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EXECUTIVE SUMMARY

Mutual Fund is the fund that pools the savings, which are then invested in capital market instruments

such as shares, debentures and other securities. It works in a different manner as compared to other

savings organizations such as banks, national saving, post office, non banking financial

companies etc. As most if not all capital market instruments have an element of risk, it is very

essential that the investors have a clear understanding of how a mutual fund operates and what are its

advantages as well as limitations. The understanding has to be created in the investors by the

distributors engaged in the market of mutual fund products. The distributors should also be

knowledgeable enough to answer fundamental and basic questions that will be raised by the

investors. It is thus essential that those engage in marketing of mutual funds such as individual

agents, distributors companies, and others have a comprehensive, clear and correct understanding

of the concept and working of mutual funds as well as essential operational and technical details.

Company also gets knowledge that from its competitors whom schemes perform better on the bases

of return. Here we take different companys schemes and compare with Birlas good performing

schemes on the base of Return.

Industry Information

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THE CONCEPT OF MUTUAL FUNDDifferent investment avenues are available to investors. Mutual funds also offer good investment

opportunities to the investors. Like all investments, they carry certain risks. The investors should

compare the risks and expected yields after adjustment of tax on various instruments while taking

investment decisions. The investors may seek advice from experts and consultants including agents

and distributors of mutual funds schemes while making investment decisions.

With an objective to make the investors aware of functioning, of mutual funds, anattempt has been made to provide information in question-answer format which may

help the investors in taking investment decisions.

Mutual Funds.

Mutual Fund Operation Flow Chart:

Mutual fund is a Mechanism for pooling the resources by issuing units to the investors

and investing funds in securities in accordance with objectives as disclosed in offer

document.

Investments in securities are spread across a wide cross-section and sectors thus the

risk is reduced. Diversification reduces the risk because all stocks may not move in the

same direction in the same proportion at the same time. Mutual fund issues units to the

investors in accordance with quantum of money invested by them Investors of mutual

funds are known as unit holders.

The profits or losses are shared by the investors in proportion to their investments. The mutual funds

normally come out with a number of schemes with different investment objectives, which are

launched from time to time. A mutual fund is required to be registered with Securities and Exchange

Board of India (SEBI) which regulates securities markets before it can collect funds from the public.

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Mutual Funds Industry in India

Investment in India:

India among the European investors is considered to be a good investment despite the political

uncertainty, bureaucracy troubles, shortage of power and infrastructural inefficiencies. India is a

potential market for overseas investment and is actively welcoming the foreign investors in the

market. It will emerge as one of the top three emerging economies. While calculating the potential

and correct estimation and possibilities, one needs to consider such factors as the inherent hurdles

and uncertainties of functioning in the Indian system. Once you enter India's marketplace, you will

have a well-designed plan that should be supported by a serious thought and careful research. Those

who look at India as a long-term growth will reap more profits rather than those who will see only

short-term profit making opportunities.

India is the fifth largest economy in the world and it ranks above France, Italy, the United Kingdom,

and Russia. It has the third largest GDP in Asia. It is the second largest of the emerging nations.

India is also one of the few markets in the world which offer high prospects of growth and earning

potential in all sectors of business. However, despite the numerous advantages on its side, India has

failed to generate the same kind of curiosity and attention that China has gathered for it.

Indian Mutual Funds

The origin of the mutual funds industry goes back to the time when mutual fund was introduced by

UTI in the year 1963. Though the growth has been relatively slow, it accelerated since 1987 when

there were players outside the UTI, who entered the industry. In the past decade, Indian mutual fund

industry had seen a remarkable improvement both quality wise and quantity wise. Before the end of

the monopoly in market, the Assets under Management (AUM) were Rs.67 bn.

History of Mutual Fund in India

The mutual fund industry in India started in 1963 with the formation of Unit Trust of India, at the

initiative of the Reserve Bank & Government of India. The objective then was to attract the small

investors and introduce them to market investments. Since then, the history of mutual fund in India

can be broadly divided in to six distinct phases.

Phase 1 1964- 1987: Growth of Unit Trust of India

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In 1963, UTI was established by an Act of Parliament. As it was the only entity offering mutual

funds in India, it was monopoly. Operationally, UTI was set up by the Reserve Bank of India, but

was later de-linked from the RBI. The first scheme and for long one of the largest number of

investors in any single investment scheme. It was also at least partially the first open end scheme in

the country.

Later in 1970s and 80s, UTI started innovating and different schemes to suit the needs of different

classes of investors. Unit Linked Insurance Plan (ULIP) was launched in1971. Six new schemes

were introduced between 1981 & 1984. During 1981-84, new scheme such as Childrens Gift

Growth Fund (1986) & Master share (1987) were launched. Master share could be termed as the first

diversified equity investment scheme in India. The first Indian offshore fund, India fund, was

launched in August 1986. During 1990s, UTI catered to the demand for income oriented schemes by

launching monthly income Schemes, a somewhat unusual mutual fund product offering assured

returns.

