PREFACE

PGDM is a stepping-stone to the management carrier and to

develop good manager it is necessary that the theoretical must be
supplemented with exposure to the real environment.
Theoretical knowledge just provides the base and it’s not sufficient
to produce a good manager that’s why practical knowledge is
needed.
Therefore the research product is an essential requirement for the
student of PGDM . This research project not only helps the student
to utilize his skills properly learn field realities but also provides a
chance to the organization to find out talent among the budding
managers in the very beginning.
In accordance with the requirement of subject we have project on
the topic “Comparative Analysis of Mutual funds”. The main
objective of the research project was to study the two instruments
and make a detailed comparison of the two.

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 ACKNOWLEDGEMENT

This is to acknowledge all those who helped us in making this

project .we are heartily thankful to our professor sir Jairajsingh
Rana ,who has given us such a wonderful opportunity to make this
project. Because of his wonderful guidance & support this project is
turned into success.

CERTIFICATE

This is to certify that Mangla,Sumit,Nimish,Rajeev ranjan

&Krishna of CIMR indore has successfully submitted the
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project on topic “Comparative analysis on TATA and UTI
balanced funds” timely on 14th june 2010.

Signature Signature

(Director) (professor)

COMPARATIVE ANALYSIS OF
MUTUAL FUNDS

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 TATA BALANCED FUND

UTI BALANCED FUND

SUBMITTED TO-

PROF.JAIRAJ SINGH RANA

SUBMITTED BY:

SUMIT CHORDIYA

NIMISH SHRIVASTAV

RAJEEV RANJAN SINGH

KRISHNA JAISWAL

MANGLA LAHOTI

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1
 INDUSTRY PROFILE

The mutual fund industry is a lot like the film star of the finance
business.
Though it is perhaps the smallest segment of the industry, it is also
the most
glamorous – in that it is a young industry where there are changes
in the rules
of the game everyday, and there are constant shifts and upheavals.
The mutual fund is structured around a fairly simple concept, the
mitigation
of risk through the spreading of investments across multiple
entities, which is
achieved by the pooling of a number of small investments into a
large bucket.
Yet it has been the subject of perhaps the most elaborate and
prolonged
regulatory effort in the history of the country.
A little history:
The mutual fund industry started in India in a small way with the UTI
Act
creating what was effectively a small savings division within the
RBI. Over a
period of 25 years this grew fairly successfully and gave investors a
good

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return, and therefore in 1989, as the next logical step, public sector
banks
and financial institutions were allowed to float mutual funds and
their success
emboldened the government to allow the private sector to foray
into this area.
The initial years of the industry also saw the emerging years of the
Indian
equity market, when a number of mistakes were made and hence
the mutual
fund schemes, which invested in lesser-known stocks and at very
high levels,
became loss leaders for retail investors. From those days to today
the retail
investor, for whom the mutual fund is actually intended, has not yet
returned
to the industry in a big way. But to be fair, the industry too has
focused on
brining in the large investor, so that it can create a significant base
corpus,
which can make the retail investor feel more secure.

The Indian MF industry has Rs 5.67 lakh crore of assets under

management. As per data released by Association of Mutual Funds
in India,
the asset base of all mutual fund combined has risen by 7.32% in
April, the
first month of the current fiscal. As of now, there are 33 fund houses
in
the country including 16 joint ventures and 3 whollyowned foreign
asset
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managers.
According to a recent McKinsey report, the total AUM of the Indian
mutual
fund industry could grow to $350-440 billion by 2012, expanding
33%
annually. While the revenue and profit (PAT) pools of Indian AMCs
are pegged
at $542 million and $220 million respectively, it is at par with fund
houses
in developed economies. Operating profits for AMCs in India, as a
percentage
of average assets under management, were at 32 basis points in
2006-07,
while the number was 12 bps in UK, 17 bps in Germany and 18 bps
in the US,
in the same time frame.

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Major players in Indian mutual fund industry and their AUM

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 Top of Form

Bottom of Form
HISTORY OF MUTUAL FUND

The mutual fund industry in India started in 1963 with the formation
of Unit Trust of India, at the initiative of the Government of India
and Reserve Bank. The history of mutual funds in India can be
broadly divided into four distinct phases: -

First Phase – 1964-87

An Act of Parliament established Unit Trust of India (UTI) on 1963. 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-linked 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 Public Sector Funds)

1987 marked the entry of non- UTI, public sector mutual funds set
up by public sector banks and Life Insurance Corporation of India
(LIC) and General Insurance Corporation of India (GIC). SBI Mutual
Fund was the first non- UTI Mutual Fund established in June 1987
followed by Can bank 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 established

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its mutual fund in June 1989 while GIC had set up its mutual fund in
December 1990.

At the end of 1993, the mutual fund industry had assets under
management of Rs.47,004 crores.

Third Phase – 1993-2003 (Entry of Private 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.

Fourth Phase – since February 2003

In February 2003, following the repeal of the Unit Trust of India Act
1963 UTI was bifurcated into two separate entities. One is the
Specified Undertaking of the Unit Trust of India with assets under
management of Rs.29,835 crores as at the end of January 2003,
representing broadly, the assets of US 64 scheme, assured return
and certain other schemes. 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.

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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 assets under
management 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.

GROWTH IN ASSETS UNDER MANAGEMENT

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 ECONOMIC ENVIRONMENT

GROWTH OF MUTUAL FUND INDUSTRY IN INDIA

While the Indian mutual fund industry has grown in size by about
320% from March, 1993 (Rs. 470 billion) to December, 2004 (Rs.
1505 billion) in terms of AUM, the AUM of the sector excluding UTI
has grown over 8 times from Rs. 152 billion in March 1999 to $ 148
billion as at March 2008.

Though India is a minor player in the global mutual fund industry, its
AUM as a proportion of the global AUM has steadily increased and
has doubled over its levels in 1999.

The growth rate of Indian mutual fund industry has been increasing
for the last few years. It was approximately 0.12% in the year of
1999 and it is noticed 0.25% in 2004 in terms of AUM as percentage
of global AUM.

Some facts for the growth of mutual funds in India

• 100% growth in the last 6 years.

• Number of foreign AMC’s is in the queue to enter the Indian

markets.

• Our saving rate is over 23%, highest in the world. Only

channelizing these savings in mutual funds sector is required.

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• We have approximately 29 mutual funds which is much less
than US having more than 800. There is a big scope for
expansion.

• Mutual fund can penetrate rurals like the Indian insurance

industry with simple and limited products.

• SEBI allowing the MF's to launch commodity mutual funds.

• Emphasis on better corporate governance.

• Trying to curb the late trading practices.

• Introduction of Financial Planners who can provide need

based advice.

Recent trends in mutual fund industry

The most important trend in the mutual fund industry is the

aggressive expansion of the foreign owned mutual fund
companies and the decline of the companies floated by the
nationalized banks and smaller private sector players.

Many nationalized banks got into the mutual fund business in

the early nineties and got off to a start due to the stock
market boom was prevailing. These banks did not really
understand the mutual fund business and they just viewed it
as another kind of banking activity. Few hired specialized staff
and generally chose to transfer staff from the parent
organizations. The performance of most of the schemes
floated by these funds was not good. Some schemes had
offered guaranteed returns and their parent organizations had
to bail out these AMCs by paying large amounts of money as a
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difference between the guaranteed and actual returns. The
service levels were also very bad. Most of these AMCs have
not been able to retain staff, float new schemes etc.

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TECHNOLOGICAL ENVIRONMENT

IMPACT OF TECHNOLOGY

Mutual fund, during the last one decade brought out several
innovations in their products and is offering value added services to
their investors. Some of the value added services that are being
offered are:

• Electronic fund transfer facility.

• Investment and re-purchase facility through internet.

• Added features like accident insurance cover, mediclaim etc.

• Holding the investment in electronic form, doing away with

the traditional form of unit certificates.

• Cheque writing facilities.

• Systematic withdrawal and deposit facility.

ONLINE MUTUAL FUND TRADING

The innovation the industry saw was in the field of distribution to

make it more easily accessible to an ever increasing number of
investors across the country. For the first time in India the mutual
fund start using the automated trading, clearing and settlement
system of stock exchanges for sale and repurchase of open-ended
de-materialized mutual fund units.

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Systematic Investment Plan (SIP) and Systematic Withdrawal Plan
(SWP) were options introduced which have come in very handy for
the investor to maximize their returns from their investments. SIP
ensures that there is a regular investment that the investor makes
on specified dates making his purchases to spread out reducing the
effect of the short term volatility of markets. SWP was designed to
ensure that investors who wanted a regular income or cash flow
from their investments were able to do so with a pre-defined
automated form. Today the SW facility has come in handy for the
investors to reduce their taxes.

LEGAL AND POLITICAL ENVIRONMENT

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 board of directors. AMFI 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 interest of mutual funds as well as their unit holders.

It has been a forum where mutual funds have been able to present
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their views, debate and participate in creating their own regulatory
framework. The association was created originally as a body that
would lobby with the regulator to ensure that the fund viewpoint
was heard. Today, it is usually the body that is consulted on matters
long before regulations are framed, and it often initiates many
regulatory changes that prevent malpractices that emerge from
time to time.

AMFI works through a number of committees, some of which are

standing committees to address areas where there is a need for
constant vigil and improvements and other which are adhoc
committees constituted to address specific issues. These
committees consist of industry professionals from among the
member mutual funds. There is now some thought that AMFI should
become a self-regulatory organization since it has worked so
effectively as an industry body.

OBJECTIVES:

 To define and maintain high professional and ethical standards

in all areas of operation of mutual fund industry

 To recommend and promote best business practices and code of

conduct to be followed by members and others engaged in the
activities of mutual fund and asset management including agencies
connected or involved in the field of capital markets and financial
services.

 To interact with the Securities and Exchange Board of India

(SEBI) and to represent to SEBI on all matters concerning the

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mutual fund industry.

 To represent to the Government, Reserve Bank of India and

other bodies on all matters relating to the Mutual Fund Industry.

 To develop a cadre of well trained Agent distributors and to

implement a programme of training and certification for all
intermediaries and other engaged in the industry.

 To undertake nation wide investor awareness programme so as

to promote proper understanding of the concept and working of
mutual funds.

 To disseminate information on Mutual Fund Industry and to

undertake studies and research directly and/or in association with
other bodies.

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 MEMBERS OF AMFI:

○ Bank Sponsored

1. Joint Ventures - Predominantly Indian

1. Canara Robeco Asset Management Company Limited

2. SBI Funds Management Private Limited

2. Others

1. Baroda Pioneer Asset Management Company Limited

2. UTI Asset Management Company Ltd

○ Institutions

1. LIC Mutual Fund Asset Management Company Limited

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○ Private Sector

1. Indian

1. Benchmark Asset Management Company Pvt. Ltd.

2. DBS Cholamandalam Asset Management Ltd.

3. Deutsche Asset Management (India) Pvt. Ltd.

4. Edelweiss Asset Management Limited

5. Escorts Asset Management Limited

6. IDFC Asset Management Company Private Limited

7. JM Financial Asset Management Private Limited

8. Kotak Mahindra Asset Management Company

Limited(KMAMCL)

9. Quantum Asset Management Co. Private Ltd.

10.Reliance Capital Asset Management Ltd.

