PROJECT REPORT ON

ANALYSIS OF RELIANCE MUTUAL FUND SCHEMES & DISTRIBUTION NETWORK
Submitted in the partial fulfillment for the award of Degree of Master of Business Administration Submitted To

RAI BUSINESS SCHOOL

Nitesh Kumar Semester 3rd RAI BUSINESS SCHOOL, New Delhi

Submitted by

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INTRODUCTION
There are a lot of investment avenues available today in the financial market for an investor with an invest able surplus. He can invest in Bank Deposits, Corporate Debentures, Bonds, Mutual Fund where there is low risk but low return. He may invest in Stock of companies where the risk is high and the returns are also proportionately high. The recent trends in the Mutual Fund Market have shown that an average retail investor always gain with good return. People began opting for fund managers with expertise in markets who would invest on their behalf. Thus we had wealth management services provided by many institutions. However they proved too costly for a small investor. These investors have found a good shelter with the mutual funds. Like most developed and developing countries the mutual fund cult has been catching on in India. The reasons for this interesting occurrence are: 1. Mutual funds make it easy and less costly for investors to satisfy their need

for capital growth, income and/or income preservation. 2. Mutual fund brings the benefits of diversification and money management

to the individual investor, providing a Opportunity for financial success that was once available only to a select few.

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Through its products and services, the Reliance - ADA Group touches the life of 1 in 10 Indians every single day. It has a business presence that extends to over 20000 towns and 4.5 lakhs villages in India, and 5 continents across the world. The interests of the Group range from communications (Reliance Communications) and financial services (Reliance Capital Ltd), to generation, transmission and distribution of power (Reliance Energy), infrastructure and entertainment. Reliance Anil Dhirubhai Ambani Group (Reliance ADAG) ranks among India's top three private sectors business houses. The group has a market capitalization of US$ 22 billion, net assets in excess of US$ 7 billion, and net worth to the tune of US$ 6 billion. Reliance Anil Dhirubhai Ambani Group has a customer base of over 50 million, the largest in India, and a shareholder base of over 8 million, among the largest in the world. R-ADAG has a business presence that is spread over 4,500 towns and 300,000 villages in India, and 5 continents across the world. Reliance Anil Dhirubhai Ambani Group came into existence when the business empire of the Reliance Group founded by Dhirubhai Ambani was split between his two sons, Mukesh and Anil. Mukesh Ambani, the elder brother, retained Reliance Industries Limited (RIL), the flagship company of the Reliance Group. The part of the empire that was inherited by the younger brother Anil Ambani was christened as Reliance Anil Dhirubhai Ambani Group. Hence, one can say that the founder of Reliance ADAG was Dhrubhai Ambani. The interests of the Reliance Anil Dhirubhai Ambani span communications, financial services, generation, transmission and distribution of power, infrastructure and entertainment.

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COMPANIES OF RELIANCE ADAG
Reliance Communications Limited: Reliance Communications Limited is the flagship company of the Reliance - ADA Group. The company is the culmination of Dhirubhai's dream of bringing about a digital revolution that will provide every Indian with affordable means of communication and a ready access to information. Reliance Communications Limited started operations in 1999 and has over 20 million subscribers today. It offers a complete range of integrated telecom services such as mobile and fixed line telephony, broadband, national and international long distance services, data services and a wide range of value added services. Reliance Capital: Reliance Capital is one of India's leading private sector financial services companies. Reliance Capital deals in asset management and mutual funds, life and general insurance, private equity and proprietary investments, stock broking and other activities in financial services. Reliance Energy Limited: Reliance Energy Limited is a fully integrated utility engaged in the generation, transmission and distribution of electricity. The company distributes more than 21 billion units of electricity to over 25 million consumers in Mumbai, Delhi, Orissa and Goa. Reliance Energy Limited currently generates 941 MW of electricity, through its power stations located in Maharashtra, Andhra Pradesh, Kerala, Karnataka and Goa. It is currently pursuing a number of gas, coal, wind and hydro-based power generation projects in Maharashtra, Uttar Pradesh, Arunachal Pradesh and Uttaranchal with total capacity of over 12,500 MW. Reliance Media & Entertainment: Reliance Media & Entertainment has interest in Movies, Music, Sports, Gaming, Internet & mobile portals, Digital cinema, IPTV, DTH and Mobile TV. In 2005, Reliance ADA Group acquired Adlabs Films Limited, one of the largest entertainment companies in India, which has interests in film processing, production, exhibition & digital cinema. Reliance Entertainment has also forayed into the FM Radio business through BIG 92.7 FM.

Reliance Health: Reliance Health aims at providing integrated health services and plans to venture into diversified fields like Insurance Administration, Health care Delivery and Integrated Health, Health Informatics and Information Management and Consumer Health.