In absolute terms, the investible funds corpus of UTI was about Rs. 600 Crores in 1984. By 1987-88

assets under management of UTI had grown ten times to Rs 6700 cr.

Phase-2 1987- 1993: Entry of Public Sector Funds

1987 marked the entry of public sector mutual funds. With the opening of the economy, many public

sector banks financial institutions were allowed to establish mutual fund. State Bank of India

established the first non-UTI mutual. Fund- SBI mutual fund in Nov 1987. this was followed by

canbank Mutual fund , LIC Mutual Fund, Indian Bank Mutual Fund, Bank of India Mutual Fund,GIC Mutual Fund & PNB Mutual Fund. These funds helped in enlarging the investor community &

investible funds. From 1987-88 to 1992-93, the assets under management increased from Rs. 6700

cr. To Rs. 47004 Cr. nearly seven times.

During this period, investor showed a marked interest in mutual funds, allocating a larger part of

their savings to investment in the funds. UTI was still the largest segment of the industry, with about

80% market share.

Phase 3 -1993-96: Emergence of Private Funds

A new era in the mutual fund industry began in 1993 with the permission granted for the entry of

private sector funds. This gave the Indian investors a broader choice of fund families and

increasing competition to the existing public sector funds. Quite significantly, foreign fund

management companies were also allowed to operate mutual funds, most of them coming into India

through their joint ventures with Indian promoters. These private funds have brought in with them

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the latest product innovations, investment management techniques and investor-servicing technology

that make the Indian mutual fund industry today a vibrant and growing financial intermediary.

During the year 1993-94, five private sector mutual funds launched their schemes followed by six

others in 1994-95. Initially, mobilization of funds by the private mutual funds was slow. But, this

segment of the fund industry began to witness much greater investor confidence in due course. One

influencing factor was the development of SEBIs regulatory framework for the Indian mutual fund

industry. Yet another important factor has been the steadily improving performance of several fund

houses. Investors in India now clearly saw the benefits of investing through mutual funds and

became discerning and selective.

Phase-4 1996-99: Growth and SEBI Regulation

Since 1996, the mutual fund industry in India saw tighter regulation and higher growth. It scaled new

heights in terms of mobilization of funds & no. of players. Deregulation & liberalization of Indian

economy had introduce competition provide impetus to the growth of the industry. Finally most

investors small or large started showing interest in mutual funds.

Measures were taken both by SEBI to protect the investor & by the government to enhance

investors returns through tax benefits. A comprehensive set of regulation for all mutual funds

operating in India was introduced with SEBI (Mutual Fund) Regulations 1996. these regulations set

uniform standard for all the funds. The erstwhile UTI voluntary adopted SEBI guidelines for its new

schemes. Similarly the budget of union Government in 1999 took a big step in exempting all mutual

fund dividends from income tax in the hands of investors. Both the 1996 Regulation & the 1999Budget must be considered of historic importance, given their far reaching impact on the fund

industry.

Phase 5 -1999-2004: Emergence of Large & Uniform Industry

The major development in the fund industry has been the creation of a level playing field for all

mutual funds operating in India. This happened in February 2003, when the UTI Act was repealed.

UTI has no longer legal status as a trust established by Act of Parliament. Instead, it has also adopted

the same structure as any other fund in India- a Trust and an Asset Management Company. UTIMutual Fund is present name of the erstwhile Unit trust of India. While UTI functioned under

separate law of Indian Parliament earlier, UTI Mutual Fund is now under the SEBIs Regulation,

1996 like all other Mutual Funds in India. UTI Mutual Fund is still the largest player in the Indian

fund industry. All SEBI compliant schemes of the erstwhile UTI are under its charge. All new

schemes offered by UTI Mutual Fund are SEBI approved. Other schemes of erstwhile UTI have

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been paced with a special undertaking administered by the Government of India. These schemes are

being gradually wound up.

The emergence of a uniform industry with the same structure, operations & regulation makes it

easier for distributors & investors to deal with any fund house in India.1999 marked the beginning of

a new phase in history of mutual fund Industry in India, phase of significant growth in terms of both

amounts mobilized from investors and assets under management.

Between 1999 to 2005, the size of the industry has doubled in terms of AUM which has gone from

about Rs. 68000 cr to over Rs. 150000 cr. Within the growing industry the relative market share of

different players in terms of amount mobilized and AUM have also undergone changes.

Phase 6 -From 2004 Onwards: Consolidation & Growth

The industry has lately witnessed a spate of mergers & acquisitions, most recent ones being the

acquisition of schemes of Alliance Mutual Fund by Birla Sun Life, Sun F&C Mutual Fund by

Principal & PNB Mutual Fund by Principal. At the same time, more international players continue to

enter India, Including Fidelity, one of the largest fund in world. The stage is set now for growth

through consolidation and entry of new international and private sector players. At the end of March

2006, there were 29 Funds.