11.Sahara Asset Management Company Private

Limited

12.Tata Asset Management Limited

13.Taurus Asset Management Company Limited

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2. Foreign

1. AIG Global Asset Management Company (India)

Pvt. Ltd.

2. FIL Fund Management Private Limited

3. Franklin Templeton Asset Management (India)

Private Limited

4. Mirae Asset Global Investment Management

(India) Pvt. Ltd.

3. Joint Ventures - Predominantly Indian

1. Birla Sun Life Asset Management Company

Limited

2. DSP Merrill Lynch Fund Managers Limited

3. HDFC Asset Management Company Limited

4. ICICI Prudential Asset Mgmt.Company Limited

5. Sundaram BNP Paribas Asset Management

Company Limited

4. Joint Ventures - Predominantly Foreign

1. ABN AMRO Asset Management (India) Pvt. Ltd.

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 2. Bharti AXA Investment Managers Private Limited

3. HSBC Asset Management (India) Private Ltd.

4. ING Investment Management (India) Pvt. Ltd.

5. JPMorgan Asset Management India Pvt. Ltd.

6. Lotus India Asset Management Co. Private Ltd.

7. Morgan Stanley Investment Management Pvt.Ltd.

8. Principal Pnb Asset Management Co. Pvt. Ltd.

REGULATORY MEASURES BY SEBI

Like Banking & Insurance up to the nineties of the last century,

Mutual Fund industry in India was set up and functioned exclusively
in the state monopoly represented by the Unit Trust of India. This
monopoly was diluted in the eighties by allowing nationalized banks
and insurance companies (LIC & GIC) to set up their institutions
under the Indian Trusts Act to transact mutual fund business,
allowing the Indian investor the option to choose between different
service providers. Unit Trust was a statutory corporation governed
by its own incorporating act. There was no separate regulatory
authority up to the time SEBI was made a statutory authority in
1992. but it was only in the year 1993, when a government took a
policy decision to deregulate Indian Economy from government
control and to transform it market oriented, that the industry was
opened to competition from private and foreign players. By the year
2000 there came to be established in the market 34 mutual funds
offerings a variety of about 550 schemes.

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SECURITIES AND EXCHANGE BOARD OF INDIA (MUTUAL
FUNDS) REGULATIONS, 1996

The fast growing industry is regulated by Securities and Exchange

Board of India (SEBI) since inception of SEBI as a statutory body.
SEBI initially formulated “SECURITIES AND EXCHANGE BOARD OF
INDIA (MUTUAL FUNDS) REGULATIONS, 1993” providing detailed
procedure for establishment, registration, constitution,
management of trustees, asset management company, about
schemes/products to be designed, about investment of funds
collected, general obligation of MFs, about inspection, audit etc.
based on experience gained and feedback received from the market
SEBI revised the guidelines of 1993 and issued fresh guidelines in
1996 titled “SECURITIES AND EXCHANGE BOARD OF INDIA (MUTUAL
FUNDS) REGULATIONS, 1996”. The said regulations as amended
from time to time are in force even today.

The SEBI mutual fund regulations contain ten chapters and twelve
schedules. Chapters containing material subjects relating to
regulation and conduct of business by Mutual Funds.

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REGISTRATION OF MUTUAL FUND:

Application for registration

1. An application for registration of a mutual fund shall be made to
the Board in Form A by the sponsor.

Application fee to accompany the application

2. Every application for registration under regulation 3 shall be
accompanied by nonrefundable application fee as specified in the
Second Schedule.

Application to conform to the requirements

3. An application which is not complete in all respects shall be liable
to be rejected:
Provided that, before rejecting any such application, the applicant
shall be given an opportunity to complete such formalities within
such time as may be specified by the Board.

Furnishing information
4. The Board may require the sponsor to furnish such further
information or clarification as may be required by it.

Eligibility criteria
5. For the purpose of grant of a certificate of registration, the
applicant has to fulfill the following, namely :—
(a) the sponsor should have a sound track record and general
reputation of fairness and integrity in all his business transactions.
Explanation : For the purposes of this clause “sound track record”
shall mean the
sponsor should,—

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(i) be carrying on business in financial services for a period of not
less than five
years; and
(ii) the networth is positive in all the immediately preceding five
years; and
(iii) the networth in the immediately preceding year is more than
the capital
contribution of the sponsor in the asset management company; and
(iv) the sponsor has profits after providing for depreciation, interest
and tax in three out of the immediately preceding five years,
including the fifth year;

(b) in the case of an existing mutual fund, such fund is in the form
of a trust and the trust deed has been approved by the Board;

(c) the sponsor has contributed or contributes at least 40% to the

net worth of the asset management company:
Provided that any person who holds 40% or more of the net worth
of an asset
management company shall be deemed to be a sponsor and will be
required to fulfill the eligibility criteria specified in these regulations;
(d) the sponsor or any of its directors or the principal officer to be
employed by the mutual fund should not have been guilty of fraud
or has not been convicted of an offence involving moral turpitude or
has not been found guilty of any economic
offence;

(e) appointment of trustees to act as trustees for the mutual fund in

accordance with the provisions of the regulations;

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(f) appointment of asset management company to manage the
mutual fund and operate the scheme of such funds in accordance
with the provisions of these regulations;

(g) appointment of a custodian in order to keep custody of the

securities 10[or gold and gold related instruments and carry out the
custodian activities as may be authorized by the trustees.

Consideration of application
8. The Board, may on receipt of all information decide the
application.

Grant of Certificate of Registration

9. The Board may register the mutual fund and grant a certificate in
Form B on the applicant paying the registration fee as specified in
Second Schedule.

Terms and conditions of registration

10. The registration granted to a mutual fund under regulation 9,
shall be subject to the following terms and conditions:
(a) the trustees, the sponsor, the asset management company and
the custodian shall comply with the provisions of these regulations;
(b) the mutual fund shall forthwith inform the Board, if any
information or particulars previously submitted to the Board was
misleading or false in any material respect;
(c) the mutual fund shall forthwith inform the Board, of any material
change in the
information or particulars previously furnished, which have a
bearing on the
registration granted by it;

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(d) payment of fees as specified in the regulations and the Second
Schedule.

Rejection of application
11. Where the sponsor does not satisfy the eligibility criteria
mentioned in regulation 7, the Board may reject the application and
inform the applicant of the same.

Payment of annual service fee:

12. A mutual fund shall pay before the 15th April each year a
service fee as specified in the Second Schedule for every financial
year from the year following the year of registration:

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Failure to pay annual service fee
13. The Board may not permit a mutual fund who has not paid
service fee to launch any scheme.

CONSTITUTION AND MANAGEMENT OF ASSET MANAGEMENT

COMPANY AND CUSTODIAN

Application by an asset management company

14. (1) The application for the approval of the asset management
company shall be made in Form D.
(2) The provisions of regulations 5, 6 and 8 shall, so far as may be,
apply to the
application made under sub-regulation (1) as they apply to the
application for registration of a mutual fund.

Appointment of an asset management company

15. (1) The sponsor or, if so authorised by the trust deed, the
trustee, shall appoint an asset management company, which has
been approved by the Board under sub-regulation(2) of regulation
21.

(2) The appointment of an asset management company can be

terminated by majority of the trustees or by seventy-five per cent of
the unitholders of the scheme.

(3) Any change in the appointment of the asset management

company shall be subject to prior approval of the Board and the
unitholders.

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Eligibility criteria for appointment of asset management
company
16. (1) For grant of approval of the asset management company
the applicant has to fulfill the following :—
(a) in case the asset management company is an existing asset
management company it has a sound track record, general
reputation and fairness in transactions.
Explanation: For the purpose of this clause sound track record
shall mean the
networth and the profitability of the asset management company;
(aa) the asset management company is a fit and proper person;
(b) the directors of the asset management company are persons
having adequate professional experience in finance and financial
services related field and not found guilty of moral turpitude or
convicted of any economic offence or violation of any securities
laws;
(c) the key personnel of the asset management company 27[have
not been found guilty of moral turpitude or convicted of economic
offence or violation of securities laws or worked for any asset
management company or mutual fund or any intermediary
29[during the period when its] registration has been suspended or
cancelled at any time by the Board;
(d) the board of directors of such asset management company has
at least fifty per cent directors, who are not associate of, or
associated in any manner with, the sponsor or any of its subsidiaries
or the trustees;
(e) the Chairman of the asset management company is not a
trustee of any mutual fund;
(f) the asset management company has a networth of not less than
rupees ten crores :

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Provided that an asset management company already granted
approval under the provisions of Securities and Exchange Board of
India (Mutual Funds) Regulations, 1993 shall within a period of
twelve months from the date of notification of these regulations
increase its networth to rupees ten crores :
Provided [further] that the period specified in the first proviso
may be extended in appropriate cases by the Board up to three
years for reasons to be recorded in writing :
Provided further that no new schemes shall be allowed to be
launched or managed by such asset management company till the
networth has been raised to rupees ten crores.
Explanation : For the purposes of this clause, “networth” means
the aggregate of the paid up capital and free reserves of the asset
management company after
deducting therefrom miscellaneous expenditure to the extent not
written off or
adjusted or deferred revenue expenditure, intangible assets and
accumulated losses.
(2) The Board may, after considering an application with reference
to the matters
specified in sub-regulation (1), grant approval to the asset
management company.

Terms and conditions to be complied with

17. The approval granted under sub-regulation (2) of regulation 21

shall be subject to the
following conditions, namely:—
(a) any director of the asset management company shall not hold
the office of the

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director in another asset management company unless such person
is an independent director referred to in clause (d) of sub-regulation
(1) of regulation 21 and approval of the Board of asset management
company of which such person is a director, has been obtained;
(b) the asset management company shall forthwith inform the
Board of any material change in the information or particulars
previously furnished, which have a bearing on the approval granted
by it;
(c) no appointment of a director of an asset management company
shall be made without prior approval of the trustees;
(d) the asset management company undertakes to comply with
these regulations;
(e) no change in the controlling interest of the asset management
company shall be made unless,—
(i) prior approval of the trustees and the Board is obtained;
(ii) a written communication about the proposed change is sent to
each unitholder and an advertisement is given in one English daily
newspaper having
nationwide circulation and in a newspaper published in the
language of the
region where the Head Office of the mutual fund is situated; and
(iii) the unitholders are given an option to exit on the prevailing Net
Asset Value
without any exit load;]
(f) the asset management company shall furnish such information
and documents to the trustees as and when required by the
trustees.

Procedure where approval is not granted

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18. Where an application made under regulation 19 for grant of
approval does not satisfy the eligibility criteria laid down in
regulation 21, the Board may reject the application.