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ABOUT THE MUTUAL FUNDS
A mutual fund is a professionally managed type of collective investment scheme that pools money from many investors and invests it in stocks, bonds, short-term money market instruments, and/or other securities. The mutual fund will have a fund manager that trades the pooled money on a regular basis. As of early 2008, the worldwide value of all mutual funds totals more than $26 trillion. Since 1940, there have been three basic types of investment companies in the United States: open-end funds, also known in the US as mutual funds; unit investment trusts (UITs); and closed-end funds. Similar funds also operate in Canada. However, in the rest of the world, mutual fund is used as a generic term for various types of collective investment vehicles, such as unit trusts, open-ended investment companies, unitized insurance funds, and undertakings for collective investments in transferable securities.

Working of Mutual Fund

Regulatory Authorities:5

To protect the interest of the investors, SEBI formulates policies and regulates the mutual funds. It notified regulations in 1993 (fully revised in 1996) and issues guidelines from time to time. MF either promoted by public or by private sector entities including one promoted by foreign entities is governed by these Regulations. SEBI approved Asset Management Company (AMC) manages the funds by making investments in various types of securities. Custodian, registered with SEBI, holds the securities of various schemes of the fund in its custody. According to SEBI Regulations, two thirds of the directors of Trustee Company or board of trustees must be independent. The Association of Mutual Funds in India (AMFI) reassures the investors in units of mutual funds that the mutual funds function within the strict regulatory framework. Its objective is to increase public awareness of the mutual fund industry. AMFI also is engaged in upgrading professional standards and in promoting best industry practices in diverse areas such as valuation, disclosure, transparency etc.

What is a Mutual Fund?
A mutual fund is just the connecting bridge or a financial intermediary that allows a group of investors to pool their money together with a predetermined investment objective. The mutual fund will have a fund manager who is responsible for investing the gathered money into specific securities (stocks or bonds). When you invest in a mutual fund, you are buying units or portions of the mutual fund and thus on investing becomes a shareholder or unit holder of the fund. Mutual funds are considered as one of the best available investments as compare to others they are very cost efficient and also easy to invest in, thus by pooling money together in a mutual fund, investors can purchase stocks or bonds with much lower trading costs than if they tried to do it on their own. But the biggest advantage to mutual funds is diversification, by minimizing risk & maximizing returns.

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Diversification
Diversification is nothing but spreading out your money across available or different types of investments. By choosing to diversify respective investment holdings reduces risk tremendously up to certain extent. The most basic level of diversification is to buy multiple stocks rather than just one stock. Mutual funds are set up to buy many stocks. Beyond that, you can diversify even more by purchasing different kinds of stocks, then adding bonds, then international, and so on. It could take you weeks to buy all these investments, but if you purchased a few mutual funds you could be done in a few hours because mutual funds automatically diversify in a predetermined category of investments (i.e. growth companies, emerging or mid size companies, low-grade corporate bonds, etc

Types of Mutual Funds Schemes in India
Wide variety of Mutual Fund Schemes exists to cater to the needs such as financial position, risk tolerance and return expectations etc. thus mutual funds has Variety of flavors, Being a collection of many stocks, an investors can go for picking a mutual fund might be easy. There are over hundreds of mutual funds scheme to choose from. It is easier to think of mutual funds in categories, mentioned below.

Overview of existing schemes existed in mutual fund category: BY STRUCTURE:1. Open - Ended Schemes:
An open-end fund is one that is available for subscription all through the year. These do not have a fixed maturity. Investors can conveniently buy and sell units at Net Asset Value ("NAV") related prices. The key feature of open-end schemes is liquidity.

2. Close - Ended Schemes:
These schemes have a pre-specified maturity period. One can invest directly in the scheme at the time of the initial issue. Depending on the structure of the scheme there are two exit options available to an investor after the initial offer period closes. Investors can transact (buy or sell) the units of the scheme on the stock exchanges where they are listed. The market price at the stock exchanges could vary from the net asset value (NAV) of the scheme on account of demand and supply situation,

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expectations of unit holder and other market factors. Alternatively some close-ended schemes provide an additional option of selling the units directly to the Mutual Fund through periodic repurchase at the schemes NAV; however one cannot buy units and can only sell units during the liquidity window. SEBI Regulations ensure that at least one of the two exit routes is provided to the investor.

3. Interval Schemes:
Interval Schemes are that scheme, which combines the features of open-ended and close-ended schemes. The units may be traded on the stock exchange or may be open for sale or redemption during pre-determined intervals at NAV related prices.

The risk return trade-off indicates that if investor is willing to take higher risk then correspondingly he can expect higher returns and vise versa if he pertains to lower risk instruments, which would be satisfied by lower returns. For example, if an investors opt for bank FD, which provide moderate return with minimal risk. But as he moves ahead to invest in capital protected funds and the profit-

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bonds that give out more return which is slightly higher as compared to the bank deposits but the risk involved also increases in the same proportion. Thus investors choose mutual funds as their primary means of investing, as Mutual funds provide professional management, diversification, convenience and liquidity. That doesn’t mean mutual fund investments risk free. This is because the money that is pooled in are not invested only in debts funds which are less riskier but are also invested in the stock markets which involves a higher risk but can expect higher returns. Hedge fund involves a very high risk since it is mostly traded in the derivatives market which is considered very volatile.