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Performance of Mutual Fund Industry From 1965 To 2008

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Here in above graph we can see that investment in mutual fund is increasing

continuously. Only January 2003 to March 2003 there is slight decrease in investment. But overallwe can say that mutual fund industry is now in Growth stage in India and it will perform well in nearfuture.

Major Players of Mutual Fund in India:

The number of Indians putting their money on mutual fund investments is steadily increasing. More

and more people are being lured by the prospect of handsome profits that investments in mutual

funds carry for the investors. In recent years, many mutual fund companies have sprung up in India.

Now the investors have lots of mutual fund companies in India to choose from. Currently there are

30 mutual fund companies operating in India. They are as follow;

NO. Mutual Fund Company

1 AIG Global Investment Group Mutual Fund2 Baroda Pioneer Mutual Fund3 Benchmark Mutual Fund4 Bharti AXA Mutual Fund5 Birla Sun Life Mutual Fund6 Canara Robeco Mutual Fund7 DBS Chola Mutual Fund8 Deutsche Mutual Fund9 DSP BlackRock Mutual Fund10 Edelweiss Mutual Fund11 Escorts Mutual Fund12 Fidelity Mutual Fund13 Fortis Mutual Fund14 Franklin Templaton Mutual Fund

15 HDFC Mutual Fund16 HSBC Mutual Fund

17 ICICI Prudential Mutual Fund18 IDFC Mutual Fund

19 ING Mutual Fund20 JM Financial Mutual Fund

21 JPMorgan Mutual Fund22 Kotak Mahindra Mutual Fund23 LIC Mutual Fund24 Lotus India Mutual Fund25 Mirae Asset Mutual Fund26 Morgan Stanley Mutual Fund27 Principal Mutual Fund28 Quantum Mutual Fund29 Reliance Mutual Fund30 Sahara Mutual Fund31 SBI Mutual Fund

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populous country in the world after china & third largest economy in Asia accounts for only 2.9%

share in regions mutual fund industry.

India is a nation of saver. As a nation we save $450 bn (Rs. 22.7 lacs Cr) per annum & mutual fund

industry account for only 7 to 8% of household savings.

Reasons for the low penetration of mutual fund industry.

Concentration of mutual fund business in metro and Tier I cities.

Low level of awareness among investors about mutual fund as an investment product.

Lower number of distributors. According to AMFI, in India there are less than 60000 mutual

fund distributors compared to over 2 million life insurance agents. Lower distribution

network restricts the reach of mutual fund industry.

Conceptual misunderstanding about mutual fund investing among investors. Mutual fund is

widely viewed as an investing option to invest in equity. Investors are not aware about the

wide variety of options available under the mutual fund umbrella.

Higher concentration on corporate/institutional money in race to increase AUM.

Indian mutual fund industry has grown at rapid pace of 43% year on year for a period from 2003-

2007. This growth has outpaced other nations. The US witnessed industry growth of 13%, UK 29%

and Brazil 44% during the same period. However Russia and China Outpaced India with AUM

growth of 97% and 67% respectively.

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Indian mutual fund industry is dominated by institutional investors specially banks and corporate.

Put together they account for more than 55% share of total industry.

Compared to mutual fund industry worldwide the size of Indian mutual fund industry is just 0.41%.

the size of Indian mutual fund industry is smaller than countries like Belgium and Italy where

population base is much smaller than India.

Market share of Different companies in India

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Birla Sun Life Mutual Fund was setup on December 24, 1994. The sponsorers of Birla Mutual Fund

are Birla Global Finance Limited and Sun Life (India) AMC Investments Inc. Sun Life Financial

Group of Companies is a financial services organization headquartered in Toronto, Canada.

.

The AMC of Birla Sun Life Mutual Fund is Birla Sun Life Asset Management Company Limited

which was incorporated on September 5, 1994. Recently Birla Mutual Fund crossed AUM of Rs.

10,000 crores. .

Since its inception in 1994, Birla Sun Life Mutual fund has emerged as one of India's leading mutual

funds managing assets of a large investor base. The fund offers a range of investment options, which

include diversified and sector specific equity schemes, fund of fund schemes, hybrid and monthly

income funds, a wide range of debt and treasury products and offshore funds..

BSLAMC follows a long-term, fundamental research based approach to investment. The approach is

to identify companies, which have excellent growth prospects and strong fundamentals. The

fundamentals include the quality of the companys management, sustainability of its business model

and its competitive position, amongst other factors. Birla Sun Life Asset Management Company has

one of the largest team of research analysts in the industry, dedicated to tracking down the best

companies to invest in.

BSLAMC strives to provide transparent, ethical and research-based investments and wealth

management services.

The Joint Venture of Birla & Sun Life.

About Sun Life Financial Inc.

