CONTENTS
1. Planning for your retirement by Ajit Dayal -------------------------------- 1
visit us at www.personalfn.com
2. A mutual fund portfolio for your retirement needs ---------------------- 5
3. 5 funds for your retirement portfolio ---------------------------------------- 9
4. Why equities are a must for a retirement portfolio -------------------- 13
5. 5 stocks for your retirement portfolio -------------------------------------- 15
6. Don’t let near term safety of capital mislead you ---------------------- 19
7. Plan early, retire comfortable by Shikha Sharma --------------------- 21
8. Life Insurance: At best returns will be moderate ---------------------- 23
9. Tax Planning for retirement by Nitin Shingala -------------------------- 25
10. How Budget 2003 will impact you by Kanu Doshi ------------------- 27
11. Don’t blame the markets for your losses ------------------------------- 29
Content Provided by :
Quantum Information Services Limited
Website
www.personalfn.com
www.equitymaster.com
Contact Information:
404, Damji Shamji,
Vidyavihar (W), Mumbai - 86.
Tel No: 022 - 5599 1234
Email: info@personalfn.com
Supported by:
DISCLAIMER
This booklet a) is for Private Circulation only and not for sale. b) is only for information purposes and Quantum
Information Services Limited (Personalfn) is not providing any professional/investment advice through it and
Personalfn disclaims warranty of any kind, whether express or implied, as to any matter/content contained in this
booklet, including without limitation the implied warranties of merchantability and fitness for a particular purpose.
Personalfn will not be responsible for any loss or liability incurred by the user as a consequence of his taking any
investment decisions based on the contents of this booklet. Use of this booklet is at the user’s own risk. The user
must make his own investment decisions based on his specific investment objective and financial position and
using such independent advisors as he believes necessary. Information contained in this Report is believed to be
reliable but Personalfn does not warrant its completeness or accuracy.
 PLANNING FOR YOUR RETIREMENT of “how can I afford to retire” depends on achieve the happy, retired life you desire.
what I wish to do when I retire. By the way,
For most of us “retirement” is a 10-letter you seek may not quite be in your grasp. “retirement” does not mean “do nothing” “In the good old days”: Time is money.
word that conjures images of sitting in the Everything has a price tag to it, even happi- but it means, in a very broad sense, stop-
garden of your house with your partner for ness. That is not to say that if you have ping to actively seek money (by way of a We all know that over time things get ex-
life, playing with the grandchildren, or hear- money you will be happy. Rather, the way to routine job or regular business) and do pensive. How many times have you heard
ing the sounds of their laughter as you read look at it is to visualise what is likely to things that you like on your pace and at your your parents tell you “when we first moved
the morning newspaper. No more troubles make you happy and then sit down with a leisure. Since there are still bills to be paid to Bombay, a flat in Juhu cost only Rs 1
in the world, no more effort to overcome the pen, paper, and calculator and see if you there will always be something to do, which million” or “tomatoes used to cost Rs 8/
many obstacles that come in everyone’s can work towards paying for that happi- is dictated by someone else’s time. (Try kg”. Over time, most things generally cost
life, just the joy of knowing that you have ness. Maybe my goal in life, my retirement not paying MTNL’s phone bill when you re- more to buy. This natural tendency for an
arrived into this heavenly state of peaceful plans, consist of moving to Hardwar and tire and see what happens!) increase in the prices of products is called
bliss - of financial nirvana. staying in an ashram and meditating by inflation.
the banks of the Ganga. Or maybe I would Now that you have worked out what you vi-
sualize your definition of happiness to be The good thing is that there are many things
MY RETIREMENT PLANNER and put a price tag on it, make a list of the that you can put your savings into, which
things you own today – after deducting any over time generally earn you money at a
My retirement (Rs) One-time Cost of Extras Gifts for two Total
cost basic living, for fun, grandchildren, loans you may have. rate higher than inflation. For example, if
every year every year every year your parents had bought a flat in Juhu for
Now look hard at the 2 tables, because a Rs 2 million in 1985, it would be worth prob-
Ashram in Hardwar lot of your major decisions in life – and the ably Rs 10 million today. However, if they
things you do for your children – will be de- had bought Rs 1 million worth of shares in
House for my termined by what you have just put down. Bajaj Auto in 1985**, the shares would be
life-partner worth Rs 44 million today – they could have
and me in Pune
For example, if that garden scene with bought four flats today even after paying
grandchildren is what you want, it is going taxes on their huge profits!
Hardwar + Pune
to cost you to buy that house and another to
live every year. If your wealth is less than Why go back to 1985 when examples exist
The basic numbers like to do all that and have a house in Pune what you have planned to spend then clearly in the recent past. In 1995, a Rs 10,000
But, wait a minute. Unless you have inher- to “escape” to and be with my friends and there is a mismatch. Something needs to investment in Infosys would be worth Rs
ited a large some of money from your an- family. Maybe my retirement is the scene be done to pull your wealth up higher and/ 756,000 today even after the technology
cestors or recently won the Playwin lottery, with the grandchildren I described above. or reduce your expectations of your retired bubble has burst and stock markets have
that financial nirvana and emotional bliss Obviously, the key to this financial equation life (maybe a 2 bedroom flat in Pune will supposedly “collapsed”!
do, not a house with a garden) to make the
MY LIST OF ASSETS two meet in happy equilibrium. Or even if money was kept in a fixed de-
posit with
What am I Value, today Any loans? This is my wealth
PRICES: THEN AND NOW Tata Steel
worth today? (Rs)
Product In 1985 In 2003 Increase in prices Increased e a r n i n g
Flat
over 25 years per annum an aver-
Car age 8%
Flat in Juhu (Rs m) 2 10 800% 9.4% interest,
Jewellery Tomatoes, Rs/kg 8 15 88% 3.6% over the
Bank deposits Rice, Rs/kg 12 28 133% 4.8% y e a r s ,
Mutual Funds that money grows into something of greater
But let’s assume that they do not meet in value.
Life Insurance Policy happy equilibrium and your revised sce-
Shares nario of happiness is still more than what Clearly, there is another way to “make”
Fixed Deposits you currently have. There is a chance that, if money and your job is not the only way to
you plan wisely for the next few years of plan for your retirement. The thing to do is
Business your working life, you may still be able to to save. To plan for your retirement and to
1 visit us at www.personalfn.com visit us at www.personalfn.com 2
find a way to try and bridge that gap be-
tween your cost of “happiness” and what
you have today as your wealth. The younger
you are, the more time you have to get to
retirement. The negative of being young
though, is that you have more expenses up
front to start your life. With your first job, your
income is not that high and you will prob-
ably buy your first TV, your first stereo, your
first motorcycle – all this costs money and
leaves you less to save. But as you get older,
you can save more of your income (you al-
ready have the TV, flat, vehicle, and you have
paid for the children’s education) – and your
income is growing as you get more experi-
ence and rewarded at your work.
But before you rush to sell your family jew-
elry and buy stocks remember that there
are many “duds” out there too, and a Rs
do some work and some study of what we
are investing in. In my opinion, you don’t
need to be an expert to make money, but
you need patience, a discipline, and maybe
some honest, unbiased opinions. If you
still don’t feel comfortable investing on your
own, hire someone to do it for you – but
make sure you share your retirement goals
and current financial situation with them.
And do not take any advice for granted:
question, understand, challenge, make
notes, check for contradictions in advice or
sudden changes and do not be shy to ask
“why”. It is your money and you have a right
to know. Let the person you hire know that
you are on top of things and not afraid to
monitor the advice you get.
In summary, the key to planning for your
retirement is:
is the financial intermediary!
6) if you do not wish to handle the financial
investments on your own, hire someone to
do it for you – and be willing to pay for the
service; most of us are born with some-
thing in our body that needs fixing and we
happily pay a doctor to try and fix it, but we
hesitate to pay someone to help fix the fi-
nancial mismatch most of us are born with.
7) to constantly update and review your re-
tirement plans and your current financial
position, and if you have hired someone to
do it for you, constantly monitor their work
and results.
Life is a wonderful journey with many ups
and downs that we all face at some point in
time. But there can be few joys greater than
holding your children next to you knowing
that you have started to plan for their future
and that one day, the grandchildren could
be running around in the garden while you
look back in satisfaction knowing that every
journey has a wonderful end.
*1 million = 10 lakhs
** Earliest available adjusted price
An investment advisor by profession,
Ajit is also the founder-director of
Equitymaster & Personalfn. He can be
reached at ajit@equitymaster.com

IF YOU HAD ONLY BOUGHT THESE

Invest in… Value in 1985** Value in 2003, Your profit after Your profit
18 years later paying tax, % per year
Bajaj Auto Rs 10,000 442,000 3,888% 22.6%
Hind Lever Rs 10,000 513,000 4,527% 23.6%
Nestle Rs 10,000 252,000 2,178% 18.7%
Capital Gains Tax calculated at 10% of profits
Excluding the benefit of Dividends received

10,000 investment in them even as recently 1) to quantify your definition of retirement