Overview of existing schemes existed in mutual fund category: BY NATURE:Equity fund:
These funds invest a maximum part of their corpus into equities holdings. The structure of the fund may vary different for different schemes and the fund manager’s outlook on different stocks. The Equity Funds are sub-classified depending upon their investment objective, as follows:  Diversified Equity Funds  Mid-Cap Funds  Sector Specific Funds  Tax Savings Funds (ELSS) Equity investments are meant for a longer time horizon, thus Equity funds rank high on the riskreturn matrix.

Debt funds
The objective of these Funds is to invest in debt papers. Government authorities, private companies, banks and financial institutions are some of the major issuers of debt papers. By investing in debt instruments, these funds ensure low risk and provide stable income to the investors.

Gilt Funds
Invest their corpus in securities issued by Government, popularly known as Government of India debt papers. These Funds carry zero Default risk but are associated with Interest Rate risk. These schemes are safer as they invest in papers backed by Government.

Income Funds 9

Invest a major portion into various debt instruments such as bonds, corporate debentures and Government securities.

MIPs
Invests maximum of their total corpus in debt instruments while they take minimum exposure in equities. It gets benefit of both equity and debt market. These scheme ranks slightly high on the riskreturn matrix when compared with other debt schemes.

Short Term Plans (STPs)
Meant for investment horizon for three to six months. These funds primarily invest in short term papers like Certificate of Deposits (CDs) and Commercial Papers (CPs). Some portion of the corpus is also invested in corporate debentures.

Liquid Funds
Also known as Money Market Schemes, These funds provides easy liquidity and preservation of capital. These schemes invest in short-term instruments like Treasury Bills, interbank call money market, CPs and CDs. These funds are meant for short-term cash management of corporate houses and are meant for an investment horizon of 1day to 3 months. These schemes rank low on risk-return matrix and are considered to be the safest amongst all categories of mutual funds.

Balanced Funds
As the name suggest they, are a mix of both equity and debt funds. They invest in both equities and fixed income securities, which are in line with pre-defined investment objective of the scheme. These schemes aim to provide investors with the best of both the worlds. Equity part provides growth and the debt part provides stability in returns.

Further the mutual funds can be broadly classified on the basis of investment parameterEach category of funds is backed by an investment philosophy, which is pre-defined in the objectives of the fund. The investor can align his own investment needs with the funds objective and invest accordingly.

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By investment objective:
Growth Schemes:
Growth Schemes are also known as equity schemes. The aim of these schemes is to provide capital appreciation over medium to long term. These schemes normally invest a major part of their fund in equities and are willing to bear short-term decline in value for possible future appreciation

Income Schemes: Income Schemes are also known as debt schemes. The aim of these schemes is to
provide regular and steady income to investors. These schemes generally invest in fixed income securities such as bonds and corporate debentures. Capital appreciation in such schemes may be limited.

Balanced Schemes: Balanced Schemes aim to provide both growth and income by periodically
distributing a part of the income and capital gains they earn. These schemes invest in both shares and fixed income securities, in the proportion indicated in their offer documents (normally 50:50).

Money Market Schemes: Money Market Schemes aim to provide easy liquidity, preservation of
capital and moderate income. These schemes generally invest in safer, short-term instruments, such as treasury bills, certificates of deposit, commercial paper and inter-bank call money.

Other schemes:Tax Saving Schemes:
Tax-saving schemes offer tax rebates to the investors under tax laws prescribed from time to time. Under Sec.88 of the Income Tax Act, contributions made to any Equity Linked Savings Scheme (ELSS) are eligible for rebate

Index Schemes:
Index schemes attempt to replicate the performance of a particular index such as the BSE Sensex or the NSE 50. The portfolio of these schemes will consist of only those stocks that constitute the index. The percentage of each stock to the total holding will be identical to the stocks index

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weightage. And hence, the returns from such schemes would be more or less equivalent to those of the Index.

Sector Specific Schemes:
These are the funds/schemes which invest in the securities of only those sectors or industries as specified in the offer documents. e.g. Pharmaceuticals, Software, Fast Moving Consumer Goods (FMCG), Petroleum stocks, etc. The returns in these funds are dependent on the performance of the respective sectors/industries. While these funds may give higher returns, they are more risky compared to diversified funds. Investors need to keep a watch on the performance of those sectors/industries and must exit at an appropriate time.

Types of returns
There are three ways, where the total returns provided by mutual funds can be enjoyed by investors: If income is earned from dividends on stocks and interest on bonds. A fund pays out nearly all income it receives over the year to fund owners in the form of a distribution. If the fund sells securities that have increased in price, the fund has a capital gain. Most funds also pass on these gains to investors in a distribution. If fund holdings increase in price but are not sold by the fund manager, the fund's shares increase in price. You can then sell your mutual fund shares for a profit. Funds will also usually give you a choice either to receive a check for distributions or to reinvest the earnings and get more shares.