Sun Life Financial Inc. is a leading international financial services organization providing a diverse

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range of wealth accumulation and protection products and services to individuals and corporate

customers. Tracing its roots back to 1865, Sun Life Financial and its partners today have operations

in key markets worldwide, including Canada, the United States, the United Kingdom, Hong Kong,

the Philippines, Japan, Indonesia, India, China and Bermuda. As of 31 December 2004, the Sun Life

Financial group of companies had total assets under management of USD 299 billion.

.

Sun Life Financial Inc. trades on the Toronto (TSX), New York (NYSE) and Philippine (PSE) stock

exchanges under ticker symbol "SLF".

On the other side it is Birla group of companies which is known for its diversified business and

Indias largest business group.

Birla Sun Life Mutual fund is joint venture of Birla & Sun Life Financial Inc.

VISION:

To be the most trusted name in investment and wealth management, to be the preferred employer in

the industry and to be a catalyst for growth and excellence of the asset management business in

India.

MISSION:

To consistently pursue investor's wealth optimization by:

Achieving superior and consistent investment results.

Creating a conducive environment to hone and retain talent.

Providing customer delight.

Institutionalizing system-approach in all aspects of functioning.

Upholding highest standards of ethical values at all times.

VALUE

Integrity

Commitment

Passion

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Seamlessness

Speed

The diversified schemes are as follows:

Debt Schemes

Balanced Schemes

Offshore Schemes

Investment Plans

Readicheque

Gift Certificates

Organization Structure of Birla Sun Life Mutual Fund

1

Anil KumarCEO

A BalasubramanianCIO

Ashok SuvamaCOO

Abhay PalnitkarCFO

Navin TiwariCo-Head Retail Sales

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Key Highlights of Market Share of Birla Sun Life Mutual fund.

Scaling up infrastructure to support growth Distribution network more than doubled in last one year to reach 78 branches and 18K

financial advisors Investor folios grew by 65% during the year to 1.9 million Multi Channel non-polarized distribution network

Superior fund performance 69% of AUM is in top quartile of performance, based on one

year returns

Recognized and awarded Mutual Fund House of the Year by CNBC TV18-CrisilBranches (Nos.) Financial Advisors (000) Investor Folios (Mn)

2

Kalpen ParekhCo-Head Retail Sales

West & South

Sarb Preet Singh

VP SalesInstitutional

Chandrasekhar ChavanHead-HR & Admin

Rajiv JoshiHead-Legal &

RaghvendranathHead-Strategy

Marketing

Laxmikant GuptaHead Risk

Management

Molly KapoorHead Customer Service

Krishna KumarHead-PAS

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5th largest in India with 6.8% share in average domestic AUM in Mar08 up from 5.8%share in end of period (EOP) AUM in Mar07

Achieved 89% growth in last one year 2nd highest AUM growth amongst top 7 players Only AMC to show positive month on month growth in average AUM in Mar08

Total AUM (EOP) grew 4 times in 3 years to Rs. 45,247 Cr. in Apr08 Includes offshore equity AUM of Rs. 2,543 Cr. in Apr08 Equity AUM grew 5 times in 3 years to Rs. 10,838 Cr. in Apr08

Offering 92 Mutual Fund schemes including 2 offshore funds Product portfolio strengthened through launch of new funds 4 equity NFOs launched collecting Rs. 2,700 Cr. Focus on high margin fixed income funds

Track Record

With a proven track record of over 14 years, Birla Sun Life Mutual Fund has been a catalyst towards

the growth of the private sector asset management business

Innovation

Birla Sun Life Mutual Fund was the first to launch:

Birla Sun Life Cash Plus, a liquid fund.

Birla Sun Life Dividend Yield Plus which is a dividend yield fund.

Birla Bond Index Fund (a debt index fund) which replicates the Crisil Composite Bond Fund

Index has been assigned AAAF rating by Crisil.

Product

Diversified Fund

1) Birla Sun Life Pure Value Fund

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2) Birla Sun Life Equity Fund

3) BSL Frontier Equity

4) BSL Mid cap Fund

5) BSL Special Situation Fund

6) BSL Top 100 Fund

7) BSL Life Advantage Fund

8) BSL Long Term Advantage Fund

9) BSL Dividend Yield Fund

10) Birla Sun Life Tax Plan (BSLTP)

11) BSL Index Fund

Theme Based Fund

1) BSL India GenNext Fund

2) Birla Sun Life India Opportunities Fund (BSLIOF)

3) Birla Sun Life MNC Fund

4) BSL Basic Industry Fund

5) BSL Infrastructure Fund

6) BSL Buy India Fund

7) Birla Sun Life New Millennium Fund

Debt Schemes

Long Term Fund

1) Birla Sun Life Income Plus

2) Birla Sun Life Income Fund

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2) Birla Sun Life Income Fund