as 1999 would be worth nothing today. In-
vesting in shares, mutual funds, or even
fixed deposits and property is risky busi-
ness and you must recognize that risk be-
fore you jump headlong into a dream world.
Not easy: Requires discipline – and com-
mon sense.
We all pride ourselves on how smart we
are and yet we make the most obvious mis-
takes and blunders – unfortunately after we
have made them and cannot recover our
lost money! Isn’t it strange that we spend
so much studying and getting a solid edu-
cation so that we can get a good job and
earn money, but when it comes to saving
what we have earned after much trouble,
we throw it away “because my friend told
me to do it”? Don’t we owe it to ourselves to
3 visit us at www.personalfn.com
and see what your version of happiness
will cost.
2) to make a list of what you own so you
recognize the gap between reality and your
dreams
3) to quantify that gap and see how a
change in investing your current wealth can
get you closer to your financial goals
4) to recognize that there is a risk in every
investment you make and to know that
there will be months, or even years, when
some of your investments are not working
out the way they were supposed to
5) to constantly review (not necessarily al-
ways change) where and how you have
invested and to stay invested in a mix of
different assets - and to recognize that the
only person who definitely makes money
each time you churn your investment mix
visit us at www.personalfn.com 4
 A MUTUAL FUND PORTFOLIO FOR YOUR RETIREMENT NEEDS
For investors planning for retirement, mu-
tual funds are an important cog in the wheel.
Mutual funds offer several advantages that
their peers don’t, the most important one
being the services of a professional invest-
ment manager.
In an earlier issue (The Mutual Fund
Investor’s Handbook – September 2002),
we had dealt with the significant advantages
that mutual funds have over their peers.
When you are planning for retirement, these
advantages get amplified manifold. This is
largely because retirement planning is a
long-term commitment and a professional
investment manager stands a better
chance than most investors of fulfilling that
commitment. Investment managers keep
a tight leash on costs and are always look-
ing to optimise performance. For your re-
tirement both these are important factors.
The increasing competition between in-
vestment managers (i.e. fund houses)
makes it even better for investors like you.
You need to note that mutual funds present
just one avenue to channelise retirement
savings. There are other avenues like PF
(provident fund), EPF (employee PF), stocks
(direct investing), bonds, NSC (National
Savings Certifi-
cate). Another WHILE EQUITY FUNDS WILL PROVIDE GROWTH
pertinent fact
you need to un- Diversified Equity Funds NAV (Rs) 1-Yr 2-Yr 3-Yr 5-Yr Incep.
derstand is that
not all your sav- Zurich India Equity Fund
ings can be Franklin India Prima Fund
termed ‘retire- Franklin India Prima Plus
ment savings’. Franklin India Bluechip
Some of these Reliance Growth Fund
m o n i e s a r e Reliance Vision Fund
earmarked for Sundaram Growth Fund
a variety of pur- S&P CNX Nifty
poses l i k e BSE Sensex
child’s educa-
tion, marriage, a house, and so on. So you have shown that equities have outperformed
need to earmark your retirement savings other comparable asset classes viz. bonds,
distinctly from other investments.
5 visit us at www.personalfn.com
Before we tackle the ‘how to save’, we must
first understand ‘how much to save?’ Ide-
ally investors planning for retirement must
endeavour to save at least 70-80% of their
income that they earned just before they
retired. You will have to review your savings
from time to time, which will hopefully steer
you towards ‘the figure’.
For investors planning for retirement, there
is perhaps no product that can help them
get there like mutual funds. Mutual funds
with their diversified portfolios help inves-
tors tide over volatility and infuse a steady
growth pattern over the years. In other
words, they serve as ‘shock absorbers’ in
times of interest rate volatility on the fixed
income side and/or a prolonged bearish
phase on the equity side. For an investor
looking to save for retirement, these are
invaluable traits in an investment.
If you have 30 years left for retirement…
For any investor who has at least another
30 years until he retires i.e. he is in his late
twenties, his retirement plan must be bi-
ased towards equity. There are some rea-
sons for that:
a. Equities have a proven track record over
the long term (over 20 yrs). Several studies
Returns (%)
22.3 -1.5 16.3 -3.7 24.4 10.1
27.8 4.6 24.9 -3.5 22.9 11.6
22.5 -6.3 10.0 -9.6 22.2 10.0
22.4 -3.5 6.7 -6.6 22.1 19.8
28.3 17.3 20.6 -10.5 16.1 15.1
26.5 37.3 38.0 3.1 15.9 14.1
12.1 -3.9 5.7 -12.1 9.9
- -14.2 -7.3 -13.8 -3.2
- -12.9 -7.5 -15.2 -5.1
(NAVs as on March 31, 2003. All growth figures are compounded)
property, gold, deposits.
b. Equities are your best bet to counter funds, Gsec funds and floating rate funds.
inflation. The abovementioned study also The latter has assumed even more signifi-
reveals that gains on equities have been cance with the recent interest volatility and
highest after accounting for inflation. In other must find a place in an investor’s portfolio
words, equities neutralize the inflationary just for its utility in curtailing volatility.
impact better than other asset classes.
Your investment objective…
c. Equities tend to be volatile over the At this age your objective is to benefit from
short term (2-3 years). So if you are over 45 younger age and use the power of equities
years old, witnessing price volatility in your to boost your retirement savings. The fixed
retirement savings can be unnerving. For income portion will serve as an anchor to
your equity investments to be really profit- stabilize growth in times of equity volatility
able, you need to give it some time (at least and will also provide you a steady source
10 years). If you are at an advanced stage of income in the form of dividends should
of your working life, then you don’t have time you want such an option.
to benefit from equities and you also tend
to get jittery over even moderate volatility. If you have 15 years left for retirement…
For these reasons, equities are ideal for If you have followed the thread of what we
the younger lot of investors as they have have been saying so far, you would have
age on their side. rightly guessed that at this age (mid-for-
ties), you need lower exposure to equities.
Investors who are 30 years or below, must Something in the region of 30% should
have at least 60% of their investments (for suffice and even this must be dominated
retirement) in diversified equity funds (eq- largely by conservatively managed diversi-
uity funds because of their obvious advan- fied equity funds with only a marginal sprin-
tages over direct investing). A large portion kling of aggressive funds. The balance 70%
of that money in diversified equity funds will be accounted for by income funds.
must be invested in aggressively managed Within income funds, you need to have most
funds with smaller portions in conserva- of your investments in conservatively man-
tively managed funds. (To learn more about aged diversified bond funds, with the bal-
aggressively and conservatively managed ance in GSec funds and floating rate funds.
funds, read our views on ‘Funds for Retire-
ment’). The ra-
tionale behind ...DEBT FUNDS WILL PROVIDE STABILITY
investing in ag-
gressive funds Income Funds
Returns (%)
NAV (Rs)
at a younger 1-Yr 2-Yr 3-Yr 5-Yr Incep.
age s t e m s JM Income Fund 24.3 11.7 15.4 14.7 14.5 11.7
from the fact that Sundaram Bond Saver 19.8 13.0 14.7 13.6 14.0 13.8
these funds Templeton India Income 21.8 11.6 14.1 13.2 13.5 13.7
over a period of Birla Income Plus 25.8 12.2 14.9 13.6 13.3 13.6
time will try to DSP-ML Bond Fund 21.1 11.6 14.7 13.9 13.1 13.4
outperform the Zurich (I) High Interest 21.2 12.2 14.9 13.8 13.0 13.3
8.9
index signifi- Alliance Income 21.1 11.5 14.5 13.3 13.0 13.1
-
cantly. (NAVs as on March 31, 2003. All growth figures are compounded)
-
At this age, you must realise that you are a
With equity funds accounting for 60% of re- little late on the retirement planning bus.
tirement assets, the balance 40% must be Nothing helps investments grow like the
distributed across income (or debt/bond) power of compounding, which in turn
funds. This can be invested across bond comes from sustained investing in good
visit us at www.personalfn.com 6
and bad ‘investing’ times over years. The
later you start planning for retirement, the
weaker is the power of compounding.
Your investment objective…
Your primary objective at this stage is capi-
tal preservation (from your income funds)
with a little capital appreciation that will come
from the conservative equity funds.
If you have less than 10 years left for re-
tirement…
If you are 50 years old or thereabouts, then
unfortunately, you may well have missed the
retirement planning bus. As we have high-
lighted earlier you need to have at least 15
years between now and retirement to con-
tribute something significant for retirement.
At 50 years, you have less than 10 years left
for retirement and at best one can hope to
salvage some savings that should just
about suffice post-retirement.
Your investments should be pre-dominantly
in income funds – 90%. This should be
largely in bond funds and floating rate
schemes with smaller allocations in Gsecs,
since they tend to be volatile in times of in-
terest rate tumult. You may also consider
investing in monthly income plans, which
can invest upto 10% (of their assets) in eq-
uities.
The balance 10% should be in conserva-
tively managed diversified equity funds for
the equity flavour to give a boost to your sav-
ings.
Your investment objective…
You do not have time on your side, so you
should be looking at preserving your capi-
tal at all cost and try to clock a little growth
7 visit us at www.personalfn.com
without being too ambitious. For capital
safety you have 90% in income funds. The
10% in conservative equity funds will pro-
vide a mild equity flavour that should see
you post some appreciation to give your
savings a respectable look.
Having read our recommended asset al-
location for retirement planning and our
tips on the same, there are some impor-
tant pointers for investors looking to save
for retirement:
1. Start saving early for retirement. Give
yourself at least 25 years for retirement plan-
ning.
2. Mutual funds must form a part of your
investment plan for their unique benefits.
3. Somehow people always seem to be
out of money while planning for retirement,
but are always flush with funds for cloth-
ing, cars, etc. You need to commit resources
for retirement and this calls for discipline.
4. Invest regularly. Investing a chunk of
money at one go will not fetch the same
kind of returns that you will get by investing
the same amount in smaller portions over
a period of time.
5. Avoid drawing from your retirement sav-
ings as this defeats the very purpose of
starting early.
6. Review your plan from time to time (ev-
ery 3 years or so). If there is an increase in
expenses at present or if you anticipate
higher expenses later, you may have to
commit more resources to meet that short-
fall.
A complete solution at your
door-step. Round the clock,
round the year.
Personalfn’s team of qualified and experienced consultants provide
personalised services for the following products:
P Life Insurance from HDFC Standard Life
P Mutual Funds, Fixed Deposits and Savings Bonds
P Government & Post Office Savings Schemes
P Home Loans from IDBI Bank
We help you work out solutions that best suit your needs and assist
you in executing the plan without ever having to leave the comfort of
your home.
We are committed to providing timely ‘after sales’ support. Post ex-
ecution of the plan/transaction we also provide our customers with a
range of FREE premium online tools and products:
P MyPlanner, to track and evaluate your Net Worth and Cash Flows!
P Daily alerts for NAVs/portfolio/dividends
P Deeply researched views and analysis & interviews with experts
P A simple yet objective Asset Allocator
P Money Simplified, a quarterly online publication
It is pertinent to highlight that we do not charge customers (retail or
HNI) for the services rendered. If you are looking for a value added
service, which does not cost you even a Rupee, give us a try.
We can be reached at 022 – 5599 1234
Or please email us at info@personalfn.com
Log on to www.personalfn.com
Address: Quantum Information Services Ltd,
404 Dhamji Shamji Trade Centre, Vidya Vihar (W), Mumbai – 86.
visit us at www.personalfn.com
 FUNDS FOR RETIREMENT PLANNING
Mutual Funds are an ideal investment av-
enue for investors chalking out their retire-
ment plans. However, the domestic mutual
fund industry has too many funds which
only tends to confuse the investor. And when
you are planning for retirement, its impor-
tant that you differentiate the chaff from the
wheat. That is exactly what we have at-
tempted to do.
We have shortlisted five funds across cat-
egories (equity, debt and balanced) that we
believe should find a place in any investor’s
portfolio depending on his age and invest-
ment profile. In our selection of funds, we
have looked at consistency of performance
vis-à-vis peers and benchmark index, con-
sistency in investment strategy and poten-
tial to deliver. We have gauged these fac-
tors over a period of time after meeting up
with fund managers/chief investment offic-
ers (CIOs) across several fund houses.
Given that the domestic mutual fund indus-
try is relatively ‘young’, we have only con-
sidered funds with a minimum 5-year his-
tory for evaluation.
ZURICH INDIA TOP 200
Fund Manager: Prashant Jain
Investment Objective: Long term capital
appreciation
Profile
Zurich India Top 200 Fund (ZITF) belongs
to Zurich India Mutual Fund, one of the lead-
ing fund houses in the country today, espe-
cially on the equity side. Earlier a part of ITC
Threadneedle Mutual Fund, the fund en-
tered the Zurich India fold in 1999 before
seeing a significant upturn in its perfor-
mance. ZITF is managed with a conserva-
tive bent of fund management, and to its
credit it has often overshadowed its more
popular and aggressive sibling the Zurich
India Equity Fund as well as others in its
peer group. Over the last 5 years, the fund’s
net asset value (NAV) has appreciated by
8.7% (compounded), Sensex down 15.2%).
9 visit us at www.personalfn.com
NAV (Rs) Zurich Top 200 Fund
24.0
20.0
16.0
12.0
8.0
Sep-96 Oct-97 Nov-98 Dec-99 Jan-01
Is this fund for you?
ZITF tries to maximise gains for investors
by avoiding risky investment calls. In other
words, the fund has delivered value to in-
vestors at lower risk. Within these param-
eters, the fund has performed very consis-
tently. When we consider that a lot of its
peers have taken some very aggressive
bets and haven’t done even half as well,
we understand why ZITF is such a rare
breed. These are factors that would make
the fund an automatic choice for any inves-
tor who has at least 5 years until retirement.
Investment Strategy
The fund follows an Index-plus investing
approach. This means that it sticks largely
to the BSE 200 (about 60% of its assets
are in invested in companies in the index)
with the balance 40% being invested out-
side the index. With such an approach the
fund tends to eliminate nasty surprises for
investors as its growth is pretty much
aligned to that of its benchmark index. It
uses the flexibility of the balance 40% to
outperform the index and clock above-av-
erage growth.
As on March 31, 2003, ZITF had about 60
stocks in its portfolio. The company’s port-
folio is dominated by large cap and liquid
stocks that are fundamentally sound, which
are more popularly known as bluechips.
Most of these stocks are in the index (but at
varying allocations), which is in line with
the fund’s strategy. The fund’s stock picks
have had steady allocations (month and
month), which is an indication that the fund
manager doesn’t manage the portfolio ag-
gressively. The fund’s leading stocks in-
clude – ONGC 9.5%, SBI – 6.8%, HPCL -
6.5%, Infosys – 5.5%, Reliance 5.9%.
Sectorally too, the fund is well-diversified
across more than 15 sectors. Its leading
sectoral allocations are in oil – 22.1%,
banks –16.3%, engineering 14.9%, soft-
ware – 7.1%, pharma – 5.9%.
Feb-02 Mar-03
Outlook
ZITF’s past performance has been impres-
sive and it has outperformed the index and
its peers alike. Going forward, its strategy
is in place to continue this performance.
For an investor with an investment horizon
of over 5 years and planning for retirement,
the fund presents a good opportunity to
clock steady growth - higher than that of the
index, with low to medium risk.
ZURICH INDIA PRUDENCE FUND
Fund Manager: Prashant Jain
Investment Objective: To generate returns
with low volatility combined with capital pres-
ervation.
Profile
Zurich India Prudence Fund (ZIPF),
launched in January 1994, is one of the
most consistent performers in balanced
funds category. The fund’s consistency
stems from a conservative fund manage-
ment strategy and the fund manager be-
lieves in maintaining the sanctity of the
60:40 equity-debt diversification at all times.
Over the last 5 years, the fund’s NAV has
appreciated by over 18.7% (CAGR), a com-
mendable performance by any standards.
Is this fund for you?
ZIPF’s steady investment strategy makes it
a good fit in just about any investor’s portfo-
lio. The fund is suitable for investors who
are essentially risk takers, but are not com-
fortable with the prospect of going with eq-
uities all the way, preferring the comfort of a
fixed income element. Investors with lower
risk appetite (above 50 years) can also in-
vest smaller amounts in the fund as the
visit us at www.personalfn.com
fixed income portion will provide a degree
of stability to their portfolios.
NAV (Rs)
Zurich Prudence Fund
28.0
24.0
20.0
16.0
12.0
8.0
Jan-94 Jul-95 Jan-97 Jul-98 Jan-00 Jul-01 Jan-03
Investment Strategy
ZIPF follows a fairly steady well-diversified
investment strategy. On the equity side, it
sticks to companies it believes provide the
maximum growth potential and waits pa-
tiently for the upturn. There is lower portfo-
lio churning and the fund avoids taking risky
bets. On the debt side, the fund is predomi-
nantly in corporate bonds in AAA/AA+/AA in-
vestment category.
As on March 31, 2003, ZIPF, had 18 stocks
in its portfolio. The fund has a mix of large
and mid cap stocks with HPCL – 8.2%, SBI
– 7.5%, Grasim – 7.3%, Bharat Electronics
– 5.4%, Bharat Forge – 5.3%, leading the
portfolio. The fund’s equity portfolio ac-
counts for 62.3% of total net assets.
Sectorally, the fund is partial to engineer-
ing/industrial machinery – 24.7%, banking
– 14.9%, oil & gas 10.4%, auto/auto com-
ponents – 5.3%, with smaller allocations
to cement – 2.7% and software – 2.4%.
On the debt side (37.7% of assets), the fund
has a presence in ACC Bonds (AA), L&T
(AA+), TELCO (AA), Gabriel (A).
Outlook
ZIPF’s past performance has been very
steady and this has come without resort-
ing to anything spectacular. The fund man-
ager has a penchant for posting growth by
getting the basics right. This means that
going forward, the fund stands a better
chance of bettering investor expectations,
as it has done so far.
10
FRANKLIN INDIA BLUECHIP FUND also has allocations in tobacco (7.0%), NAV (Rs) NAV (Rs) Sundaram Growth Fund
Templeton Floating Rate Income Fund
Fund Manager: K. N. Siva Subramanian pharma (5.2%), conglomerates (4.8%) and 11.0
22.0

Investment Objective: To provide medium aluminium (4.7%). 10.8

19.0

to long-term capital appreciation 10.6 16.0

Outlook 13.0
10.4
Profile FIBF has a track record of delivering value.
10.0
Franklin India Bluechip Fund (FIBF), for- It has also established a knack of homing 10.2