Restrictions on business activities of the asset management

company
19. The asset management company shall—
(1) not act as a trustee of any mutual fund;

(2) not undertake any other business activities except activities in

the nature of
portfolio management services,] management and advisory
services to offshore funds, pension funds, provident funds, venture
capital funds, management of insurance funds, financial
consultancy and exchange of research on commercial basis if any of
such activities are not in conflict with the activities of the mutual
fund :

Provided that the asset management company may itself or

through its subsidiaries undertake such activities if it satisfies the
Board that the key personnel of the asset management company,
the systems, back office, bank and securities accounts are
segregated activity-wise and there exist systems to prohibit access
to inside information of various activities :
Provided further that asset management company shall meet
capital adequacy
requirements, if any, separately for each such activity and obtain
separate approval, if necessary under the relevant regulations.
(3) The asset management company shall not invest in any of its
schemes unless full disclosure of its intention to invest has been

2
made in the offer documents 34[in case of schemes launched after
the notification of these regulations :
Provided that an asset management company shall not be entitled
to charge any fees on its investment in that scheme.

Asset management company and its obligations

20. (1) The asset management company shall take all reasonable
steps and exercise due diligence to ensure that the investment of
funds pertaining to any scheme is not contrary to the provisions of
these regulations and the trust deed.
(2) The asset management company shall exercise due diligence
and care in all its investment decisions as would be exercised by
other persons engaged in the same business.
(3) The asset management company shall be responsible for the
acts of commission or omission by its employees or the persons
whose services have been procured by the asset management
company.

(4) The asset management company shall submit to the trustees

quarterly reports of each year on its activities and the compliance
with these regulations.

(5) The trustees at the request of the asset management company

may terminate the assignment of the asset management company
at any time:
Provided that such termination shall become effective only after
the trustees have accepted the termination of assignment and

2
communicated their decision in writing to the asset management
company.

(6) Notwithstanding anything contained in any contract or

agreement or termination, the asset management company or its
directors or other officers shall not be absolved of liability to the
mutual fund for their acts of commission or omission, while holding
such position or office.

(6A) The Chief Executive Officer (whatever his designation may be)
of the asset
management company shall ensure that the mutual fund complies
with all the provisions of these regulations and the guidelines or
circulars issued in relation thereto from time to time and that the
investments made by the fund managers are in the interest of the
unit holders and shall also be responsible for the overall risk
management function of the mutual fund.
Explanation.—For the purpose of this sub-regulation, the words
“these regulations” shall mean and include the Securities and
Exchange Board of India (Mutual Funds) Regulations, 1996 as
amended from time to time.

(6B) The fund managers (whatever the designation may be) shall
ensure that the funds of the schemes are invested to achieve the
objectives of the scheme and in the interest of the unit holders.

(7) (a) An asset management company shall not through any

broker associated with the sponsor, purchase or sell securities,
which is average of 5 per cent or more of the aggregate purchases
and sale of securities made by the mutual fund in all its schemes :

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Provided that for the purpose of this sub-regulation, the aggregate
purchase and sale of securities shall exclude sale and distribution of
units issued by the mutual fund :
Provided further that the aforesaid limit of 5 per cent shall apply
for a block of any three months.
(b) An asset management company shall not purchase or sell
securities through any broker [other than a broker referred to in
clause (a) of sub-regulation (7) which is average of 5 per cent or
more of the aggregate purchases and sale of securities made by the
mutual fund in all its schemes, unless the asset management
company has recorded in writing the justification for exceeding the
limit of 5 per cent and reports of all such investments are sent to
the trustees on a quarterly basis :
Provided that the aforesaid limit shall apply for a block of three
months.

(8) An asset management company shall not utilise the services of

the sponsor or any of its associates, employees or their relatives, for
the purpose of any securities transaction and distribution and sale
of securities :
Provided that an asset management company may utilise such
services if disclosure to that effect is made to the unitholders and
the brokerage or commission paid is also disclosed in the half-yearly
annual accounts of the mutual fund :
Provided further that the mutual funds shall disclose at the time
of declaring halfyearly and yearly results :
(i) any underwriting obligations undertaken by the schemes of the
mutual funds with respect to issue of securities associate
companies,
(ii) devolvement, if any,

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(iii) subscription by the schemes in the issues lead managed by
associate companies,
(iv) subscription to any issue of equity or debt on private placement
basis where the sponsor or its associate companies have acted as
arranger or manager.

(9) The asset management company shall file with the trustees the
details of transactions in securities by the key personnel of the
asset management company in their own name or on behalf of the
asset management company and shall also report to the Board, as
and when required by the Board.

(10) In case the asset management company enters into any

securities transactions with any of its associates a report to that
effect shall be sent to the trustees at its next meeting.

(11) In case any company has invested more than 5 per cent of the
net asset value of a scheme, the investment made by that scheme
or by any other scheme of the same mutual fund in that company or
its subsidiaries shall be brought to the notice of the trustees by the
asset management company and be disclosed in the half-yearly and
annual accounts of the respective schemes with justification for
such investment 40[provided the latter
investment has been made within one year of the date of the
former investment calculated on either side.

(12) The asset management company shall file with the trustees
and the Board—
(a) detailed bio-data of all its directors along with their interest in
other companies
within fifteen days of their appointment;
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(b) any change in the interests of directors every six months; and
(c) a quarterly report to the trustees giving details and adequate
justification about the purchase and sale of the securities of the
group companies of the sponsor or the asset management
company, as the case may be, by the mutual fund during the said
quarter.
(13) Each director of the asset management company shall file the
details of his transactions of dealing in securities with the trustees
on a quarterly basis in accordance with guidelines issued by the
Board.

(14) The asset management company shall not appoint any person
as key personnel who has been found guilty of any economic
offence or involved in violation of securities laws.

(15) The asset management company shall appoint registrars and

share transfer agents who are registered with the Board:
Provided if the work relating to the transfer of units is processed
in-house, the charges at competitive market rates may be debited
to the scheme and for rates higher than the competitive market
rates, prior approval of the trustees shall be obtained and reasons
for charging higher rates shall be disclosed in the annual accounts.

(16) The asset management company shall abide by the Code of

Conduct as specified in the Fifth Schedule.

Appointment of custodian

21. (1) The mutual fund shall appoint a Custodian to carry out the
custodial services for the schemes of the fund and sent intimation

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of the same to the Board within fifteen days of the appointment of
the Custodian:
Provided that in case of a gold exchange traded fund scheme, the
assets of the scheme being gold or gold related instruments may be
kept in custody of a bank which is registered as a custodian with
the Board.

(2) No custodian in which the sponsor or its associates hold 50 per

cent or more of the voting rights of the share capital of the
custodian or where 50 per cent or more of the directors of the
custodian represent the interest of the sponsor or its associates
shall act as custodian for a mutual fund constituted by the same
sponsor or any of its associates or subsidiary company.

Agreement with custodian

22. The mutual fund shall enter into a custodian agreement with
the custodian, which shall contain the clauses which are necessary
for the efficient and orderly conduct of the affairs of the custodian:
Provided that the agreement, the service contract, terms and
appointment of the
custodian shall be entered into with the prior approval of the
trustees.

CHARACTERISTICS OF MUTUAL FUNDS

• The ownership is in the hands of the investors who have

pooled in their funds.

• It is managed by a team of investment professionals and

other service providers.

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 • The pool of funds is invested in a portfolio of marketable
investments.

• The investors share is denominated by ‘units’ whose value is

called as Net Asset Value (NAV) which changes everyday.

• The investment portfolio is created according to the stated

investment objectives of the fund.

ADVANTAGES OF MUTUAL FUNDS

The advantages of mutual funds are given below: -

Portfolio Diversification

Mutual funds invest in a number of companies. This

diversification reduces the risk because it happens very rarely that
all the stocks decline at the same time and in the same proportion.
So this is the main advantage of mutual funds.

Professional Management

Mutual funds provide the services of experienced and skilled

professionals, assisted by investment research team that analysis
the performance and prospects of companies and select the
suitable investments to achieve the objectives of the scheme.

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Low Costs

Mutual funds are a relatively less expensive way to invest as

compare to directly investing in a capital markets because of less
amount of brokerage and other fees.

Liquidity

This is the main advantage of mutual fund, that is whenever an

investor needs money he can easily get redemption, which is not
possible in most of other options of investment. In open-ended
schemes of mutual fund, the investor gets the money back at net
asset value and on the other hand in close-ended schemes the units
can be sold in a stock exchange at a prevailing market price.

Transparency

In mutual fund, investors get full information of the value of

their investment, the proportion of money invested in each class of
assets and the fund manager’s investment strategy

Flexibility

Flexibility is also the main advantage of mutual fund. Through

this investors can systematically invest or withdraw funds according
to their needs and convenience like regular investment plans,
regular withdrawal plans, dividend reinvestment plans etc.

Convenient Administration

Investing in a mutual fund reduces paperwork and helps

investors to avoid many problems like bad deliveries, delayed
payments and follow up with brokers and companies. Mutual funds
save time and make investing easy.

Affordability

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 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.

Well Regulated

All mutual funds are registered with SEBI and they function with
in the provisions of strict regulations designed to protect the
interest of investors. The operations of mutual funds are regularly
monitored by SEBI.

DISADVANTAGES OF MUTUAL FUNDS

Mutual funds have their following drawbacks:

No Guarantees

No investment is risk free. If the entire stock market declines in

value, the value of mutual fund shares will go down as well, no
matter how balanced the portfolio. Investors encounter fewer risks
when they invest in mutual funds than when they buy and sell
stocks on their own. However, anyone who invests through mutual
fund runs the risk of losing the money.

Fees and Commissions

All funds charge administrative fees to cover their day to day

expenses. Some funds also charge sales commissions or loads to
compensate brokers, financial consultants, or financial planners.
Even if you don’t use a broker or other financial advisor, you will
pay a sales commission if you buy shares in a Load Fund.

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Taxes

During a typical year, most actively managed mutual funds sell

anywhere from 20 to 70 percent of the securities in their portfolios.
If your fund makes a profit on its sales, you will pay taxes on the
income you receive, even you reinvest the money you made.

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Management Risk

When you invest in mutual fund, you depend on fund manager to

make the right decisions regarding the fund’s portfolio. If the
manager does not perform as well as you had hoped, you might not
make as much money on your investment as you expected. Of
course, if you invest in index funds, you forego management risk
because these funds do not employ managers.

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STRUCTURE OF MUTUAL FUND

There are many entities involved and the diagram below illustrates t
he structure of mutual funds: -

Structure of Mutual Funds

SEBI

The regulation of mutual funds operating in India falls under the

preview of authority of the “Securities and Exchange Board of
India” (SEBI). Any person proposing to set up a mutual fund in
India is required under the SEBI (Mutual Funds) Regulations, 1996 to
be registered with the SEBI.

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Sponsor

The sponsor should contribute at least 40% to the net worth of

the AMC. However, if any person holds 40% or more of the net
worth of an AMC shall be deemed to be a sponsor and will be
required to fulfill the eligibility criteria in the Mutual Fund
Regulations. The sponsor or any of its directors or the principal
officer employed by the mutual fund should not be guilty of fraud or
guilty of any economic offence.

