O N O F A M F I C E R T I F I E D

D I S T R I B U T O R S : -

M r . S a u r a b s o n t h a l i a C H A I R M A N

M r . A n t h o n y H e r e d i a M E M B E R

M r . A s h o k S u r v a r n a M E M B E R

M r . J o h n M a t h e w s M E M B E R

M r . K M a d h a v a K u m a r M E M B E R

M r . V i j a y V e n k a t r a m M E M B E R

M r . W a q a r N a q v i M E M B E R

M r . A M K u r i a n M E M B E R

M r . M V a n k a t a r a m a n M E M B E R



Mutual Fund Companies in India

The concept of mutual funds in India dates back to

the year 1963. The era between 1963 and 1987 marked

the existence of only one mutual fund company in India

with Rs.67bn assets under management (AUM), by the

end of its monopoly era, the Unit Trust of India (UTI). By

the end of the 80s decade, few other mutual fund

companies in India took their position in mutual fund

market.

The new entries of mutual fund companies in India

were SBI Mutual Fund, Canbank Mutual Fund, Punjab

National Bank Mutual Fund, Indian Bank Mutual Fund,

Bank of India Mutual Fund.

The succeeding decade showed a new horizon in

Indian mutual fund industry. By the end of 1993, the

total AUM of the industry was Rs.470.04 bn. The private

sector funds started penetrating the fund families. In

the same year the first Mutual Fund Regulations came

into existence with re-registering all mutual funds

except UTI. The regulations were further given a revised

shape in 1996.

Kothari Pioneer was the first private sector mutual

fund company in India which has now merged with

Franklin Templeton. Just after ten years with private

sector player’s penetration, the total assets rose up to



Rs.1218.05 bn. Today there are 33 mutual fund

companies in India.



Major Mutual Fund Companies in India

ABN AMRO Mutual Fund

ABN AMRO Mutual Fund was setup on April 15,

2004 with ABN AMRO Trustee (India) Pvt. Ltd. as the

Trustee Company. The AMC, ABN AMRO Asset

Management (India) Ltd. was incorporated on November

4, 2003. Deutsche Bank A G is the custodian of ABN

AMRO Mutual Fund.

Birla Sun Life Mutual Fund

Birla Sun Life Mutual Fund is the joint venture of

Aditya Birla Group and Sun Life Financial. Sun Life

Financial is a global organization evolved in 1871 and is

being represented in Canada, the US, the Philippines,

Japan, Indonesia and Bermuda apart from India. Birla

Sun Life Mutual Fund follows a conservative long-term

approach to investment. Recently it crossed AUM of

Rs.10,000 crores.

Bank of Baroda Mutual Fund (BOB Mutual Fund)

Bank of Baroda Mutual Fund or BOB Mutual Fund

was setup on October 30, 1992 under the sponsorship of

Bank of Baroda. BOB Asset Management Company

Limited is the AMC of BOB Mutual Fund and was


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http://finance.indiamart.com/india_business_information/birla_sunlife.html

http://finance.indiamart.com/india_business_information/abn_amro.html


incorporated on November 5, 1992. Deutsche Bank AG

is the custodian.

HDFC Mutual Fund

HDFC Mutual Fund was setup on June 30, 2000 with

two sponsorers namely Housing Development Finance

Corporation Limited and Standard Life Investments Ltd


http://finance.indiamart.com/india_business_information/hdfc.html


HSBC Mutual Fund

HSBC Mutual Fund was setup on May 27, 2002 with

HSBC Securities and Capital Markets (India) Private

Limited as the sponsor. Board of Trustees, HSBC Mutual

Fund acts as the Trustee Company of HSBC Mutual

Fund.

ING Vysya Mutual Fund

ING Vysya Mutual Fund was setup on February 11,

1999 with the same named Trustee Company. It is a

joint venture of Vysya and ING. The AMC, ING

Investment Management (India) Pvt. Ltd. was

incorporated on April 6, 1998.

Prudential ICICI Mutual Fund

The mutual fund of ICICI is a joint venture with

Prudential Plc. of America, one of the largest life

insurance companies in the US of A. Prudential ICICI

Mutual Fund was setup on 13th of October, 1993 with


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http://finance.indiamart.com/india_business_information/ing_vysya.html

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two sponsorers, Prudential Plc. and ICICI Ltd. The

Trustee Company formed is Prudential ICICI Trust Ltd.

and the AMC is Prudential ICICI Asset Management

Company Limited incorporated on 22nd of June, 1993.



SAHARA MUTAL FUND

Sahara Mutual Fund was set up on July 18, 1996

with Sahara India Financial Corporation Ltd. as the

sponsor. Sahara Asset Management Company Private

Limited incorporated on August 31, 1995 works as the

AMC of Sahara Mutual Fund. The paid-up capital of the

AMC stands at Rs.25.8 crore.

State Bank of India Mutual Fund

State Bank of India Mutual Fund is the first Bank

sponsored Mutual Fund to launch offshore fund, the

India Magnum Fund with a corpus of Rs.225 cr.

approximately. Today it is the largest Bank sponsored

Mutual Fund in India. They have already launched 35

Schemes out of which 15 have already yielded

handsome returns to investors. State Bank of India

Mutual Fund has more than Rs.5,500 Crores as AUM.

Now it has an investor base of over 8 Lakhs spread over

18 schemes.


http://finance.indiamart.com/india_business_information/sbi.html


Tata Mutual Fund

Tata Mutual Fund (TMF) is a Trust under the Indian

Trust Act, 1882. The sponsorers for Tata Mutual Fund

are Tata Sons Ltd., and Tata Investment Corporation

Ltd. The investment manager is Tata Asset Management

Limited and its Tata Trustee Company Pvt. Limited. Tata

Asset Management Limited's is one of the fastest in the

country with more than Rs.7,703 crores (as on April 30,

2005) of AUM.


http://finance.indiamart.com/india_business_information/tata.html


Kotak Mahindra Mutual Fund

Kotak Mahindra Asset Management Company

(KMAMC) is a subsidiary of KMBL. It is presently having

more than 1,99,818 investors in its various schemes.

KMAMC started its operations in December 1998. Kotak

Mahindra Mutual Fund offers schemes catering to

investors with varying risk - return profiles. It was the

first company to launch dedicated gilt scheme investing

only in government securities.

Unit Trust of India Mutual Fund

UTI Asset Management Company Private Limited,

established in Jan 14, 2003, manages the UTI Mutual

Fund with the support of UTI Trustee Company Private

Limited. UTI Asset Management Company presently

manages a corpus of over Rs.20000 Crore. The

sponsorers of UTI Mutual Fund are Bank of Baroda

(BOB), Punjab National Bank (PNB), State Bank of India

(SBI), and Life Insurance Corporation of India (LIC). The



schemes of UTI Mutual Fund are Liquid Funds, Income

Funds, Asset Management Funds, Index Funds, Equity

Funds and Balance Funds.



eliance Mutual Fund

Reliance Mutual Fund (RMF) was established as

trust under Indian Trusts Act, 1882. The sponsor of RMF

is Reliance Capital Limited and Reliance Capital Trustee

Co. Limited is the Trustee. It was registered on June 30,

1995 as Reliance Capital Mutual Fund which was

changed on March 11, 2004. Reliance Mutual Fund was

formed for launching of various schemes under which

units are issued to the Public with a view to contribute

to the capital market and to provide investors the

opportunities to make investments in diversified

securities.

Standard Chartered Mutual Fund

Standard Chartered Mutual Fund was set up on

March 13, 2000 sponsored by Standard Chartered Bank.

The Trustee is Standard Chartered Trustee Company

Pvt. Ltd. Standard Chartered Asset Management

Company Pvt. Ltd. is the AMC which was incorporated

with SEBI on December 20, 1999.



Franklin Templeton India Mutual Fund

The group, Franklin Templeton Investments is a

California (USA) based company with a global AUM of

US$ 409.2 bn. (as of April 30, 2005). It is one of the

largest financial services groups in the world. Investors

can buy or sell the Mutual Fund through their financial

advisor or through mail or through their website. They

have Open end Diversified Equity schemes, Open end

Sector Equity schemes, Open end Hybrid schemes, Open

end Tax Saving schemes, Open end Income and Liquid

schemes, closed end Income schemes and Open end

Fund of Funds schemes to offer.

Morgan Stanley Mutual Fund India

Morgan Stanley is a worldwide financial services

company and it’s leading in the market in securities,

investment management and credit services. Morgan

Stanley Investment Management (MISM) was established



in the year 1975. It provides customized asset

management services and products to governments,

corporations, pension funds and non-profit

organizations. Its services are also extended to high net

worth individuals and retail investors. In India it is

known as Morgan Stanley Investment Management

Private Limited (MSIM India) and its AMC is Morgan

Stanley Mutual Fund (MSMF). This is the first close end

diversified equity scheme serving the needs of Indian

retail investors focusing on a long-term capital

appreciation.

Escorts Mutual Fund

Escorts Mutual Fund was setup on April 15, 1996

with Escorts Finance Limited as its sponsor. The Trustee

Company is Escorts Investment Trust Limited. Its AMC

was incorporated on December 1, 1995 with the name

Escorts Asset Management Limited.



Alliance Capital Mutual Fund

Alliance Capital Mutual Fund was setup on

December 30, 1994 with Alliance Capital Management

Corp. of Delaware (USA) as sponsored. The Trustee is

ACAM Trust Company Pvt. Ltd. and AMC, the Alliance

Capital Asset Management India (Pvt) Ltd. with the

corporate office in Mumbai.

Benchmark Mutual Fund

Benchmark Mutual Fund was setup on June 12,

2001 with Niche Financial Services Pvt. Ltd. as the

sponsored and Benchmark Trustee Company Pvt. Ltd. as

the Trustee Company. Incorporated on October 16, 2000

and headquartered in Mumbai, Benchmark Asset

Management Company Pvt. Ltd. is the AMC.

Canbank Mutual Fund

Canbank Mutual Fund was setup on December 19,

1987 with Canara Bank acting as the sponsor. Canbank

Investment Management Services Ltd. incorporated on



March 2, 1993 is the AMC. The Corporate Office of the

AMC is in Mumbai.

Chola Mutual Fund

Chola Mutual Fund under the sponsorship of

Cholamandalam Investment & Finance Company Ltd.

was setup on January 3, 1997. Cholamandalam Trustee

Co. Ltd. is the Trustee Company and AMC is

Cholamandalam AMC Limited.



LIC Mutual Fund

Life Insurance Corporation of India set up LIC

Mutual Fund on 19th June 1989. It contributed Rs.2

Crores towards the corpus of the Fund. LIC Mutual Fund

was constituted as a Trust in accordance with the

provisions of the Indian Trust Act, 1882. . The Company

started its business on 29th April 1994. The Trustees of

LIC Mutual Fund have appointed Jeevan Bima Sahayog

Asset Management Company Ltd as the Investment

Managers for LIC Mutual Fund.

GIC Mutual Fund

GIC Mutual Fund, sponsored by General Insurance

Corporation of India (GIC), a Government of India

undertaking and the four Public Sector General

Insurance Companies, viz. National Insurance Co. Ltd

(NIC), The New India Assurance Co. Ltd. (NIA), The

Oriental Insurance Co. Ltd (OIC) and United India

Insurance Co. Ltd. (UII) and is constituted as a Trust in



accordance with the provisions of the Indian Trusts Act,

1882.



Mutual Fund Investing vs. Stock

Investing

I t seems strange to compare mutual funds to

stocks s ince mutual funds are pr imar i ly composed of

stocks, but i t i s important to d ist inguish the two

because there are some notable advantages to us ing

mutual funds.

Get Focused

I wi l l admit that invest ing in indiv idual stocks

can be fun because each company has a unique

story. However, i t i s important for people to focus

on making money. Invest ing isn ' t a game. Your

f inancia l future depends on where you put you hard

earned dol lars and i t shouldn' t be taken l ight ly .

Diversif ication

There is no greater advantage to us ing mutual

funds than d ivers i f icat ion. Do you honest ly bel ieve

wealthy investors purchase just a couple of stocks?