merly Pioneer ITI Bluechip Fund, has in on stocks earlier on. Both these are fea- 10.0 7.0
Apr-02 Jun-02 Aug-02 Oct-02 Dec-02 Feb-03 Apr-03 Jan-97 Jan-98 Jan-99 Jan-00 Jan-01 Jan-02 Jan-03
evolved into the leading diversified equity tures that make the fund an automatic
fund in the country today. Launched in 1993, choice for retirement planning. Going for- duces price fluctuations arising out of in- Is this fund for you?
it is one of the oldest equity funds and its ward, investors will benefit from its aggres- terest rate volatility. So long as an investor has at least 5 years
consistent performance over 10 years must sive stock selection and witness the occa- to retirement, SGF is an ideal fit in his port-
be seen in light of this fact. Over 5 years, the sional bouts of volatility. However, if you are As on February 28, 2003, TFIR (Long Term folio. Given its conservative fund manage-
fund’s NAV has climbed by over 22% (com- looking at it from a long-term perspective, Option) had 70.6% in corporate bonds ment, it will suit investors across risk pro-
pounded), outperforming the BSE Sensex then these will get ironed out eventually. (floating rate), 28.7% in MIBOR-linked files, although younger investors must have
(down 15.2%) impressively. (Mumbai Interbank Offered Rate) instru- smaller allocations with larger investments
NAV (Rs) TEMPLETON FLOATING RATE ments, and 7.2% in PSU Bonds. in aggressive funds.
Franklin Bluechip Fund
49.0
INCOME FUND
41.0 Fund Manager: Nilesh Shah Outlook Investment Strategy
33.0 Investment Objective: To minimise risk TFIR must not be looked at as an invest- Unlike most growth funds, SGF’s stock al-
arising from interest rate fluctuation. ment that will make money for you over the locations have been very steady. The fund
25.0
long term. This is a fallacy because the has stringent investment guidelines in
17.0
Profile fund does not set out to do that in the first place which for instance do not permit the
9.0 A relatively late entrant on the mutual fund place. The fund will fulfill its role as a fund manager to exceed the 5% investment
Dec-93 Feb-95 Apr-96 Jun-97 Aug-98 Oct-99 Dec-00 Feb-02 Apr-03
scene (launched in February 2002), stabilising force in your portfolio at times of ceiling in stocks and a 7% ceiling in sec-
Is this fund for you? Templeton Floating Rate Income Fund, interest rate volatility. tors. This has worked very well for the fund
FIBF is managed aggressively and is ideal TFIR, has already caught the fancy of debt and has ensured adequate diversification
for investors who have at least 10 years to fund investors. It is the first fund of its kind SUNDARAM GROWTH FUND that has worked well for the fund, during
retirement. Investors aged 30-40 years can in the country and has heralded the entry of Fund Manager: Anand Radhakrishnan the bearish phase in particular. However,
allocate a larger quantum of their retirement a new product category. The fund may not Investment Objective: Capital appreciation on the flipside the fund underperformed its
monies to the fund, as compared to inves- have a track record to back its performance peers during the tech boom in 1998-1999
tors who are over 50 years. (we have waived the 5-year performance Profile as it had lower allocations to software/
criterion in this case) but is a winner purely Launched in January 1997, Sundaram telecom/media.
Investment Strategy on its capacity to offset interest rate risk. Growth Fund (SGF) is backed by one of the
FIBF has been aggressive in its investment most reliable names (Sundaram Group) As on March 31, 2003, the fund had about
strategy over the years. It has been quick to Is this fund for you? in Indian business. True to its reputation, 35 stocks in its portfolio with Reliance 5.5%,
identify potential sectors/stocks and has TFIR will find a place in any investor’s port- the fund has been very conservative and HPCL 5.5%, SBI 4.4%, ONGC 4.3%, ITC
benefited from the upturn in several in- folio for its hedging prowess. It is a fund ‘level-headed’ in its approach to fund man- 4.3% dominating its portfolio. Sectorally, the
stances with the tech surge in 1998-1999 that must exist in every investor’s portfolio agement and has delivered value to inves- fund is well-diversified into banking 13.7%,
being a case in point. The fund sticks mainly regardless of his age and risk profile. In- tors. Its performance may not have been oil 12.8%, chemicals 8.5%, software 7.5%,
to large cap and liquid companies in its vestors at an advanced age (less than 5 too spectacular when compared to some pharma 6.6%.
stock-pickings and is fairly well-diversified. years to retirement) need to allocate more of its more aggressive peers, but then the
As on March 31, 2003, the fund had nearly resources to the fund. fund’s strategy is not geared to do that. Outlook
25 stocks in its portfolio. Companies lead- SGF’s performance has been steady and Historically, SGF’s performance has been
ing its pack are SBI (9.4%), HPCL (8.4%), Investment Strategy consistent which can’t be said for too many predictable which is a comforting thing
BPCL (7.9%), ITC (7.0%), HCL Tech (6.7%). TFIR’s investment strategy is fairly uncom funds and this was starkly highlighted post- when you are planing for retirement. To that
Sector-wise, the fund is concentrated across plicated. Its strategy is to invest predomi March 2000, when SGF was a big performer. extent, the fund is on solid ground and in-
3 sectors - banking (17.9%), oil & gas nantly in floating rate instruments. Floating Over the last 5 years, the fund’s NAV has vestors can expect it to perform consistently
(16.7%), software (12.1%), which collectively rate instruments have their coupon rates appreciated by 9.9% (compounded), even in the future.
account for nearly 47% of assets. The fund adjusted at periodical intervals which re Sensex down 15.2%.
11 visit us at www.personalfn.com visit us at www.personalfn.com 12
 WHY EQUITIES ARE A MUST FOR A RETIREMENT PORTFOLIO
I am a retired man today and have been so,
for quite some time now. While I spend my
days peacefully, at the back of my mind there
is this nagging feeling that for all the hard
work I did over the years, maybe I deserved
a slightly better life, in the material sense.
Keeping this I mind, I began investigating
to find out where I lost money and how I
could have been wealthier.
Since I come from a traditional south In-
dian family, I was trained to keep a close
watch on my expenditure. I took out all my
old accounts books to investigate how I
saved and what were my living expenses
over the years. While I could not find all the
Table 1
THE IMPACT OF INFLATION
Slippers 7.0
Hair cut 0.6
Lunch and dinner for one month 43.0
Rent for accommodation 15.0
Soap 0.6
Railway fare from Bombay to native place 63.0
Movie 1.3
Coffee powder 1.0
Butter 4.3
Rice 0.6
Average
Salary from bank 156.0
details that I would have loved to see, I did
figure out some of the major expenses had
increased (Table 1).
When I began my career (in 1955-56), I was
very clear that I had to save. In fact the mood
of the generation at that time was to save. I
was also clear that I needed a house in
Bombay, since that was where I was posted.
I had the following asset classes to choose
from - real estate, bonds, stocks, bullion.
There was no decision to be made on real
13 visit us at www.personalfn.com
sideration the amount I would have spent growth companies such as Hindustan Le-
on medical and doctors bills. This was not ver, my returns today would have been phe-
estate, as I needed a house, anyway. Since done intentionally. I did not have the data. nomenally higher. (See Table 2)
I was never trained to understand stocks, I l I have taken average interest rates in
did not invest in any stocks. I purchased my calculations, based on interest rates My conclusion was similar to what I read
gold more for the purpose of making jew- given in “Handbook of Statistics on Indian much later in my life in this book called
elry for my wife than as an investment for Economy 2001”. “Walking down the Wall Street” by Peter
future needs. Lynch (a renowned fund manager).
Assuming that I earned around 3.1% real
Therefore the only investments I made for interest (11.5% stated interest less 8.4% In stocks you’ve got the company’s growth
my future were in bonds, largely govern- increase in my living expenses) on my sav- on your side. You become a partner in a
ment bonds. ings, by 2002 when I actually stopped work- expanding business which can be pros-
ing my savings based on this interest would perous too. I also realized that, the earn-
Removing the investment made in real es- have been about Rs 670,000/-. Investing ings of some of these companies do not
tate (read house), I must have saved about this at interest rates of 8% I get a princely get affected by inflation, as the increased
20% of income for the future after keeping monthly figure of Rs 4,500. My actual fig- cost, for such companies are usually
aside amounts needed for my daughter’s ures are close to this figure. passed on end consumers.
education and marriage.
Table 2
It is a different matter that THE WAY TO GO
I inherited some wealth
and therefore I am com- January January
1956 2003
% increase CAGR fortable today, but clearly 1990 2002 % increase CAGR
Rs Rs
I had not planned ad- Hindustan Lever 7 221 3,084% 33%
140.0 1,900% 6.6% equately and invested Indian Hotels 34 190 459% 15%
40.0 6,352% 9.3% smartly over the years. Asian Paints 43 264 514% 16%
1,800.0 4,086% 8.3% Tata Power 16 115 616% 18%
4,000.0 26,567% 12.6% If only I had invested my Telco 65 125 92% 6%
12.0 1,835% 6.5% savings (20% of monthly
500.0 694% 4.5% income) entirely in the BSE Sensex since In the case of bonds the only thing we get is
75.0 5,669% 9.0% its inception in 1978, my savings would the interest. Think of all the people who
90.0 8,900% 10.0% have earned a real return of 5.8% (14.2% owned bonds in growing companies. The
160.0 3,665% 8.0% from the growth of the Sensex less my 8.4% relationship between them and the com-
25.0 4,067% 8.3% increase in my living expense) from that pany ends with the payoff of the debt. Un-
8.4% year instead of 3.1%. This would have en- like the stockholders they do not get the
22,400.0 14,259% 11.1% abled me to accumulate a sum of Rs benefit of growth.
840,000/-. Investing this amount at interest
In trying to understand my numbers, sav- rates of 8% would have fetched me a Therefore I advise all my young friends to
ings pattern etc, I made some broad as- monthly amount of Rs 5,600 (25% more save part of your income in stocks. You could
sumptions: than what I receive today for having invested begin with a higher percentage in the initial
l The increase in prices has not been purely in bonds or fixed return instruments). years and then reduce it as you grow older.
weighted by the percentage of the monthly
income spent on them. Even If I had invested only 50% of my monthly It is clear that if we are to cope with even a
l I did not take into consideration the taxes savings in BSE Sensex since 1978, my in- mild inflation, we must undertake invest-
that I paid on interest earned. I also did not come would have been 12% higher than ment strategies that maintain our real pur-
take into consideration the capital gain what I earn today. chasing power; otherwise we are doomed
taxes that I would have paid had I invested to decreasing standard of living.
and sold stocks. Remember I would have realized these
l I have not taken into account all the ex- higher returns by just staying invested in The author is a Director at
penses that I normally would incur in a the Sensex, clearly a “no- brainer activity”. Quantum Advisors Pvt Limited. He
month/year. E.g. I have not taken into con- can be reached at ivsubbu@qasl.com
Had I done some work and invested in
visit us at www.personalfn.com 14
 5 STOCKS FOR YOUR RETIREMENT
Equities are often perceived as risky by re-
tail investors. So what is the rationale for
including this aspect of investment for re-
tirement planning? The fact is that if inves-
tors take time out to pick and choose, equi-
ties are known to outperform all investment
avenues in the longer term. The reason
being, that when you buy equities backed
by proper research and not on some ‘hot
tips’, it invariably means you are backing
the company to do well in the next decade
or more. Equities form that part of your high
growth asset folio, which you bank on to
beat inflation comfortably and give you con-
sistent returns in the form of dividends,
bonuses and more importantly capital ap-
preciation in the long term.
When we set out to select the 5 stocks that
we felt an investor should have in its retire-
ment folio, we based our selection on the
mix of 4 key criteria. These are: manage-
ment of the company, market dominance,
past growth and dividend paying track record
and of course, the ability to come out on
tops in the future. There were many other
stalwarts and emerging companies that we
felt were very good investment opportuni-
ties, but we feel that the 5 we selected would
stand the test of time. Here goes…
ASIAN PAINTS
In the consumer’s hierarchy of needs, the
importance of housing cannot be under-
stated. This is one of the basic premises
based on which one should look at invest-
ing in sectors like paint. The industry has
been in a transition period in the last five
years. Apart from the robust growth of the
services sector that has provided a major
fillip to income levels (in urban and semi-
urban markets notably), the paint industry
has benefited from other factors as well.
Affordable interest rates, tax incentives for
the housing sector, increasing involvement
of consumers and market share gains by
the organised players have translated into
a 9% compounded growth of decorative
15 visit us at www.personalfn.com
paint demand in the last five years.
(Rs)
Asian Paints
400
350
300
Adjusted share price
250
200
150
100
50
0
1990 1992 1994 1996
Given this backdrop, which company
should an investor invest in from a long-
term perspective? The key beneficiary from
the steady transition in the industry over
the years has been Asian Paints. The com-
pany dominates the sector with a com-
manding 23% of the overall market and
more than 39% of the organised segment.
The key strengths of the company are large-
scale capacity that gives it an operating le-
verage, distribution network and ability to
stay ahead of the competition with initia-
tives like dealer tinting machines. Though
a family owned company, it is run by a pro-
fessional management, which means that
there is stability over the long-term.
Going forward, keeping in mind a softer
interest rate regime, decorative paint de-
mand is expected to grow in line with the
GDP growth in the long run. Since Asian
Paints derives 90% of its revenues from
the decorative segment, the company
would benefit from such industry trends.
Though there are concerns on the raw
material front, the susceptibility to the vola-
tility in input prices has also reduced over
the years. Given this backdrop, we believe
that the company could provide stability to
one’s retirement portfolio in the long-term.
HINDUSTAN LEVER
With sales of Rs 100 bn, Hindustan Lever
Limited (HLL), accounts for over 50% of
the branded FMCG market. The company
is No. 1 or a strong No. 2 in categories like
soaps, detergents, tea, culinary items
(sauces, jams, noodles), ice-creams, per-
sonal care (skin creams, lotions), hair care
(shampoos, oils) and oral care. All its prod-
ucts are backed by one of the strongest
and most sophisticated distribution net-
works reaching even the remote corners of
India.
(Rs)
350
300
Adjusted share price
250
200
1998 2001 2003 150
100
50
0
1990 1992 1994
Though the year 2002 was disappointing
considering the company’s past perfor-
mance, a large part of it came due to the
bold ‘power brand’ strategy, which saw the
company pruning its unprofitable brands
and hiving/selling off non-core businesses.
The company recognises the potential for
branded staples in the long run has in-
vested heavily to make this the next growth
engine. HLL is also aiming at US$ 1 bn
outsourcing business from its parent
Unilever. In the 90’s investors saw HLL
growing its FMCG business both organi-
cally and inorganically. Trust the company
to replicate the success in foods. In the
years to come, this churning will enable
HLL to grow its business consistently and
profitably. With almost half of the popula-
tion still using unbranded products, the
scope for HLL’s growth is immense.
In the last decade, HLL’s net sales have
clocked an impressive CAGR of over 19%,
and net profits an even more impressive
34% CAGR. Had one invested Rs 1,000 in
the HLL stock even at the 52-week high of
Rs 585 in 1993, the investment would have
still been worth nearly Rs 3,000 (CAGR of
13%) today. The company has a consistent
dividend paying record and its return ratios
are among the best in India Inc. An investor
would have earned Rs 370 as dividends in
the past decade on his Rs 1,000 invest-
ment.
INDIAN HOTELS
Taj group of hotels, the flagship brand of
Indian Hotels (IHCL), has been a landmark
in the Indian hospitality industry for the last
100 years. The company owns and man-
ages over 60 hotels in India and different
HLL parts of the world. Over the last decade the
company’s revenues have been growing
at a healthy 11% CAGR till FY02, while its
net profit has grown at 21% CAGR during
the same period.
(Rs) Indian Hotels
900
800
700
Adjusted share price
1996 1998 2000 2003
600
500
400
300
200
100
0
1990 1992 1994 1996 1998 2000 2003
Tourist inflow in India has stagnated for the
last few years at 2.5 m according to World
Tourist Organisation (WTO) estimates.
However, this number is expected to grow
to 6 m in 2010 and around 10 m in 2020,
indicating a CAGR of 6% per annum. The
relaxation of the FDI norms is likely to en-
courage business travelers from around
the globe to come to Indian shores. Initia-
tives like construction of new roads, rail-
ways, airports, and seaports will enhance
connectivity this will get translated into bet-
ter movement of tourists who can access
the heritage sites that India has. These ini-
tiatives will help augur growth in the num-
ber of tourists and business travelers to
the country.
The stemming of international tourist has
given rise to increase in the number of do-
mestic travelers, thus indicating that the
spending capacity of the urban populace is
also on the rise. Currently only 20 m Indi-
ans travel and stay in hotels in a year. As