Trustees

The mutual fund is required to have an independent Board of

Trustees, i.e. two third of the trustees should be independent
persons who are not associated with the sponsors in any manner.
An AMC or any of its officers or employees are not eligible to act as
a trustee of any mutual fund. The trustees are responsible for - inter
alia – ensuring that the AMC has all its systems in place, all key
personnel, auditors, registrar etc. have been appointed prior to the
launch of any scheme.

Asset Management Company

The sponsors or the trustees are required to appoint an AMC to

manage the assets of the mutual fund. Under the mutual fund
regulations, the applicant must satisfy certain eligibility criteria in
order to qualify to register with SEBI as an AMC.

1. The sponsor must have at least 40% stake in the AMC.

2. The chairman of the AMC is not a trustee of any mutual fund.

3. The AMC should have and must at all times maintain a

minimum net worth of Cr. 100 million.

4. The director of the AMC should be a person having adequate

professional experience.

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 5. The board of directors of such AMC has at least 50% directors
who are not associate of or associated in any manner with the
sponsor or any of its subsidiaries or the trustees.

The Transfer Agents

The transfer agent is contracted by the AMC and is responsible

for maintaining the register of investors / unit holders and every day
settlements of purchases and redemption of units. The role of a
transfer agent is to collect data from distributors relating to daily
purchases and redemption of units.

Custodian

The mutual fund is required, under the Mutual Fund Regulations,

to appoint a custodian to carry out the custodial services for the
schemes of the fund. Only institutions with substantial
organizational strength, service capability in terms of
computerization and other infrastructure facilities are approved to
act as custodians. The custodian must be totally delinked from the
AMC and must be registered with SEBI.

Unit Holders

They are the parties to whom the mutual fund is sold. They are
ultimate beneficiary of the income earned by the mutual funds.

TYPES OF MUTUAL FUND SCHEMES

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 In India, there are many companies, both public and private that are
engaged in the trading of mutual funds. Wide varieties of Mutual
Fund Schemes exist to cater to the needs such as financial position,
risk tolerance and return expectations etc. Investment can be made
either in the debt Securities or equity .The table below gives an
overview into the existing types of schemes in the Industry.

TYPES OF MUTUAL FUND SCHEME

By structure By Investment
Other Schemes
Objectives

Tax saving fund

Open-ended Debt Equity
Schemes Schemes Schemes

Close Ended MM Mutual Large cap Sector specific

Schemes fund fund fund

Interval Schemes FMP

Mid cap Index Schemes
Fund

Other Debt
Schemes Small cap
fund

Any Other
Equity Fund

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 Generally two options are available for every scheme
regarding dividend payout and growth option. By opting for growth
option an investor can have the benefit of long-term growth in the
stock market on the other side by opting for the dividend option an
investor can maintain his liquidity by receiving dividend time to
time. Some time people refer dividend option as dividend fund and
growth fund. Generally decisions regarding declaration of the
dividend depend upon the performance of stock market and
performance of the fund.

OPTION REGARDING DIVIDEND

Dividend Growth

Payout Reinvested

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Systematic Investment Plan (SIP)

Systematic investment plan is like Recurring Deposit in which

investor invests in the particular scheme on regular intervals. In the
case it is convenient for salaried class and middle-income group. In
this case on regular interval units of specified amount is created. An
investor can make payment by regular payments by issuing cheques,
post dated cheques, ECS, standing Mandate etc. SIP can be started in
the any open-ended fund if there is provision of it. There are some
entry and exit load barriers for discontinuation and redemption of the
fund before the said period.

According to Structure

Open – Ended Funds

An open – ended fund is one that is available for subscription all

through the year. These do not have a fixed maturity. Investors can
conveniently buy and sell units at Net Asset Value (NAV) related
prices. The key feature of open – ended schemes is liquidity.

Close – Ended Funds

A close – ended fund has a stipulated maturity period which

generally ranging from 3 to 15 years. The fund is open for
subscription only during a specified period. Investors can invest in
the scheme at the same time of the initial public issue and
thereafter they can buy and sell the units of the scheme on the
stock exchanges where they are listed. In order to provide an exit
route to the investors, some close – ended funds give an option of
selling back the units to the mutual fund through periodic
repurchase at NAV related prices.

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Interval Funds

Interval funds combine the features of open – ended and close –

ended schemes. They are open for sales or redemption during pre-
determined intervals at their NAV.

According to Investment Objective:

Growth Funds

The aim of growth funds is to provide capital appreciation

over the medium to long term. Such schemes normally invest
a majority of their corpus in equities. It has been proven that
returns from stocks are much better than the other
investments had over the long term. Growth schemes are
ideal for investors having a long term outlook seeking growth
over a period of time.

Income Funds

The aim of the income funds is to provide regular and

steady income to investors. Such schemes generally invest in
fixed income securities such as bonds, corporate debentures
and government securities. Income funds are ideal for capital
stability and regular income.

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Balanced Funds

The aim of balanced funds is to provide both growth and

regular income. Such schemes periodically distribute a part of
their earning and invest both in equities and fixed income
securities in the proportion indicated in their offer documents.
In a rising stock market, the NAV of these schemes may not
normally keep pace or fall equally when the market falls.
These are ideal for investors looking for a combination of
income and moderate growth.

Money Market Funds

The main aim of money market funds is to provide easy

liquidity, preservation of capital and moderate income. These
schemes generally invest in safe short term instruments such
as treasury bills, certificates of deposit, commercial paper and
inter – bank call money. Returns on these schemes may
fluctuate depending upon the interest rates prevailing in the
market. These are ideal for corporate and individual investors
as a means to park their surplus funds for short periods.

Other Schemes

Tax Saving Schemes

These schemes offer tax rebates to the investors under

specific provisions of the Indian Income Tax laws as the
government offers tax incentives for investment in specified
avenues. Investments made in Equity Linked Saving Schemes
(ELSS) and Pension Schemes are allowed as deduction u/s 88
of the Income Tax Act, 1961. The Act also provides
opportunities to investors to save capital gains.

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Special Schemes:

Index Schemes

Index funds attempt to replicate the performance of a

particular index such as the BSE Sensex or the NSE 50.

Sector Specific Schemes

Sector funds are those which invest exclusively in a

specified industry or a group of industries or various segments
such as ‘A’ group shares or initial public offerings.

Bond Schemes

It seeks investment in bonds, debentures and debt related

instrument to generate regular income flow.

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FREQUENTLY USED TERMS

Advisor - Is employed by a mutual fund organization to give

professional advice on the fund’s investments and to supervise the
management of its asset.

Diversification – The policy of spreading investments among a

range of different securities to reduce the risk.

Net Asset Value (NAV) - Net Asset Value is the market value of
the assets of the scheme minus its liabilities. The per unit NAV is the
net asset value of the scheme divided by the number of units
outstanding on the Valuation Date.

Sales Price - Is the price you pay when you invest in a scheme.
Also called Offer Price. It may include a sales load.

Repurchase Price - Is the price at which a close-ended scheme

repurchases its units and it may include a back-end load. This is
also called Bid Price.

Redemption Price - Is the price at which open-ended schemes

repurchase their units and close-ended schemes redeem their units
on maturity. Such prices are NAV related.

Sales Load - Is a charge collected by a scheme when it sells the

units. Also called ‘Front-end’ load. Schemes that do not charge a
load are called ‘No Load’ schemes.

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COMPARISON
BETWEEN ULIPS
AND MUTUAL
FUNDS

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COMPARISON BETWEEN ULIPS AND MUTUAL FUNDS:

Unit Linked Insurance Policies (ULIPs) as an investment avenue are

closest to mutual funds in terms of their structure and functioning.
As is the case with mutual funds, investors in ULIPs are allotted
units by the insurance company and a net asset value (NAV) is
declared for the same on a daily basis.

Similarly ULIP investors have the option of investing across various

schemes similar to the ones found in the mutual funds domain, i.e.
diversified equity funds, balanced funds and debt funds to name a
few. Generally speaking, ULIPs can be termed as mutual fund
schemes with an insurance component.

However it should not be construed that barring the insurance

element there is nothing differentiating mutual funds from ULIPs.

Points of difference between the two:

1. Mode of investment/ investment amounts

Mutual fund investors have the option of either making lump sum
investments or investing using the systematic investment plan (SIP)
route which entails commitments over longer time horizons. The
minimum investment amounts are laid out by the fund house.

ULIP investors also have the choice of investing in a lump sum

(single premium) or using the conventional route, i.e. making
premium payments on an annual, half-yearly, quarterly or monthly
basis. In ULIPs, determining the premium paid is often the starting
point for the investment activity.
3
This is in stark contrast to conventional insurance plans where the
sum assured is the starting point and premiums to be paid are
determined thereafter.

ULIP investors also have the flexibility to alter the premium amounts
during the policy's tenure. For example an individual with access to
surplus funds can enhance the contribution thereby ensuring that
his surplus funds are gainfully invested; conversely an individual
faced with a liquidity crunch has the option of paying a lower
amount (the difference being adjusted in the accumulated value of
his ULIP). The freedom to modify premium payments at one's
convenience clearly gives ULIP investors an edge over their mutual
fund counterparts.

2. Expenses

In mutual fund investments, expenses charged for various activities

like fund management, sales and marketing, administration among
others are subject to pre-determined upper limits as prescribed by
the Securities and Exchange Board of India.

For example equity-oriented funds can charge their investors a

maximum of 2.5% per annum on a recurring basis for all their
expenses; any expense above the prescribed limit is borne by the
fund house and not the investors.

Similarly funds also charge their investors entry and exit loads (in
most cases, either is applicable). Entry loads are charged at the
timing of making an investment while the exit load is charged at the
time of sale.
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Insurance companies have a free hand in levying expenses on their
ULIP products with no upper limits being prescribed by the
regulator, i.e. the Insurance Regulatory and Development Authority.
This explains the complex and at times 'unwieldy' expense
structures on ULIP offerings. The only restraint placed is that
insurers are required to notify the regulator of all the expenses that
will be charged on their ULIP offerings.

Expenses can have far-reaching consequences on investors since

higher expenses translate into lower amounts being invested and a
smaller corpus being accumulated. ULIP-related expenses have
been dealt with in detail in the article "Understanding ULIP
expenses".

3. Portfolio disclosure

Mutual fund houses are required to statutorily declare their

portfolios on a quarterly basis, albeit most fund houses do so on a
monthly basis. Investors get the opportunity to see where their
monies are being invested and how they have been managed by
studying the portfolio.

There is lack of consensus on whether ULIPs are required to disclose

their portfolios. During our interactions with leading insurers we
came across divergent views on this issue.

While one school of thought believes that disclosing portfolios on a

quarterly basis is mandatory, the other believes that there is no
legal obligation to do so and that insurers are required to disclose
their portfolios only on demand.
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Some insurance companies do declare their portfolios on a
monthly/quarterly basis. However the lack of transparency in ULIP
investments could be a cause for concern considering that the
amount invested in insurance policies is essentially meant to
provide for contingencies and for long-term needs like retirement;
regular portfolio disclosures on the other hand can enable investors
to make timely investment decisions.