3) Birla Sun Life Dynamic Bond Fund

Gilt Fund

1) Birla Sun Life Gilt Fund

2) BSL Govt Security Fund

Short Term Fund

1) BSL Savings Fund

2) BSL Short Term Fund

Floating Rate Fund

1) BSL Floating Rate Fund

Cash Fund

1) BSL Cash Plus

2) BSL Cash Manager

Fixed Maturity Plan

1) BSL Fixed Maturity Fund Annual Yearly Series 3

Fixed Term Fund

Interval Income Fund

Hybrid Schemes

Balanced Fund

1) BSL Balanced

2) BSL 95 Fund

3) Birla Sun Life MIP- I

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4) BSL MIP- II

5) BSL Monthly Income

Fund Of Funds

1) Birla Sun Life Asset Allocation Fund

Functional information

Emergence of Mutual Funds:Mutual Funds now represent perhaps the most appropriate investment opportunity for most small

investors. As financial markets become more sophisticated and complex, investors need a financial

intermediary who provides the required knowledge and professional expertise on successful

investing. It is no wonder then that in the birthplace of mutual funds- the U.S.A the fund industry

has already overtaken the banking industry, with more money under mutual fund management than

deposited with banks.

The Indian mutual fund industry has already opened up many exciting investment opportunities toIndian investors. We have started witnessing the phenomenon of more savings now being entrusted

to the funds. Despite the expected continuing growth in the industry, mutual fund is still a new

financial intermediary in India.

Introduction:

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A Mutual Fund is a trust that pools the savings of a number of investors who share a common

financial goal. The money thus collected is invested by the fund manager in different types of

securities depending upon the objective of the scheme. These could range from shares to debentures

to money market instruments. The income earned through these investments and the capital

appreciations realized by the scheme are shared by its unit holders in proportion to the number of

units owned by them (pro rata). Thus a Mutual Fund is the most suitable investment for the common

man as it offers an opportunity to invest in a diversified, professionally managed portfolio at a

relatively low cost. Anybody with an investible surplus of as little as a few thousand rupees can

invest in Mutual Funds. Each Mutual Fund scheme has a defined investment objective and strategy.

A mutual fund is the ideal investment vehicle for todays complex and modern financial scenario.

Markets for equity shares, bonds and other fixed income instruments, real estate, derivatives and

other assets have become mature and information driven. Price changes in these assets are driven by

global events occurring in faraway places. A typical individual is unlikely to have the knowledge,skills, inclination and time to keep track of events, understand their implications and act speedily. An

individual also finds it difficult to keep track of ownership of his assets, investments, brokerage dues

and bank transactions etc.

A mutual fund is the answer to all these situations. It appoints professionally qualified and

experienced staff that manages each of these functions on a full time basis. The large pool of money

collected in the fund allows it to hire such staff at a very low cost to each investor. In effect, the

mutual fund vehicle exploits economies of scale in all three areas - research, investments and

transaction processing. While the concept of individuals coming together to invest money

collectively is not new, the mutual fund in its present form is a 20 th century phenomenon. In fact,

mutual funds gained popularity only after the Second World War. Globally, there are thousands of

firms offering tens of thousands of mutual funds with different investment objectives. Today, mutual

funds collectively manage almost as much as or more money as compared to banks.

A draft offer document is to be prepared at the time of launching the fund. Typically, it pre specifies

the investment objectives of the fund, the risk associated, the costs involved in the process and the

broad rules for entry into and exit from the fund and other areas of operation.

There are different entities involved in the Mutual Fund, like Sponsor, Asset Management Company,

Trustee, Custodian, Registrar, Bankers, Transfer Agent Unit Holder & SEBI.

Mutual Fund simply pool the saving from investors, invest them in different securities, Generate

good return and finally pass it in the hands of investors. So there is one chain, which we can see

below.

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Structure of Mutual Funds in India:

Like other countries, India has a legal framework within which Mutual Funds must be constituted.

India has unique structure as Unit Trusts, all the funds open end or closed end, are governed by the

same regulation and the regulatory body, the SEBI. The structure that is required to be followed by

mutual funds in India is laid down under SEBI (Mutual Fund) Regulations, 1996.

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Organization of Mutual Fund:

Unit-Holder

Unit holder is the beneficiaries, who invest their money in the different schemes of Mutual Fund, as

per their own investment objectives. Mutual Fund in India are open for investment by;

a) Residents including

Resident Indian individuals, including high net worth individuals and the retail or

small investors

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Indian Companies

Indian Trust/ Charitable Institutions

Banks

Non-Banking Finance Companies.

Insurance Companies

Provident Funds

a) Non-Residents, including

Non-Resident Indians

Other Corporate Bodies

c) Foreign Entities Namely Foreign institutional Investors (FIIs) registered with SEBI.

Sponsor

Sponsor is defined under SEBI regulations, as any person who, acting alone or in combination with

another body corporate, establishes a mutual fund. The sponsor of a fund is akin a promoter of a

company as he gets the fund registered with SEBI. The sponsor will form a Trust and appoint a

Board of Trustees. The sponsor generally appoints Asset Management Company as fund managers.