Indian infrastructure improves not only travel
will become easier, but also the domestic
standard of living will improve. This will
mean a buoyant tourism industry. Being the
best in India, IHCL stands to benefit more
visit us at www.personalfn.com 16
than anyone else because it has one of the
best and strategically located hotels, which
can cater to both the domestic as well as
international tourist. Moreover, it is also look-
ing at countries like China, SAARC and the
Middle East region, which going forward will
make it a truly world class Asian hotel chain.
TATA POWER
With a generation capacity of 2,300 MW, Tata
Power is one of the largest private sector
utilities in India. The company supplies 52%
of the total generating capacity installed in
the country’s private sector. Tata Power has
taken up one distribution circle each in
Orissa and Delhi. It has also initiated a joint
venture with the Power Grid Corporation of
India to execute a 1,000 MW transmission
project. In essence, Tata Power is gearing
itself to garner a chunk of India’s power
development pie. In the last few years, it
has also invested in telecom (Tata
Teleservices) and the energy sector (Tata
Petrodyne) with a view to becoming the Tata
Group’s vehicle for exposure to the infra-
structure sector.
Tata Power
(Rs)
300
250
Adjusted share price
200
150
100
50
0
1990 1992 1994
As per statistics, India has to add around
10,000 MW of capacity every year for the next
10 years in order to plug the demand sup-
ply gap. Also, if India has to achieve a con-
sistent 7% GDP growth, then power gen-
eration has to grow by 8%-9% per annum.
Thus, demand is not an issue in this indus-
try. To capitalise on this, Tata Power in re-
cent years, has looked beyond the Mumbai
shores to set up CPP and IPP capacity in
Jharkhand and Karnataka. Infact, in 2002,
the company’s CPP generation grew by
87% YoY to 1,459 MUs. Consequently, it fin-
ished FY02 with 30% profit growth at Rs 5
17
bn (its highest profits ever). We expect Tata
Power to sell over 14,500 MUs by FY05 (at STRENGTHS AS PER THE 4 CRITERIA
a CAGR of over 7% since FY02). Management Market Ability to Dividend ROCE
Till date, the poor health of the SEBs and dominance outperform payout
government control on licencing of power
Asian Paints Good High High 50.1% 25.2%
projects has capped Tata Power’s growth
HLL Good High High 69.0% 49.2%
plans. However, with the passing of the
Indian Hotels Good Growing High 39.9% 8.6%
Electricity Bill 2001, one is likely to see im-
Tata Power Good Growing High 19.5% 11.3%
provement in the health of the electricity
SBI Average High High 9.1% 20%*
boards, better distribution and metering * FY02 Data; For SBI taken RONW instead of ROCE
systems and realistic power tariffs. It is
clear that power will be the sunrise indus-
and growth. So, the company initiated a advantage of sustained low cost deposits,
try for India in the next decade and Tata
VRS, which successfully covered around which is critical to remain competitive in
Power will be one of the key contenders in
10% of employees and this just the start. the industry. Sooner or later, growth in cit-
this growth.
The bank has embarked on an aggressive ies will get saturated and that is when SBI’s
computerization and networking plan for all strengths will come into play.
STATE BANK OF INDIA
its branches. SBI has already computer-
You will be wondering why we have cho-
ized over 35% branches and is implement- The management has shown signs of ag-
sen a slow moving PSU bank, with a lot of ing a core-banking product, which will see gressiveness by entering the insurance and
government control among the 5 stocks the bank bridge the technological gap with the retail segment, particularly home loans
one should hold in his/her retirement port- its private peers. in a big way. Despite a late entry, retail loans
folio. Even we deliberated a lot on this already form 20% of SBI’s loan book. An
choice, but the factors listed below con-
All these initiatives are likely to show con- efficient and aggressive SBI will be a tough
vinced us that SBI is the bank for the future. tinued improvement at the efficiency levels competitor to beat going forward. We see
450
(Rs) SBI for SBI. When these measures start bear- SBI as one of the dominant bankers in In-
400 ing fruit, the gains for SBI will be tremen- dia of the 21st century.
350
dous considering its sheer size and scale
Adjusted share price
300
250 of operations. The private banks cannot For research reports on India’s leading com-
even begin to compete with SBI in terms of panies and weekly buy/sell recommendations
200
150
its reach in inner India. Its reach across the
100
length and breath of the country gives it the
www.equitymaster.com
50
0
1993 1996 1998 2000 2003
State Bank of India (SBI) is the largest bank
For value added investment services...
1996 1998 2001 2003
in India, with 9,000 own branches and
4,400 branches of its subsidiaries. The
bank has 52 overseas offices spread
across 31 countries and has correspon-
dent relationships with 720 foreign banks.
The bank enjoys a market share of about
20% in total deposits of the schedule com- CONTACT US.
mercial banks. The bank’s sheer size in
terms of branch network and employees,
coupled with its PSU status saw the bank’s
NPAs touch 9% in FY99. These facts did
not enthuse investors.
But in the last couple of years, competition Tel: 022 - 5599 1234
has forced the bank to think of its survival Email: info@personalfn.com
visit us at www.personalfn.com visit us at www.personalfn.com 18
 DO NOT LET NEAR TERM SAFETY OF CAPITAL MISLEAD YOU
Safety of capital is of paramount importance
to most investors today. This need for safety
got a boost post the bursting of the TMT
bubble. The mistake investors made then
was that they were over exposed to equi-
ties. Today, unfortunately, most investors are
making the same mistake all over again,
only the asset class in question is differ-
ent.
Yes, the asset class we are referring to is
fixed income securities – be it fixed depos-
its, PPF, EPF, Relief Bonds, Bonds offering
section 88 benefits etc. No, we are not say-
ing that these instruments are not attrac-
tive. In fact some of these schemes are
very attractive from the perspective of meet-
ing needs in 3 – 5 year horizon. But the
issue here is that being over weight in such
securities does not bode well for a portfolio
that is designed to meet retirement needs.
While planning for retirement, one thing that
is different from most other situations is
the long tenure of investment (most read-
ers will probably have over 20 years before
they retire). And as the tenure of investment
increases, the risk – return tradeoff for dif-
ferent types of securities changes. Let’s
take an example.
NOT GOOD, FOR THE LONG TERM
RBI Relief Bond - History
Initial Investment in 1991
Interest Offered
Rs
%
1,000.0
12.0
Maturity Value in 1995* Rs 1,762.3
Reinvestment Rate in 1995 % 10.0
Maturity Value in 1999* Rs 2,838.3
Reinvestment Rate in 1999 % 9.0
Maturity Value in 2003* Rs 4,367.0
Effective Return** % 13.1
over last 12 years
* Assuming interest earned is reinvested
** Compounded Annual Growth Rate (CAGR)
19 visit us at www.personalfn.com
characteristic of Relief Bond. This holds true tially higher returns, even though there may
for most other fixed income securities (like not be absolute safety of capital in the near
The RBI Relief Bond (in its pre-budget ava- fixed deposits) as well. term (mutual funds, for example). Investing
tar) is considered to be the safest instru- disproportionately in securities of relatively
ment available in the market. The returns, The message is simple. When you are in- very short tenures (unless ofcourse, you
especially after one takes into account the vesting for your retirement, you need to pre- are due to retire shortly) will probably do
tax benefit, are very attractive. So if you are dominantly invest in instruments that over more harm than good to your retirement
looking at investing for 5 years, and are keen the long term they will generate a substan- portfolio.
on safety of capital, then this instrument
scores over most others. But what if you
wish to invest to fulfill a need 20 years down
the line?
In such a circumstance the RBI Relief Bond
loses some of its lustre. The reason is
simple – the Relief Bond will give you the
money back after 5 years. You will then need
What’s
to reinvest the money – maybe again in the
Relief Bond at a much lower interest rate
(given the trend of declining interest rates,
the flavour
five years down the line the interest rates
could be as low as 5%!). This is referred to
of the
as the ‘reinvestment risk’ – the risk that the
money received at maturity may have to be
month?
invested at a lower interest rate. So if you
have a 20 year horizon, you will be exposed
to this reinvestment risk 3 times!! Now does
the Relief Bond as an investment option for
Mutual Funds
a long term portfolio look as safe as be-
fore?!
The table below brings out this important
RBI Relief Bond - Going forward
Reinvestment Rate in 2003
Maturity Value in 2007*
%
Rs
6.5
5,983.2
Check
them out now at
Reinvestment Rate 2007 % 5.0
Maturity Value in 2011* Rs 7,636.3
Effective Return** % 7.2
between 2003 - 2011
Overall Return - 20 year period 10.7
INFO | COMPARE | QUERY | ANALYSE | TRACK | ALERTS
visit us at www.personalfn.com 20
 PLAN EARLY, RETIRE COMFORTABLY
It’s ironic that if there is one aspect that
Indians don’t really think twice about, it is
their own life. Wealth one likes to protect,
health one is forced to look after, but life is
considered almost incidental. But the re-
cent entry of private players has transformed
the very nature of the business and the way
it is conducted; and one of the biggest
changes has been the effort made by life
insurers into hitherto poorly serviced areas,
such as retirement planning.
Life insurance plays the vital role of shield-
ing the policyholder’s family in the event of
early death, but today, an equally important
concern is of living too long. Rising life ex-
pectancy, rapidly increasing costs of basic
necessities and medical treatment and fall-
ing interest rates all beg the questions –
how will I maintain my lifestyle after I retire?
Will my nest-egg be enough? Very perti-
nent questions, given that retirement plan-
ning is something that most of India’s grow-
ing middle class doesn’t think twice about.
Why plan for retirement?
In an environment where there is no social
security net, the onus is on every individual
to plan for their golden years, a commit-
ment that cannot, and should not, be ig-
nored. However the fact remains that con-
sumer awareness about the realities of
post-retirement life is low. Few are aware
of how much they must save, how much
they will require after retiring, how inflation
will impact them or the possible changes
in their lifestyle. And with unpredictable
socio-economic circumstances, the need
to plan for retirement becomes even more
pressing. Take, for instance, the following
factors:
1. Ageing Population and Increasing Life
Expectancy
Only 11% of the working population in India
has any form of social security for old age.
Self-employed persons, professionals
such as doctors and lawyers, people in the
21 visit us at www.personalfn.com
unorganized sector, and those engaged in
agriculture, have no form of guaranteed
post-retirement income. Add to this the fact
that life expectancy is likely to rise from 77
years to 85 years over the next decade, and
it becomes obvious that one will have many
more years of retirement to provide for.
2. Protection of Lifestyles
Do you spend more when you are on vaca-
tion or while at work? During vacation,
right? And what is retirement but an ex-
tended vacation? The past 10 years have
shown a significant increase (ranging from
180% to 530%) in the cost of basic items
such as groceries, petrol and train tickets.
In all likelihood, the cost of these items will
increase with time. Sure, there are certain
expenses that will decrease or disappear
over the next 20 years (such as children’s
education), but there will be others - such
as medical expenses, which are highly in-
flationary. Overall, the cost of living is ex-
pected to rise 15%.
3. Protection for Spouse/Dependent
Research shows that people of 45 years
want financial independence for them-
selves and their spouses during the retire-
ment period. And with the increasing trend
towards nuclear families, this is even more
important.
4. Compounding Effect of money
The earlier one starts, the lower the amount
to be contributed to earn a specific retire-
ment kitty, as the money is compounded
over a longer period of time.
(Rs)
The early bird gets the worm…
2,025,000
Savings
1,899,450
1,525,000
1,081,818
1,025,000
525,000
100,000 250,000
25,000
35 years
So, how does one plan for retirement?
Firstly, begin saving early. Regular savings
over an extended period accumulate into a
substantial kitty that will provide a healthy
annuity. Another task is to carefully answer
several seemingly basic, but very impor-
tant questions, such as — what is the ex-
pected inflation rate? How much will my
savings grow? How much risk can I bear?
Where will I live? And how much will I
spend? The answers to these questions
will determine the amount of annuity re-
quired, and form the basis for seeking a
solution. What’s more, retirement plans
cannot be static. They must be dynamic;
re-examined on a regular basis or at criti-
cal junctures in life, and adjusted to suit
renewed conditions. So, for instance, if a
person moves to another city or has a higher
standard of living, this must be factored into
the retirement savings.
Obviously, people from different walks of
life will have varying requirements at a par-
ticular stage. For instance, self-employed
persons usually begin earning in their early
twenties and also retire earlier – usually in
their late fifties or early sixties. Profession-
als like doctors and lawyers on the other
hand, typically begin earning in their late
twenties, reach the peak of their careers in
their forties and fifties and often work till
well into their seventies, though they may
be semi-retired.
Which plan?
Because of the unique needs of people,
Retirement
60 years
visit us at www.personalfn.com
there’s no single, straitjacket approach to
planning for retirement. Retirement plans
must be flexible enough to allow their hold-
ers to make adjustments as their life
changes. Market-linked retirement plans,
being inherently flexible, are perfectly suited
to this need. They have been introduced on
the premise that the markets have proven
themselves in the past, giving investors
returns and capital appreciation in the long-
run, and are hence well-suited for long-term
investments like pensions.
In response to these different needs, ICICI
PruLife introduced two market-linked retire-
ment solutions - LifeTime Pension (regu-
lar premium plan) and LifeLink Pension
(single premium plan). These bring to-
gether the benefits of steady returns with
the assurance and longevity of a pension
plan. ICICI PruLife also offers a classical
retirement solution – ForeverLife – which
is a regular saving product that one can
invest in for a period of 10+ years, after
which one can buy an annuity. All plans of-
fer tax benefits u/s 80CCC(I). The policy-
holder can retire any time between the ages
of 50 and 70, to purchase any of four annu-
ity options, each of which has varying de-
grees of protection for dependents.
Ms. Shikha Sharma is the Managing Di-
rector & CEO, ICICI Prudential Life Insur-
ance Company.
22
 LIFE INSURANCE: AT BEST RETURNS WILL BE MODERATE sarily the deciding factor. Take for example they are today and therefore it may be un-
the Single Premium Bond, the maturity pro- wise to plan an investment based on
What is the need that is driving you to take ment opportunities like mutual funds. ceeds of which are to become taxable. If today’s tax laws.
an insurance policy? Most likely
it is the need to save tax. There ENDOWMENT POLICY SINGLE PREMIUM BOND Regular insurance cum savings
is also the need for taking care products (an endowment plan,
Sum Assured Rs 100,000.0
of dependents in case of an un- Sum Assured Rs 100,000.0 for example) as we have seen
Annual Premium* Rs 3,117.0
foreseen eventuality. But some Premium (one time) Rs 95,000.0 do not offer lucrative returns (if
Total Premium Paid Rs 93,510.0
individuals look at insurance there is high guaranteed return
as an investment opportunity. Assumed Return/Bonus (pa) 7% 7,000.0 Assumed Return (Compounded) 7% 7,000.0 that has been offered, then you
Is insurance an attractive in- Terminal/Loyalty Bonus (one time) 20% 20,000.0 Terminal/Loyalty Bonus (one time) 20% 20,000.0 need to be sure that the com-
vestment opportunity? pany will be able to meet its ob-
Maturity Value in 2033 Rs 330,000.0
Maturity Value in 2013 Rs 216,715.1 ligation). The insurance – invest-
There are several types of life Present Value of Premiums** Rs 38,679.0 ment products however score
insurance products available in Present Value of Maturity Amount** Rs 43,351.1 Effective Return^ % 8.6 much better in terms of returns.
the market today. These prod- Present Value of Premiums # Rs 35,090.5 ^ Compounded Annual Growth Rate (CAGR)
ucts range from pure life cover Present Value of Maturity Amount# Rs 32,794.5 Although, insurance products
policies (i.e. no savings com- we were to factor in a tax liability on capital may not offer the best returns, they never-
* for a healthy male, age 30 years, tenure 30 years - HDFC Standard Life
ponent) to single premium in- ** Using a discount rate of 7% pa gains at 10%, the return would drop to 8% theless have a place in a retirement portfo-
surance bonds which offer little # Using a discount rate of 8% pa CAGR, which is still quite attractive for a 10 lio as they meet needs that others cannot.
life cover and are more like in- year product. Another reason for ignoring But to think of them as lucrative investment
vestment products. We will limit our dis- the tax factor is that 10 years down the line instruments is a fallacy.
cussion to two types of insurance policies - Ofcourse, the returns are understated to the tax laws may be very different from what
Endowment (life cover plus savings) and the extent that a part of the premiums paid
Single Premium Bond (mostly savings) – is towards the insurance component. But
and focus solely on the attractiveness in even if you factor in this, the scenario will
terms of returns. not change much.