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4. Flexibility in altering the asset allocation

As was stated earlier, offerings in both the mutual funds segment

and ULIPs segment are largely comparable. For example plans that
invest their entire corpus in equities (diversified equity funds), a
60:40 allotment in equity and debt instruments (balanced funds)
and those investing only in debt instruments (debt funds) can be
found in both ULIPs and mutual funds.

If a mutual fund investor in a diversified equity fund wishes to shift

his corpus into a debt from the same fund house, he could have to
bear an exit load and/or entry load.

On the other hand most insurance companies permit their ULIP

inventors to shift investments across various plans/asset classes
either at a nominal or no cost (usually, a couple of switches are
allowed free of charge every year and a cost has to be borne for
additional switches).

Effectively the ULIP investor is given the option to invest across

asset classes as per his convenience in a cost-effective manner.

This can prove to be very useful for investors, for example in a bull
market when the ULIP investor's equity component has appreciated,
he can book profits by simply transferring the requisite amount to a
debt-oriented plan.

5. Tax benefits

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ULIP investments qualify for deductions under Section 80C of the
Income Tax Act. This holds good, irrespective of the nature of the
plan chosen by the investor. On the other hand in the mutual funds
domain, only investments in tax-saving funds (also referred to as
equity-linked savings schemes) are eligible for Section 80C benefits.

Maturity proceeds from ULIPs are tax free. In case of equity-oriented

funds (for example diversified equity funds, balanced funds), if the
investments are held for a period over 12 months, the gains are tax
free; conversely investments sold within a 12-month period attract
short-term capital gains tax @ 10%.

Similarly, debt-oriented funds attract a long-term capital gains tax

@ 10%, while a short-term capital gain is taxed at the investor's
marginal tax rate.

Despite the seemingly similar structures evidently both mutual

funds and ULIPs have their unique set of advantages to offer. As
always, it is vital for investors to be aware of the nuances in both
offerings and make informed decisions.

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Investing in ulips? Remember …………

The high returns (above 20 per cent) are definitely not

sustainable over a long term, as they have been generated during
the biggest bull run in recent stock market history.

The free hand given to ULIPs might prove risky if the timing of exit
happens to coincide with a bearish market phase, because of the
inherently high equity component of these schemes.

While a debt-oriented ULIP scheme might be superior to a debt

option in a conventional mutual fund due to tax concessions that
insurance companies enjoy, such tax incentives may not last.

Look beyond NAVs

The appreciation in the net asset value (NAV) of ULIPs barely

indicate the actual returns earned on your investment. The various
charges on your policy are deducted either directly from premiums
before investing in units or collected on a monthly basis by
knocking off units.

Either way, the charges do not affect the NAV; but the number of
units in your account suffers. You might have access to daily NAVs
but your real returns may be substantially lower.

A rough calculation shows that if our investments earn a 12 per cent

annualised return over a 20-year period in a growth fund, when

2
measured by the change in NAV, the real pre- tax returns might be
only 9 per cent. The shorter the term, the lower the real returns.

How charges dent returns

An initial allocation charge is deducted from our premiums for

selling, marketing and broker commissions. These charges could be
as high as 65 per cent of the first year premiums. Premium
allocation charges are usually very high (5-65 per cent) in the first
couple of years, but taper off later. The high initial charges mainly
go towards funding agent commissions, which could be as high as
40 per cent of the initial premium as per IRDA (Insurance
Regulatory and Development Authority) regulations.

The charges are higher for a linked plan than a non-linked plan, as
the former require lot more servicing than the latter, such as
regular disclosure of investments, switches, re-direction of
premiums, withdrawals, and so on. Insurance companies have the
discretion to structure their expenses structure whereas a mutual
fund does not have that luxury. The expense ratios in their case
cannot exceed 2.5 per cent for an equity plan and 2.25 per cent for
a debt plan respectively. The lack of regulation on the expense front
works to the detriment of investors in ULIPs.

The front-loading of charges does have an impact on overall

returns as we lose out on the compounding benefit. Insurance
companies explain that charges get evened out over a long term.
Thus we are forced to stay with the plan for a longer tenure to even

2
out the effect of initial charges as the shorter the tenure, the lower
our real returns.

If we want to withdraw from the plan, you lose out, as you will have
to pay withdrawal charges up to a certain number of years.

In effect, when we lock in our money in a ULIP, despite the promise

of flexibility and liquidity, we are stuck with one fund management
style. This is all the more reason to look for an established track
record before committing our hard-earned money.

Evaluate alternative options

As an investor we have to evaluate alternative options that give

superior returns before considering ULIPs.

Insurance companies argue that comparing ULIPs with mutual funds

is like comparing oranges with apples, as the objectives are
different for both the products.

Most ULIPs give us the choice of a minimum investment cover so

that we can direct maximum premiums towards investments.

Thus, both ULIPs and mutual funds target the same

customers. If risk cover is your primary objective, pure insurance
plans are less expensive.

When we choose a mutual fund, we look for an established track

record of three to five years of consistent returns across various
market cycles to judge a fund's performance.
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It is early days for insurance companies on this score; investing
substantially in linked plans might not be advisable at this juncture.

3
Try top-ups

Insurance companies allow us to make lump-sum investments in

excess of the regular premiums. These top-ups are charged at a
much lower rate — usually one to two per cent. The expenses
incurred on a top-up including agent commissions are much lower
than regular premiums.

Some companies also give a credit on top-ups. For instance, if you

pay in Rs 100 as a top up, the actual allocation to units will be Rs
101. If you keep the regular premiums to the minimum and increase
your top ups, you can save up on charges, enhancing returns in the
long run.

Reduce life cover

The price of the life cover attached to a ULIP is higher than a normal
term plan. Risk charges are charged on a daily or monthly basis
depending on the daily amount at risk. Rates are not locked and are
charged on a one-year renewal basis.

Our life cover charges would depend on the accumulation in your

investment account. As accumulation increases, the amount at risk
for the insurance company decreases. However, with increasing
age, the cost per Rs 1,000 sum assured increases, effectively
increasing your overall insurance costs. A lower life cover could
yield better returns.

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Stay away from riders

Any riders, such as accident rider or critical illness rider, are also
charged on a one-year renewal basis. Opting for these riders with a
plain insurance cover could provide better value for money.

ULIP's as an investment is a very good vehicle for wealth creation

,but way Unit Linked Insurance schemes are sold by insurance
company representative's and insurance advisors is not correct.

ULIP's usually have following charges built into it :

a) Up-front Charges
b) Mortality Charges ( Charges for providing the risk cover for life)
c) Administrative Charges
d) Fund Management Charges

Mutual Fund's have the following charges :

a) Up-front charges ( Marketing, Advertising, distributors fee etc.)

b) Fund Management Charges ( expenses for managing your fund)

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A few aspects of investing in ULIPs versus mutual funds.

Liquidity

ULIPs score low on liquidity. According to guidelines of the Insurance

Regulatory and Development Authority (IRDA), ULIPs have a
minimum term of five years and a minimum lockin of three years.
You can make partial withdrawals after three years. The surrender
value of a ULIP is low in the initial years, since the insurer deducts a
large part of your premium as marketing and distribution costs.
ULIPs are essentially long-term products that make sense only if
your time horizon is 10 to 20 years.

Mutual fund investments, on the other hand, can be redeemed at

any time, barring ELSS (equity-linked savings schemes). Exit loads,
if applicable , are generally for six months to a year in equity funds.
So mutual funds score substantially higher on liquidity.

Tax efficiency

ULIPs are often pitched as tax-efficient , because your investment is

eligible for exemption under Section 80C of the Income Tax Act
(subject to a limit of Rs 1 lakh). But investments in ELSS schemes
of mutual funds are also eligible for exemption under the same
section .Besides the premium, the maturity amount in ULIPs is also
tax-free , irrespective of whether the investment was in a balanced
or debt plan. So they do have an edge on mutual funds, as debt
funds are taxed at 10% without indexation benefits, and 20% with
indexation benefits. The point, though, is that if you invest in a debt
plan through a ULIP, despite its tax-efficiency your post-tax returns

3
will be low, because of high front-end costs. Debt mutual funds
don’t charge such costs.

2
Expenses

Insurance agents get high commissions for ULIPs, and they get
them in the initial years, not staggered over the term. So the insurer
recovers most charges from you in the initial years, as it risks a loss
if the policy lapses. Typically , insurers levy enormous selling
charges, averaging more than 20% of the first year’s premium, and
dropping to 10% and 7.5% in subsequent years. (And this is after
investors balked when charges were as high as 65%!) Compare this
with mutual funds’ fees of 2.25% on entry, uniform for all schemes.
Different ULIPs have varying charges, often not made clear to
investors.

For instance, an agent who sells you a ULIP may get 25% of your
first year’s premium, 10% in the second year, 7.5% in the third and
fourth year and 5% thereafter. If your annual premium is Rs 10,000
and the agent’s commission in the first year is 25%, it means only
Rs 7,500 of your money is invested in the first year. So even if the
NAV of the fund rises, say 20%, that year, your portfolio would be
worth only Rs 9,000—much lower than the Rs 10,000 you paid. On
the other hand, if you invest Rs 10,000 in an equity scheme with a
2.25% entry load, Rs 225 is deducted , and the rest is invested. If
the scheme’s NAV rises 20%, your portfolio is worth Rs 11,730. This
shows how ULIPs work out expensive for investors. Deduct the cost
of a term policy from the mutual fund returns, and you’re still left
with a sizeable difference.

1
3
Tata mutual Fund
1) Overview of company
2) Fund type
3) Chair person
4) NAV of past one year
5) Index value of NIFTY
6) Calculation

1
Overview
Backed by one of the most trusted and valued brands in India, Tata
Mutual Fund has earned the trust of lakhs of investors with its
consistent performance and world-class service.
Tata Mutual Fund manages around Rs. 22,673.00 crores (average
AUM for the month) as on May 31, 2010 worth of assets across its
varied offerings. Tata Mutual Fund offers an investment option for
everyone, whether you are a businessman or salaried professional,
a retired person or housewife, an aggressive investor or a
conservative capital builder.
The Tata Asset Management philosophy is centred on seeking
consistent, long-term results. Tata Asset Management aims at
overall excellence, within the framework of transparent and rigorous
risk controls.
We constantly benchmark our efforts against these tenets of
performance:
Consistency : We strive to deliver consistent results through our
value-based investing methodology, keeping alive the credo of the
late doyen of the Tata Group, Mr. J.R.D. Tata, that money received
from the people should go back to them several times over.
Flexibility : Tata Mutual Fund offers investors a broad range of
managed investment products in various asset classes and risk
parameters, with operational flexibility to suit their varied
investment needs.
Stability: Our commitment to the highest quality of service and
integrity is the foundation upon which we build trust with our
clients.