Advantages of Investing Mutual Funds:
1. Professional

Management - The basic advantage of funds is that, they are professional

managed, by well qualified professional. Investors purchase funds because they do not have the time or the expertise to manage their own portfolio. A mutual fund is considered to be relatively less expensive way to make and monitor their investments.

2.

Diversification - Purchasing units in a mutual fund instead of buying individual stocks or bonds,

the investors risk is spread out and minimized up to certain extent. The idea behind diversification is

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to invest in a large number of assets so that a loss in any particular investment is minimized by gains in others.

3.

Economies of Scale - Mutual fund buy and sell large amounts of securities at a time, thus help to

reducing transaction costs, and help to bring down the average cost of the unit for their investors.

4. Liquidity - Just like an individual stock, mutual fund also allows investors to liquidate their
holdings as and when they want.

Disadvantages of Investing in Mutual Funds:
1. Professional

Management- Some funds doesn’t perform in neither the market, as their

management is not dynamic enough to explore the available opportunity in the market, thus many investors debate over whether or not the so-called professionals are any better than mutual fund or investor him self, for picking up stocks.

2. Costs

– The biggest source of AMC income is generally from the entry & exit load which they

charge from investors, at the time of purchase. The mutual fund industries are thus charging extra cost under layers of jargon.

3. Dilution - Because funds have small holdings across different companies, high returns from a few

investments often don't make much difference on the overall return. Dilution is also the result of a successful fund getting too big. When money pours into funds that have had strong success, the manager often has trouble finding a good investment for all the new money.

4. Taxes - when making decisions about your money, fund managers don't consider your personal tax

situation. For example, when a fund manager sells a security, a capital-gain tax is triggered, which affects how profitable the individual is from the sale. It might have been more advantageous for the individual to defer the capital gains liability.

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Growth of Mutual Fund Industry in India:In India Mutual Fund Industry growing very rapidly. Since its inception of 1965, this industry has collected many billions rupees. This graph showing this pace of the industry as on 30th March 2009.

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Schemes offering by Reliance:EQUITY/GROWTH SCHEMES
Reliance Growth Fund (An Open-ended Equity Growth Scheme) Reliance Vision Fund (An Open-ended Equity Growth Scheme) Reliance Equity Opportunities Fund (An Open-ended Diversified Equity Scheme) Reliance Quant plus Fund (An Open-ended Equity Scheme) Reliance NRI Equity Fund (An Open-ended Diversified Equity Scheme) Reliance Tax Saver (ELSS) Fund (An Open-ended Equity Linked Savings Scheme) Reliance Regular Savings Fund (An open ended Scheme) Reliance Equity Fund (An open-ended Diversified Equity Scheme) Reliance Equity Advantage Fund (An Open ended Diversified Equity Scheme) Reliance Long Term Equity Fund (A 36 months close ended diversified equity fund) Reliance Equity Linked Saving Fund – Series I (A 10 year close-ended Equity Linked Savings Scheme) Reliance Natural Resources Fund (An Open Ended Equity Scheme) Reliance Infrastructure Fund (An open ended Equity Scheme)

DEBT/LIQUID SCHEMES
Reliance Income Fund (An Open-ended Income Scheme) Reliance Liquid Fund (An Open-ended Liquid Scheme) Reliance Medium Term Fund (An Open-ended Income Scheme with no assured returns) Reliance Short Term Fund (An Open-ended Income Scheme) Reliance Gilt Securities Fund (An Open-ended Govt. Securities Scheme) Reliance Monthly Income Plan (An Open-ended Fund-Monthly Income)

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Reliance Floating Rate Fund (An Open-ended Liquid Scheme) Reliance NRI Income Fund (An Open-ended Income Scheme) Reliance Money Manager Fund (Open ended income scheme) Reliance Liquidity Fund (An Open-ended liquid scheme) Reliance Regular Savings Fund (An open ended Scheme) Debt Option:

SECTOR SPECIFIC SCHEMES
Reliance Pharma Fund (An Open-ended Pharma Sector Scheme): Reliance Diversified Power Sector Fund (An Open-ended Power Sector Scheme): Reliance Media & Entertainment Fund (An Open-ended Media & Entertainment Sector Scheme) Reliance Banking Fund (An Open-ended Banking Sector Scheme) EXCHANGE TRADED FUND

Reliance Banking Exchange Traded Fund (An Open-ended, exchange listed, index linked Scheme) Reliance Gold Exchange Traded Fund (An open ended Gold Exchange Traded Fund)