Of course not! I f they are not us ing mutual funds

(many do) , than they are purchasing a large number

of stocks. Smart investors d ivers i fy because i t

great ly reduces r isk without sacr i f ic ing returns. I f

the idea of d ivers i f icat ion is new to you, I

recommend th is art ic le .


http://mutualfunds.about.com/library/weekly/aa070101a.htm


Professional Management

By purchasing mutual funds, you are essent ia l ly

h i r ing a profess ional manager at an especia l ly

inexpensive pr ice. I t would be a b i t cocky to th ink

that you know more than mutual fund manager.

These managers have been around the industry for a

long t ime and have the academic credent ia ls to back

i t up. Saying you could outperform a mutual fund

manager is s imi lar to a footbal l fan s i t t ing on their

couch saying " I could have made that catch" -

poss ib le , but not l ike ly .

Even i f some of us are better at p ick ing stocks than

a profess ional and their support staf f , most of us

would not want to spend the amount of t ime i t takes

to watch, research and trade the market on a dai ly

bas is .

Efficiency

By pool ing investors ' monies together , mutual

fund companies can take advantage of economies of

sca le. With large sums of money to invest , they

often trade commiss ion- f ree and have personal

contacts at the brokerage f i rms.

Ease of Use

Can you imagine keeping track of a port fo l io

cons ist ing of hundreds of stocks? The bookkeeping

dut ies involved with stocks are much more

compl icated than owning a mutual fund. I f you are



doing your own taxes, or are short on t ime, th is can

be a b ig deal .

Liquidity

I f you f ind yoursel f in need of money in a short

amount of t ime, mutual funds are h ighly l iqu id.

S imply put in your order dur ing the day and when

the market c loses a check wi l l be sent to you or you

can have i t wired to a bank account . Stocks can be

much more d i f f icu l t depending on what k inds of

stocks you are invested in . CD's of fer no l iqu id i ty

(not without a hefty fee) and bonds can be d i f f icu l t ,

too. Some mutual funds a lso carry check wr i t ing

pr iv i leges, which means you can actual ly wr i te

checks f rom the account , s imi lar to your checking

account at the bank.

Cost

Mutual funds are excel lent for the new

investors because you can invest smal l amounts of

money and you can invest at regular intervals with

no trading costs . Stock invest ing, however, carr ies

h igh transact ion fees making i t d i f f icu l t for the

smal l investor to make money. I f an investor wanted

to put in $100 a month into stocks and the broker

charged $15 per t ransact ion, thei r investment is

automat ica l ly down 15 percent every t ime they

invest . That is not a good way to start of f !



Wealthy stock investors get specia l t reatment

f rom brokers and wealthy bank account holders get

specia l t reatment f rom the banks, but mutual funds

are non-discr iminatory. I t doesn' t matter whether

you have $50 or $500,000, you are gett ing the exact

same manager, the same account access and the

same investment.

Risk

In general , mutual funds carry much lower r isk

than stocks. This is pr imar i ly due to d ivers i f icat ion

(as ment ioned above) . Certa in mutual funds can be

r isk ier than indiv idual stocks, but you have to go

out of your way to f ind them.

With stocks, one worry is that the company you

are invest ing in goes bankrupt . With mutual funds,

that chance is next to n i l . S ince mutual funds

typica l ly hold anywhere f rom 25-5000 companies, a l l

o f the companies that i t ho lds would have to go

bankrupt .

I won't argue that you shouldn' t ever invest in

indiv idual stocks, but I do hope you see the

advantages of us ing mutual funds and make the

r ight choice for the money that you real ly care

about



Markets a lone lost around 9% over the day. The

Indian markets could not susta in the beat ing i t got

f rom both ends and saw the maximum decl ine

witnessed in the last e ight months. The market was

around 200 points down after the markets opened

for the day. But the announcement of the FM to h ike

d iv idend d istr ibut ion tax saw another fa l l o f more

than 300 points which the markets was not able to

recover t i l l the end of the day. Among the major

sectors Cement is c lear ly the most h i t , and to some

extent IT serv ices a lso got h i t , because of br inging

both the sector under MAT.



The announcement of MAT of 11.3 % on IT

companies was mis interpreted by the market on the

budget day, by responding in negat ive, but saw

some recovery, in the next t rading day when

markets real ized that MAT can be used as a deferred

tax asset by IT companies post FY 2010 to of fset

taxes, Secondly SEZs are st i l l MAT f ree. Hence the

impact is not severe as was thought on the budget

day. Secondly, as per F inance Min ister FBT on ESOP

is st i l l under not i f icat ion.

The Indian Mutual Fund industry a lso suf fered

on announcement of the h ike in d iv idend

d istr ibut ion tax. The DDT for the money market and

l iqu id mutual funds has been proposed to be brought

at par at 25%. Current ly the rate is 12.5% for reta i l

investor and 23% for inst i tut ional investors . The FM

said that th is was being done to restr ict the

arb i t rage opportuni t ies used by these schemes.

Another proposal put up by the F inance Min ister

was for Mutual Funds to p lay a b igger ro le in

infrastructure development by launching and

operat ing dedicated infrastructure funds which

would d i rect ly invest into core sector pro jects . The

Indian Mutual Fund industry a l ready have schemes

which are sector speci f ic and invest into

infrastructure sector through equit ies . Now after



th is part icu lar proposal Mutual Funds can d i rect ly

invest into infrastructure pro jects .

FM a lso a l lowed del ivery based short se l l ing for

inst i tut ional part ic ipants . Most ly in a l l developed

countr ies short se l l ing is a l lowed. In India , t i l l

recent ly only the reta i l investors were a l lowed to

enjoy th is . A long with F I I , Mutual Fund houses are

a lso a l lowed for del ivery based short se l l ing.



FM has proposed to br ing the asset

management serv ices of fered by indiv iduals under

the serv ice tax bracket . The indiv iduals who provide

investment fund management advisory serv ices wi l l

now have to pay serv ice tax. The managers wi l l have

to register themselves with the Centra l Exc ise

department and have to pay serv ice tax, i f thei r

serv ice fee is more than Rs.8 lakh per annum.

A long with the above the FM also proposed for

the reta i l investor to invest abroad through Mutual

Funds. Current ly the industry has qui te a few mutual

fund schemes which invest dedicatedly abroad. A

few more schemes invest part ia l ly abroad.

On a whole, the budget other than the DDT hike

for the l iqu id and the money market mutual funds

and the infrastructure funds d idn’t have much in

store for the Mutual Fund industry.

To summarize, the Budget wi l l susta in h igh

economic growth through larger investments,

increased savings and bui ld ing of manpower

capabi l i t ies .



Performance Measures of Mutual Funds

Mutual Fund industry today, with about 34

players and more than five hundred schemes , is one

of the most preferred investment avenues in India.

However, with a plethora of schemes to choose from,

the retail investor faces problems in selecting funds.

Factors such as investment strategy and management

style are qualitative, but the funds record is an

important indicator too. Though past performance alone

can not be indicative of future performance, it is,

frankly, the only quantitative way to judge how good a

fund is at present. Therefore, there is a need to

correctly assess the past performance of different

mutual funds.

Worldwide, good mutual fund companies over are

known by their AMCs and this fame is directly linked to

their superior stock selection skills. For mutual funds to

grow, AMCs must be held accountable for their selection

of stocks. In other words, there must be some

performance indicator that will reveal the quality of

stock selection of various AMCs.

Return alone should not be considered as the basis

of measurement of the performance of a mutual fund

scheme, it should also include the risk taken by the

fund manager because different funds will have

different levels of risk attached to them. Risk



associated with a fund, in a general, can be defined as

variability or fluctuations in the returns generated by it.

The higher the fluctuations in the returns of a fund

during a given period, higher will be the risk associated

with it. These fluctuations in the returns generated by a

fund are resultant of two guiding forces. First, general

market fluctuations, which affect all the securities,

present in the market, called market risk or systematic

risk and second, fluctuations due to specific securities

present in the portfolio of the fund, called unsystematic

risk. The Total Risk of a given fund is sum of these two

and is measured in terms of standard deviation of

returns of the fund. Systematic risk, on the other hand,

is measured in terms of Beta, which represents

fluctuations in the NAV of the fund vis-à-vis market. The

more responsive the NAV of a mutual fund is to the

changes in the market; higher will be its beta. Beta is

calculated by relating the returns on a mutual fund with

the returns in the market. While unsystematic risk can

be diversified through investments in a number of

instruments, systematic risk can not. By using the risk

return relationship, we try to assess the competitive

strength of the mutual funds vis-à-vis one another in a

better way.

In order to determine the risk-adjusted returns of

investment portfolios, several eminent authors have

worked since 1960s to develop composite performance

indices to evaluate a portfolio by comparing alternative



portfolios within a particular risk class. The most

important and widely used measures of performance

are:

Ø The Treynor Measure

Ø The Sharpe Measure

Ø Jenson Model

Ø Fama Model

The Treynor Measure

Developed by Jack Treynor, this performance measure

evaluates funds on the basis of Treynor's Index. This

Index is a ratio of return generated by the fund over

and above risk free rate of return (generally taken to be

the return on securities backed by the government, as

there is no credit risk associated), during a given period

and systematic risk associated with it (beta).

Symbolically, it can be represented as:

Treynor's Index (Ti) = (RI - RF)/Bi.

Where, RI represents return on fund, RF is risk free rate

of return and Bi is beta of the fund.

All risk-averse investors would like to maximize this

value. While a high and positive Treynor's Index shows

a superior risk-adjusted performance of a fund, a low



and negative Treynor's Index is an indication of

unfavorable performance.

The Sharpe Measure

In this model, performance of a fund is evaluated

on the basis of Sharpe Ratio, which is a ratio of returns

generated by the fund over and above risk free rate of

return and the total risk associated with it. According to

Sharpe, it is the total risk of the fund that the investors

are concerned about. So, the model evaluates funds on

the basis of reward per unit of total risk. Symbolically,

it can be written as:

Sharpe Index (Si) = (RI - RF)/Si

Where, Si is standard deviation of the fund.

While a high and positive Sharpe Ratio shows a

superior risk-adjusted performance of a fund, a low and

negative Sharpe Ratio is an indication of unfavorable

performance.

Comparison of Sharpe and Treynor

Sharpe and Treynor measures are similar in a way,

since they both divide the risk premium by a numerical

risk measure. The total risk is appropriate when we are

evaluating the risk return relationship for well-

diversified portfolios. On the other hand, the systematic

risk is the relevant measure of risk when we are



evaluating less than fully diversified portfolios or

individual stocks. For a well-diversified portfolio the

total risk is equal to systematic risk. Rankings based on

total risk (Sharpe measure) and systematic risk (Treynor

measure) should be identical for a well-diversified

portfolio, as the total risk is reduced to systematic risk.

Therefore, a poorly diversified fund that ranks higher on

Treynor measure, compared with another fund that is

highly diversified, will rank lower on Sharpe Measure.



Jenson Model

Jenson's model proposes another risk adjusted

performance measure. This measure was developed by

Michael Jenson and is sometimes referred to as the

Differential Return Method. This measure involves

evaluation of the returns that the fund has generated

vs. the returns actually expected out of the fund given

the level of its systematic risk. The surplus between the

two returns is called Alpha, which measures the

performance of a fund compared with the actual returns

over the period. Required return of a fund at a given

level of risk (Bi) can be calculated as:

Ri = Rf + Bi (Rm - Rf)

Where, Rm is average market return during the given

period. After calculating it, alpha can be obtained by

subtracting required return from the actual return of

the fund.

Higher alpha represents superior performance of the

fund and vice versa. Limitation of this model is that it

considers only systematic risk not the entire risk

associated with the fund and an ordinary investor can

not mitigate unsystematic risk, as his knowledge of

market is primitive.

Fama Model



The Eugene Fama model is an extension of Jenson

model. This model compares the performance,

measured in terms of returns, of a fund with the

required return commensurate with the total risk

associated with it. The difference between these two is

taken as a measure of the performance of the fund and

is called net selectivity.