1
Service: We offer a wide range of services to assist investors have
a fulfilling and rewarding financial planning experience with us. We
have designed our services keeping in mind the needs of our
investors, giving them a smooth and hassle-free financial planning
process.
A Proud Pedigree
Tata Asset Management Ltd is a part of the Tata group, one of
India's largest and most respected industrial groups, renowned for
its adherence to business ethics.
The Group has always believed in returning wealth to the society
that it serves. Thus, nearly two-thirds of the equity of Tata Sons, the
Group's promoter company, is held by philanthropic trusts, which
have created a host of national institutions in the natural sciences,
medical care, energy and the arts. The trusts also give substantial
annual grants and endowments to deserving individuals and
institutions in the areas of education, healthcare and social uplift.
By combining ethical values with business acumen, globalisation
with national interests and core businesses with emerging ones, the
Tata Group aims to be the largest and most respected global brand
from India. This way, it fulfils its long-standing commitment to
improving the quality of life of its stakeholders.
Leadership With Trust
Our purpose at the Tata Group is to improve the quality of life of the
communities we serve. We do this by attaining leadership positions
in sectors of national economic significance, to which the Group
brings a unique set of capabilities. This requires us to grow
aggressively in focused areas of business.
Our heritage of returning to society what we earn evokes trust
among consumers, employees, shareholders and the community. It
is an ongoing process, continuously enriched by the formalisation of
the high standards of behaviour that we expect from employees
and companies.
The Tata name is a unique asset, representing leadership with trust.
Leveraging this asset to enhance Group synergy and becoming

2
globally competitive is the route to sustained growth and long-term
success.

Core Values
The Tata Group has always sought to be a value-driven
organisation. These values continue to direct the Group's growth
and businesses. The five core Tata values that underpin the way we
do business are:
Integrity: We must conduct our business fairly, with honesty and
transparency. Everything we do must stand the test of public
scrutiny.
Understanding: We must be caring, show respect, compassion
and humanity for our colleagues and customers around the world,
and always work for the benefit of the communities we serve.
Excellence: We must constantly strive to achieve the highest
possible standards in our day-to-day work and in the quality of the
goods and services we provide.
Unity: We must work cohesively with our colleagues across the
Group and with our customers and partners around the world,
building strong relationships based on tolerance, understanding and
mutual cooperation.
Responsibility: We must continue to be responsible, sensitive to
the countries, communities and environments in which we work,
always ensuring that what comes from the people goes back to the
people many times over.

2
Overview
At Tata Asset Management Company, we believe that your
investment needs depend on personal and financial goals.
Identifying your financial goals is the key to achieving the big things
in your life, be it your child's education or a carefree and
comfortable retired life.
After identifying and defining your financial goals, you now need to
plan for each of them in an organised and a professional way.
Investment experts around the world advise instruments like equity
funds and stocks for long-term (more than 5 years), income funds
for medium-term and liquid funds for short-term needs.

The investment matrix here depicts the entire available variety of

investment options. Those at the top provide for a greater
opportunity for long-term capital growth while those at the bottom
take care of current income and reasonable return & liquidity. Tata
Mutual Fund offers a wide range of funds for different investment
instruments designed to cater to your individual profile and life-
stage.

1
Equity Fund
• Tata Tax Saving Fund
• Tata Select Equity Fund
• Tata Life Sciences & Technology Fund
• Tata Equity Opportunities Fund
• Tata Index Fund
• Tata Growth Fund
• Tata Equity P/E Fund
• Tata Dividend Yield Fund
• Tata Infrastructure Fund
• Tata Mid Cap Fund
• Tata Contra Fund
• Tata Tax Advantage Fund 1
• Tata Equity Management Fund
• Tata Capital Builder Fund
• Tata Indo-Global Infrastructure Fund
• Tata Growing Economies Infrastructure Fund
• Tata Infrastructure Tax Saving Fund
• Tata SIP Fund Scheme I
• Tata SIP Fund Scheme II

3
 Balanced product

1) Tata balanced fund

2) Tata young citizen fund

3) Tata smart investment plan

Debt product

• Tata Short Term Bond Fund

• Tata Gilt Securities Fund
• Tata Income Fund
• Tata Income Plus Fund
• Tata Monthly Income Fund
• Tata Dynamic Bond Fund
• Tata Floating Rate Fund
• Tata Liquid Fund
• Tata MIP Plus Fund
• Tata Liquidity Management Fund
• Tata Treasury Manager Fund
• Tata Fixed Income Portfolio Fund
• Tata Fixed Investment Plan-1
• Tata Fixed Investment Plan-2
• Tata Fixed Investment Plan-3
• Tata Fixed Investment Plan-4

1
Board of director

Tata Trustee Company Limited

• Mr. S. M. Datta (Chairman))
• Mr. I. Hussain (Director))
• Mr. J. N. Godrej (Director))
• Mr. Nowroze J. N. Vazifdar

Board of directors of Assets management company

•
• Mr. F. K. Kavarana
• Mr. A. R. Gandhi (Director))
• Mr. A. Hasib (Director)
• Mr. M. L. Apte (Director)
• Mr. Aspy D Cooper
• Mr. Ved Prakash Chaturvedi (Managing Director)

NAV History

Tata Mutual Fund

Tata Balanced Fund -
Growth

1
 Net Asset Index
Date Value Value
1-Apr-09 43.1243 3060.35
2-Apr-09 44.0426 3211.05
6-Apr-09 44.3254 3256.6
8-Apr-09 44.8285 3342.95
9-Apr-09 45.0838 3342.05
13-Apr-09 45.7311 3382.6
15-Apr-09 46.7091 3484.15
16-Apr-09 45.5401 3369.5
17-Apr-09 45.885 3384.4
20-Apr-09 46.1778 3377.1
21-Apr-09 45.9366 3365.3
22-Apr-09 45.7453 3330.3
23-Apr-09 46.3154 3423.7
24-Apr-09 47.0039 3480.75
27-Apr-09 46.7077 3470
28-Apr-09 45.7289 3362.35
29-Apr-09 46.5308 3473.95
4-May-09 47.9815 3654
5-May-09 48.459 3661.9
6-May-09 48.1409 3625.05
7-May-09 48.796 3683.9
8-May-09 48.3187 3620.7
11-May-09 47.6321 3554.6
12-May-09 48.6463 3681.1
13-May-09 48.2959 3635.25
14-May-09 48.2249 3593.45
15-May-09 48.9543 3671.65
19-May-09 54.922 4318.45
20-May-09 56.0365 4270.3
21-May-09 55.2104 4210.9
22-May-09 55.8582 4238.5
25-May-09 56.5443 4237.55
26-May-09 55.2342 4116.7
27-May-09 56.9626 4276.05
28-May-09 57.2848 4337.1
29-May-09 58.2898 4448.95
1-Jun-09 59.1096 4529.9
2-Jun-09 59.1665 4525.25
3-Jun-09 59.8049 4530.7
4-Jun-09 60.269 4572.65
5-Jun-09 60.2471 4586.9
1
 8-Jun-09 58.3199 4429.9
9-Jun-09 59.9399 4550.95
10-Jun-09 60.9672 4655.25
11-Jun-09 60.8008 4637.7
12-Jun-09 60.0607 4583.4
15-Jun-09 59.1296 4484
16-Jun-09 59.8093 4517.8
17-Jun-09 58.2155 4356.15
18-Jun-09 57.1969 4251.4
19-Jun-09 58.0393 4313.6
22-Jun-09 57.5298 4235.25
23-Jun-09 57.6952 4247
24-Jun-09 58.7362 4292.95
25-Jun-09 58.7582 4241.85
26-Jun-09 59.8163 4375.5
29-Jun-09 60.083 4390.95
30-Jun-09 58.9334 4291.1
1-Jul-09 59.3832 4340.9
2-Jul-09 59.3627 4348.85
3-Jul-09 60.0231 4424.25
6-Jul-09 57.4621 4165.7
7-Jul-09 58.1911 4202.15
8-Jul-09 56.9604 4078.9
9-Jul-09 57.0467 4080.95
10-Jul-09 56.0876 4003.9
13-Jul-09 55.3641 3974.05
14-Jul-09 56.8623 4111.4
15-Jul-09 58.4651 4233.5
16-Jul-09 58.5908 4231.4
17-Jul-09 60.019 4374.95
20-Jul-09 60.9797 4502.25
21-Jul-09 60.8448 4469.1
22-Jul-09 60.0286 4398.9
23-Jul-09 61.01 4568.55
24-Jul-09 61.6938 4572.3
27-Jul-09 61.7561 4564.1
28-Jul-09 62.1004 4513.5
29-Jul-09 61.4848 4571.45
30-Jul-09 61.9642 4636.45
31-Jul-09 62.8018 4711.4
3-Aug-09 63.6394 4680.5
4-Aug-09 63.0814 4694.15

2
 5-Aug-09 63.3182 4585.5
6-Aug-09 62.0368 4481.4
7-Aug-09 61.1817 4437.65
10-Aug-09 60.65 4471.35
11-Aug-09 60.7906 4457.5
12-Aug-09 60.8254 4605
13-Aug-09 62.2725 4580.05
14-Aug-09 62.3494 4387.9
17-Aug-09 60.5465 4458.9
18-Aug-09 61.6755 4394.1
19-Aug-09 61.1739 4453.45
20-Aug-09 61.4981 4528.8
21-Aug-09 62.2144 4642.8
24-Aug-09 63.7839 4659.35
25-Aug-09 64.4677 4680.85
26-Aug-09 64.9145 4688.2
27-Aug-09 64.8869 4732.35
28-Aug-09 64.9054 4662.1
31-Aug-09 64.78 4625.35
1-Sep-09 64.4543 4608.35
2-Sep-09 64.3626 4593.55
3-Sep-09 64.1701 4680.4
4-Sep-09 64.8005 4782.9
7-Sep-09 65.671 4805.25
8-Sep-09 65.5237 4814.25
9-Sep-09 65.4927 4819.4
10-Sep-09 65.522 4829.55
11-Sep-09 65.2827 4808.6
14-Sep-09 65.3139 4892.1
15-Sep-09 66.1486 4958.4
16-Sep-09 66.7469 4965.55
17-Sep-09 66.8675 4976.05
18-Sep-09 66.8869 5020.2
22-Sep-09 67.6146 4969.95
23-Sep-09 67.3026 4986.55
24-Sep-09 67.6467 4958.95
25-Sep-09 67.6377 5006.85
29-Sep-09 67.9366 5083.95
30-Sep-09 69.0488 5083.4
1-Oct-09 68.8779 5003.2
5-Oct-09 68.2381 5027.4
6-Oct-09 68.5437 4985.75