The sponsor, either directly or acting through the Trustees, will also appoint a Custodian to hold the

fund assets. All these appointments are made in accordance with SEBI Regulations.

As per the existing SEBI regulations, for a person to qualify as a sponsor, he must contribute at least40% of the net worth of the AMC and possess a sound financial track record over five years prior to

registration.

Mutual Funds as Trusts

A mutual fund in India is constituted in the form of a Public Trust created under the Indian Trusts

Act, 1882.the fund sponsor acts as the settler of the Trust, contributing to its initial capital, and

appoints a Trustee to hold the assets of the trust for the benefit of the unit-holders, who are the

beneficiaries of the Trust. The fund then invites investors to contribute their money in the common

pool, by subscribing to units issued by various schemes established by the trust, units being the

evidence of their beneficial interest in the fund.

The Trust the mutual fund may be managed by a Board of Trustees- a body of individuals or a

Trust Company- a corporate body. Most of the funds in India are managed by Board of Trustees.

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While the Board of Trustees are governed by the provision of Indian Trust Act, where the trustee is

the corporate body, it would also required to comply with the provisions of companies Act 1956.

The Board or the Trustee company, as an independent body act as protector of the unit-holders

interest. The Trustees do not directly manage the portfolio of securities. For this specialist function,

they appoint an Asset management Company. They ensure that the fund is managed by the AMC as

per the defined objectives and in accordance with the Trust Deed and SEBI Regulations.

The trust is created through the document called Trust Deed that is executed by the fund sponsor in

the favor of the Trustees. The Trust deed is required to be stamped as registered under the provisions

of the Indian Registration Act and registered with SEBI.

The Trustees being the primary guardians of unit-holders funds & assets, a Trustee has to be a

person of high repute & integrity. Trustees must ensure that thee investors interests are safeguarded

and that the AMCs operations are along professional lines. SEBI mandates a minimum of 2/3

independent directors on the Board of the Trustee company.

The Asset Management Company

The role of an AMC is to act as the Investment Manager of the Trust. The sponsors, or the trustees,

if so authorized by the Trust Deed, appoint the AMC. The AMC so appointed is required to be

approved by SEBI. Once approved, the AMC functions under the supervision of its own Board of

Directors and also under the direction of the Trustees & SEBI.

The AMC would, in the name of the Trust, float & then manage the different investment schemes

as per SEBI Regulations and as per the Investment Management Agreement it signs with the

Trustees. The AMC of a mutual fund must have a net worth of at least Rs. 10 Crores at all times.

Directors of the AMC, both independent & non-independent, should have adequate professional

experience in financial service and should be individuals of high moral standing, a condition also

applicable to other key personnel of the AMC. The AMC con not act as a trustee of any other Mutual

Fund. Besides its role as the fund manager, it may undertake specified activities such as advisory

services and financial consulting, provided these activities are run independently of one another and

the AMCs resources (such as personnel, systems, etc.)are properly segregated by activity. The

AMC must always act in the interest of the unit-holders and report to the trustees with respect to its

activities. To ensure the independence of the asset management company, SEBI mandates that a

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minimum of 50% of the directors of the board of the asset management company should be

independent directors.

Custodian and Depositories

Mutual funds are in the business of buying and selling of securities in large volumes. Handling these

securities in terms of physical delivery and eventual safekeeping is therefore a specialized activity.

The custodian is appointed by the Board of Trustees for safekeeping of physical securities or

participating in any clearing system through approved depository companies on behalf of the mutual

fund in case of dematerialized securities. A custodian must fulfill its responsibilities in accordance

with its agreement with the mutual fund. The custodian should be an entity independent of the

sponsors and is required to be registered with SEBI. (Please refer to Chapter IV of SEBI (MF)

Regulations, 1996).

Note that the Indian capital markets have moved away from having physical certificates for

securities, to ownership of these securities in dematerialized from with a depository. Thus, a

mutual funds dematerialized securities holdings are held by a custodian. Thus, deliveries of a funds

securities are given or received by a custodian or a depository participant, at the instruction of the

AMC, although under the overall direction and responsibility of the Trustee

Merits of Mutual Fund investment:

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Professional Management

Mutual Funds provide the services of experienced and skilled professionals, backed by a dedicated

investment research team that analyses the performance and prospects of companies and selects

suitable investments to achieve the objectives of the scheme.

Diversification

Mutual Funds invest in a number of companies across a broad cross-section of industries and sectors.

This diversification reduces the risk because seldom do all stocks decline at the same time and in the

same proportion. You achieve this diversification through a Mutual Fund with far less money than

you can do on your own.

Convenient Administration

Investing in a Mutual Fund reduces paperwork and helps you avoid many problems such as bad

deliveries, delayed payments and follow up with brokers and companies. Mutual Funds save your

time and make investing easy and convenient.