The net selectivity represents the stock selection

skill of the fund manager, as it is the excess return over

and above the return required to compensate for the

total risk taken by the fund manager. Higher value of

which indicates that fund manager has earned returns

well above the return commensurate with the level of

risk taken by him.

Required return can be calculated as:

Ri = Rf + Si/Sm*(Rm - Rf)

Where, Sm is standard deviation of market

returns. The net selectivity is then calculated by

subtracting this required return from the actual return

of the fund.

Among the above performance measures, two

models namely, Treynor measure and Jenson model use

systematic risk based on the premise that the

unsystematic risk is diversifiable. These models are

suitable for large investors like institutional investors



with high risk taking capacities as they do not face

paucity of funds and can invest in a number of options

to dilute some risks. For them, a portfolio can be spread

across a number of stocks and sectors. However, Sharpe

measure and Fama model that consider the entire risk

associated with fund are suitable for small investors, as

the ordinary investor lacks the necessary skill and

resources to diversify. Moreover, the selection of the

fund on the basis of superior stock selection ability of

the fund manager will also help in safeguarding the

money invested to a great extent. The investment in

funds that have generated big returns at higher levels

of risks leaves the money all the more prone to risks of

all kinds that may exceed the individual investors' risk

appetite

Mutual Funds: hope floats

The new mi l lennium brought with i tse l f what

had rare ly been seen in the market . Burgeoning

growth. R id ing on the ICE boom, the market touched

great heights . A lso touching new heights were the

returns generated by equity funds. But as the saying

goes, what goes up has to come down and the

h igher one goes the steeper is the fa l l .



This is exact ly what the equity funds have

exper ienced over the last one year as they have

been robbed of thei r va luables by the volat i le

markets . The fa l l out of the volat i le market

condit ions is ref lected in s igni f icant eros ion of the

tota l assets under management of the equity funds.

As can be seen, in the last one-year , equi ty

funds have lost a lmost 18 percent of the wealth they

had started the year with. Yet , surpr is ingly , they

have managed to stay above the market that lost

a lmost 26 percent in the same durat ion. So despi te

the fact that people have lost money in th is year at

a rate greater than the rate of deprec iat ion of

market capi ta l izat ion of the index, the funds have

received some fresh inf lows. The industry on the

whole saw a cumulat ive inf low of Rs.5962 crores



through new issues and Rs.81,210 crores through

exist ing schemes in the year but a lso saw

redemption of Rs.68,514 crores in the same per iod.

The same trends can be observed i f we d issect

the industry across d i f ferent categor ies of fund

houses. Assets under management of d i f ferent

categor ies of fund houses have moved d iversely .

The industry f in ished with lower assets under

management as i t lost a lmost 2 percent in the year

whi le the industry g iant UTI lost about 4.5 percent

fo l lowed by Indian Jo int Ventures at 4.1 percent .

However, the category to have lost maximum in the

year was that of Bank sponsored mutual funds that

lost a lmost 56 percent . The poor performance in th is

category was not just due to the ICE bust as many

would l ike to bel ieve but a lso due to redemption of



many schemes in the sector . However, the industry

saw shi f t ing patterns in the investor ’s preferences.

The pr ivate sector mutual funds and fore ign jo int

ventures struck b ig t ime th is year and have emerged

as the b iggest gainers despi te the market crash.

Both the categor ies gained in excess of 30 percent

and def ied the general t rend in the industry. This

stresses the point that returns as wel l as qual i ty of

serv ices matter to the investor . This had h i therto

been not too s igni f icant t i l l now but has become

apparent now.

This is indeed ref lect ive of matur ing investors ,

though only just . Investors have been known to

fo l low the herd mental i ty and sel l o f f when the

pr inc ipal amount is under pressure. A l though people

have redeemed money f rom their investments in

equi ty , by and large, more money has a lso f lown in

to the industry. With the markets looking to rev ive,

the industry can st i l l hope for better days, as

investors seem to gradual ly understand that despi te

the corre lat ion between the market and mutual

funds, they are better p laced with thei r r isks

reduced in mutual funds.

Risk Return Grid



Risk Tolerance/Return

ExpectedFocus

Suitable Products

Benefits offered by MFs

Low DebtBank/ Company FD, Debt based Funds

Liquidity, Better Post-Tax returns

Medium Partially Debt, Partially Equity

Balanced Funds, Some Diversified Equity Funds and some debt Funds, Mix of shares and Fixed Deposits

Liquidity, Better Post-Tax returns, Better Management, Diversification

High Equity

Capital Market, Equity Funds (Diversified as well as Sector)

Diversification, Expertise in stock picking, Liquidity, Tax free dividends



Chapter 3:- profile of l ic mutual funds

history of l ic mutual fund

different schemes of l ic mf’s



PROFILE

OBJECT IVE OF THE COMPANY

T h e L I C M u t u a l F u n d w a s l a u n c h e d w i t h t h e

b a s i c o b j e c t i v e s o f m o b i l i z i n g s a v i n g s f r o m

i n v e s t o r s s p r e a d a c r o s s t h e c o u n t r y , w h o h a d n o

e a s y a c c e s s t o t h e c a p i t a l m a r k e t , w i t h a v i e w t o

p r o v i d i n g t h e m a v e h i c l e f o r i n v e s t m e n t o f t h e i r

f u n d s t h e r e b y e n s u r i n g s a f e t y , s e c u r i t y , e a s y

l i q u i d i t y a n d r e a s o n a b l y g o o d r e t u r n s .

SET UP OF THE FUND

L i f e I n s u r a n c e C o r p o r a t i o n o f I n d i a s e t u p

L I C M u t u a l F u n d o n 1 9 t h J u n e 1 9 8 9 a n d

c o n t r i b u t e d R s . 2 C r o r e s t o w a r d s t h e c o r p u s o f

t h e F u n d . L I C M u t u a l F u n d w a s c o n s t i t u t e d a s a

T r u s t i n a c c o r d a n c e w i t h t h e p r o v i s i o n s o f t h e

I n d i a n T r u s t A c t , 1 8 8 2 . T h e s e t t l e r i s n o t

r e s p o n s i b l e f o r t h e m a n a g e m e n t o f t h e T r u s t . T h e



s e t t l e r i s a l s o n o t r e s p o n s i b l e o r l i a b l e f o r a n y

l o s s o r s h o r t f a l l r e s u l t i n g i n a n y o f t h e s c h e m e s

o f L I C M u t u a l F u n d .

T h e T r u s t e e s o f t h e L I C M u t u a l F u n d h a v e

e x c l u s i v e o w n e r s h i p o f T r u s t F u n d a n d a r e v e s t e d

w i t h g e n e r a l p o w e r o f s u p e r i n t e n d e n c e ,

d i s c r e t i o n a n d m a n a g e m e n t o f t h e a f f a i r s o f t h e

T r u s t . L I C M u t u a l F u n d A s s e t M a n a g e m e n t

C o m p a n y L t d . w a s f o r m e d o n 2 0 t h A p r i l 1 9 9 4 i n

c o m p l i a n c e w i t h t h e S e c u r i t i e s a n d E x c h a n g e

B o a r d o f I n d i a ( M u t u a l F u n d s ) R e g u l a t i o n s , 1 9 9 3 .

T h e C o m p a n y c o m m e n c e d b u s i n e s s o n 2 9 t h A p r i l

1 9 9 4 . T h e T r u s t e e s o f L I C M u t u a l F u n d h a v e

a p p o i n t e d L I C M u t u a l F u n d A s s e t M a n a g e m e n t

C o m p a n y L t d . a s t h e I n v e s t m e n t M a n a g e r s f o r L I C

M u t u a l F u n d . T h e T r u s t e e s a r e r e s p o n s i b l e f o r

a p p o i n t i n g a C u s t o d i a n . T h e T r u s t e e s s h o u l d a l s o

e n s u r e t h a t t h e a c t i v i t i e s o f t h e T r u s t a n d t h e

A s s e t M a n a g e m e n t C o m p a n y a r e i n a c c o r d a n c e

w i t h t h e T r u s t D e e d a n d t h e S E B I M u t u a l F u n d

R e g u l a t i o n s a s a m e n d e d f r o m t i m e t o t i m e . T h e

T r u s t e e s h a v e a l s o t o r e p o r t p e r i o d i c a l l y t o S E B I

o n t h e f u n c t i o n i n g o f t h e F u n d .

T h e i n v e s t o r s u n d e r t h e s c h e m e s c a n o b t a i n

a c o p y o f t h e T r u s t D e e d , t h e t e x t o f t h e



c o n c e r n e d S c h e m e a s a l s o a c o p y o f t h e A n n u a l

R e p o r t , o n a w r i t t e n r e q u e s t m a d e t o t h e L I C

M u t u a l F u n d A s s e t M a n a g e m e n t C o m p a n y L t d . a t

a n o m i n a l p r i c e o f R s . 1 0 / - .

T h e L I C M u t u a l F u n d w a s s e t u p a s a

s e p a r a t e T r u s t b y t h e L i f e I n s u r a n c e C o r p o r a t i o n

o f I n d i a h a v i n g i t s c e n t r a l o f f i c e a t Y o g a k s h e m a ,

J e e v a n B i m a M a r g , M u m b a i 4 0 0 2 0 1 .

T h e T r u s t d e e d d a t e - 2 0 . 4 . 8 9 w a s m o d i f i e d

t h r o u g h a d e e d o f m o d i f i c a t i o n a s m e n t i o n e d i n

s c h e d u l e l l l o f S E B I ( M u t u a l F u n d ) R e g u l a t i o n s ,

1 9 9 6 . T h e T r u s t d e e d w i l l n o t b e m o d i f i e d

w i t h o u t t h e p r i o r a p p r o v a l o f S E B I a n d U n i t

h o l d e r s a p p r o v a l w i l l b e o b t a i n e d w h e r e i t a f f e c t s

t h e i n t e r e s t o f t h e U n i t h o l d e r s .



L I C h a s m a d e a n i n i t i a l c o n t r i b u t i o n o f R s . 2

c r o r e t o w a r d s t h e t r u s t F u n d . T h e L I C M u t u a l

F u n d T r u s t e e c o . p v t . l t d . i s f o r m e d a n d a p p o i n t e d

t o s u p e r v i s e t h e a c t i v i t i e s o f t h e F u n d . T h e

T r u s t e e C o m p a n y h a s e n t r u s t e d t h e w o r k o f

m a n a g e m e n t o f t h e F u n d t o J e e v a n B i m a S a h a y o g

A s s e t M a n a g e m e n t C o m p a n y L t d . , w h i c h i s a

c o m p a n y p r o m o t e d b y t h e L i f e I n s u r a n c e

C o r p o r a t i o n o f I n d i a w i t h a n a u t h o r i z e d c a p i t a l o f

R s . 2 5 c r o r e s . T h e d a y - t o - d a y o p e r a t i o n s o f J B S

A M C L t d . , t h e i n v e s t m e n t m a n a g e r t o L I C M F , a r e

l o o k e d a f t e r b y s e n i o r o f f i c i a l s o n d e p u t a t i o n

f o r m t h e L I C o f I n d i a .

T h e L I C M u t u a l F u n d m o b i l i z e d o v e r R s . 8 7 5 0

c r o r e s g r o s s c o l l e c t i o n i n t h e F i n a n c i a l Y e a r i . e . ,

2 0 0 3 - 2 0 0 4 a n d m a n a g i n g A s s e t s U n d e r

M a n a g e m e n t o f R s . 4 3 7 5 c r o r e ( a s o n

3 1 . 0 7 . 2 0 0 4 ) . T h e L I C M u t u a l F u n d m o b i l i z e d h a d

r e d e e m e d 2 2 o f t h e c l o s e e n d e d s c h e m e s g i v i n g

f a i r l y g o o d s r e t u r n s t o t h e i n v e s t o r s . I t h a s

p i o n e e r e d o p e n - e n d e d s c h e m e s i n t h e i n d u s t r y .

F o r t h e F i n a n c i a l Y e a r 2 0 0 4 - 2 0 0 5 f r o m

f i f t e e n d i v e r s e o p e n - e n d e d s c h e m e s . M o b i l i z e d

o v e r R s . 1 2 , 8 0 0 c r o r e ( g r o s s ) . I t i n v e s t o r s b a s e o f

a r o u n d 2 . 5 l a k h ’ s a s o n 3 1 . 0 3 . 2 0 0 5 .