Before we move ahead with the analysis, it
is pertinent to mention that life insurance
does and will form an integral part of any
‘investment’ portfolio (benefits of diversifi-
cation, stability of returns etc). But the ques-
tion that we are raising here is that given
the returns will probably be moderate in-
vestors should not load up with these poli-
cies in a disproportionate manner.
Let’s take the case of a regular Endowment
Policy, where an individual pays a fixed sum
every year as premium and at maturity he
receives the sum assured along with the
accrued bonuses.
The table below clearly brings to the fore
the modest returns one can expect from
such policies – somewhere between 7 –
8% CAGR (the discount rate used). This
surely does not compare with the returns
one can expect from other long term invest-
23 visit us at www.personalfn.com
Now let’s consider Single Premium Bond What can a Fund Manager
product offered by HDFC Standard Life (the
comparable LIC product would be the Bima and you have in common?
Nivesh). These are more like investment
products (with a small insurance compo-
nent), the only difference being that they are
issued by insurance companies.
Access to professional research and views.
The fact that the returns in the Single Pre-
mium Bond are being compounded annu-
ally dramatically increases the attractive-
ness of this instrument (tenure 10 years). Equitymaster - the pioneer of equity research in
This compares very well with the longer ten- India, now provides professional research
ure Endowment product discussed earlier. for retail customers. Click here to know more.
And once you factor in the safety of capital,
it surely deserves to be a part of your retire-
ment portfolio.
We have avoided factoring in the tax benefit
while calculating returns. The reason for
the same is that while tax benefits do help The investor’s best friend.
in maximizing gains, they are not neces-
visit us at www.personalfn.com 24
 TAX PLANNING FOR RETIREMENT Clearly, the interest as well as the net units of mutual funds are good examples
amount you receive on maturity will be more of such investments. In fact, since income
The main objective of Investment Planning income after retirement — which means if your money compounds without getting distribution by mutual funds is now tax-free,
is maximisation of returns. Keeping, of their tax slabs are rarely lower — due to axed by taxes each year. That is, you get a many mutual fund income schemes allow
course, parameters like liquidity and secu- substantial income that accrues from in- larger corpus if income is taxed on matu- you to reinvest such income. However, one
rity in mind. The returns, to an extent, de- vestment of retirement benefits. rity. It so follows that you should select in- needs to consider that the mutual fund it-
pend upon the rate of tax applicable. Tax is struments that defer the payment of tax as self would be paying 12.8125% tax on the
therefore an important factor to be consid- Harness the power of compounding far as possible, preferably till maturity, to income, thereby lowering the rate of return
ered while deciding investments. Work with compounding if you are invest- get compounding to work best for you. and reducing the effect of compounding.
ing long term. A compounded annual rate Convert returns into Capital Gains
Investment planning for retirement is like of return of 10% is equivalent to a simple Avoid annual tax payouts Table 3
normal investment planning in so far as tax rate of return of as much as 15.9% over 10 Under the tax laws, there is a distinction PAY TAX ON MATURITY
aspects are concerned. The differences lie years and 28.6% over 20 years! Besides, between instruments where income ac-
in the longer time frame for retirement, higher the frequency of compounding, bet- Opening Interest Tax Closing
crues and is compounded annually, and Year
security of the investment and factors like ter the rates of return. It is therefore benefi- Balance (@ 10%) (@ 30%)Balance
instruments where the income accrues
health. One should take into account liquid- cial to select instruments that compound on maturity. Cumulative fixed deposits, 0 0 0 0 10,000
ity in one’s sunset years, the need to bal- your money at frequent intervals. National Savings Certificates, Kisan 1 10,000 1,000 0 11,000
ance growth with income and ensure that Vikas Patras and Indira Vikas Patras 2 11,000 1,100 0 12,100
post-tax returns exceed the rate of inflation. Make taxes work for you are instruments where income accrues 3 12,100 1,210 0 13,310
The compounding effect is mitigated if you annually — and not on maturity — even 4 13,310 1,331 0 14,641
Tax rates not likely to fall pay tax on your income before maturity. This though the income is handed over on 5 14,641 1,464 0 16,105
Typically, the tax-related factors most people is because the interest for the post-tax pe- maturity. If a taxpayer follows the mer- 6 16,105 1,611 0 17,716
consider is their current tax rate and the riod is computed on the accumulated cantile system of accounting (account- 7 17,716 1,772 0 19,487
Table 1 amount net of tax. For in- ing on an accrual basis), tax is payable 8 19,487 1,949 0 21,436
COMPARATIVE POST-TAX RETURNS stance, if you invest Rs 10,000 on the accrued income from such in- 9 21,436 2,144 0 23,580
for 10 years at a compound vestments every year. 10 23,580 2,358 4781 21,156
Investment Pre-tax Tax rates
@ 20% @ 30% annual rate of 10%, and your Total 15,937 4,781
Return
income is taxed every year, However, a taxpayer does have the option Assets like shares, property and growth
NSC VIII series 8.0% 6.4% 5.6% you end up with Rs 19,672 of following the cash system of accounting schemes of mutual funds offer capital ap-
PPF - Tax free 8.0% 8.0% 8.0% (Table 2). On the other hand, for such income (that is, he can account for preciation and are also fairly tax-efficient
Relief Bonds - Taxable 8.0% 6.4% 5.6% if your pay tax only on maturity, it on actual receipt). But this method should long-term investments. This is because the
Relief Bonds - Tax free 6.5% 6.5% 6.5% you get Rs 21,156 (Table 3) at then be followed for all similar income fall- assessee’s tax liability is postponed till the
rate they expect after retirement. Many pre- the end of 10 years. ing under this head. The assessee should date of liquidation of the asset.
sume they will be in a lower tax slab also exercise caution to ensure that he does
after they quit working. So they attempt Table 2 PAYING TAX EVERY YEAR not lose out on the annual benefit of deduc- Besides, the tax liability is generally lower
to invest in instruments that defer the tion for interest income under Section 80L. than the 20% rate of tax (plus applicable
taxability of their income till after re- Year Opening Interest Tax Closing
surcharge) on actual capital appreciation,
tirement. However, tax rates in recent Balance (@ 10%) (@ 30%) Balance
Pay tax on maturity since the assessee gets the benefits of
years have fallen to fairly low levels 0 0 0 0 10,000 In the case of instruments where the in- cost indexation and a flat rate of 20 per cent
as compared with other countries. 1 10,000 1,000 300 10,700 come accrues on maturity, the income is (plus applicable surcharge) on long-term
The rates may, therefore, not come 2 10,700 1,070 321 11,449 taxed only in the year of maturity, irrespec- capital gains. In fact, an assessee may not
down much. Of course, in India, higher 3 11,449 1,145 343 12,250 tive of the method of accounting followed. A have to pay tax on capital gains at all if the
rates are still applicable at fairly low 4 12,250 1,225 368 13,108 deep discount bond is a good example of sale proceeds or gains are reinvested in
levels of income slabs. Thus, at the 5 13,108 1,311 393 14,026 such an instrument. The entire interest in- specified instruments. But there are no
most, there may be an increase in 6 14,026 1,403 421 15,007 come is regarded as having accrued on assured returns in such cases and the tax
the income slab levels to which higher 7 15,007 1,501 450 16,058 maturity. Such an instrument, therefore, benefits must be weighed carefully against
tax rates will be applicable. This will, 8 16,058 1,606 482 17,182 gives you the full benefit of compounding. the risks attached to such investments.
in effect, amount to just a marginal 9 17,182 1,718 515 18,385 The power of compounding works equally Mr. Nitin Shingala is a Chartered
decline in tax rates. Experience shows 10 18,385 1,839 552 19,672 well with investments that offer tax-free re- Accountant. He can be reached at
that most people end up with higher Total 13,817 4,145 turns. The Public Provident Fund (PPF) and nitin.shingala@vsnl.com
25 visit us at www.personalfn.com visit us at www.personalfn.com 26
 HOW BUDGET 2003 WILL IMPACT YOU? income from Mutual Funds is also now to- plication only after 1 st March 2003. Existing
tally tax free. holdings are thus not eligible.
Let us see how does the first Budget of Mr. Table 1
Jaswant Singh, the Finance Minister, affect AT LAST, SOME RELIEF
It may be recalled that Kelkar Committee Similarly, purchases after 1st March 2004
our investments? Present Proposed had suggested exemption of dividend in- are also not eligible.
Income
Tax Tax comes and mutual Funds income. But the
First, the rates of income tax on our income Committee had also said that Companies The FM says he is experimenting for ONE
have not been changed for our financial year Rs 500,000 130,200 124,000
& Mutual Funds should not be taxed on their year only? He may extend it next year.
beginning 1st April 2003 and the Finance Rs 850,000 240,450 229,000
income distributions. Yet, the Finance Min-
Minister says stability is a virtue and he Rs 1,000,000 287,700 301,400
ister has ignored that advice and has im- Again, please remember, exemption pre-
wants to be virtuous. (His own words in Rs 10,000,000 3,122,700 3,271,400
posed tax on companies and Mutual Funds supposes that there is a Capital Gain.
para 146 of his Budget speech) There are other changes of interest also. @12.5% (+2.5% Surcharge = 12.81% of Therefore Loss, if any, is not available for
such distributions.). All Open Ended Equity set off against other capital gains.
Let us recap these rates: First, Standard Deduction for Salaries Oriented funds no doubt are exempted from Finally, tax payers will have to keep elabo-
(i) Basic rates for Individuals, HUF & all (Again stability goes for a toss!) this income distribution tax for Table 2
other Entities (Other than Firm & Co.) distributions upto 31st March THE NEW TAX STRUCTURE
Secondly, consider yet another change, this 2004.
(a) Income upto Rs 50,000 NIL time in section 88: Presently Proposed
Salary
(b) Between Rs 50,001 Available
Surprisingly, our deduction
to Rs 60,000 10% Tax Rebate under section 88 (PPF, LIC, under section 80L in respect (i) Upto Rs 1.5 lacs Lower of 33% Lower of 40%
(c) Between Rs 60,001 20% PF, etc) is continued at Rs 70,000 + 30,000 of investment incomes from or Rs 30,000 or Rs 30,000
to Rs 150,000 for Infrastructure Bonds. (Rs 100,000) to several instruments has a
(d) Over Rs 1,50,000 30% Individuals and HUF @ 15% if Gross Total (ii) Over Rs 1.5 lacs but
bigger space and a bigger de-
Income is below Rs 500,000. less than Rs 3 lacs Rs 25,000 Rs 30,000
duction. Because, earlier your
(ii) Basic rate of tax for Firms and Compa- dividend income from shares; (iii) Over Rs 3 lacs but
nies is also unchanged. But First Rupee of For Gross Total Income over Rs 500,000 income from mutual funds; in- less than Rs 5 lacs Rs 20,000 Rs 30,000
income is taxed @ 35%. no tax rebate at all is available is contin- terest income from ICICI/
ued. But a new item is added in section 88 (iv) Over Rs 5 lacs Rs NIL Rs 20,000
(iii) Sur Charge of 5% on Income tax is HDFC/IDBI Bonds; interest
which is payment for “tuition fees” paid upto on savings Bank, Bank FD interest, co-op- rate records of date wise purchases and
changed. (Stability is no longer a virtue!)
two children @ Rs 12,000 per child. Maxi- erative society interest and dividend; all had sales and offer for tax capital gains on all
(a) Surcharge on Individual, mum Rs 24,000 per year to the parent. to be aggregated and our deduction was shares outside the two dates.
HUF, AOP, BOI upto taxable Amounts actually paid to university, college, restricted to Rs 12,000.
income of Rs 850,000 NIL school or other educational institution for Senior citizens have been granted some
FULL TIME courses within India only are Of course, we had a separate exclusive de- relief. For them the tax rebate is increased
(b) If Taxable Income exceeds
Rs 850,000 10% eligible. Payments of part time courses and duction of Rs 3,000 from interest on secu- from present Rs 15,000 to Rs 20,000 un-
coaching classes are not eligible. But again rities which is continued in the Budget. der section 88B even though Kelkar Com-
(c) Aggregate incidence this maximum amount of Rs 24,000 is mittee had suggested its withdrawal. If a
of tax on categories within Rs 70,000 only. Now the quantum of deduction is still at Rs senior citizen earns salary or pension, he
(b) above (30 *10) 33%
12,000 but major items like company divi- may not have any tax liability if his income
(d) Sur Charge on Firms Does Budget hurt anywhere? dends and mutual funds income have is Rs 183,000.
& Companies 2.5% moved out of this deduction (because they
Yes. Again in several ways. Savings Bank & are exempt) creating greater space for bank Similarly, Form No. 15H for non deduction
(e) Aggregate on Bank Fixed Deposits rates of interest are interest and other items. Therefore, please of tax at source can be filed by senior citi-
(d) above (35 * 2.5) 35.875% lowered by about 1% and 7% & 8% tax Free do retain money in Bank Deposits to avail zens even if income payable to them ex-
(f) Surcharge on Artificial Bonds are gone. Instead RBI will issue of this deduction of Rs 12,000 under Sec- ceeds Rs 50,000.
Juridical Person 10% new series of 6.5% Tax Free Bonds and tion 80L. Now let us have a word about ex-
8% Taxable Bonds. However, on dividends emption of long term capital gains on eq-
Let me give some comparative figures to from companies we have a pleasant sur- uity shares under new section 10(36). Mr. Kanu Doshi is a partner at Kanu Doshi
understand the impact of changes in sur prise, because our dividend income is now First, eligibility is restricted to only listed Associates, Chartered Accountants.
charge (See Table 2) fully EXEMPT from 1.4.2003. And even our equity shares and that too acquired by im- He can be reached at ca@vsnl.com
27 visit us at www.personalfn.com visit us at www.personalfn.com 28
 DON’T ONLY BLAME THE MARKETS FOR YOUR LOSSES been very challenging for the stock mar-
kets. Of the 28 diversified equity schemes
A lot of us today believe that the safest in- From the table it is apparent that a diversi- covered in Personalfn’s performance analy-
strument to put one’s money are the debt fied portfolio can do relatively well even when sis of this five year period, 18 schemes
funds. For some, it is the Relief Bonds and one or two asset classes perform badly. generated a positive compounded return
other savings products offered by the gov- (with the highest being 27.4% pa). Of the Do you have
ernment. Some prefer direct investment in Let’s take the current infatuation with in- losers, only 2 schemes had a loss of in five minutes?
shares of listed companies. Some vesting in the debt mutual funds. In Janu- excess of 5% pa. This basically under-
ofcourse, till a few years back, believed that ary the bond markets witnessed a sharp scores the point that over the long term the
the Unit Trust of India (UTI) was the place fall in prices (as yields inched up). This is stock markets have the potential to deliver
to be. Then there are those who swear by something that a large chunk of the invest- reasonable returns – that is if you have been
gold, real estate or….. ing community did not anticipate – that there careful in your selection of funds/stocks.
is a potential for incurring a loss even in And therefore, you need to have an expo-
So is there any one safe investment for us? debt securities. So, when the correction
Should we be putting all our eggs in one came, those who invested in debt funds
sure to this asset class.
Select and Invest
basket. Probably not. probably saw about 1 to 2% of their portfo-
lios disappear in a matter of just one week!
So what should you do now? in the best
The purpose of investing is to help us meet
a need/objective sometime in the future.
For those with a disproportionate exposure
to debt funds (i.e. not well diversified), the
If you are only beginning to invest now, all MUTUAL FUNDS
you have to do is ensure that you do not get
And when we talk of the future only one thing actual loss has been very significant. carried away by market sentiment. Invest
is certain. And that is ‘uncertainty’. Uncer-
tainty about how interest rates will move, As investors we must all realise the ben-
rationally and allocate your money as per a Get a
predetermined ratio that helps you gener-
uncertainty about how the stock markets efits of having a diversified portfolio. Even
will perform,
ate a return in line with your objectives. LIFE INSURANCE
uncertainty IT MAKES SENSE TO DIVERSIFY However, if you are carrying ‘baggage’ (an policy from HDFC Standard Life
about whether already existing portfolio), take measures
Maturity Value in Mar 03
the government to ensure that allocations between asset
will remain sol- Instrument Amt If invested If invested
Allocation
vent to repay all Invested in Jan 99 in Jan 00 classes are rational. The sooner you cor- Compare various
rect the anomaly, the better it is.
its liabilities etc FD of AAA Co.
etc. NSE Nifty
30.0%
40.0%
30.0
40.0
47.7
43.9
42.1
24.6 HOME LOAN
Property 25.0% 25.0 30.0 30.0
offers and apply for the best
And that is why Gold 5.0% 5.0 5.8 5.9
it is essential 100.0 127.4 102.6
for us to struc-
ture our invest-
CAGR 5.85% 0.80% Track your net worth
Time frame of invest. (4.25 years) (3.25 years)
ments in a
manner that no single development in a within investment classes, like equities for
with the help of the
market derails our entire plan. To under- example, diversification is necessary. MyPLANNER
stand this better let’s take an example.
A large chunk of investors continue to hold
We all know how the stock markets have the view that equity funds (or investing di-
performed over the last couple of years. rectly in shares) are best avoided (due to
Those who only invested in stocks, or were the bad experience they have had in recent
over exposed to them, probably got hit the years). But are the stock markets to be
worst. But those who had a carefully avoided?
planned investment portfolio, with ad- Tel: 022 - 5599 1234
equate diversification, did pretty well – even Let’s take the example of ‘diversified’ mu- Email: info@personalfn.com
when they invested in the stock markets at tual funds over the last five years (1998 – Address: 404, Damji Shamji,
the peak in early 2000 (see table)! 2002), of which the last three years have Vidyavihar (W), Mumbai - 86.