3
 7-Oct-09 68.7596 5002.25
8-Oct-09 69.0875 4945.2
9-Oct-09 68.4791 5054.25
12-Oct-09 69.427 5118.2
14-Oct-09 70.6366 5108.85
15-Oct-09 70.9072 5142.15
16-Oct-09 71.1774 5114.45
20-Oct-09 71.0192 5063.6
21-Oct-09 70.2003 4988.6
22-Oct-09 69.2386 4997.05
23-Oct-09 69.801 4970.9
26-Oct-09 69.7353 4846.7
27-Oct-09 68.7481 4826.15
28-Oct-09 68.8845 4750.55
29-Oct-09 68.3668 4711.7
30-Oct-09 68.3754 4563.9
3-Nov-09 66.5667 4710.8
4-Nov-09 68.2069 4765.55
5-Nov-09 69.0617 4796.15
6-Nov-09 70.1882 4898.4
9-Nov-09 71.5821 4881.7
10-Nov-09 71.2333 5003.95
11-Nov-09 72.6782 4952.65
12-Nov-09 72.2866 4998.95
13-Nov-09 72.6118 5058.05
16-Nov-09 73.1074 5062.25
17-Nov-09 73.1958 5054.7
18-Nov-09 73.1915 4989
19-Nov-09 72.1601 5052.45
20-Nov-09 72.6769 5103.55
23-Nov-09 72.8459 5090.55
24-Nov-09 73.0207 5108.15
25-Nov-09 73.2661 5005.55
26-Nov-09 72.3849 4941.75
27-Nov-09 71.7476 5032.7
30-Nov-09 72.6876 5122
1-Dec-09 73.853 5123.25
2-Dec-09 73.6553 5131.7
3-Dec-09 74.082 5108.9
4-Dec-09 73.9436 5066.7
7-Dec-09 73.2952 5147.95
8-Dec-09 73.682 5112

4
 9-Dec-09 73.2929 5134.65
10-Dec-09 73.4614 5117.3
11-Dec-09 73.3931 5105.7
14-Dec-09 73.377 5033.05
15-Dec-09 72.5075 5042.05
16-Dec-09 72.7298 5041.75
17-Dec-09 73.005 4987.7
18-Dec-09 72.6621 4952.6
21-Dec-09 72.1711 4985.85
22-Dec-09 72.4653 5144.6
23-Dec-09 73.7334 5178.4
24-Dec-09 73.9633 5187.95
29-Dec-09 74.1229 5169.45
30-Dec-09 74.083 5201.05
31-Dec-09 74.5816 5232.2
4-Jan-10 75.3508 5277.9
5-Jan-10 75.8132 5281.8
6-Jan-10 76.2209 5263.1
7-Jan-10 75.7907 5244.75
8-Jan-10 75.3277 5249.4
11-Jan-10 75.4634 5210.4
12-Jan-10 75.5603 5233.95
13-Jan-10 76.0125 5259.9
14-Jan-10 76.5259 5252.2
15-Jan-10 76.2805 5274.85
18-Jan-10 76.3907 5225.65
19-Jan-10 75.8885 5221.7
20-Jan-10 75.9345 5094.15
21-Jan-10 74.6744 5036
22-Jan-10 74.2491 5007.9
25-Jan-10 73.3544 4853.1
27-Jan-10 71.5267 4867.25
28-Jan-10 72.0066 4882.05
29-Jan-10 72.2066 4899.7
1-Feb-10 72.9902 4830.1
2-Feb-10 72.3305 4931.85
3-Feb-10 73.1943 4845.35
4-Feb-10 72.1797 4718.65
5-Feb-10 71.1654 4757.25
8-Feb-10 71.9642 4760.4
9-Feb-10 72.8394 4792.65
10-Feb-10 72.5446 4757.2

5
11-Feb-10 72.807 4826.85
15-Feb-10 72.6696 4801.95
16-Feb-10 73.0611 4855.75
17-Feb-10 73.6084 4914
18-Feb-10 73.007 4887.75
19-Feb-10 72.5243 4844.9
22-Feb-10 72.33 4856.4
23-Feb-10 72.2994 4870.05
24-Feb-10 72.3648 4858.6
25-Feb-10 72.2209 4859.75
26-Feb-10 72.8792 4922.3
2-Mar-10 73.9644 5017
3-Mar-10 74.735 5088.1
4-Mar-10 74.9467 5080.25
5-Mar-10 75.1954 5088.7
8-Mar-10 75.6439 5124
9-Mar-10 75.4133 5101.5
10-Mar-10 75.1719 5116.25
11-Mar-10 75.4323 5133.4
12-Mar-10 75.421 5137
15-Mar-10 75.407 5128.9
16-Mar-10 75.8721 5198.1
17-Mar-10 76.087 5231.9
18-Mar-10 75.9642 5245.9
19-Mar-10 75.9727 5262.8
22-Mar-10 75.5764 5205.2
23-Mar-10 75.8312 5225.3
25-Mar-10 76.1198 5260.4
26-Mar-10 76.4053 5282
29-Mar-10 76.3546 5302.85
30-Mar-10 76.0097 5262.45
31-Mar-10 76.0252 5249.1
1-Apr-10 76.6705 5290.5
5-Apr-10 77.1787 5368.4
6-Apr-10 77.0742 5366
7-Apr-10 77.101 5374.65
8-Apr-10 76.6227 5304.45
9-Apr-10 77.1325 5361.75
12-Apr-10 77.0551 5339.7
13-Apr-10 77.1463 5322.95
15-Apr-10 76.9171 5273.6
16-Apr-10 76.744 5262.6

6
19-Apr-10 76.4332 5203.65
20-Apr-10 76.8616 5230.1
21-Apr-10 77.1821 5244.9
22-Apr-10 77.3187 5269.35
23-Apr-10 77.5831 5304.1
26-Apr-10 77.8642 5322.45
27-Apr-10 77.5772 5308.35
28-Apr-10 76.7151 5215.45
29-Apr-10 76.9931 5254.15
30-Apr-10 77.3317 5278
3-May-10 76.9983 5222.75
4-May-10 76.3808 5148.5
5-May-10 76.4167 5124.9
6-May-10 76.0841 5090.85
7-May-10 74.766 5018.05
10-May-10 76.4115 5193.6
11-May-10 75.8963 5136.15
12-May-10 76.3192 5156.65
13-May-10 77.1099 5178.9
14-May-10 76.5242 5093.5
17-May-10 76.356 5059.9
18-May-10 76.3994 5066.2
19-May-10 74.6037 4919.65
20-May-10 74.8923 4947.6
21-May-10 74.3403 4931.15
24-May-10 74.4928 4943.95
25-May-10 72.843 4806.75
26-May-10 73.8718 4917.4
27-May-10 74.5135 5003.1
28-May-10 75.2711 5066.55
31-May-10 75.829 5086.3
1-Jun-10 74.8319 4970.2
2-Jun-10 75.2965 5019.85
3-Jun-10 76.1301 5110.5
4-Jun-10 76.3915 5135.5
7-Jun-10 75.6626 5034
8-Jun-10 75.4066 4987.1
9-Jun-10 75.5974 5000.3
10-Jun-10 76.2913 5078.6

7
 CALCULATION

Standard deviation =

1
 = 9.2416

Coefficient of correlation =

= 0.96533

Mean =

= 67.226

1
coefficient of variance =

= 13.742

1
UTI mutual Fund
1) Overview of company
2) Fund type
3) Chair person
4) NAV of past one year
5) Index value of NIFTY
6) Calculation

2
3
 Introduction
Vision
To be the most Preferred Mutual Fund.
Our mission is to make UTI Mutual Fund:
•The most trusted brand, admired by all stakeholders
•The largest and most efficient money manager with global presence
•The best in class customer service provider
•The most preferred employer
•The most innovative and best wealth creator
• A socially responsible organisation known for best corporate governance
Genesis
January 14, 2003 is when UTI Mutual Fund started to pave its path following the vision of UTI
Asset Management Co. Ltd. (UTIAMC), which was appointed by UTI Trustee Co, Pvt. Ltd. for
managing the schemes of UTI Mutual Fund and the schemes transferred/migrated from the
erstwhile Unit Trust of India.
UTIAMC provides professionally managed back office support for all business services of UTI
Mutual Fund in accordance with the provisions of the Investment Management Agreement, the
Trust Deed, the SEBI (Mutual Funds) Regulations and the objectives of the schemes. State-of-the-
art systems and communications are in place to ensure a seamless flow across the various
activities undertaken by UTIMF.
Since February 3, 2004, UTIAMC is also a registered portfolio manager under the SEBI (Portfolio
Managers) Regulations, 1993 for undertaking portfolio management services. UTIAMC also acts
as the manager and marketer to offshore funds through its 100 % subsidiary, UTI International
Limited, registered in Guernsey, Channel Islands.
Assets Under Management
UTIAMC presently manages a corpus of over Rs. 79,457 Crores* as on 30th April 2010. UTI Mutual
Fund has a track record of managing a variety of schemes catering to the needs of every class of
citizens. It has a nationwide network consisting 144 UTI Financial Centres (UFCs) and UTI
International offices in London, Dubai and Bahrain.UTIAMC has a well-qualified, professional fund
management team, which has been fully empowered to manage funds with greater efficiency
and accountability in the sole interest of the unit holders. The fund managers are ably supported
by a strong in-house securities research department. To ensure investors’ interests, a risk
management department is also in operation.
Reliability
UTIMF has consistently reset and upgraded transparency standards. All the branches, UFCs and
registrar offices are connected on a robust IT network to ensure cost-effective quick and efficient
service. All these have evolved UTIMF to position as a dynamic, responsive, restructured, efficient
and transparent entity, fully compliant with SEBI regulations.

Investment Philosophy

UTI Mutual Fund’s investment philosophy is to deliver consistent and stable returns in the
4
medium to long term with a fairly lower volatility of fund returns compared to the broad market.
It believes in having a balanced and well-diversified portfolio for all the funds and a rigorous in-
house research based approach to all its investments. It is committed to adopt and maintain
good fund management practices and a process based investment management.
UTI Mutual Fund follows an investment approach of giving as equal an importance to asset
allocation and sectoral allocation, as is given to security selection while managing any fund. It
combines top-down and bottom-up approaches to enable the portfolios/funds to adapt to
different market conditions so as to prevent missing an investment opportunity.
In terms of its funds performance, UTI Mutual Fund aims to consistently remain in the top quartile
vis-à-vis the funds in the peer group.

Sponsors
Three leading public sector banks – Bank of Baroda, Punjab National Bank and State Bank of India
and Life Insurance Corporation of India (LIC), the largest public financial investment institution
and life insurer in India are the sponsors of UTI Mutual Fund.
Bank of Baroda:-
Bank of Baroda is a commercial bank performing activities in terms of Banking Companies
(Acquisition and Transfer of Undertakings Act 1970) under which the Undertaking of the Bank
was taken over by the Central Government. During the period since inception, it has always
maintained its practice of sound value based banking to emerge as one of the premier public
sector Banks of the country today. It has a track record of uninterrupted profits since inception in
1908. The financial strength of the Bank and its long tradition of efficient customer service are
drawn substantially from the extensive reach of its 2732 strong branch network (as of
31.03.2007) covering almost every State and Union Territory in the Country. The Bank is also one
of the few Indian Banks with a formidable presence overseas with 40 branches. Thus, the total
branch network is 2,772 as at 31.03.2007.