A n d f o r t h e F i n a n c i a l Y e a r 2 0 0 5 - 2 0 0 6 f r o m

f i f t e e n d i v e r s e o p e n - e n d e d s c h e m e s w i t h

m o b i l i z e d o v e r R s . 4 4 , 4 8 5 c r o r e ( g r o s s ) . I t h a d a

i n v e s t o r b a s e o f a r o u n d 2 . 1 0 l a k h ’ s a s o n

3 1 . 0 3 . 2 0 0 6 .

A s s e t U n d e r M a n a g e m e n t ( A U M ) o f L I C

M u t u a l F u n d a s o n 3 1 . 0 7 . 2 0 0 4 ( f o r F / Y 2 0 0 3 - 0 4 )

w a s R s . 4 3 7 5 c r o r e s . A n d f o r F / Y 2 0 0 4 - 2 0 0 5 A U M

w a s R s . 2 8 9 0 . 3 8 c r o r e .

A U M o f L I C M u t u a l F u n d a s o n 3 1 - 0 3 . 2 0 0 6

w a s R s . 5 2 2 8 . 9 0 c r o r e a s a g a i n s t t h e

c o r r e s p o n d i n g p r e v i o u s y e a r f i g u r e t h e r e b y

r e g i s t e r i n g g r o w t h o f 8 0 . 9 1 % . L I C M u t u a l F u n d

l a u n c h e d s i x f i x e d m a t u r i t y p l a n s ( c l o s e - e n d e d

s c h e m e ) a n d m o b i l i z e d a r o u n d u n d e r t h e s e p l a n s .

T h e b e l o w c h a r t s h o w s d e t a i l s o f M o b i l i z e d &

A U M f o r t h r e e F i n a n c i a l Y e a r 2 0 0 3 - 0 4 , 2 0 0 4 - 0 5 &

2 0 0 5 - 0 6 .



0

5,000

10,000

15,000

20,000

25,000

30,000

35,000

40,000

45,000

GROSS AMOUNT OFMOBILISED IN (CRORES)

2003-04

2004-05

2005-06

The above chart shows the growth in mobi l iz ing

f rom investors for three f inancia l years are as

fo l lows: -

1. There was a low growth rate of 46.29% for the

f inancia l year 2004-05.

2. But there was a good rate of 247.54% for the

f inancia l year 2005-2006.


YEARS

GROSS AMOUNT OF MOBILISED IN

(CRORES)

2003-04 8,750

2004-05 12,800

2005-06 44,485


The above chart expla ins about the Asset Under

Management for the f inancia l years: -

1. For the F/Y 2004-05 was a decl ine in AUM was

Rs.2890.38 crs @ 33.93% from F/Y 2003-04 was

Rs.4375 crs .

2. In the f inancia l year

2005-2006 there

was an against to

last F /Y ’s because

the growth rate was 80.91% for Rs.2890.38 crs

in F /Y of 2004-05 the amount was Rs.5228.90

crs


YEARS AUM2003-04 4,3752004-05 2,890.382005-06 5,228.90


LIC Mutual Fund Trustees Company

Private Limited

SHRI V. Raghavendra


NAME OF THE DIRECTORS &

ADDRESS

SHRI D.K Mehrotra

Manag ing D i rec to r ,

L IC o f I nd ia

Cent ra l O f f i ce ,

Mumbai

SHRI P. N. Mehta

Char te red Accountan t

607 , Akash Deep ,

26 -A , Ba rakhamba Road ,

New Delh i - 110 001

SHRI P. N. Shah

Char te red Accountan t

Maker Bhavan - 2 ,

18 , New Mar ine L ines ,

Mumbai - 400 020

SHRI V.G. Subramanyam

A/5 , Swami Sh ivananda CHS . ,

Chaka la Road , Andher i (E )

Mumbai - 400 099


C-5 /104 , Sake t Comp lex

Thane (W)

Thane - 400 601



Board of Directors of LICMF-AMC

LIMITEDNAME &

ADDRESS

SHRI T S Vi jayan

Chairman

LIC of India

Centra l Of f ice,

Mumbai

SHRI C. R. Thakore

Director L ICMF-AMC

Mrudul -8,

Jeevan Prakash Society,

St . Xavier High School Road,

P.O: Navajeevan

Ahmedabad - 380 014

SHRI D. M. Sukthankar

D i rector L ICMF-AMC

NO.5 , 'PRIYA' , Abdul

Ghaffar Khan Marg,

Wor l i Sea Face ,

MUMBAI-400 025

SHRI R. M. Honavar

Director L ICMF-AMC



"LAKSHMI KAMAL", 20 Chintamani

Co-operat ive Housing Society

Karve Nagar,

PUNE - 411 052



Shri. S.K Mitter

Chief Execut ive

LIC Housing F inance Ltd.

Bombay L i fe Bui ld ing,

2 n d F loor ,

45/47, Near Nar iman Road,

MUMBAI - 400 001

Shri. T.S.Vishwanath

Chartered Accountant

F lat No: 10

Sankar Market ,

Konnaught Ci rcus,

New Delhi - 110 001

Shri. H.N.Motiwalla

Chartered Accountant

508, Sharada Chambers,

15 A, New Mar ine L ines,

Mumbai - 400 002.

Shri. N. Mohan Raj

Chief Execut ive

LICMF-AMC Ltd

Industr ia l Assurance Bldg. ,

4th F loor , Opp. Churchgate Stat ion,

Mumbai - 400 020.

Shri. N.N Vohra



1805, sector-17-A,

Gurgoan-122001,

Haryana.



Exper ience/Exposure of The Key

Personnel

Shr i . N . Mohan Ra j

S h r i . N . M o h a n R a j i s a p o s t - g r a d u a t e i n

E c o n o m i c s f r o m M a d r a s U n i v e r s i t y . H e s t a r t e d h i s

c a r e e r a s a D i r e c t R e c r u i t O f f i c e r o f 1 0 t h b a t c h

o f L I C o f I n d i a f r o m A h m e d a b a d , D i v i s i o n a l

O f f i c e . H i s v a r i e d e x p e r i e n c e e n c o m p a s s e s S e n i o r

D i v i s i o n a l M a n a g e r ( I / C ) o f T h i r u v a n a n t h a p u r a m

a n d S a l e m D i v i s i o n s . H e h a s h e l d v a r i o u s

i m p o r t a n t p o s i t i o n s i n L I C o f I n d i a , i n c l u d i n g

C h i e f ( I n v e s t m e n t ) , C o r p o r a t e O f f i c e , M u m b a i a s

w e l l a s Z o n a l M a n a g e r , C e n t r a l Z o n e , B h o p a l . I n

N o v e m b e r 2 0 0 2 , h e r e p r e s e n t e d L I C o f I n d i a i n

t h e S e m i n a r o f A s i a n I n s u r a n c e R e v i e w h e l d a t

S i n g a p o r e .



SchemesLIC Mutual fund schemes may be c lass i f ied on the

bas is of i ts structure and i ts investment object ive.

1. Debt

Name of Open Ended schemes

I. LICMF Bond Fund

I I . LICMF Chi ldren's Fund

I I I . LICMF F loater MIP - P lan A

IV. LICMF F loater MIP - P lan B

V. LICMF F loat ing Rate Fund

VI. LICMF Govt Secur i t ies Fund

VII. LICMF L iquid Fund

VIII . LICMF Monthly Income Plan

IX. L ICMF Short Term Plan

Name of Close Ended schemes

I. LICMF F ixed Matur i ty P lan: Ser ies - I - ONE

Year P lan

I I . LICMF F ixed Matur i ty P lan: Ser ies - I - S IX

Month P lan

I I I . LICMF F ixed Matur i ty P lan: Ser ies – I I

IV. LICMF F ixed Matur i ty P lan: Ser ies – I I I

2.Balanced


I. LIC MF Balance Fund ( Former ly known as

Dhansahayog)



3.Equity


I. LIC MF Opportuni t ies Fund

I I . LIC MF Growth Fund (Former ly Known as

Dhansamriddhi )

I I I . LICMF Equity Fund (Former ly Known as

Dhanvikas1)

IV. LICMF Index Fund Ni f ty P lan

V. LICMF Index Fund Sensex Advantage P lan

VI. L ICMF Tax P lan



Name of Close Ended schemes

I. Dhan Tax Saver 1996

4. Others


I. LIC MF Unit L inked Insurance Scheme

4. RedeemedN A M E O F

S C H E M E

D A T E O F

R E D E M P T I O N

R E D E M P T I O N P R I C E

D h a n 8 0 C C ( 1 ) 3 1 - J A N - 9 5 R s . 2 1 . 8 2

D h a n a s h r e e 8 9 3 1 - O c t - 9 6 R s . 1 0 . 0 0

D h a n v a r h a ( 3 ) 3 0 - N o v - 9 6

O p t i o n ( 1 )

R s . 1 0 . 0 0

O p t i o n ( 2 )

R s . 1 0 . 0 0

O p t i o n ( 3 )

R s . 2 0 . 3 0

O p t i o n ( 4 )

R s . 2 0 . 3 0

D h a n a l a k s h m i

( 1 )

1 - F e b - 9 7 R s . 1 0 . 7 5

D h a n a s h r e e 9 0 3 1 - A u g - 9 7 R s . 1 0 . 7 3

D h a n a v a r s h a

( 4 )

1 - A p r - 9 8

O p t i o n ( 1 )

R s . 1 0 . 0 0 O p t i o n

( 2 ) R s . 1 0 . 0 0

O p t i o n ( 3 )

R s . 2 5 . 0 0 O p t i o n



( 4 ) R s . 2 5 . 0 0


( 5 )

3 1 - J u l - 9 8

O p t i o n ( 1 )

R s . 1 0 . 1 0 O p t i o n

( 2 ) R s . 1 0 . 1 0

O p t i o n ( 3 )

R s . 2 5 . 1 0 O p t i o n

( 4 ) R s . 2 5 . 1 0

D h a n a s h r e e 9 1 3 0 - S e p - 9 8 R s . 1 0 . 6 5


( 1 ) R o l l O v e r

( R o l l e d o v e r o n

0 1 / 1 1 / 1 9 9 5 )

1 - N o v - 9 9 R s . 1 0 . 0 0

D h a n v r i d d h i

1 9 8 9

1 5 - M a y - 0 0 R s . 1 0 . 0 0


( 2 ) R o l l O v e r

( R o l l e d o v e r o n

0 1 / 0 6 / 1 9 9 6 )

7 - J u l - 0 0

O p t i o n ( 1 )

R s . 1 0 . 0 0 O p t i o n

( 2 ) R s . 1 0 . 0 0

O p t i o n ( 3 )

R s . 1 6 . 5 2


( 6 )

3 0 - N o v - 0 0 R s . 1 0 . 0 0


( 9 )

3 1 - J a n - 0 1

O p t i o n ( 1 )

R s . 1 0 . 0 1 O p t i o n

( 2 ) R s . 1 0 . 0 1

O p t i o n ( 3 )

R s . 1 7 . 1 2

O p t i o n ( 1 )




( 7 )

3 1 - M a r - 0 1

R s . 1 0 . 0 0 O p t i o n

( 2 ) R s . 1 0 . 0 0

O p t i o n ( 3 )

R s . 1 0 . 0 0 O p t i o n

( 4 ) R s . 1 0 . 0 0

O p t i o n ( 5 )

R s . 1 7 . 9 7

D h a n 8 0 C C B

( 1 )

3 1 - M a r - 0 1

O p t i o n ( 1 ) R s . 9 . 2 6

O p t i o n ( 2 ) R s . 9 . 2 6

O p t i o n ( 3 )

R s . 2 7 . 0 0

D h a n v a r s h a

( 1 0 )

3 1 - A u g - 0 1

O p t i o n ( 1 )

R s . 1 0 . 0 0 O p t i o n

( 2 ) R s . 1 0 . 0 0

O p t i o n ( 3 )

R s . 1 6 . 0 0

D h a n v a r s h a ( 8 ) 3 0 - S e p - 0 1

O p t i o n ( 1 )

R s . 1 0 . 0 0 O p t i o n

( 2 ) R s . 1 0 . 0 0

O p t i o n ( 3 )

R s . 1 9 . 0 8

D h a n v a r s h a

( 1 1 )

2 8 - F e b - 0 2

O p t i o n 1 - 1 0 . 0 0 ,

O p t i o n 2 - 1 0 . 0 0 ,

O p t i o n 3 - 1 5 . 3 7 5 7

D h a n 8 0 C C B

( 2 )

1 - A p r - 0 2 4 . 7 8 8 2 P l a n C -

R s 6 . 5 6 1 9

D h a n v a r s h a 3 0 - S e p - 0 2 F o r M o n t h l y O p t i o n



( 1 3 )

C u m u l a t i v e

R s . 1 0 . F o r Y e a r l y

O p t i o n R s . 1 0 .