29 visit us at www.personalfn.com visit us at www.personalfn.com 30

 PERFORMANCE ANALYSIS GLOSSARY
Asset Allocation
A systematic approach for dividing the port-
folio into stocks, bonds and cash.
In our performance analysis, we have given
the portfolio break up for equity and debt
(cash and others have been included in
the debt component).
Asset Allocation (of portfolios) is as on
March 31, 2003, unless stated otherwise.
Average Maturity
It is the average of the maturities of all pa-
pers/ instruments in a bond fund. Typically,
a higher average maturity implies that fund
manager is bullish on the interest rate sce-
nario and a lower average maturity implies
that he is cautious.
Expense Ratio
Expense ratio is annual expenses of a fund
(at the end of the financial year), including
the management fee, administrative costs,
divided by the average assets under man-
agement. A lower ratio would indicate a
more cost efficient fund.
Net Asset Value (NAV)
NAV is the price or value per unit of a fund. It
is calculated by dividing the market value of
Performance Analysis the net assets of the fund by the number of
units outstanding. Net Assets includes the
cash held and any accrued income less
the liabilities of the fund.
March 2003 For our Performance Analysis, we have
taken NAVs as on March 31, 2003.
NAV Returns
NAV Returns is the percentage change in
the NAV over the given period of time.
In case where returns are for periods less
than one year, returns are absolute. For
periods greater than 1 year, the return re-
All statistics provided by flects the compounded annual growth rate
(CAGR). However, in case of liquid funds,
the returns are annualised for all periods,
even less than a year.
Net Assets
Net assets is the total value of a fund’s cash
and securities less its liabilities or obliga-
tions. All net asset figures in our analysis
are as on March 31, 2003, unless stated
otherwise
Rolling Return
It is the return calculated based on the
moving averages over a timeframe. In case
of liquid and short-term plans, we have
taken 7 day annualized rolling return for
one year. A rolling return tends to iron out
the volatility.
Sharpe Ratio (SR)
It is a measure developed to calculate risk-
adjusted returns. The Sharpe Ratio is the
difference between the annualised return
of the scheme, Ri, and the average risk free
return, Rf, (normally bank fixed deposit rate)
divided by the standard deviation SD dur-
ing the specified period.
Sharpe Ratio = (Ri - Rf )/ SD
Therefore higher the magnitude of the
Sharpe Ratio, higher is the performance
rating of the scheme.
Standard Deviation (SD)
It tells us how much the values have devi-
ated from the mean of the values. Standard
deviation measures by how much the in-
vestor could diverge from the mean return
either upwards or downwards. It points to
the element of risk associated with the fund.
The standard deviation is calculated by
using returns of the scheme i.e. the Net
Asset Value (NAV). Higher the standard
deviation, higher the element of risk (vola-
tility) in a scheme.
Standard Deviation has been calculated for
taking monthly returns for the last 2 years.
 DIVERSIFIED EQUITY SCHEMES
NAV Return (%) SD SR Net Assets Expense Launch
Scheme Name
(Rs) 1 yr 3 yr 5 yr Incep. (Rs m) Ratio (%) Date
Alliance Equity Fund (Gr) 24.48 (9.0) (22.4) - 21.4 8.62 (0.02) 29,564 2.32 Aug-98
Birla Advantage Fund Plan B 22.90 (14.0) - - 10.8 5.83 (0.10) 26,951 2.24 Feb-95
Boi-nza Exclusive Growth 9.64 4.0 3.2 5.4 (0.5) 6.66 0.22 - 1.42# Apr-95
Canbonus 6.79 (14.6) (17.5) - 0.2 6.88 (0.16) 2,775 2.50 Jul-91
Canglobal 4.25 (18.9) (24.2) - 1.5 6.15 (0.24) 454 2.31 Mar-90
Dha-samriddhi 2.15 (1.5) (24.4) (12.5) (16.4) 5.41 (0.02) - 2.48# Sep-94
DSP-ML Equity Fund 12.98 (7.8) (21.6) 5.7 8.6 6.52 (0.08) 2,137 2.36 Apr-97
Franklin India Bluechip (G) 22.42 (3.5) (6.6) 22.1 19.8 7.97 0.03 45,120 2.30$ Dec-93
Franklin India Growth Fund 5.31 (5.5) (16.9) - (18.2) 6.83 0.01 2,350 2.39$ Feb-00
Franklin India Prima Fund (G) 27.82 4.6 (3.5) 22.9 11.6 8.71 0.20 9,764 2.49$ Dec-93
Franklin India Prima Plus (G) 22.50 (6.3) (9.6) 22.2 10.0 7.46 0.07 14,810 2.42$ Sep-94
Franklin India Vista Fund (G) 4.65 (11.6) (42.5) - (14.9) 11.61 (0.02) 1,092 1.29# Jun-98
GIC Fortune 94 6.56 (4.8) (3.9) (3.3) (5.0) 8.43 0.10 7,113 2.50 Jan-95
GIC Growth Plus II 9.86 (5.3) (23.3) 4.4 2.8 6.72 (0.09) 1,966 1.74 Feb-94
IDBI PRIN. Child Benefit (CBP) 16.36 (1.8) 9.3 9.7 9.9 3.19 0.08 235 2.15# Jan-98
IDBI PRIN. Child Benefit (FGP) 16.14 (1.8) 9.1 9.3 9.6 3.23 0.07 - 2.25# Jan-98
IDBI PRIN.Equity Fund (Gr.) 9.10 (8.5) (13.4) (0.2) (1.2) 6.47 (0.02) 5,987 2.34 Jun-95
IDBI PRIN.INDEX Fund 7.57 (13.0) (13.2) - (7.3) 6.64 (0.13) 17,686 1.47# Jul-99
IL&FS Growth&Value Fund (Gr) 11.23 0.8 (21.3) - 3.5 6.81 0.03 9,318 2.50 Oct-99
ING Growth Portfolio (Gr.) 6.57 (17.2) (39.4) - (10.2) 13.96 0.02 5,240 2.50 May-99
JM Equity Fund (Gr.) 7.19 1.3 (23.2) (5.9) (4.0) 5.72 (0.05) 1,117 2.34 Apr-95
LIC MF Equity Fund 5.69 (8.7) (17.4) (6.9) (5.5) 6.74 (0.02) 2,984$ 1.95# Apr-93
Magnum Equity Fund 7.60 (14.9) (35.4) 2.4 6.4 6.93 (0.14) 9,334 2.35 Jan-91
Magnum Global Fund 6.58 (13.5) (30.2) (3.7) (17.0) 7.13 (0.10) 2,658 1.81 Jan-01
Magnum Multiplier Plus (Open) 7.09 (20.7) (41.8) (8.5) (1.5) 8.70 (0.17) 13,886 2.35 Mar-93
 NAV Return (%) SD SR Net Assets Expense Launch
Scheme Name
(Rs) 1 yr 3 yr 5 yr Incep. (Rs m) Ratio (%) Date
NIfty BeES 98.30 (13.7) - - 543.7 6.56 (0.17) - - Jan-02
Pru ICICI Growth (Gr) 18.02 (9.8) (18.0) - 13.3 7.28 (0.01) 27,591 2.33 Jul-98
Reliance Growth Fund (Gr) 28.28 17.3 (10.5) 16.1 15.1 7.30 0.21 2,098 1.97 Nov-95
Reliance Vision Fund 26.50 37.3 3.1 15.9 14.1 7.38 0.35 7,718 2.57 Nov-95
Sun F & C Value Fund (Gr) 15.66 (5.7) (17.8) 9.5 10.4 7.72 (0.04) 1,717 1.80# Jul-97
Sundaram Growth Fund (Gr) 12.06 (3.9) (12.1) 9.9 8.9 6.40 0.02 3,475 - Apr-97
Tata Pure Equity Fund 8.87 (12.5) (15.8) - 13.6 6.67 (0.12) 2,615 2.50 May-98
Taurus Discovery Fund 3.41 (11.4) (26.6) (3.1) (11.9) 7.66 (0.24) - 2.50# Oct-94
Taurus Starshare 5.42 (6.6) (23.9) 3.2 (6.5) 7.98 (0.06) - 2.47# Feb-94
Templeton India Growth Fund 12.33 (6.8) (3.6) 7.1 5.1 6.51 0.01 17,869 2.40 Sep-96
UTI - Master Index Fund 9.34 (12.1) (15.3) - (1.4) 6.77 (0.13) 30,836$ - Jun-98
UTI Index Select Equity Fund 12.43 (9.3) (11.5) 8.6 6.8 6.67 (0.05) 2,749$ - Aug-97
UTI Nifty Index Fund 5.98 (13.5) (13.3) - (15.2) 6.73 (0.13) 13,557$ - Feb-00
UTI-Grandmaster93 8.53 (11.1) (11.9) (3.4) 1.6 6.19 (0.06) 2,848$ - Apr-93
UTI-Master Plus 91 15.35 (6.7) (10.2) (4.4) 5.7 6.78 (0.08) 45,646$ - Dec-91
UTI-Mastergain 92 8.97 (8.0) (11.8) (5.0) 1.0 6.54 (0.08) 85,062$ - Apr-92
UTI-Mastergrowth 93 13.12 (4.7) (11.7) (2.4) 4.9 6.33 (0.04) 22,344$ - Jan-93
UTI-Mastershare 86 10.80 (11.6) (14.9) (5.5) 16.5 6.87 (0.09) 103,664$ - Sep-86
UTI-PEF Unit Scheme 11.75 (15.5) (12.8) 3.2 3.4 5.36 (0.10) 6,699$ - Apr-95
Zurich (I) Cap Builder (Gr) 9.98 (10.8) - - (0.0) 5.20 (0.08) 2,671 2.50 Dec-93
Zurich (I) Equity Fund (Gr) 22.26 (1.5) (3.7) 24.4 10.1 6.75 0.14 25,240 2.49 Dec-94
Zurich (I) Top 200 Fund (Gr) 16.61 (1.9) - - 8.0 6.38 0.09 5,946 2.47 Aug-96

BSE 200 (0.0) (16.8) (1.4) 7.22

S&P CNX Nifty (7.3) (13.8) (3.2) 6.72
BSE Sensex (7.5) (15.2) (5.1) 6.78

NAVs as on 31st March 2003. Net Assets as in March 2003. Expense Ratio as in FY02
$ - Feb 2003; # - FY01
 EQUITY LINKED SAVING SCHEMES
NAV Return (%) SD SR Net Assets Expense Launch
Scheme Name
(Rs) 1 yr 3 yr 5 yr Incep. (Rs m) Ratio (%) Date
Alliance Tax Relief 96 52.81 (6.6) (15.9) 32.8 32.1 8.04 0.03 1,842 2.50 Dec-95
Birla Equity Plan 11.79 (0.5) (22.9) - 8.5 5.91 0.02 2,065 2.49 Feb-99
BOB ELSS 96 9.57 (12.0) (16.4) (0.1) 2.4 7.11 (0.07) - 2.45# Mar-96
Canequity - Tax Saver 9.00 (15.7) (26.5) - 4.8 9.60 (0.12) 595 2.18 Mar-93
Dhanraksha 89 10.85 5.8 3.2 6.1 7.9 1.60 0.01 56$ 1.76# Jun-89
First India TaxGain 97 (G) 34.12 (10.5) (29.7) 25.7 23.7 7.20 (0.04) - - Mar-97
Franklin India Index Tax (Gr) 7.64 (12.9) - - (12.1) 6.59 (0.13) 255 1.50$ Feb-01
Franklin India Tax Shield (O) (G) 23.60 (6.6) (8.7) - 24.1 7.37 0.01 9,613 2.48$ Apr-99
HDFC Tax Plan 2000 (Gr) 13.16 11.7 - - 13.1 5.30 0.21 849 2.47 Jan-01
IDBI PRIN.Tax Savings Fund 13.82 (2.4) (13.4) 12.8 8.0 7.46 0.09 4,133 2.50 Mar-96
LIC MF Tax Plan 7.09 (4.6) (24.7) (7.2) (5.6) 5.40 (0.03) 109$ 2.50# Mar-97
Magnum Tax Gain Scheme 10.67 (20.2) (41.3) 1.9 2.9 8.60 (0.16) 3,212 2.18 Mar-93
Pru ICICI Tax Plan(Gr) 11.44 (12.0) (18.9) - 3.8 7.75 0.04 2,415 2.14 Aug-99
SUN F & C Perso-l Tax Saver 40.75 (11.4) (14.3) 21.3 22.2 6.89 (0.03) 298 1.89# Apr-96
Sundaram Tax Saver (Open End) 8.45 (4.6) (12.4) - (4.9) 6.54 0.01 461 1.85# Nov-99
Tata Tax Saving Fund 10.14 (9.0) (22.8) 19.5 12.9 6.41 - 2,345 2.50 Dec-95
Taurus Libra Tax Shield 7.71 2.5 (19.2) (1.0) (3.5) 9.99 0.03 - 2.39# Jan-96
UTI Equity Tax Savings Plan 10.05 (1.0) (4.1) - 3.3 6.65 0.01 2,276$ - Nov-99
UTI-ULIP-1971 12.22 6.9 - - 7.8 2.56 (0.08) 387,189$ - Oct-71
Zurich (I) Tax Saver (Gr) 18.64 (7.3) - - 8.9 6.10 0.06 4,099 2.50 Dec-95