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RELIANCE IN TERMS OF AUM WITH OTHER PLAYERS
Reliance AMC has highest Assets Under Management as on June 30th 2009
Assets Under Management (AUM) as at the end of JUN-2009 (Rs in Lakhs) Average AUM For The Month Excluding Fund of Sr No Mutual Fund Name Funds - Domestic but Fund Of Funds including Fund of Domestic Funds - Overseas 1 AIG Global Investment Group Mutual Fund 154787.95 0 2 Baroda Pioneer Mutual Fund 372337.92 0 3 Benchmark Mutual Fund 111985.24 0 4 Bharti AXA Mutual Fund 24321.91 0 5 Birla Sun Life Mutual Fund 5628286.60 1826.22 6 Canara Robeco Mutual Fund 762400.12 0 7 DBS Chola Mutual Fund 250850.60 0 8 Deutsche Mutual Fund 1361563.21 0 9 DSP BlackRock Mutual Fund 1739634.99 0 10 Edelweiss Mutual Fund 4478.89 0 11 Escorts Mutual Fund 20144.95 0 12 Fidelity Mutual Fund 937537.91 3589.23 13 Fortis Mutual Fund 802767.54 9234.94 14 Franklin Templeton Mutual Fund 2547284.93 18514.32 15 Goldman Sachs Mutual Fund N/A N/A 16 HDFC Mutual Fund 7819790.24 0 17 HSBC Mutual Fund 960483.83 0 18 ICICI Prudential Mutual Fund 7016946.33 2796.66 19 IDFC Mutual Fund 2167628.96 1254.72 20 ING Mutual Fund 239677.15 19046.64 21 JM Financial Mutual Fund 777085.93 0 22 JPMorgan Mutual Fund 376635.88 0 17

23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38

Kotak Mahindra Mutual Fund LIC Mutual Fund Mirae Asset Mutual Fund Morgan Stanley Mutual Fund PRINCIPAL Mutual Fund Quantum Mutual Fund Reliance Mutual Fund Religare AEGON Mutual Fund Religare Mutual Fund Sahara Mutual Fund SBI Mutual Fund Shinsei Mutual Fund Sundaram BNP Paribas Mutual Fund Tata Mutual Fund Taurus Mutual Fund UTI Mutual Fund Grand Total
OF THE

3083302.28 3241492.12 23788.46 220835.95 869538.09 6663.52 10833236.33 N/A 1003125.02 21253.53 3406103.72 N/A 1331465.05 2122280.89 56126.70 6797818.56 67093661.3

16297.69 0 0 0 0 0 0 N/A 0 0 0 N/A 0 0 0 0 72560.42

O V E R V I E W A N A L Y S IS

INDIAN MUTUAL FUND INDUSTRY

There are many entities involved in mutual fund and the diagram below illustrates the stakeholders involved.

FIGURE 1 INDIAN MF STAKEHOLDERS

The mutual fund is constituted as trust in India, which is supervised by the Board of Trustees. Mutual funds in India are structurally arranged into 3-tier: Sponsor – Trustee – AMC

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RELIANCE MUTUAL FUNDS SCHEMES
GROWTH FUND
INVESTMENT OBJECTIVE The primary investment objective of the scheme is to achieve long-term growth of capital by investing in equity and equity related securities through a research based investment approach. FUND DATA Structure . . . . ………………..Open-ended Equity Growth Scheme Date of allotment . . . . . . . . . . .October 8, 1995 Inception Date . . . . . . . . . . . . .October 8, 1995 Corpus……………………… 5171.25cr(30/06/2009) Minimum Investment ………..Retail Plan- Rs 5,000 Institutional Plan (IP)- Rs 5 cr Fund Manager . . . . . . . . . . . .Sunil Singhania Benchmark. . . . . . . . . . . . . . . BSE 100 Index

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VOLATILITY MEASURES Beta Standard Deviation R Squared Sharpe Ratio Portfolio Turnover Ratio 0.8511 4.2468 0.9039 0.0766 1.99

VISION FUND
INVESTMENT OBJECTIVE

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The primary investment objective of the scheme is to achieve long-term growth of capital by investment in equity and equity related securities through a research based investment approach.

FUND DATA Structure . . . ………………….... Open-ended Equity Growth Scheme Date of allotment . . . . . . . . . . …. October 8, 1995 Inception Date . . . . . . . . . . . . . . . .October 8, 1995 Corpus: …………………………..3453.32 cr(30/06/2009) Minimum Investment Retail Plan- Rs 5,000 Institutional Plan (IP)- Rs 5 cr Fund Manager . . . . . . . . . . . . . . . Ashwani Kumar Benchmark. . . . . . . . . . . . . . . . . .. BSE 100 Index

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NRI EQUITY FUND
INVESTMENT OBJECTIVE The primary investment objective of the scheme is to generate optimal returns by investing in equity and equity-related instruments primarily drawn from the Companies in the BSE 200 Index.

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FUND DATA Structure . . . Open-ended Diversified Equity Scheme Date of allotment: . . . . . . . . . . November 15, 2004 Inception Date . . . . . . . . . . . . . November 16, 2004 Corpus: 118.47 crore . . . . . . . . . . . (30/06/2009) Minimum Investment . . . . . . . . . . . . . . . . .Rs 5,000 Fund Manager . . . . . . . . . . . . . . Omprakash Kuckian Entry Load . . . . . . . . . . <2cr - 3%; >_2cr <5cr - 2% >_5cr - Nil Exit Load . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Nil No Entry Load for Direct Investments w.e.f January 4, 2008 Benchmark. . . . . . . . . . . . . . . . . . . . BSE 200 Index

VOLATILITY MEASURES Beta Standard Deviation R Squared Sharpe Ratio 0.9631 4.8298 0.8967 0.0834

Portfolio Turnover Ratio 2.1

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BANKING FUND
INVESTMENT OBJECTIVE The primary investment objective of the scheme is to generate continous returns by actively investing in equity and equity-related or fixed-income securities of Banks.