C u m m u l a t i v e

O p t i o n R s . 1 5 . 4 6 8 7

D h a n 8 8 ( 1 ) 3 1 - M a r - 0 3 R s . 4 . 9 8 2 6

D h a n v a r s h a

( 1 2 )

3 1 - M a y - 0 3

M o n t h l y : R s . 1 0 . 4 8 2

0

Y e a r l y : R s . 1 0 . 4 8 2 0

C u m u l a t i v e : R s . 1 6 . 7

1 6 0

D h a n v i d y a 1 5 - D e c - 0 3 R s . 1 0 . 0 0



Services

The data of the investors l ike their names,

cert i f icate and fo l io numbers, addresses etc . , are

stored in e lectronic form by our registrars duly

appointed by us. We of fer a var iety of af ter sa les

serv ices. A l l k inds of serv ices are bas ica l ly handled

by our registrars and accordingly the investors have

to wr i te to the registrars in the f i rst instance. We

handle serv ices at our Area Centers a lso, but that

act iv i ty is restr icted to L IC Bond Fund and

Government Secur i t ies Fund, the open ended funds.

I t i s very essent ia l to quote the Cert i f icate

Number, Fo l io Number and Scheme Name as they

appear in the cert i f icate in case of any compla int /

correspondence.

For a l l payments l ike premature encashment /

redemption, a proper d ischarge e i ther at the back of

the uni t cert i f icate or through a separate d ischarge

form i f b lank d ischarge form is not provided at the

back of the cert i f icate duly s igned by a l l the holders

and witnessed shal l be g iven. Submiss ion of the uni t

cert i f icate or in l ieu of that a or ig inal va l id proof of

hold ing at the speci f ied of f ices is a must for

sett lement of such payments.



In case of repurchases, the unused warrants

inc luding the warrant perta in ing to the month in

which the repurchase is preferred shal l be sent

a long with the duly d ischarged cert i f icate.

The performance of our registrars is c losely and

regular ly monitored by a team of of f ic ia ls of the

Corporate Off ice.

The investors may register thei r compla ints

with the Corporate Off ice, in respect of any of the

l is ted after sa les serv ice i tems herein, i f they do not

get the required serv ice with in reasonable t ime f rom

the respect ive registrars .



After sales service

CHANGE OF ADDRESS

CORRECTION/CHANGE OF NAME IN THE CERTIF ICATE

NON-RECEIPT OF CERTIF ICATE

NON-RECEIPT OF

DIVIDEND/REDEMPTION/REPUTCHASE/REFUND

WARRANTS.

REDEMPTION TRANSFER OF HOLDING

STATEMENT OF ACCOUNTS

REVALIDATION / CORRECTION OF WARRANTS

CHANGE OF NOMINEE

SPLIT OF UNIT CERTIF ICATES

REGISTRATION/CANCELLATION OF L IEN

DEATH CLAIMS

LOSS OF UNIT CERTIF ICATES

LOSS OF WARRANTS

BANK MANDATE

REPURCHASE

T h e i n v e s t o r s m a y c o n t a c t a n y o f o u r o f f i c e s t o

k n o w m o r e i n f o r m a t i o n a b o u t t h e v a r i o u s a s p e c t s

o f t h e a b o v e s e r v i c e s .

Benefits

Tax Benefits

Tax Treatment of Investment in Mutual funds:

Taxation: The following summary outlines the tax benefits available to the Unitholders

The following information is provided for general information only. However, in view of the individual nature of the tax benefits, each investor is advised to consult with his/her own tax



advisor with respect to the specific tax implications arising out of his/her participation in the schemes of the fund.

Tax Implications For All Unitholders

Income Tax:Consequent upon the amendments made by the Finance Act, 2002 to the Income Tax Act, 1961, w.e.f. 1.4.2002 income in respect of units of Mutual Funds is now taxable in the hands of the investors at their applicable rate of tax on total income. Such income will now be also subject to deduction of tax at source.



Tax Concessions:Accordingly, all residents and non residents (if units are bought through payment from non-resident ordinary account) who are individuals and Hindu Undivided Families (HUFs) will enjoy deduction under section 80L of the Act from their gross total income upto an overall limit of Rs. 9,000/- in respect of income from units of the fund.

Tax Rebate:Under section 88 of the Act, subscriptions / contributions made in the following plans of LIC Mutual Fund by individuals and HUFs will be eligible for tax rebate:

contribution to Dhanaraksha 1989 (being unit-linked insurance plan as notified by the Central Government) in the name of the individual himself/herself, spouse and any child of such individual in case of individual and in case of HUF, in the name of any member of HUF.

subscription to units of LIC Mutual Fund Tax Plan ( being a plan formulated in accordance with the scheme notified by the Central Government) not exceeding Rs.10,000/-.

The quantum of rebate and maximum eligible amount for the same are mentioned below:Tax Rebate @30% if- income chargeable under the head “Salaries” (before giving deduction u/s. 16) is not more than Rs.1 lac; and such income is at least 90% of gross total income

Tax Rebate @20% if- gross total income does not exceed Rs. 1.5 lacs;

Tax Rebate @15% if- gross total income is between Rs. 1.5 lacs and Rs. 5 lacs

Tax Rebate NIL if gross total income exceeds Rs. 5 lacs

Maximum qualifying amount for rebate in respect of contribution/ subscription to our plans (i) to (ii) above is Rs. 70,000

2. Residents:(a) Deduction of Tax at source: Under the re-introduced section 194K, Mutual Fund is required to deduct income tax at source @ 10% + 5% sur charge from the income payable to investors, if such income exceeds Rs.1,000 per scheme during the financial year.

(b) No Deduction of Tax: Investors (not being a company or a firm), desiring receipt of income without deduction of tax at source should furnish to the Mutual Fund a declaration in writing, in duplicate, in the prescribed Form No. 15H and verified in the prescribed manner to the effect that the tax on his/its estimated total Income of the relevant year will be nil in accordance with the Income tax rules. The prescribed Form No. 15H for non deduction of tax at source should be submitted alongwith the application and for subsequent years at least three months before the dispatch of income distribution warrants, failing which tax will be deducted at source as per prevalent tax laws.However, Form No. 15H will not be acceptable by the Mutual Fund if the income paid or likely to be paid to the investor exceeds Rs. 50,000 (maximum amount not chargeable to tax) in the financial year.

(c) Long Term Capital Gains:For Individuals, HUFs, Partnership Firms, Indian Companies:Long-term capital gains in respect of units held for a period of more than twelve months will be chargeable under Section 112 of the Act, at concessional rate of tax, at 20% as increased by the applicable sur charge. The following amounts are deductible from the full value of consideration, to arrive at the amount of such capital gains:-Under section 88 of the Act, subscriptions / contributions made in the following plans of LIC Mutual Fund by individuals and HUFs will be eligible for tax rebate:Cost of acquisition of units as adjusted by Cost Inflation Index notified by the Central Government, and expenditure incurred wholly and exclusively in connection with such transfer.

However, where the tax payable on such long-term capital gains, computed before indexation, exceeds 10% as increased by the applicable sur charge, of the amount of capital gains, such excess tax shall not be payable by the unit holder.



In a case, where taxable income, as reduced by long term capital gains, is below the exemption limit, the long term capital gains will be reduced to the extent of the short fall and only the balance long term capital gains will be charged at the flat rate 20% plus surcharge, as may be applicable.

(d) Short Term Capital Gains:Short-term capital gains in respect of units held for a period of not more than 12 months is added to the total income. Short-term capital gains are chargeable to tax as per the relevant slab rates. The maximum tax rates applicable to different categories of assesses are as follows:

Individuals and HUF 30% plus surcharge

Partnership firms 35% plus surcharge

Indian companies 35% plus surcharge

(e) Tax deduction at source on capital gains:No tax is required to be deducted at source on capital gains arising to any resident unit holder (under section 194K) wide circular No. 715 dated August 8, 1995 issued by the Central Board of Direct Studies (CBDT).

(f) Exemption of capital gains

(i) Section 54 EC of the Act:According to the provisions of section 54 EC of the Act, gains arising from the transfer of long-term capital assets (including units held for a period of more than 12 months prior to the date of transfer/redemption), are not chargeable to tax provided the said gains are invested in specific assets within six months of such transfer.

A specified asset has been defined to mean any bond redeemable after three years, issued on or after April, 1 2000 by a National Bank for Agriculture and Rural

Development or by the National Highways Authority of India. The Act provides that bonds redeemable after three years, issued on or after a April 1, 2001 by the Rural Electrification Corporation Ltd will also qualify as a specified asset. Similarly Bonds issued after April 1, 2002 by National Bank or by SIDBI also qualify for such investment.

(ii) Section 54 ED of the Act:

3. Non-Residents:

(a) Tax on Income on units: Section 115 E provides for concessional tax at the rate of 20% plus applicable surcharge in respect of investment income of Non Resident Indian.Section 115 AB provides for tax at the rate of 10% in respect of investment income in respect of units purchased in foreign currency by an Offshore Fund.

(b) Deduction of Tax at source:Section 196A of the Income Tax Act 1961, provides for deduction of tax at source at the rate of 20% on income received by a Non Resident in respect of units of the Mutual Fund.

Section 196B of the Income Tax Act 1961, provides for deduction of tax at source at the rate of 10% plus applicable surcharge on income received by Offshore Fund and FIIs as defined in section 115AB in respect of units of the Mutual Fund.

(c) Long Term Capital Gains:

(i) For Non Residents and Foreign companies



Under section 115 E of the Act, in case of non-resident Indians, income by way of the long-term capital gains, in respect of units, each chargeable at the rate of 20% plus applicable surcharge. Such long-term capital gains would be calculated without indexation of cost of acquisition.

(iii) For Overseas Financial Organization, including Overseas Corporate Body and Foreign Institutional Investor fulfilling conditions laid down under section 115 AB (Offshore Fund) under section 115 AB of the Act, long-term capital gains in respect of units held for a period of more than 12 months will be chargeable at the rate of 10% plus surcharge, as may be applicable. Such gains would be calculated without indexation of cost of acquisition.

(d) Short Term Capital Gains:Short-term capital gains in respect of units held for a period of not more than 12 months is added to the total income. Such capital gains are chargeable to tax as per the relevant slab rates. The maximum tax rates applicable to different categories of assessees are as follows:

Foreign companies 40% plus surchargeNon-resident Indians 30% plus surcharge

(e) Tax deduction at source on capital gains:

Under section 195 of the Act and shall be deducted at source as under:

(a) In case of non-resident other than a Company: Long-term capital gains 20% plus surcharge

Short-term capital gains 30% plus surcharge

(a) Tax on Income on units:

(b) In case of foreign companies Short-term capital gains 40% plus surcharge Long-term capital gains 20% plus surcharge

(c) In case of Offshore Fund and FIIs as defined in 115 AB

Long-term capital gains 10%

However, recentlly Delhi High Court has held that deduction of tax at source as per the provisions of DTAA can not be done at a concessional rate. The Court has held that the concessional rate can apply only at the time of final assessment. As per CBDT circular No. 728 dated October 30, 1995, in the case of remittance to a country with which a Double Taxation Avoidance Agreement (DTAA) is in force, the tax should be deducted at the rate provided in the Finance Act of the relevant year or at the rate provided in the DTAA whichever is more beneficial to the assessee. In order to obtain the benefit of a lower rate available under DTAA, the unitholder is required to provide the mutual fund with a certificate obtained from his/her assessing officer stating his/her eligibility for the lower rate.