BSE 200 (11.4) (16.8) (1.4) 7.22

S&P CNX Nifty (14.2) (13.8) (3.2) 6.72
BSE Sensex (12.9) (15.2) (5.1) 6.78

NAVs as on 31st March 2003. Net Assets as in March 2003. Expense Ratio as in FY02
$ - Feb 2003; # - FY01
 SECTORAL FUNDS
NAV Return (%) SD SR Net Assets Expense Launch
Scheme Name
(Rs) 1 yr 3 yr 5 yr Incep. (Rs m) Ratio (%) Date
Alliance Basic Industries(Gr) 11.72 11.4 9.1 - 4.9 6.94 0.21 4,158 2.50 Dec-99
Alliance Buy India Fund (Gr) 4.08 (22.2) (21.3) - (23.8) 5.50 (0.22) 2,719 2.50 Dec-99
Alliance New Millennium (Gr) 3.62 (17.2) (35.2) - (26.6) 14.53 (0.03) 15,082 2.36 Dec-99
Birla IT Fund (Gr) Plan B 12.06 (2.2) (26.1) 11.9 2.3 12.05 0.15 4,931 2.14 Mar-95
Birla MNC Fund (Gr) 26.87 (9.0) (8.9) 24.0 12.0 4.50 (0.06) 7,066 2.50 Jun-94
DSP-ML Technology.Com (Gr) 4.15 (13.4) - - (26.4) 12.14 0.05 1,609 2.14 May-00
Franklin Infotech Fund (G) 12.51 (12.1) (33.4) - 22.0 15.57 0.01 15,692 2.36$ Aug-98
Franklin Internet Opport(G) 4.50 (11.5) (21.7) - (22.7) 10.66 (0.03) 18,226 2.35$ Feb-00
Franklin Pharma Fund (G) 7.99 (18.9) (9.9) - (5.5) 4.87 (0.14) 3,374 2.47$ Mar-99
Franklin FMCG Fund (G) 9.68 (14.1) (10.7) - (0.8) 4.49 (0.18) 1,614 2.48$ Mar-99
IL&FS eCOM Fund (Growth) 2.51 (21.6) (39.3) - (35.5) 12.05 (0.03) 4,222 1.97# Feb-00
JM Basic Fund 11.48 0.4 26.7 29.1 29.9 11.43 0.21 251 - Jun-97
Magnum Contra Fund 9.91 (6.9) 1.8 - (0.3) 7.66 0.10 919 1.69# Jul-99
Magnum FMCG Fund 5.30 (16.8) (20.9) - (15.9) 5.81 (0.20) 905 2.49# Jul-99
Magnum IT Fund 5.17 (18.0) (42.1) - (5.6) 10.00 (0.12) 3,985 1.62# Jul-99
Magnum Pharma Fund 7.89 (15.2) (10.2) - (6.3) 5.07 (0.14) 1,823 1.54# Jul-99
Pru ICICI FMCG Fund (Gr) 7.13 (18.8) (14.1) - (8.1) 4.80 (0.28) 3,339 2.04 Mar-99
Pru ICICI Technology Fund(Gr) 2.72 (16.3) (33.7) - (34.5) 12.23 (0.03) 11,125 2.41 Mar-00
Sun F & C Emerging Tech. (Gr) 2.82 (24.6) (31.0) - (34.4) 10.81 (0.09) 3,434 2.25# Mar-00
Tata Life Sc & Tech Fund (I) 7.92 (10.9) (24.3) - (2.5) 4.20 (0.13) 1,662 0.15# Jun-99
UTI Brand Value Fund 7.44 (12.8) (13.3) - (4.8) 5.71 (0.08) 3,823$ - May-99
UTI Petro Fund 12.23 0.7 20.1 - 20.0 9.23 0.11 5,720$ - May-99
UTI Pharma & Healthcare Fund 9.16 (19.2) (8.3) - (2.3) 5.29 (0.09) 6,135$ - May-99
UTI Services Sector Fund 12.86 (7.6) (20.3) - 18.1 6.94 (0.11) 5,680$ - May-99
UTI Software Fund 6.83 (19.5) (39.9) - (5.0) 14.76 (0.02) 17,504$ - May-99

BSE 200 (11.4) (16.8) (1.4) 7.22

S&P CNX Nifty (14.2) (13.8) (3.2) 6.72
BSE Sensex (12.9) (15.2) (5.1) 6.78

NAVs as on 31st March 2003. Net Assets as in March 2003. Expense Ratio as in FY02
$ - Feb 2003; # - FY01
 BALANCED FUNDS
Return (%)
Return (%) Asset Alloc (%)
Scheme Name NAV SD SR Net Assets Expense Launch
(Rs) 1 yr 3 yr 5 yr Incep. (Rs m) Ratio (%) Debt Equity Date
Alliance 95 Fund (Gr) 46.06 (2.8) (12.7) 23.3 20.5 6.03 0.01 20,175 2.26 27.0 73.0 Jan-95
Birla Balance (Gr) 8.64 (4.7) (16.3) - (4.1) 4.25 (0.09) 22,213 2.31 37.9 62.1 Oct-99
Canpremium (Open) 13.40 6.2 15.8 - 15.3 4.47 0.09 605 2.50 61.8 38.2 Feb-98
Cantriple Plus 18.21 (5.9) (7.9) - 5.5 5.14 (0.05) 17,473 1.29 37.3 62.7 Dec-91
DSP-ML Balanced Fund (Gr) 10.06 1.4 (7.7) - 0.2 4.51 - 5,014 1.95 39.4 60.6 May-99
Franklin India Balanced (Gr) 10.23 3.6 - - 0.9 4.43 0.10 1,730 2.25$ 36.3 63.7 Aug-00
FT India Balanced Fund (G) 9.16 (2.4) (5.1) - (2.6) 5.10 0.06 9,407 2.46$ 34.4 65.6 Dec-99
GIC Balanced Fund 10.11 2.1 (2.4) (2.0) 2.9 3.51 - 3,686 2.06 42.2 57.8 Feb-93
HDFC Balanced Fund (Gr) 10.30 (3.4) - - 1.2 4.76 0.01 8,980 2.18 36.9 63.1 Sep-00
IDBI PRIN. Balanced Fund (Gr) 9.90 0.2 - - (0.4) 3.45 (0.03) 1,461 2.06 35.0 65.0 Oct-00
JM Balanced Fund (Gr.) 15.76 (2.4) 4.7 14.2 10.6 5.36 0.23 1,016 2.47 47.2 52.8 Apr-95
K Balance 10.10 2.3 (5.3) - 2.7 3.51 0.04 3,066 2.48 44.7 55.3 Nov-99
Magnum Balanced Fund 9.04 (9.1) (29.0) 6.2 6.6 4.56 (0.12) 7,213 1.66 46.0 54.0 Oct-95
Pru ICICI Balanced Fund (Gr) 9.37 0.9 (11.6) - (1.9) 4.93 0.03 15,385 2.30 41.2 58.8 Nov-99
Sun F & C Balanced Fund (Gr) 6.53 (4.7) (15.2) - (12.4) 5.83 (0.04) 3,775 - 26.9 73.2 Jan-00
Sundaram Balanced Fund (Gr) 10.16 0.3 - - 0.6 3.91 0.02 1,319 - 43.4 56.6 Jun-00
Tata Balanced Fund 13.19 (1.5) (9.8) 9.4 7.1 4.48 (0.04) 8,236 2.50 35.0 65.0 Aug-95
Templeton India Pension (G) 19.53 5.8 7.9 11.2 11.8 2.64 0.09 3,323 - 62.1 37.9 Mar-97
Unit Scheme - 1964 5.56 (12.5) - - (1.1) 6.21 (0.18) 1,042,537 - - - Jul-64
UTI Unit Scheme - 1995 (Gr) 18.29 0.7 (4.3) 16.9 14.1 3.62 0.01 17,994$ - - - Jan-95
UTI Variable Inv Scheme (ILP) 9.58 - - - (11.6) 3.63 (0.49) 10,499$ - - - Nov-02
UTI Unit Scheme - 2002 5.64 - - - 2.4 2.47 (0.49) 60,251$ - 53.1$ 46.9$ Nov-02
Zurich (I) Prudence (Gr) 23.96 5.6 5.3 18.7 13.3 4.64 0.20 11,750 2.45 37.7 62.3 Dec-93

Crisil Balanced Fund Index (4.8) - - 3.83

NAVs as on 31st March 2003. Net Assets as in March 2003. Expense Ratio as in FY02
Asset Allocation as in March 2003
$ - Feb 2003; # - FY01
 MONTHLY INCOME PLANS
Scheme Name NAV Return (%) SD SR Net Assets Expense Asset Alloc (%) Launch
(Rs) 1mth 3mth 6mth 1yr 2yr Incep. (Rs m) Ratio (%) Debt Equity Date

Alliance Monthly Income (Gr) 16.53 (0.6) 0.4 5.3 9.5 11.8 15.2 1.10 0.32 30,892 1.99 86.2 13.8 Sep-99
Birla MIP Plan C (Growth) 13.24 (0.5) (0.3) 5.3 10.2 13.2 12.6 0.80 0.56 13,105 1.73 91.0 9.1 Nov-00
FT India MIP (G) 13.25 (0.7) (0.7) 6.5 8.5 11.7 11.9 1.12 0.30 6,755 2.23$ 86.5 13.5 Sep-00
IDBI MIP (Gr) 11.09 (0.5) (0.5) 5.6 - - 10.9 - - 9,808 - 95.5 4.5 May-02
Magnum MIP (Gr) 11.85 (0.0) 0.1 2.7 7.5 8.8 8.8 0.49 0.24 3,482 0.10# 95.4 4.6 Mar-01
Pru ICICI MIP (Cum) 12.74 (0.3) 0.3 4.0 8.3 9.9 10.7 0.52 0.38 27,536 2.00 96.5 3.6 Nov-00
Reliance MIP (Gr) 13.24 (0.0) 0.3 3.3 10.3 11.2 11.7 0.47 0.62 11,853 1.52 100.0 - Sep-00
Sun F & C Monthly Inc. (Gr) 12.75 (0.6) (2.5) 3.3 6.4 9.8 8.4 0.95 0.20 5,641 NA 93.6 6.4 Mar-00
Tata Monthly Income (Acc) (Gr) 19.82 (0.6) (1.4) 3.3 8.2 10.3 12.0 0.82 0.28 1,086 2.04 96.3 3.7 Mar-97
Templeton M I P (Growth) 13.28 (0.8) (0.7) 4.3 7.4 10.7 9.4 0.94 0.27 9,367 1.95$ 88.9 11.1 Feb-00

Crisil MIP Blended Index -0.81 -1.6 2.77 6.73 NA NA 1.3182

NAVs as on 31st March 2003. Net Assets as in March 2003. Expense Ratio as in FY02
Asset Allocation as in March 2003
$ - Feb 2003; # - FY01
 LIQUID FUNDS
NAV Return (%) Rolling Net Assets Launch
Scheme Name
(Rs) 1wk 1mth 3mth 6mth Incep. Return (%) (Rs m) Date
Alliance Cash Manager (Gr) 14.84 6.6 5.9 6.0 6.2 9.9 6.5 27,872 May-98
Birla Cash Plus (Gr) 16.29 6.1 5.6 5.8 6.1 10.9 6.5 83,236 Jun-97
Canliquid (Gr) 10.91 6.5 5.8 6.1 7.0 7.6 7.0 16,723 Jan-02
Chola Liquid Fund (Cum) 12.19 6.5 5.7 5.7 6.1 8.8 6.4 18,667 Oct-00
DSP-ML Liquidity Fund (Gr) 14.72 5.9 5.5 5.3 6.0 9.3 6.4 26,983 Mar-98
Grindlays Cash Fund (Gr.) 11.25 6.0 5.4 5.6 6.0 7.2 6.5 64,355 Jul-01
HDFC Liquid Fund (Gr) 12.03 5.2 5.1 5.5 5.9 8.3 6.5 132,906 Oct-00
IDBI PRIN. Cash Mgmt(Call) Gr 11.72 7.3 5.8 5.5 5.6 7.1 5.8 20,391 Oct-00
IDBI PRIN. Cash Mgmt(Liq)(Gr) 11.93 6.0 5.6 5.8 6.1 8.0 6.5 25,819 Oct-00
IL&FS Liquid Fund (Gr.) 11.23 6.4 6.0 6.1 6.5 7.3 6.5 34,106 Jul-01
JM High Liquidity Fund (Gr) 16.76 6.5 5.8 5.9 6.5 12.9 6.7 103,448 Dec-97
K Liquid (Gr) 12.09 5.8 5.6 6.0 6.2 8.4 6.5 104,043 Oct-00
LIC Liquid Fund (Gr) 10.73 2.1 5.3 6.4 6.2 7.0 6.7 8,519 Mar-02
Magnum Insta Cash Fund (Cash) 13.56 5.4 5.3 5.5 6.0 9.3 6.4 43,222 May-99
Pru ICICI Liquid (Gr) 14.87 6.4 5.8 5.8 6.1 10.2 6.5 154,520 Jun-98
Reliance Liquid Fund TP (Gr) 14.67 6.0 5.6 5.8 6.3 9.3 6.8 73,565 Mar-98
Reliance Liquid Super Cash(G) 10.34 6.5 5.7 5.8 6.2 6.1 6.2 67,858 Sep-02
Sundaram Money Fund (App) 12.66 5.7 5.4 5.4 5.8 8.7 6.4 14,855 Mar-00
Templeton India Liquid (Gr) 14.99 6.1 5.7 5.8 6.1 10.4 6.6 53,148 Jun-98
Templeton India TMA (G) 1,505.56 6.0 5.6 5.9 6.3 10.3 6.8 55,196 Apr-98
Zurich (I) Liquidity (IP)(Gr) 13.16 5.3 5.4 6.4 6.5 9.4 6.7 3,637 Nov-99