FUND DATA Structure . . . . . ……………………Open-ended Banking Sector Scheme Date of allotment . . . . . . . . . . . . . . May 26, 2003 Inception Date . . . . . . . . . . . . . . . . . May 28, 2003 Corpus: 942.29 crore . . . . . . . . . . . (30/06/2009) Minimum Investment . . …………Retail Plan- Rs 5000 Institutional Plan- Rs 5 cr Fund Manager . . . . . . . . . . . . . . . . . . Sunil Singhania Benchmark. . . . . . . . . . . . . . . . S&P CNX Bank Index VOLATILITY MEASURES Beta Standard Deviation R Squared Sharpe Ratio 0.9456 5.2473 0.7318 0.1339

Portfolio Turnover Ratio 0.95

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DIVERSIFIED POWER SECTOR FUND
INVESTMENT OBJECTIVE The primary investment objective of the scheme is to seek to generate continous returns by actively investing in equity and equity-related or fixed-income securities of Power and other associated companies. ASSET ALLOCATION

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FUND DATA Structure . . . . . ……………………….Open-ended Pharma Sector Scheme Date of Allotment . . . . . . . . . . . . . . . .June 5, 2004 Inception Date . . . . . . . . . . . . . . . . . . June 8, 2004 Corpus . . . . . . . . . . . . ………………114.36 cr (30/06/2009) Minimum Investment . . . . . . . . . . . . . .Rs 5,000 Fund Manager . . . . . . . . . . . . . . . . . Sailesh Rajbhan

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Benchmark. . . . . . . . . . . . …………. BSE - Health Care Index

VOLATILITY MEASURES Beta Standard Deviation R Squared Sharpe Ratio 0.8579 4.4893 0.8216 0.1594

Portfolio Turnover Ratio 2.4

PHARMA FUND
INVESTMENT OBJECTIVE The primary investment objective of the scheme is to seek to generate consistent returns by investing in equity and equity related or fixed income securities of Pharma and other associated companies.

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FUND DATA Structure . . . . ………………… Open-ended Media & Entertainment Date of allotment: . . . . . . . . . …. September 30, 2004 Inception Date . . . . . . . . . . . . . . . ...October 7, 2004 Corpus . . . . . . . . . . . . ……………127.21 cr (30/06/2009) Minimum Investment . . . . . . . . . . . .Rs 5,000 Fund Manager . . . . . . . . . . . . . . . . Sailesh Rajbhan Benchmark. . ………………… … S&P CNX Media & Entertainment Index VOLATILITY MEASURES Beta Standard Deviation R Squared Sharpe Ratio 0.6297 4.0613 0.5423 0.0960

Portfolio Turnover Ratio 0.94

MEDIA & ENTERTENMAINT FUND
INVESTMENT OBJECTIVE The primary investment objective of the scheme is to generate continous returns by investing in equity and equity-related or fixed-income securities of Media & Entertainment and other associated companies.

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FUND DATA Structure . . . . . ……………………..Open-ended Media & Entertainment Date of allotment: . . . . . . . . . ……. ..September 30, 2004 Inception Date . . . . . . . . . . . . . . . . .October 7, 2004 Corpus . . . . . . . . . . . . …………… 127.21 cr(30/06/2009) Minimum Investment . . . . . . . . . . . Rs 5,000 Fund Manager . . . . . . . . . . . . . . . Sailesh Rajbhan Benchmark. . ……………………… S&P CNX Media & Entertainment Index VOLATILITY MEASURES Beta Standard Deviation R Squared Sharpe Ratio 0.8199 4.9842 0.6091 0.0481

Portfolio Turnover Ratio 0.29

EQUITY OPPOURTIENTIES FUND
INVESTMENT OBJECTIVE The primary investment objective of the scheme is to seek to generate capital appreciation & provide long term growth opportunities by investing in a portfolio constituted of equity securities & equity-

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related securities and the secondary objective is to generate consistent returns by investing in debt and money market securities.

FUND DATA Structure . . ……………………… Open-ended Diversified Equity Scheme Date of allotment . . . . . . . . . . . . …March 28, 2005 Inception Date . . . . . . . . . . . . . . . . March 31, 2005 Corpus . . . . . . . . . . ……………… 1506.76 cr (30/06/2009) Minimum Investment . . . ………..Retail Plan- Rs 5,000 IP Plan- Rs 5 cr Fund Manager . . . . . . . . . . . . . . . . . Sailesh Raj Bhan Benchmark. . . . . . . . . . . . . . . . . . . . BSE 100 Index

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VOLATILITY MEASURES Beta Standard Deviation R Squared Sharpe Ratio Portfolio Turnover Ratio 0.8512 4.3592 0.8586 0.0547 0.98

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RELIANCE REGULAR SAVING FUND (Equity Option)
INVESTMENT OBJECTIVE The primary investment objective of this option is to seek capital appreciation and or to generate consistent returns by actively investing in equity / equity related securities.