(f) Exemption of capital gains:

Section 54 EC of the Act:

According to the provisions of section 54 EC of the Act, gains arising from the transfer of long-term capital assets (including units held for a period of more than 12 months prior to the date of transfer/redemption), are not chargeable to tax provided the said gains are invested in specific assets within six months of such transfer.

A specified asset has been defined to mean any bond redeemable after three years, issued on or after April, 1 2000 by a National Bank for Agriculture and Rural Development or by the National Highways Authority of India. The Act provides that



bonds redeemable after three years, issued on or after a April 1, 2001 by the Rural Electrification Corporation Ltd will also qualify as a specified asset. Similarly Bonds issued after April 1, 2002 by National Bank or by SIDBI also qualify for such investment.

Section 54 ED of the Act:

Section 54 ED of the Act provides that gains arising from transfer of long-term capital assets being listed securities or units, shall not be chargeable to income-tax, if such capital gains are invested in equity shares by way of a public issue within six months from the date of such transfer. However, such shares will be locked in for a period of one year and will not be entitled to be sold or transferred during the lock-in period.

Religious and Charitable Trusts:Investment in the units of the Mutual Fund by Religious and Charitable Trusts is an eligible investment under section 11 (5) of the Act, read with Rule 17C of the Income tax Rules, 1962.

Wealth Tax and Gift Tax benefits

Units held under the schemes of the Mutual Fund are not treated as chargeable assets under section 2(ea) within the meaning of the Wealth Tax Act, 1957 and therefore are not liable to wealth tax. Similarly, gift of the units held under the schemes are also not chargeable to Gift Tax under the Gift tax Act, 1958 after 1.10.1998.

TAX IMPLICATIONS FOR THE MUTUAL FUNDTax benefit to the fund:

Our Mutual Fund is duly registered with SEBI and as such the entire income of the fund is exempt from income tax under section 10 (23D) of the Act and is entitled to receive its income without any deduction of tax at source.



Chapter 4:- a valuation of NAV’s & swot

analyis

valuations of nav’s

brief about swot analysis



Calculating Net Asset Value (NAV)Learn how to calculate this popular mutual fund

number

You may have heard the term Net Asset Value

(NAV) used when referr ing to mutual funds. Now's

your chance to learn how to ca lculate a mutual

fund's NAV and understand what i t rea l ly means.

Treat a mutual fund's net asset va lue as i ts

pr ice per share. I f you see a fund NAV as $14, then

you can expect to buy the fund for $14 or se l l i t for

$14 (a l though some loaded funds don' t fo l low th is

log ic) . S ince mutual funds hold a number of

secur i t ies , the net asset va lue must be ca lculated at

the end of day on a dai ly bas is (as opposed to

stocks that change pr ices by the second) .

Calculating NAVs

Calculat ing mutual fund net asset va lues is easy.

S imply take the current market va lue of the fund's

net assets (secur i t ies held by the fund minus any

l iab i l i t ies) and d iv ide by the number of shares

outstanding. So i f a fund had net assets of $50

mi l l ion and there are one mi l l ion shares of the fund,

then the pr ice per share (or NAV) is $50.00.

How to Use Net Asset Values



NAVs are helpfu l in keeping an eye on your mutual

fund's pr ice movement, but NAVs are not the best

way to keep track of performance. The reason for

th is is mutual fund d istr ibut ions. Mutual funds are

forced by law to d istr ibute at least 90% of i ts '

rea l ized capi ta l ga ins and d iv idend income each

year . When a fund pays out th is d istr ibut ion, the

NAV drops by the amount paid.



This is important because an investor may become

fr ightened when they see their fund's NAV drop by

$3 even though they haven't lost any money ( the

$3 was paid out to the shareholder) . For a better

understanding of mutual fund d istr ibut ions.

The most important th ing to keep in mind is that

NAVs change dai ly and are not a good indicator on

how your port fo l io is doing because th ings l ike

d istr ibut ions mess with the NAV ( i t a lso makes

mutual funds hard to t rack)

HOW THE NET ASSET VALUE OF FUND IS

DETERMINED

Market value of the stocks & bonds in the fund

10,000,000

Minus total liabilities -

130,000

Net worth

99,870,000

Number of shares outstanding

7,500,000

Net asset value 13.316

(99,870,000/7,500,000)



The net asset value changes daily because of

market fluctuations of the stock & bond prices in the

fun. NAV’s are important because:-

The NAV is used to determine the value of your

holdings in the mutual fund (the number of shares held

multiplied by the NAV price per share)



HOW TO DETERMINE THE EFFECTIVE LOAD

CHARGE:-

A mutual fund quotes its load charge as a percentage of

its offer price, which understates the real charge paid

by investor in load funds. For ex, for a mutual fund with

a load charge of 5% & NAV quoted in the newspaper of

25 per share, the offer price is determined as follows:-

Offer price=net asset value (NAV)

(1-Load %)

= 25

(1-0.05)

= 26.32

The investor pays a load fee of 1.32 per

share(26.32-25), which is a 5% charge of the offer

price. However, this load charge as a % of the NAV is

higher than 5%.

Effective load charge= Load charge

Net asset value

= 1.32

25.00

= 5.28%



Conducting a SWOT or (OTSW)

What is it?

The granddaddy of focus group data gather ing

processes is the tradi t ional SWOT and i ts updated

of fspr ing, OTSW Analys is . You can SWOT (or OTSW) a

concept , a program, a department, a school , or a

new in i t iat ive. You can even SWOT a person,

a l though one must be carefu l when doing so.

When doing SWOT Analys is , remember that the

S and the W are INTERNAL and the O and T are

external . Tradi t ional ly , fac i l i tators begin with the

organizat ion’s Strengths and Weaknesses and

then move out to the external Opportunities and

Threats . Recent th ink ing prompts cons iderat ion

f i rst of the opportuni t ies and threats ex ist ing in the

"outs ide wor ld" against which the inst i tut ion can

leverage i ts strengths and f ind convict ion to correct

i ts weaknesses. We l ike th is reversal of the

t radi t ional order because i t helps an organizat ion

p lace i tse l f in context .

Method

Group Process Technique: Bra instorming

Purpose: To generate a large quant i ty of ideas in

response to a stated problem or quest ion.



The group is asked to generate as many responses

to the fo l lowing quest ions with in a l imited t ime

f rame (10-20 minutes per quest ion) . A l l responses

are recorded verbat im and ideas are not judged

unt i l evaluat ion t ime.

Group S ize: Can be used with any number of

part ic ipants ( large groups can be broken into

smal ler groups of 6-10 to maximize output)

Resources: F l ip chart and markers



Procedure

1. Expla in bas ic ru les of bra instorming:

a . Don’t evaluate the idea; defer judgment.

b . Quant i ty is the goal .

c . The wi lder the better .

d . Record each idea verbat im.

e. Tagging on or combining ideas is okay.

2. Begin bra instorming by asking the fo l lowing

quest ions:

a . What opportuni t ies ex ist in our external

environment?

b. What threats to the inst i tut ion exist in our

external environment?

Brainstorm these a long the l ines of :

Pol i t ica l , economic, soc ia l , technology

Market s ize and behavior

Const i tuent behavior

Benef i ts sought

Potent ia l new entrants

Direct compet i tors ’ performance, strategies,

capabi l i t ies , intent ions

c . What are the strengths of our inst i tut ion?



d. What are the weaknesses of our inst i tut ion?

Brainstorm these a long the l ines of :

Abi l i ty to des ign/ innovate

Abi l i ty to source and produce

Abi l i ty to market and serv ice

Abi l i ty to f inance

Abi l i ty to manage

4. Record a l l ideas verbat im.

5. After a l l ideas have been storyboarded and the

t ime l imit is up, categor ize ideas into themat ic

groupings.

Faci l itator Notes to Wrap Up

Pr ior i t izat ion is a key factor in obta in ing usefu l

SWOT (OTSW) data, as the output f rom

bra instorming wi l l be s igni f icant .

At the end of the smal l group reports , reduce the

l is t of strengths and weaknesses to no more than

f ive d ist inct ive competencies and debi l i tat ing

weaknesses:

1 . Strengths that are d ist inct ive competencies

Are those few th ings that your inst i tut ion does

best that const i tuents real ly care about and



that set i t apart f rom other market entr ies .

Core competencies usual ly attract widespread

agreement. An organizat ion wi l l focus on

capi ta l iz ing on i ts d ist inct ive competencies.

2 . Weaknesses that are debi l i tat ing

Are those areas in which const i tuents expect

and demand performance or competency and

the inst i tut ion is dangerously lack ing?

Debi l i tat ing weaknesses f requent ly attract

widespread agreement. An organizat ion wi l l

focus on correct ing i ts debi l i tat ing weaknesses.

Reduce threats and opportuni t ies to the f ive

most cr i t ica l ly important of each.

Quest ions to Consider when evaluat ing OTSWs or

SWOTs:

1. What wi l l the inst i tut ion gain i f i t does nothing?

What wi l l i t lose?

2. What wi l l the inst i tut ion gain i f i t launches a

successfu l in i t iat ive? What wi l l i t lose i f i t does

not?



SWOT (OTSW) MATRIX

1. What are the Threats and Opportuni t ies present

in the external marketplace that ef fect th is

school , department, program, and pro ject? 2 . What are the Strengths and Weaknesses present inside the institution that

effect this school, department, program, and project?

Opportuni t ies

Threats

Strengths

Weaknesses



SWOT Analysis

Swot analys is is used to conduct a general and

quick examinat ion of a f i rm’s current pos i t ion so i t

can ident i fy i ts pos i t ion in the market and l ike ly

d i rect ions for the future. I t involves looking at the

internal strengths and weaknesses of a bus iness and

the external opportuni t ies and threats .

F i rst ly the f i rm wi l l ident i fy i t ’s strengths, these are

th ings which:

They are ef fect ive at

They are wel l known for

Make money

Generate a reputat ion

Cause repeated bus iness f rom the same

customers

Cause other bus inesses to learn f rom them

Then the F i rm wi l l look at i ts internal weaknesses .

Th is inc ludes any causes for d isputes, loses,

compla ints etc .

Opportunities are d i rect ions that the f i rm could

take into the future and make a prof i t f rom them.

Threats to a bus iness ar ise f rom the act iv i t ies of

compet i t ion and f rom fa i l ing to bui ld on ar is ing



opportuni t ies A lso threats can come from a lack of

prof i t perhaps due to a r ise in costs

Swot analys is is usual ly done as a bra instorming

event as i t i s an ef fect ive way of gather ing

informat ion. Swot Analys is is of ten used in the

market ing department as a method of which to

produce i ts market ing strategy.

Chapter 5:-



evaluation &

swot analysis of l ic mutual fund



Performance of Mutual Funds in India

Let us start the d iscuss ion of the performance

of mutual funds in India f rom the day the concept of

mutual fund took b i r th in India . The year was 1963.

Uni t Trust of India inv i ted investors or rather to

those who bel ieved in savings, to park their money

in UTI Mutual Fund.

For 30 years i t goaled without a s ingle second

p layer . Though the 1988 year saw some new mutual

fund companies, but UTI remained in a monopoly

pos i t ion.

The performance of mutual funds in India in the

in i t ia l phase was not even c loser to sat is factory

level . People rare ly understood, and of course

invest ing was out of quest ion. But yes, some 24

mi l l ion shareholders were accustomed with

guaranteed h igh returns by the beginning of

l ibera l izat ion of the industry in 1992. This good

record of UTI became market ing tool for new

entrants . The expectat ions of investors touched the

sky in prof i tabi l i ty factor . However, people were

mi les away f rom the preparedness of r isks factor

af ter the l ibera l izat ion.