Return Potential

Over a medium to long-term, Mutual Funds have the potential to provide a higher return as they

invest in a diversified basket of selected securities

Low Costs

Mutual Funds are a relatively less expensive way to invest compared to directly investing in the

capital markets because the benefits of scale in brokerage, custodial and other fees translate into

lower costs for investors.

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Liquidity

In open-end schemes, the investor gets the money back promptly at net asset value related prices

from the Mutual Fund. In closed-end schemes, the units can be sold on a stock exchange at the

prevailing market price or the investor can avail of the facility of direct repurchase at NAV related

prices by the Mutual Fund.

Transparency

one can get regular information on the value of his investment in addition to disclosure on the

specific investments made by his scheme, the proportion invested in each class of assets and the fund

manager's investment strategy and outlook.

Flexibility

Through features such as regular investment plans, regular withdrawal plans and dividend

reinvestment plans, you can systematically invest or withdraw funds according to your needs and

convenience.

Affordability

Investors individually may lack sufficient funds to invest in high-grade stocks. A mutual fund

because of its large corpus allows even a small investor to take the benefit of its investment strategy.

Mutual Funds offer a family of schemes to suit your varying needs over a lifetime.

Well Regulated

All Mutual Funds are registered with SEBI and they function within the provisions of strict

regulations designed to protect the interests of investors. The operations of Mutual Funds are

regularly monitored by SEBI.

Demerits of Mutual Fund investment:

Professional Management

Many investors debate over whether or not the so-called professionals are any better than you or I at

picking stocks. Management is by no means infallible, and, even if the fund loses money, the

manager still takes his/her cut.

Dilution

It's possible to have too much diversification. Because funds have small holdings in so many

different companies, high returns from a few investments often don't make much difference on the

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manager or one who aggressively churns the fund. It is also dependent on the volatility of the fund

size i.e. whether the fund constantly receives fresh subscriptions and redemptions. Such portfolio

changes have associated costs of brokerage, custody fees, registration fees etc. which lowers the

portfolio return commensurately

Change of index composition

World over, the indices keep changing to reflect changing market conditions. There is an inherent

survivorship bias in this process, with the bad stocks weeded out and replaced by emerging blue

chips. This is a severe problem in India with the Sensex having been changed twice in the last 5

years, with each change being quite substantial. Another reason for change index composition is

Mergers & Acquisitions. The weight ages of the shares of a particular company in the index changes

if it acquires a large company not a part of the index.

Research Methodology

Research Problem Definition:1. The measurement & analysis of performance of different Equity schemes that is Large cap,

Mid Cap, small cap, Tax Saving Scheme, , of four selected companies i.e. Birla Sun Life

Mutual Fund, HDFC Mutual Fund, ICICI Prudential Mutual Fund & Reliance Mutual Fund

through comparative study by using statistical tools & techniques.

About The Study

This study is all about measurement & analysis of performance of different Mutual Funds,

and this has been done by comparative study between them.

There are around 35 mutual funds in India, among them only 4 companies taken for study

purpose. And again they are among top 5 mutual funds in terms of market share in India.

They are Birla Sun Life M.F., Reliance Mutual Fund, and ICICI Prudential Mutual Fund &

HDFC Mutual Fund.

This study is done for the month of June 2010

There is no. of schemes offered by different mutual funds like Equity, Debt, Balanced,

International schemes & fund of funds etc. but among them, only Equity Schemes chosen for

research Study.

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Again among equity schemes only those schemes have been chosen which are common for

all mutual fund selected for study. Those Equity Schemes are Large Cap Schemes, Mid Cap

Schemes, Small Cap Schemes, Tax Saving Schemes.

Objectives of Study:

Secondary Objectives:

To increase my knowledge regarding what are the parameters which seems very important

before making investment decision particularly in mutual fund & in that for equity schemes?

To share my knowledge/experience of study with others.

Primary Objectives:

To know how to measure & analyses the performance of Equity Schemes of different Mutual

Fund Company.

To study what is the performance of Birla Sun Life Mutual Fund.

To find which company perform well among selected four companies.

UTILITY OF RESEARCH STUDY:

Useful to Investor:

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The investor naturally would be interested in tracking the value of his investment, whether he invests

directly in the markets or indirectly through mutual funds. He would have to make intelligent

decisions on whether he gets an acceptable return on his investments in the funds selected by him, or

if he needs to switch to another fund.

He therefore needs to understand the basis of appropriate performance measurement for the fund, &

acquire the basic knowledge of the different measures of evaluating the performance of a fund. Only

then would he be in position to judge correctly whether his fund is performing well or not and make

the right decisions.