FUND DATA Structure . . . . . . . . . . . . . . . . ……… ..Open-ended Scheme Date of allotment . . . . . . . . . . . . . . . …June 8, 2005 Inception Date . . . . . . . . . . . . . . . . . ....June 9, 2005 Corpus . . . . . . . ………………………Rs. 1112.38 cr (30/06/2009) Minimum Investment . . …………….. Rs 500 Fund Manager . . . . . . . . . . . . . ……… Omprakash Kuckian Benchmark. . . . . . . . . . . . . . . . . . . . ….BSE 100 Index

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VOLATILITY MEASURES Beta Standard Deviation R Squared Sharpe Ratio Portfolio Turnover Ratio 0.8995 4.7029 0.8237 0.1138 1.98

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REGULAR SAVINGS FUND (Balanced Option)
INVESTMENT OBJECTIVE The primary investment objective of this option is to generate consistent returns and appreciation of capital by investing in a mix of securities comprising of equity, equity related instruments & fixed income instruments.

FUND DATA Structure . . . . . . . . . . . . . . . . .Open-ended Scheme Date of allotment . . . . . . . . . ..June 8, 2005 Inception Date . . . . . . . . . . . ..June 9, 2005 Corpus . . . . . . . . …………….Rs. 86.86 cr (30/06/2009) Minimum Investment . . . ……Rs 500 & in multiples of Re 1 Fund Manager. ……………...Arpit Malaviya & Omprakash Kuckian Benchmark. . . . . . . . . . . . ……Crisil Balanced Fund Index

36

VOLATILITY MEASURES Beta Standard Deviation R Squared Sharpe Ratio Portfolio Turnover Ratio 1.0640 3.3220 0.7917 0.0799 9.78

37

REGULAR SAVINGS FUND (Debt Option)
INVESTMENT OBJECTIVE The primary investment objective of this option is to generate optimal returns consistent with moderate level of risk. This income may be complemented by capital appreciation of the portfolio. Accordingly investments shall predominantly be made in Debt & Money Market Instruments.

FUND DATA Structure . . . . . . . . . . . . . . . . ………. Open-ended Scheme Date of allotment . . . . . . . . . . . . . . . . June 8, 2005 Inception Date . . . . . . . . . . . . . . . . . . .June 9, 2005 Corpus . . . . . . . . . . . . ……………….Rs 2.37 crore (30/06/2009) Minimum Investment……………….. Rs 500 Fund Manager . . . . . . . . . . . . . . . . . . .Arpit Malaviya Benchmark. . . . . . ……………………Crisil Composite Bond Fund Index

38

TAX SAVER (ELSS) FUND
INVESTMENT OBJECTIVE The primary objective of the scheme is to generate long term capital appreciation from a portfolio that is invested predominantly in equity and equity-related instruments.

FUND DATA Structure . . …………………. .Open-ended Equity Linked Savings Scheme Date of allotment . . . . . . .. …..September 21, 2005 Inception Date . . . . . . . . . . ….September 22, 2005 Corpus . . . . . . . . . ……………Rs 1879.81 crore (30/06/2009) Minimum Investment . . . . . …Rs 500 Fund Manager . . . . . . . . . . …Ashwani Kumar Benchmark. . . . . . . . . . . . . . ….BSE 100 Index

39

VOLATILITY MEASURES Beta Standard Deviation R Squared Sharpe Ratio Portfolio Turnover Ratio 0.7840 4.1772 0.7945 0.0570 1.78

40

EQUITY FUND
INVESTMENT OBJECTIVE The primary investment objective of the scheme is to seek to generate capital appreciation and provide long term growth opportunities by investing in a portfolio constituted of equity and equity related securities of top 100 companies by market capitalization and of companies which are available in the derivatives segment from time to time and the secondary objective is to generate consistent returns by investing in debt and money market securities.

FUND DATA Structure . . . ……………………. .Open-ended Diversified Equity Scheme Date of allotment . . . . . . . . . . . . . .March 28, 2006 Inception Date . . . . . . . . . . . . . . . .March 30, 2006 Corpus . . . . . . . . …………………Rs. 2232.02 crore (30/06/2009) Minimum Investment . . . ……… Retail Plan- Rs 5,000 Institutional Plan (IP)- Rs 5 cr and Fund Manager . . . . . . . . . . . . . . . . .Sunil Singhania Benchmark. . . . . . . . . . . . . . . . . . . . .S&P CNX Nifty

41

VOLATILITY MEASURES Beta Standard Deviation R Squared Sharpe Ratio Portfolio Turnover Ratio 0.7499 3.7354 0.9097 0.0745 1.10

42

Long-Term Equity Fund
INVESTMENT OBJECTIVE The primary investment objective of the scheme is to seek to generate long term capital appreciation & provide long-term growth opportunities by investing in a portfolio constituted of equity & equity related securities and Derivatives and the secondary objective is to generate consistent returns by investing in debt and money market securities.