The Assets Under Management of UTI was

Rs.67bn. by the end of 1987. Let me concentrate



about the performance of mutual funds in India

through f igures. From Rs.67bn. the Assets Under

Management rose to Rs.470 bn. in March 1993 and

the f igure had a three t imes h igher performance by

Apr i l 2004. I t rose as h igh as Rs.1,540bn.

The net asset va lue (NAV) of mutual funds in

India decl ined when stock pr ices started fa l l ing in

the year 1992. Those days, the market regulat ions

d id not a l low port fo l io sh i f ts into a l ternat ive

investments. There were rather no choices apart

f rom hold ing the cash or to further cont inue

invest ing in shares. One more th ing to be noted,

s ince only c losed-end funds were f loated in the

market , the investors d is invested by se l l ing at a

loss in the secondary market .

The performance of mutual funds in India

suf fered qual i tat ive ly . The 1992 stock market

scandal , the losses by d is investments and of course

the lack of t ransparent ru les in the whereabouts

rocked conf idence among the investors . Part ly owing

to a re lat ive ly weak stock market performance,

mutual funds have not yet recovered, wi th funds

t rading at an average d iscount of 1020 percent of

thei r net asset va lue.

The superv isory author i ty adopted a set of

measures to create a t ransparent and compet i t ive



environment in mutual funds. Some of them were

l ike re lax ing investment restr ict ions into the

market , introduct ion of open-ended funds, and

paving the gateway for mutual funds to launch

pension schemes.

The measure was taken to make mutual funds

the key instrument for long-term saving. The more

the var iety of fered, the quant i tat ive wi l l be

investors .

At last to ment ion, as long as mutual fund

companies are performing with lower r isks and

h igher prof i tabi l i ty with in a short span of t ime, more

and more people wi l l be inc l ined to invest unt i l and

unless they are fu l ly educated with the dos and

don’ts of mutual funds.



Future of Mutual Funds in India

By December 2004, Indian mutual fund industry

reached Rs.1,50,537 crore. I t i s est imated that by

2010 March-end, the tota l assets of a l l scheduled

commercia l banks should be Rs.40,90,000 crore.

The annual composi te rate of growth is

expected 13.4% dur ing the rest of the decade. In

the last 5 years we have seen annual growth rate of

9%. According to the current growth rate, by year

2010, mutual fund assets wi l l be double.



Let us discuss with the following table:

Source – RBI

Aggregate deposits of Scheduled Com Banks in India (Rs.Crore)

Month/Year Mar-98 Mar-00 Mar-01 Mar-02 Mar-03Mar-04 Sep-04 4-Dec

Deposits 605410 851593 989141 1131188 1280853 - 1567251 1622579

Change in % over last yr

15 14 13 12 - 18 3



Source - AMF I

Mutua l Fund AUM’s Growth

Month /YearMar -

98

Mar -

00

Mar -

01

Mar -

02

Mar -

03Mar -04 Sep -04 4 -Dec

MF AUM's 68984 93717 83131 94017 75306 137626 151141 149300

Change in

% over l a s t

y r

26 13 12 25 45 9 1



Some facts for the growth of mutual funds in

India : -

100% growth in the last 6 years .

Number of fore ign AMC's are in the que to enter

the Indian markets l ike F idel i ty Investments, US



based, wi th over US$1tr i l l ion assets under

management wor ldwide.

Our saving rate is over 23%, h ighest in the wor ld .

Only channel iz ing these savings in mutual funds

sector is required.

We have approximately 29 mutual funds which is

much less than US having more than 800. There is

a b ig scope for expansion.

'B ' and 'C ' c lass c i t ies are growing rapid ly . Today

most of the mutual funds are concentrat ing on the

'A ' c lass c i t ies . Soon they wi l l f ind scope in the

growing c i t ies .

Mutual fund can penetrate rura ls l ike the Indian

insurance industry with s imple and l imited

products .

SEBI a l lowing the MF's to launch commodity

mutual funds.

Emphasis on better corporate governance.

Try ing to curb the late t rading pract ices.

Introduct ion of F inancia l P lanners who can provide

need based advice.



Union Budget 2007-08 & the Mutual

Fund industry

The 2007-08 budget presented by the F inance

Min ister was a lso a low impact budget , compared

with the last year , whose fundamental message was

for overa l l growth of the economy and a pos i t ive

emphasis to be put on agr icu l tura l and rura l

development, as wel l as educat ion, which wi l l

certa in ly g ive a long term boost to the growth of the

economy. The reduct ion in f isca l def ic i t i s a lso a

pos i t ive step and the government wi l l a lso increase

spending on educat ion by 34%.

Markets have seen a major correct ion over the

last few trading sess ions. On 28th the markets was

h i t hard f rom both s ides, internal ly as wel l as



external ly . The budget had a few shockers when the

d iv idend d istr ibut ion tax was h iked, and on the

other s ide the g lobal market saw major meltdown

with the As ian market were beaten the most ,

Chinese

Why Invest In India?

Indian Economy-High Growth Rates, Low

Inflation and Soaring Foreign Investments.

Ind ia has had robust economic growth s ince

1991 when the government reversed i ts soc ia l is t -

inspi red pol icy of a large publ ic sector with

extens ive contro ls on the pr ivate sector and began

to l ibera l ize the economy. The economy has

responded wel l by post ing strong growth in many

sectors . A 2003 report by Goldman Sachs predicts

that India 's economy would be the th i rd largest by

2050.

Indian Financial Sector-New Opportunities

The far - reaching changes in the Indian economy

s ince l ibera l izat ion in the ear ly 1990s have had a



deep impact on the Indian f inancia l sector . The

f inancia l sector has gone through a complex

restructur ing, capi ta l iz ing on new opportuni t ies as

wel l as responding to new chal lenges.

Capital Markets - Mature Systems

The Indian capi ta l markets have witnessed a

t ransformat ion over the last decade. India is now

placed among the mature markets of the wor ld . Key

progress ive in i t iat ives in recent years inc lude:

The deposi tory and share demater ia l izat ion

systems that have enhanced the ef f ic iency of the

transact ion cyc le

The InfoTech-dr iven Nat ional Stock Exchange

(NSE) with a nat ional presence ( for the benef i t o f

investors across locat ions) and other in i t iat ives to

enhance the qual i ty of f inancia l d isc losures.

Ind ian capi ta l markets have rewarded Foreign

Inst i tut ional Investors (F I Is ) wi th attract ive

valuat ions and increas ing returns.

Many new instruments have been introduced in

the markets , inc luding index futures, index

opt ions, der ivat ives and opt ions and futures in

se lect stocks. (Broking industry consol idat ion has

to be brought out)

Indian capital markets-The Opportunities

Today



With over 20 mi l l ion shareholders , India has the

th i rd largest investor base in the wor ld af ter the

USA and Japan. Over 9,000 companies are l is ted on

the stock exchanges, which are serv iced by

approximately 7,500 stockbrokers . The Indian

capi ta l market is s igni f icant in terms of the degree

of development, vo lume of t rading and i ts

t remendous growth potent ia l . Ind ia 's market

capi ta l izat ion was amongst the h ighest among the

emerging markets .

Mutual fund industry has become a dominant

p layer in the market . As of end-December 2006, the

assets under management by the Indian MF industry

stood at a stagger ing Rs.3,23,601 crore .

There is a large presence of F I Is in the Indian

capi ta l market with over 1044 F I Is (as of 3rd January

2007) . The cumulat ive investment of F I Is in the

Indian stock market stood at US$ 50 bi l l ion as on

3rd January 2007.



SWOT ANALYSIS OF LIC MUTUAL FUND WITH

OTHER MUTUAL FUND’S

About SWOT analys is we d iscussed in above

chapter 4 t h . Here analyses of Strength’s , Weak

ness’s , Opportuni ty ’s & Threat ’s of L IC Mutual Fund

with compet i tor ’s of other mutual fund: -

When compared with strengths o f L IC Mutual Fund

with other mutual fund we can f ind those are

THEY HAVE HIGH NETWORK WITH BACKGROUND OF

THERE L IC INSURANCE CO. ,

THERE GOODWILL IN MARKET WITH THE L INK OF

L IC INS CO. ,

THEY HAVE NUMBER OF AGENTS TO MEET THE

CUSTOMERS.

THEY HAVE HIGHLY EXECUTIVE MEMBERS WITH

LOTS OF EXPERIENCE.

THEY HAVE OLD CUSTUMERS L INKED TO L IC

INSURANCE CO. , WITH THAT THEY CAN CONVIENCE

TO THOSE CUSTOMERS

THERE STAFF HAVING AN INNOVATIVE POWER.

WHICH THEY RESENTLY RELEASED SCHEME WAS

ULIP (UNIT L INKED INSURANCE SCHEME) WHICH

HAS BECOME MORE POPULARISED SCHEME IN

MUTUAL FUND INDUSTRY



When compared with weak nesses o f L IC Mutual

Fund with other mutual fund we can f ind those are: -

THEY DON’T HAVE ANY TRAINING INSTITUTE FOR

SHORT TERM PLAN TO AGENTS

THEY DON’T HAVE ANY SPECIF IED OFFICE FOR

CONTACT PURPOSE TO CUSTOMERS L IKE OTHER

FINANCIAL SERVICE SECTORS HAVE.

We f ind OPPORTUNITIES in L IC Mutual Fund with

other mutual fund those are: -

WITH OVER 20 MILLION SHAREHOLDERS, INDIA

HAS THE THIRD LARGEST INVESTOR BASE IN THE

WORLD AFTER THE USA & JAPAN.

THERE IS A LARGE PRESENCE OF F I IS IN THE

INDIAN CAPITAL MARKET WITH OVER 1044 F I IS (AS

OF 3 R D JANUARY 2007) .

INDIAN CAPITAL MARKETS HAVE REWAREDED

FOREIGN INSTITUTIONAL INVESTORS (F I Is ) WITH

ATTRACTIVE VALUATIONS AND INCREASING

RETURNS.

MANY NEW INSTRUMENTS CAN BEEN INTRODUCED

IN THE MARKETS, INCLUDING INDEX FUTURES,

INDEX OPTIONS, DERIVATIVES AND OPTIONS AND

FUTURES IN SELECT STOCKS

THEY HAVE INNUMEROUS OF OPPORTUNITES IN

F INANCIAL SERVICE SECTORS TO DIVERSIFY.



AT THE PRESENT SECNARIO THE REALESTATE,

RETAIL ING SECTORS HAVE TREMONDOUS GROWTH

IN INDIA TO PORTFOLIO THE INVESTMENTS

THEY CAN L IVE FURTHER FUNDS L INKED TO

INSURANCE.

THEY CAN GIVE DIRECT ONLINE IPO TO

CUSTOMERS TO SUBSCRIBE THE MUTUAL FUND

SCHEME WITH EASY F ILL ING FORM.

We f ind some of the threats faced by L IC Mutual

Fund they are: -

WE FIND 34 PLAYERS IN MUTUAL FUND INDUSTRY

COMPARE TO EARLIER.

WE FIND NUMBER OF SCHEMES OUTCOMING DAY

BY DAY DIFFERENT TYPES OF OPTIONS IN MARKET.



Opportunities

20 million

shareholders

Large presence of

fii’s

Many instruments

can be introduce

Diversification

Real estate,

retailing sectors

Further funds like

ulip

Online ipo

Threats

34 players in

Indian mutual

fund

Number of

schemes

Strengths

Network

Goodwil l

No of agents

Experience

Old customers

Innovative power

Weaknesses

Training

institute

Specified office



Evaluations are based in questionnaires:-

Analysis of Survey

The following table shows the distributions on their profession

The following graph shows the distributions on their profession


S.L. NoProfession No. of

Respond

%age

1 Businessman 9 18%

2 Govt. Employees 22 44%

3 Pvt Employees 13 26%

4 Others 6 12%

Total 50 100%

Businessman18%

Govt. Employees44%

Pvt Employees26%

Others12%


The following table source on the basis of distribution of

investors on the basis of monthly income of the family.

S.l. NoMonthly Income

No. of

Investors

% age

1 Below 6000 8 16%

2 6000 to 12000 21 42%

3 12000 to 18000 11 2%

4 Above 18000 10 20%

Total 50 100%

The following graph source on the basis of distribution

of investors on the basis of monthly income of the

family.