Useful to advisor:

If person is an intermediary recommending a mutual fund to a potential investor, he would expect

advisor to give him proper advice on which fund have a good performance track record. If advisor

want to be an effective investment advisor, then he too have to know how to measure and evaluate

the performance of the different funds that are available to the investor. The need to compare

different funds performance requires the advisor to have the knowledge of the correct and

appropriate measures of evaluating the fund performance.

Useful to company

The performance of any company become meaningful when it is compared with other companies for

same period so this comparative study is definitely useful as this study provide very important data

to company & can adopt competitive strategy for improvement or increase the performance &

thereby its sales & market share in industry.

DATA COLLECTION:

Data used in the comparative study is secondary data. In other word comparative study is based on

secondary data. Data is collected from Factsheet other required information through internet.

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Factsheet:

It is the monthly report of all schemes of Mutual Fund Company. It involves data

like Investment Performance, Portfolio and Asset Allocation, Investment Objectives, Entry and Exit

Load, AUM and much important information.

DATA ANALYSIS

What is the performance of different schemes in terms of return?

LARGE CAP SCHEME

Large Cap Schemes Return (in %)

1 year 3 year 5 year

Birla Sun Life Equity Fund 26.45 6.88 22.27

HDFC Top 200 35.37 17.34 27.67

ICICI Prudential Growth Fund 27.23 7.79 21.42

Reliance Vision Fund 26.17 7.81 22.28

Interpretation:

From the above chart we can see that the in the 1 st year Birla Sun Life Equity fund

give around 26% return from its investment Which is less as compare to HDFC Top 200 schemes by

around 9%. It is also less as compare to ICICI Prudential Growth Fund by around 1%. We can also

see that in 3rd year also Birla Sun Life Equity fund give less return as compare to other three

schemes. In the 5th year Birla Sun Life Equity fund give around 22% return which is around 6% less

as compare to HDFC Top 200 schemes. But it is around 6% higher as compare to ICICI Prudential

Growth Fund. So from this I can conclude that in all the year HDFC Top 200 scheme give higher

return when it invest in Large Cap scheme.

MID CAP SCHEME

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Mid Cap Schemes Return (in %)

1 year 3 year 5 year

Birla Sun Life Mid Cap 40.92 12.95 24.66

HDFC Capital Builder 49.38 12.12 22.54

ICICI Prudential Emerging Star 56.11 1.04 19.98

Reliance Equity Opportunity. 54.43 10.93 24.79

Interpretation:The above chart shows that in mid cap scheme in 1 st year ICICI Prudential Emerging

star gave higher return which is around 56%. Birla Sun Life gave return of around 41% which is less

as compare to other companys scheme. From the 3rd year Birla Sun Life Mid cap gave higher return

as compare to others. It give higher return by .83% as compare to HDFC Capital Builder and around

10% higher than ICICI Prudential Emerging star and around 11% higher than Reliance Equity

Opportunity. In 5th year we can see that Birla Sun Life give around 24% return which is more or less

same as compare to Reliance Equity Opportunity. So I can conclude that as the investment become

less HDFC and ICICI give less return. Whereas Birla Sunlife is gave higher return in the mid cap

scheme.

SMALL CAP EQUITY SCHEMES

Blend Equity Schemes Return (in %)

1 year 3 year 5 year

Birla Sun Life Basic Industry Fund 27.70 9.93 20.92HDFC Growth Fund 42.02 14.08 26.07ICICI Dynamic Fund 43.32 12.06 27.67

Reliance Growth 35.54 14.47 27.22

Interpretation:

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Here, we can see that in the Blend Equity scheme in the 1 st year HDFC and ICICI

gave higher return which is more or less similar. Birla sun life industry fund gave around 28%

return. Which is less as compare to other companys scheme in Blend Equity scheme? In 2 nd year

Birla Sun life gave return around 10% which is less as compare to other companys scheme. It is less

by around 4% with compare to HDFC, 2% as compare to ICICI, and 15% as compare to Reliance

Growth. In 3d year also Birla Sun Life Basic Industry fund gave less return as compare to other

companys scheme. So we can conclude that Birla Sun Life give less return in Blend Equity Scheme.

TAX SAVING SCHEMES

Equity Linked Saving Schemes Return (in %)

1 year 3 year 5 year

Birla Sun Life Tax Relief 96 29.21 6.05 21HDFC Tax Saver 48.75 11.71 22.80ICICI Tax Plan 53.74 12.25 19.75

Reliance Tax Saver 33.91 8.55 -

Interpretation:

The above chart shows that in Equity Linked Saving Scheme ICICI give higher

return as compare to other companys scheme which is around 54%. And the return given by Birla

Sun Life is around 29% which is 25% less as compare to ICICI. It is also lesser than HDFC by 20%

and lesser than Reliance by 5%. In the 2nd year also Birla Sun Life Tax Relief 96 give lesser return as

compare to other companys scheme. In 3rd year Birla sun Life give 21% return which is around 2%

lesser as compare to HDFC. It is higher than ICICI by around 1% and higher than Reliance by

around 12%.