Life Insurance Corporation of India

Life Insurance Corporation of India (LIC) is amongst the largest insurance companies in the world,
with 2048 branches and having a Fund size of Rs.-5,60,806.33 crore.
Punjab National Bank
Punjab National Bank is a commercial bank performing activities in terms of Banking Companies
(Acquisition and Transfer of Undertakings Act 1970) under which the Undertaking of the Bank
was taken over by the Central Government. The main object of the bank under the said Act is as
below:- An act to provide for the acquisition and transfer of the undertaking of certain banking
companies, having regard to their size, resources coverage and organization, in order to further
to control the heights of the economy, to meet progressively and serve better, the needs of the
development of the economy and to promote the welfare of the people, in conformity with the
policy of the State towards securing the principles laid down in clause (b) and (c) of Article 39 of
the Constitution of India and for matter connected therewith or incidental therein. As on
31.03.2007 Punjab National Bank has 4539 domestic offices including 421 extension counters, 2
subsidiaries and a deposit size of Rs.1, 39,860 crores.

5
State Bank of India:
The State Bank of India is the largest public sector bank in India with 9517 branches in India and
83 offices in 32 countries worldwide. In addition to this, SBI also has 21 subsidiaries.
The sponsors are not responsible nor liable for any loss resulting from the operation of the
scheme beyond the contribution of an amount of Rs.10,000/- made by them towards setting up
of the Mutual Fund

Trustee
UTI Trustee Company Private Limited company incorporated under The Companies Act, 1956
will be the Trustee of transferred/migrated schemes are the first and sole trustee of the Mutual
Fund under the Trust Deed dated December 9, 2002 executed between the Sponsors and the
Trustee Company (the Trustee).

Registered office:

UTI Tower, Gn Block, Bandra - Kurla Complex, Bandra (East), Mumbai - 400 051

Trustee

Shri Janki Ballabh, Dr. P G Apte

Chairman, Former Chairman, SBI Director, Indian Institute of Management,
Flat No. 605, Versova Vinayak Bangalore,
Co-op. Hsg. Soc., HSG Plot No. 415, IIMB Campus,
8, Near Versova Telephone Bannerghatta Road,
Exchange, Versova, Andheri (W), Bangalore - 560 076
Mumbai 400 053
Shri S P Oswal Shri Babasaheb Neelkanth Kalyani
Chairman & Managing Director-Vardhman Chairman & Managing Director -Bharat Forge
Textiles Ltd. Limited
Auro Mirra Bhawan, 2722, 'Amit' 221/A, Kalyani Nagar,
Gurdev Nagar, Pakhowal Road, Yerawada, Pune - 411 006
Ludhiana.
Shri Ashok K Kini Shri S Ravi
Flat No. B-202, Mantri Pride Senior Partner,Ravi Rajan & Co. Chartered
Apartment, 1st Cross Mountain Accountants
Road, Jayanagar, 1st Block, D-218, Saket,
Bangalore - 560011 New Delhi - 110 017
Prof P V Ramana
Chairman, ITM Business School, Kharghar
6
Bungalow No 12, Gulab View,
Near Chembur,
Mumbai - 400 071

Asset Management

UTI Asset Management Co. Ltd. (UTIAMC) is a company incorporated under The Companies Act,
1956.

UTIAMC was appointed as the Asset Management Company of the UTI Mutual Fund in terms of the
Investment Management Agreement executed between UTI Trustee Co. Ltd. and UTIAMC on
December 9, 2002. UTIAMC was registered by SEBI to act as the asset management company for
UTI Mutual Fund vide its letter of January 14, 2003.

The paid up capital of UTIAMC has been subscribed equally by four sponsors: State Bank of India,
Life Insurance Corporation of India, Bank of Baroda and Punjab National Bank. UTIAMC, apart from
managing the schemes of UTI Mutual Fund, also manages the schemes transferred/migrated from
the erstwhile Unit Trust of India, in accordance with the provisions of the Investment Management
Agreement, the Trust Deed, the SEBI (Mutual Funds) Regulations and the objectives of the
schemes.

UTIAMC has also entered into a service agreement with the Administrator of the Specified
Undertaking of the Unit Trust of India (SUUTI) to provide them with back office support for
business processes.

UTIAMC is also a registered Portfolio Manager under the SEBI (Portfolio Managers) Regulations,
1993 since February 3, 2004 for undertaking portfolio management services.

Subsidiaries

UTI International Ltd. (UTIIL) is a 100% subsidiary of UTIAMC, registered in Guernsey, Channel
Islands, which acts as the manager to offshore funds and markets these offshore funds abroad.
Towards expansion of its activities, UTIIL has signed a joint venture agreement with Shinsei Bank
Ltd. of Japan to set up UTI International (Singapore) Pvt. Ltd.
UTIIL is focussed on investment management and distribution of financial products in the South
East Asian region. UTIIL also manages funds investing in other jurisdictions.
UTI Retirement Solutions Ltd. (UTIRSL), is a 100% subsidiary of UTIAMC which was incorporated in
December, 2007 and started operations w.e.f. March, 2008. UTIRSL has been set up to carry out
the operations as a Pension Fund Manager under the New Pension System set up by Pension Fund
Regulatory and Development Authority (PFRDA).
UTIRSL was initially appointed by the NPS to manage the pension funds of the government

7
employees. In March, 2009, the Company has also been appointed by NPS for management of
pension funds for non-government employees.
UTI Ventures is a 100% subsidiary of UTI AMC, UTI Ventures is a leading Indian private equity
firm.Focused on growth capital, we propel the ambitions of passionate Indian entrepreneurs,
while unlocking superior returns for our investors. Our demonstrated track record of successful
investments, led by an experienced management team, positions our funds among top
performers in India.

Key People
Mr. U.K. Sinha Mr. Jaideep Bhattacharya
Mr. Satish Chandra Dikshit Mr. Imtaiyazur Rahman
Mr. T.N.Radhakrishna Mr. Anoop Bhaskar
Mr. Amandeep Singh Chopra Mr. Asish Ranawade
Mr. S.L.Pandian Mr. Manas Lal Mitra

Fund Managers

Mr. Anoop Bhaskar Mr. Amandeep Chopra

Mr. Sanjay Ramdas Dongre Ms. Swati Kulkarni
Mr. Harsha Upadhyaya Ms. Shilpita Guha
Mr. V. Srivatsa Mr. Kaushik Basu
Mr. K Mukundan Mr. Puneet Pal
Mr. Ajay Tyagi Mr. Lalit Nambiar

8
9
UTI Mutual Fund
UTI – Balanced Fund
UTI – Balanced Fund-Growth
Date Net Asset Value Index Value
1-Apr-09 45.04 3060.35
2-Apr-09 46.34 3211.05
6-Apr-09 46.77 3256.6
8-Apr-09 47.31 3342.95
9-Apr-09 47.5 3342.05
13-Apr-09 48.2 3382.6
15-Apr-09 49.54 3484.15
16-Apr-09 48.47 3369.5
17-Apr-09 48.82 3384.4
20-Apr-09 48.86 3377.1
21-Apr-09 48.48 3365.3
22-Apr-09 48.21 3330.3
23-Apr-09 49.13 3423.7
24-Apr-09 49.76 3480.75
27-Apr-09 49.7 3470
28-Apr-09 48.63 3362.35
29-Apr-09 49.32 3473.95
4-May-09 51.09 3654
5-May-09 51.05 3661.9
6-May-09 50.67 3625.05
7-May-09 51.2 3683.9
8-May-09 50.66 3620.7
11-May-09 49.98 3554.6
12-May-09 50.92 3681.1
13-May-09 50.78 3635.25
14-May-09 50.63 3593.45
15-May-09 51.4 3671.65
19-May-09 57.82 4318.45
20-May-09 58.16 4270.3
21-May-09 57.54 4210.9
22-May-09 57.72 4238.5
25-May-09 58.35 4237.55
26-May-09 57.43 4116.7
27-May-09 58.83 4276.05
28-May-09 59.05 4337.1
29-May-09 60.04 4448.95
1-Jun-09 60.73 4529.9
2-Jun-09 60.92 4525.25
3-Jun-09 61.13 4530.7
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11
 CALCULATION

Standard deviation =

= 7.6618

Coefficient of correlation =

r = 0.9770

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 Mean =

= 66.8545

coefficient of variance =

= 11.4604

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14
RESEARCH METHODOLOGY

OBJECTIVES:

• To study about the mutual funds industry.

• To study the approach of investors towards mutual funds

and ulips.

• To study the behavior of the investors whether they prefer

mutual funds or ulips?

SCOPE OF THE STUDY:

• Subject matter is related to the investor’s approach towards

mutual funds and ulips.

• People of age between 20 to 60

• Area limited to Chandigarh.

• Demographics include names, age, qualification, occupation,

marital status and annual income.

STEPS OF RESEARCH DESIGN:

• Define the information needed:- This first step

states that what is the information that is actually
required. Information in this case we require is that

15
 what is the approach of investors while investing
their money in mutual funds and ulips e.g. what do
they consider while deciding as to invest in which of
the two i.e mutual funds or ulips. Also, it studies the
extent to which the investors are aware of the
various costs that one bears while making any
investment. So, the information sought and
information generated is only possible after defining
the information needed.

• Design the research:- A research design is a

framework or blueprint for conducting the research
project. It details the procedures necessary for
obtaining the information needed to solve research
problems. In this project, the research design is
explorative in nature.

• Specify the scaling procedures:- Scaling

involves creating a continuum on which
measured objects are located. Both nominal and
interval scales have been used for this purpose.

• Construct and pretest a questionnaire:- A

questionnaire is a formalized set of questions for
obtaining information from respondents. Where as
pretesting refers to the testing of the questionnaire
on a small sample of respondents in order to
identify and eliminate potential problems.

Population

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All the clients of State bank of India and State bank of
Patiala who are investing money in mutual funds and
ulips, both.

• Sample Unit

Investors and non-investors.

• Sample Size

This study involves 50 respondents.

• Sampling Technique:

The sample size has been taken by non-random

convenience sampling technique

• Data Collection:
• Data has been collected both from primary as well as
secondary sources as described below:
• Primary sources
Primary data was obtained through questionnaires filled
by people and through direct communication with
respondents in the form of Interview.
• Secondary sources
The secondary sources of data were taken from the
various websites , books, journals reports, articles etc.
This mainly provided information about the mutual fund
and ulips industry in India.

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 • Plan for data analysis : Analysis of data is planned
with the help of mean, chi-square technique and
analysis of variance.

LIMITATIONS:

No study is free from limitations. The limitations of this study

can be:

• Sample size taken is small and may not be sufficient to

predict the results with 100% accuracy.

• The result is based on primary and secondary data that has

it’s own limitations.

• The study only covers the area of Chandigarh that may not be
applicable to other areas.

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1
In conclusion we can see that the return of the investment of two
mutual funds TATA and UTI are having 76.92 and 64.54
respectively
But the TATA’S coefficient of variance is 13.74% whereas is
having 11.46%. According to the coefficient of variance UTI is
having more steadily growth and lesser risky but Tata Coefficient
of variance is a little bit higher and more return so in conclusion we
would prefer to go with TATA .

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FINDINGS

• By research we could get to know that risk and retune are

directly related.

• By calculating the risk we can minimize the risk.

• Tata is having a calculative risk which could give a better

return.

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