Crisil Liquid Fund Index 4.6 5.2 4.9 5.0 5.9

NAVs as on 31st March 2003. Net Assets as in March 2003. Expense Ratio as in FY02
$ - Feb 2003; # - FY01
 SHORT TERM PLANS
NAV Return (%) Rolling Net Assets Launch
Scheme Name
(Rs) 1wk 1mth 3mth 6mth Incep. Return (%) (Rs m) Date
Alliance Short Term Fund (Gr) 10.69 4.1 3.7 3.0 6.1 7.3 7.1 2,918 Apr-02
Birla Bond Plus (G) 11.10 6.5 5.1 4.2 7.1 8.2 7.6 45,527 Nov-01
BOB Income Fund STP (Gr) 10.23 7.3 5.4 7.5 - 6.7 7.4 - Nov-02
Chola Freedom STP(Cum) 17.28 6.1 3.4 4.5 7.0 13.6 7.1 4,326 Nov-97
DSP-ML Short Term Fund 10.41 6.3 6.3 4.1 7.1 7.2 8.2 24,203 Sep-02
Grindlays Floating Rate (Gr) 10.06 6.2 5.6 - - 5.6 7.0 24,838 Feb-03
Grindlays Super Saver (STP)(G) 12.02 7.9 2.7 4.3 7.1 8.8 5.9 59,460 Dec-00
HDFC Floating Rate STP (Gr) 10.12 5.9 5.3 - - 5.9 4.5 10,067 Jan-03
HDFC Short Term Plan (G) 10.88 7.5 4.7 3.4 6.8 8.1 5.5 88,335 Feb-02
HSBC Income Fund STP (Gr) 10.17 7.5 5.7 4.5 - 5.6 5.3 8,336 Dec-02
IDBI Income Fund STP (Gr) 10.73 6.6 4.4 4.1 6.9 7.9 5.4 12,508 Apr-02
IL&FS Bond Fund (STP) (Gr) 10.92 5.8 2.6 2.9 6.4 7.7 3.1 8,265 Jan-02
ING Income Portfolio STP - (Gr) 10.42 6.3 3.5 4.3 6.8 6.7 9.4 8,432 Aug-02
JM Short Term Fund (Gr) 10.67 6.3 5.7 6.0 8.2 8.8 5.4 41,693 Jun-02
K Bond Short Term Plan (Gr) 10.72 9.0 6.3 4.6 7.0 7.9 6.5 25,471 May-02
Magnum Insta Cash (STP) 10.31 6.0 3.8 1.7 6.1 2.7 5.2 13,382 Feb-02
Pru ICICI Short Term Plan(G) 11.23 10.5 3.7 3.7 6.7 8.7 7.7 107,879 Oct-01
Reliance STP (Gr) 10.16 7.4 3.7 5.4 - 5.7 7.6 30,386 Dec-02
Tata Short Term Bond Fund (App) 10.55 4.3 2.5 5.0 8.1 8.5 8.0 6,056 Aug-02
Templeton Floating Rate(STP)(G) 10.83 6.1 5.9 6.1 6.5 7.5 8.0 42,282 Feb-02
Templeton India STP Inc (G) 1,096.58 7.1 3.9 4.1 6.8 8.3 6.8 46,763 Jan-02
Zurich (I) High InterestSTP(G) 10.98 6.9 2.8 3.2 6.9 8.6 7.6 44,382 Feb-02

NAVs as on 31st March 2003. Net Assets as in March 2003. Expense Ratio as in FY02
$ - Feb 2003; # - FY01
 G-SEC (GILT) FUNDS
NAV Return (%) SD SR Net Assets Avg. Expense Launch
Scheme Name
(Rs) 1 yr 3 yr 5 yr Incep. (Rs m) Maturity Ratio (%) Date
SHORT TERM GILT FUNDS
Alliance Govt. Sec. (ST)(Gr) 13.74 6.4 9.3 - 9.7 0.60 0.25 116 2.94 yrs 1.25 Oct-99
Birla Gilt Plus (L P)(Gr) 14.67 7.7 11.1 - 12.9 0.71 0.44 655 2.42 yrs 1.50 Feb-00
DSP-ML Govt. Sec Fund (SDP-G) 13.82 6.3 9.5 - 9.7 0.50 0.24 3,008 2.13 yrs 1.10 Sep-99
Grindlays Gov.Sec STP (G) 10.91 8.7 - - 8.5 0.82 0.10 81 5.08 yrs 0.80 Mar-02
HDFC Gilt Fund (ST) (Gr) 11.54 5.9 - - 8.9 0.72 0.17 646 2.05 yrs 1.18 Jul-01
IDBI PRIN.Govt.Sec (SP)(Gr) 11.82 8.7 - - 11.0 0.56 0.52 270 0.85 yrs 1.25 Aug-01
K Gilt (Saving) (Gr) 14.92 6.8 9.4 - 9.9 0.31 0.33 1,592 1.81 yrs 1.02 Dec-98
Magnum Gilt Fund STP (Gr) 12.46 7.0 - - 10.3 0.73 0.28 1,453 - 0.38# Jan-01
Pru ICICI Gilt(TP)(Gr) 14.35 6.1 9.8 - 10.5 0.57 0.23 3,450 4.74 yrs 1.08 Aug-99
Zurich (I) Sov Gilt (SP)(Gr) 12.45 4.7 7.2 - 7.2 0.18 (0.70) 170 0.27 yrs 1.06 Jan-00

I - Sec Si - BEX 7.8 - -

LONG TERM GILT FUNDS

LIC MF Govt. Sec. Fund (Gr) 15.90 11.6 14.6 - 15.0 1.60 0.49 17,226$ 7.69 yrs$ 1.28# Dec-99
Tata Gilt Sec Fund B (App) 19.49 15.3 20.6 - 20.0 2.24 0.55 14,333 12.17 yrs 1.30 Aug-99
Templeton India Govt Sec (Gr) 19.90 15.8 20.5 - 20.0 2.02 0.58 51,587 11.05 yrs 1.25$ Jun-99
UTI G-Sec Fund (Growth) 16.15 10.9 14.2 - 14.4 1.24 0.56 43,333$ 7.91 yrs$ - Sep-99
Alliance Govt. Sec. (LT)(Gr) 16.61 16.1 15.9 - 16.0 1.37 0.67 1,451 10.06 yrs 1.25 Oct-99
Birla Gilt Plus (L T P) (Gr) 18.83 15.4 19.9 - 19.7 1.88 0.61 16,013 11.71 yrs 1.57 Sep-99
DSP-ML Govt. Sec Fund (LDP-G) 19.21 18.1 20.9 - 20.5 1.92 0.63 12,213 10.44 yrs 1.10 Sep-99
K Gilt (Invest) (Gr) 19.42 13.9 18.2 - 16.9 1.83 0.55 27,950 12.30 yrs 1.64 Dec-98
Pru ICICI Gilt(IP)(Gr) 17.95 11.3 17.7 - 17.6 2.10 0.44 45,720 17.43 yrs 1.13 Aug-99
Zurich (I) Sov Gilt (PT)(Gr) 15.61 10.4 16.4 - 15.1 1.65 0.52 357 8.65 yrs 0.98 Jan-00

I - Sec Li - BEX 16.2 - -

I - Sec Mi - BEX 11.8 - -

NAVs as on 31st March 2003. Net Assets as in March 2003. Expense Ratio as in FY02. Average Duration as in March 2003
$ - Feb 2003; # - FY01
 INCOME FUNDS
NAV Return (%) SD SR Net Assets Avg. Expense Launch
Scheme Name
(Rs) 1 yr 3 yr 5 yr Incep. (Rs m) Maturity Ratio (%) Date
Alliance Income (Gr) 21.09 11.5 13.3 13.0 13.1 0.80 0.67 81,059 6.64 yrs 1.77 Mar-97
Birla Income Plus B 25.76 12.2 13.6 13.3 13.6 0.89 0.64 295,720 5.96 yrs 1.65 Oct-95
BOB Income Fund (G) 10.65 6.1 - - 6.3 0.69 (0.14) - - - Mar-02
Cancigo 11.54 8.5 10.0 11.2 10.4 1.59 0.29 7,806 6.47 yrs$ 1.67 Apr-88
Chola Triple Ace (Cumulative) 20.93 10.9 12.5 12.2 13.1 0.84 0.54 31,595 7.25 yrs 1.31 Mar-97
Dha-vidya 5.49 (21.2) (29.2) (16.5) (5.3) 10.32 (0.41) 193$ - 1.57# Mar-92
DSP-ML Bond Fund(Gr) 21.05 11.6 13.9 13.1 13.4 0.95 0.59 139,498 - - Apr-97
DSP-ML Saving Plus (Gr) 10.00 - - - (0.2) - - 2,372 5.22 yrs 1.71 Feb-03
Dundee Corp. Bond Fund (App) 12.97 4.9 7.0 - 8.1 0.30 (0.10) - - - Nov-99
Dundee P S B Fund (App) 13.44 5.0 7.4 - 9.2 0.33 (0.26) - - 2.25 Nov-99
Escorts Income Plan (Gr) 18.11 12.4 12.3 - 13.0 0.44 1.02 341 - 2.25 May-98
First India Income Fund (G) 10.65 6.2 - - 5.8 1.03 (0.06) - - - Feb-02
Franklin India Maxima Fund (G) 17.68 6.3 - - 15.6 0.14 (0.57) 58$ 6.49 yrs$ - Apr-99
FT India AAF Inflation Hedg (G) 10.48 6.8 - - 4.3 0.79 (0.05) 1,080 - - Feb-02
FT India AAF-Conservative (G) 10.19 4.5 - - 1.8 1.59 (0.13) 1,080 - - Feb-02
GIC Debt Fund (Gr) 10.45 - - - 4.5 0.07 (3.27) 419 - - Apr-02
Grindlays Dy-mic Bond (G) 10.98 - - - 13.0 1.28 0.34 28,811 9.25 yrs - Jun-02
Grindlays Super Saver (Gr) 14.39 11.5 - - 14.4 1.03 0.55 219,877 - - Jul-00
HDFC Floating Rate LTP (Gr) 10.12 - - - 5.8 0.03 (5.85) 442 5.76 yrs 1.68 Jan-03
HDFC Income Fund (Gr) 14.43 12.8 - - 15.5 0.99 0.61 354,598 5.87 yrs 1.67 Sep-00
IDBI PRIN. Income Fund (Gr) 14.18 12.1 - - 15.5 0.92 0.62 56,193 5.82 yrs 1.86 Oct-00
IDBI PRIN.Deposit (54 EA) 15.05 6.2 9.5 9.9 9.6 0.35 0.37 2,300 - 1.56# Aug-97
IDBI PRIN.Deposit (54 EB) 15.05 6.2 9.5 9.9 9.6 0.35 0.37 2,300 - - Aug-97
IL&FS Bond Fund (Gr) 15.74 11.7 13.0 - 13.0 1.03 0.52 47,761 6.98 yrs 0.65 Jul-99
ING Capital Portfolio (Gr) 10.86 8.2 - - 6.1 0.86 (0.14) 23,890 1.19 yrs 0.51 Nov-01
 NAV Return (%) SD SR Net Assets Avg. Expense Launch
Scheme Name
(Rs) 1 yr 3 yr 5 yr Incep. (Rs m) Maturity Ratio (%) Date
ING Income Portfolio (Gr.) 15.45 8.7 11.6 - 11.8 1.01 0.38 8,432 - - May-99
JM Income Fund (Gr) 24.29 11.7 14.7 14.5 11.7 1.05 0.58 22,530 4.4 yrs 2.12 Apr-95
K Bond99 (Deposit Plan)(Gr) 15.35 11.1 13.3 - 13.7 0.99 0.53 117,581 6.38 yrs 2.00 Nov-99
K Bond99 (Wholesale Plan)(Gr) 15.67 11.7 13.9 - 14.4 0.99 0.58 117,581 6.38 yrs 2.04 Nov-99
Libra Bond Fund (G) 11.34 3.5 - - 7.7 1.50 0.05 - 7.10 yrs 1.49 Jul-01
LIC MF Bond Fund (Gr) 16.63 12.2 13.3 - 14.1 0.90 0.59 202,564$ - - May-99
LIC MF Children`s Fund 11.35 8.9 - - 9.1 0.63 0.19 1,473$ 5.39 yrs$ 2.21# Oct-01
Magnum Income Fund(Gr) 17.04 11.0 12.7 - 13.1 1.01 0.49 104,900 5.42 yrs - Nov-98
PNB Debt Fund (Gr) 18.09 14.1 17.3 - 17.0 1.39 0.58 11,066 8.19 yrs 1.54# Jun-99
Pru ICICI Income (Gr) 18.03 11.3 13.2 - 13.3 0.94 0.55 317,349 6.75 1.35 Jul-98
Pru ICICI LongTerm Plan(G) 11.36 13.5 - - 13.5 0.87 0.56 23,434 6.75 yrs 1.60 Mar-02
Reliance Income Fund (Gr) 18.66 10.5 12.6 12.6 12.6 0.97 0.46 43,905 6.24 yrs - Dec-97
SUN F & C Bond Fund - (Gr) (B) 18.46 9.5 11.1 12.2 12.2 0.85 0.38 2,847 6.24 yrs 1.29 Nov-97
Sun F & C Fixed Inc Sec LTP (C) 11.15 - - - 14.0 1.01 0.53 101 6.37 yrs$ 2# May-02
SUN F&C Money Value Bond (Gr) 17.04 11.0 13.0 - 13.0 0.95 0.53 15,778 5.83 yrs$ - Nov-98
Sundaram Bond Saver (Cumm.) 19.75 13.0 13.6 14.0 13.8 0.96 0.57 78,625 6.39 yrs - Dec-97
Templeton Floating Rate(LTP)(G) 10.84 7.4 - - 7.4 0.08 (0.07) 18,812 1.17 yrs 1.49$ Feb-02
Templeton India Child Asset Plan 18.00 9.4 13.4 - 13.0 0.93 0.49 - - 2.25# Jun-98
Templeton India IBA (G) 21.35 12.2 14.0 13.9 14.1 1.03 0.58 147,705 6.68 yrs 1.69$ Jun-97
Templeton India Income (Gr.) 21.79 11.6 13.2 13.5 13.7 0.86 0.60 199,333 5.55 yrs 1.62$ Mar-97
UTI - Bond Fund (Growth) 17.51 10.6 12.0 - 12.4 0.64 0.58 178,680$ - - Jun-98
UTI Mahila Unit Scheme (Gift) 12.07 9.8 - - 9.9 2.19 0.12 926$ - - Apr-01
UTI Small Investors Fund 17.05 10.4 11.2 - 11.9 0.98 0.24 60$ 2.90 yrs$ - Jul-98
UTI-CRTS81 89.99 1.6 - - 10.1 2.54 (0.29) 38,907$ 4.16 yrs$ - Oct-81
UTI-Grihalaxmi Unit Plan 94 10.98 8.2 0.0 9.0 5.9 2.27 (0.11) 6,180$ 1.47 yrs$ - Aug-94
UTI-Retirement Benefit Plan 94 17.72 6.5 (4.8) 4.2 7.9 2.16 (0.22) 28,088$ 2.90 yrs$ - Dec-94
Zurich (I) High Interest (Gr) 21.15 12.2 13.8 13.0 13.3 0.94 0.61 12,150 5.42 yrs 1.59 Mar-97

Index
Crisil Composite Bond Fund Index 10.8 - - - 0.72
IBEX (Total Return ) 15.0 18.5 16.8 -

NAVs as on 31st March 2003. Net Assets as in March 2003. Expense Ratio as in FY02. Average Duration as in March 2003
$ - Feb 2003; # - FY01