The following table shows distribution investments among

different financially institutions

Sl.NoFinancial Institutions

No. of Investors

%age

1 LIC & UTI 20 40%2 LIC & Commercial Bank 12 24%3 LIC & Others 3 6%4 LIC & UTI& Others 4 8%5 LIC, UTI & Commercial Bank 11 22%

Total 50 100%

The following graph shows distribution investments

among different financially institutions



Distribution of money investments among different financial institution.

SL. NO PARTICULARSNO.OF

INVESTORS

% AGE

1 Advertisement 10 20%

2 Friends 10 20%

3 Agents 24 48%

4 Advt.and agents 06 12%

TOTAL 50 100%

Distribution of money investments among different

financial institution.



Following table shows the position of the 4 important schemes

S.l. No Schemes & plan No. of Investor % age

1 ULIP 12 24%

2 RBP 6 12%

3 MASTER SHARE 11 22%

4 MASTER VALUE FUND 5 10%

5 OTHER SCHEME 16 32%

Total 50 100%

Following graph shows the position of the 4 important schemes


12

6

11

5

16

0

2

4

6

8

10

12

14

16

ULIP EQUITYFUNDS

GROWTHFUNDS

BALANCEDFUNDS

OTHERSCHEME


Following table shows in which manner they are not satisfied with the Return:-

SL.NOOPINION

NO.OF

INVESTORS

% AGE

1Interest

8 16%

2 Dividend 15 30%

3 Services 20 40%

4 Others 07 14%

TOTAL 50 100%

Following graph shows in which manner they are not

satisfied with the Return :-



FOLLOWING TABLE SHOWS THE SERVICES PROVIDED BY LIC COMPARED WITH OTHER FINANCIAL INSTITUTIONS:-

SL.NO OPINION NO.OF

RESPONDENTS

%AGE

1 EXCELLENT 06 12%

2 SATISFACTORY 25 50%

3 GOOD 15 30%

4 BAD 04 08%

TOTAL 50 100%

Following graph shows the services provided by LIC

compared with other financial institutions



Chapter 6:- findings & suggestions QUESTIONERIEBibliography



FINDINGS & SUGGESTIONS ARE BASED ON TWO

TYPES:-

1. ON GENERAL INFORMATION COLLECTED

2. BASED ON QUESTIONAIRIE

FINDINGS ON GENERAL INFORMATION COLLECTED:-

1 . M u t u a l F u n d i n d u s t r y t o d a y , w i t h a b o u t 34

p layers a n d m o r e t h a n f i ve hundred

schemes , i s o n e o f t h e m o s t p r e f e r r e d

i n v e s t m e n t a v e n u e s i n I n d i a . H o w e v e r , w i t h a

p l e t h o r a o f s c h e m e s t o c h o o s e f r o m , the re ta i l

i nves tor f a c e s p r o b l e m s i n s e l e c t i n g f u n d s .

F a c t o r s s u c h a s i n v e s t m e n t s t r a t e g y a n d

m a n a g e m e n t s t y l e a r e q u a l i t a t i v e , b u t t h e

f u n d s r e c o r d i s a n i m p o r t a n t i n d i c a t o r t o o .

2 . W o r l d w i d e , g o o d m u t u a l f u n d c o m p a n i e s o v e r

a r e k n o w n b y t h e i r A M C s a n d t h i s f a m e i s

d i r e c t l y l i n k e d t o t h e i r s u p e r i o r s t o c k s e l e c t i o n

s k i l l s .

3 . T h e n e w m i l l e n n i u m b r o u g h t w i t h i t s e l f w h a t

h a d r a r e l y b e e n s e e n i n t h e m a r k e t .

B u r g e o n i n g g r o w t h . R i d i n g o n t h e I C E b o o m ,

t h e m a r k e t t o u c h e d g r e a t h e i g h t s . A l s o

t o u c h i n g n e w h e i g h t s w e r e t h e r e t u r n s



g e n e r a t e d b y e q u i t y f u n d s . B u t a s t h e s a y i n g

g o e s , w h a t g o e s u p h a s t o c o m e d o w n a n d t h e

h i g h e r o n e g o e s t h e s t e e p e r i s t h e f a l l . T h i s i s

e x a c t l y w h a t t h e e q u i t y f u n d s h a v e

e x p e r i e n c e d o v e r t h e l a s t o n e y e a r a s t h e y

h a v e b e e n r o b b e d o f t h e i r v a l u a b l e s b y t h e

v o l a t i l e m a r k e t s . T h e f a l l o u t o f t h e v o l a t i l e

m a r k e t c o n d i t i o n s i s r e f l e c t e d i n s i g n i f i c a n t

e r o s i o n o f t h e t o t a l a s s e t s u n d e r m a n a g e m e n t

o f t h e e q u i t y f u n d s .

SUGGESTIONS ON GENERAL INFORMATION COLLECTED:-

1 . T h o u g h p a s t p e r f o r m a n c e a l o n e c a n n o t b e

i n d i c a t i v e o f f u t u r e p e r f o r m a n c e , i t i s , f r a n k l y ,

t h e o n l y q u a n t i t a t i v e w a y t o j u d g e h o w g o o d a

f u n d i s a t p r e s e n t . T h e r e f o r e , t h e r e i s a n e e d

t o c o r r e c t l y a s s e s s t h e p a s t p e r f o r m a n c e o f

d i f f e r e n t m u t u a l f u n d s .

2 . F o r m u t u a l f u n d s t o g r o w , A M C s m u s t b e h e l d

a c c o u n t a b l e f o r t h e i r s e l e c t i o n o f s t o c k s . I n

o t h e r w o r d s , t h e r e m u s t b e s o m e p e r f o r m a n c e

i n d i c a t o r t h a t w i l l r e v e a l t h e q u a l i t y o f s t o c k

s e l e c t i o n o f v a r i o u s A M C s .



3 . R e t u r n a l o n e s h o u l d n o t b e c o n s i d e r e d a s t h e

b a s i s o f m e a s u r e m e n t o f t h e p e r f o r m a n c e o f a

m u t u a l f u n d s c h e m e , i t s h o u l d a l s o i n c l u d e t h e

r i s k t a k e n b y t h e f u n d m a n a g e r b e c a u s e

d i f f e r e n t f u n d s w i l l h a v e d i f f e r e n t l e v e l s o f r i s k

a t t a c h e d t o t h e m . R i s k a s s o c i a t e d w i t h a f u n d ,

i n a g e n e r a l , c a n b e d e f i n e d a s v a r i a b i l i t y o r

f l u c t u a t i o n s i n t h e r e t u r n s g e n e r a t e d b y i t . T h e

h i g h e r t h e f l u c t u a t i o n s i n t h e r e t u r n s o f a f u n d

d u r i n g a g i v e n p e r i o d , h i g h e r w i l l b e t h e r i s k

a s s o c i a t e d w i t h i t . T h e s e f l u c t u a t i o n s i n t h e

r e t u r n s g e n e r a t e d b y a f u n d a r e r e s u l t a n t o f

t w o g u i d i n g f o r c e s .

a . F i r s t , g e n e r a l m a r k e t f l u c t u a t i o n s , w h i c h

a f f e c t a l l t h e s e c u r i t i e s p r e s e n t i n t h e

m a r k e t , c a l l e d m a r k e t r i s k o r s y s t e m a t i c r i s k

a n d

b . s e c o n d , f l u c t u a t i o n s d u e t o s p e c i f i c

s e c u r i t i e s p r e s e n t i n t h e p o r t f o l i o o f t h e

f u n d , c a l l e d u n s y s t e m a t i c r i s k .



FINDINGS & SUUGESTIONS BASED ON

QUESTIONNAIRIE:-

PROBLEM FACED BY LIC WHILE DEALING WITH ITS

CUSTOMERS

Since many of a scheme are decentralized and different

registrars at different places has led unit scheme to feel difficulty in

following up with them is laborious.

Normally customers do not read offer document but invest on

the words of agents and friends and expect excessive return from the

investment, which lead dissatisfaction. They expect regular return from

equity oriented schemes in which LIC invest 80% of fund in share

'market and 20% in money market.

Some investors opt for change of option during the scheme,

which is difficult for LIC to respond to their needs

A few customers take undue advantage of duplicate certificate

issued in leave or original certificate, which is reported last by selling

the original certificate in the market.



SUGGESTIONS

Educating the customer about LIC and its scheme and plans for

creating customer awareness.

The LIC have to improve in their services by adopting modern

technology like computerization

Its performance is good only in some schemes but there is a lot to

improve in its schemes.

In the area of customer Service, the leadership is provided by the

branch manager. The working group on customer service is rightly

observed. It is a job of branch manager to stimulate and motivate

his subordinates. Ideally, branch manager should have proper

orientations and his relationship with his service tasks, rules and

regulations and procedures so amending to deploy the entire

collection centers in attending to customer during business hours.

There must be a good and quick correspondence between branch

office and collection centers.

The person who wish to become an agent of LIC should have a good

communication skill, capacity of hard working, attractive

personality, good knowledge of rules and regulations of LIC and its

schemes and plans along with SEBI rules & regulations, and as well

as he should be very prompt in his duty.



Request letter to the investor

(respondent)

Please take some time to fil l out

the questionnaire



QUESTIONNAIRE

1. NAME:-

2. ADDRESS:-

3. QUALIFICATION:-

4. PROFESSION

GOVT. EMPLOYEE ( )

PVT. EMPLOYEE ( )

BUSINESS MAN ( )

OTHERS ( )

5. SEX

MALE ( )

FEMALE ( )

6. MARITAL STATUS

MARRIED ( )

UNMARRIED ( )

7. MONTHLY INCOME

BELOW 6,000/- ( )

RS 6,000/-12,000/- ( )



RS 12,000/-18,000/- ( )

ABOVE 18,000/- ( )



8. DO YOU INTENDED TO SAVE MONEY FOR FUTURE

YES ( )

NO ( )

9. IF YES, IN WHICH OF THE FOLLOWING SAVINGS

LIC ( )

UTI ( )

COMMERCIAL BANK ( )

OTHERS ( )

10. HOW DO YOU KNOW ABOUT THE UTI & ITS

SCHEMES?

ADVERTISEMENT ( )

FRIENDS ( )

AGENTS ( )

OTHER SOURCES ( )

11. IF YOU ARE A CUSTOMER OF LIC, IN WHICH

SCHEME YOU INVESTED?

EQUITY FUNDS ( )

GROWTH FUNDS ( )

BALANCED FUNDS ( )

ULIP ( )

OTHERS ( )



12. ARE YOU SATISFIED WITH THE RETURNS GIVEN BY

THE LIC?

YES ( )

NO ( )

13. IF YES, IN WHICH WHAT MANNER?

INTEREST ( )

DIVIDEND ( )

SERVICES ( )

OTHERS ( )

14. WHAT IS YOUR OPINION ABOUT THE SERVICES OF

LIC?

EXCELLENT ( )

SATISFACTORY ( )

GOOD ( )

BAD ( )

15. WHAT IS YOU OPINION ABOUT THE RATE OF

INTEREST GIVEN BY THE LIC?

GOOD ( )

SATISFACTORY ( )

NON-SATISFACTORY ( )



16. HOW DO YOU RATE THE AFTER SALES SERVICES

PROVIDED LIC?

EXCELLENT ( )

SATISFACTORY ( )

GOOD ( )

BAD ( )

17. WHAT IS YOUR OPINION ABOUT THE TAX

EXEMPTION PROVIDED UNDER VARIOUS LIC

SCHEMES?

GOOD ( )

SATISFACTORY ( )

NON-SATISFACTORY ( )

18. SUGGESTION IF ANY,

a).................................................................................

b).................................................................................

c).................................................................................



BIBLIOGRAPHY

FINANCIAL MARKETS & SERVICES

By: MALOTHRA

AGENTS OF MANUAL LIC

ANNUAL REPORT OF LIC

APPLICATION FORMS OF LICSCHEMES

LIC BULLETIN PLUS

NEWSPAPERS & MAGAZINE


HARI LIC MF

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