FUND DATA Structure . . . . …………………. …….A 36-month close-ended diversified Date of allotment . . . . . . . . . . ……….December 26, 2006 Inception Date . . . . . . . . . . . . . ………December 27, 2006 Corpus . . . . . . . …………………. ….Rs 1922.99 cr (30/06/2009) Minimum Investment . . . . . . . . . . . …Rs 5,000 Fund Manager . . . . . . . . . . . . . . . . ..Sunil Singhania Benchmark. . . . . . . . . . . . . . . . . . . . BSE 200 Index

43

VOLATILITY MEASURES Beta Standard Deviation R Squared Sharpe Ratio Portfolio Turnover Ratio 0.6901 4.0827 0.7392 0.0265 0.77

44

EQUITY ADVANTAGE FUND
INVESTMENT OBJECTIVE The primary investment objective of the scheme is to seek to generate capital appreciation & provide longterm growth opportunities by investing in a portfolio predominately of equity & equity related instruments with investments generally in S & P CNX Nifty stocks and the secondary objective is to generate consistent returns by investing in debt and money & money market securities.

FUND DATA Structure . . . …………………………Open-ended Diversified Equity Scheme Date of allotment . . . . . . . . . . . . . …..August 8, 2007 Inception Date . . . . . . . . . . . . . . . . ….August 9, 2007 Corpus . . . . . . . . ………………… ...Rs 1869.15 cr(30/06/2009) Minimum Investment . . . …………..Retail Plan- Rs 5,000 and Fund Manager . . …………………Ashwani Kumar & Sailesh Raj Bhan Benchmark. . . . . . . . . . . . . . . . . . . . .S&P CNX Nifty

45

VOLATILITY MEASURES Beta Standard Deviation R Squared Sharpe Ratio Portfolio Turnover Ratio 0.9098 5.2003 0.9713 0.0270 1.16

46

NATURAL RESOURCE FUND
INVESTMENT OBJECTIVE The primary investment objective of the scheme is to seek to generate capital appreciation & provide long term growth opportunities by investing in companies principally engaged in the discovery, development, production, or distribution of natural resources and the secondary objective is to generate consistent returns by investing in debt and money market securities.

FUND DATA Structure . . . . . . . . . . ……………. .Open-ended Equity Scheme Date of allotment . . . . . . . . . . . ……February 25, 2008 Inception Date . . . . . . . . . . . . . . …..February 26, 2008 Corpus . . . . . . . . …………………...Rs 4419.12 crore (30/06/2009) Minimum Investment . . ……………Retail Plan- Rs 5000 Institutional Plan (IP) - Rs 5 cr Fund Manager . . . . . ……………….Ashwani Kumar & Shiv Chanani

47

Benchmark ........................................ A custom benchmark created using the BSE-200 to the extent of 65% of portfolio and MSCI World Energy Index for balance 35% of the portfolio.

48

VOLATILITY MEASURES Beta Standard Deviation R Squared Sharpe Ratio Portfolio Turnover Ratio 0.7327 4.5916 0.839 -0.0269 2.06

49

QUANT PLUS FUND
INVESTMENT OBJECTIVE The investment objective of the Scheme is to generate capital appreciation through investment in equity and equity related instruments. The Scheme will seek to generate capital appreciation by investing in an active portfolio of stocks selected from S & P CNX Nifty on the basis of a mathematical model

FUND DATA Structure . . . . . . . . . . …………… Open-ended Equity Scheme Date of allotment . . . . . . . . . . . . . .April 18, 2008 Inception Date . . . . . . . . . . . . . .. . .April 18, 2008 Corpus . . . . . . . . . . . ………………Rs 42.73 crore (30/06/2009) Minimum Investment . . . …………Retail Plan - Rs 5,000 Institutional plan - Rs 5 cr Fund Manager . . . . . . . . . . . . . . . . . Krishan Daga Benchmark ..................................... S&P CNX Nifty

50

VOLATILITY MEASURES Beta Standard Deviation R Squared Sharpe Ratio Portfolio Turnover Ratio 0.8763 5.2696 0.9577 0.0145 2.17

51

INCOME FUND
INVESTMENT OBJECTIVE The primary investment objective of the scheme is to generate optimal returns consistent with moderate level of risk. This income may be complemented by capital appreciation of the portfolio. Accordingly, investments shall predominantly be made in Debt & Money Market Instruments.

FUND DATA Structure . . . . . . . . ……………... . .Open-ended Income Scheme Date of allotment . . . . . . . . . . . . …. January 1, 1998 Inception Date . . . . . . . . . . . . . . . . ..January 1, 1998 Corpus . . . . . . . . …………………..Rs 1560.75 crore (30/06/2009) Min Investment For Growth Option..Rs. 5,000; Mthly Div Plan: Qtrly Div Plan: Half yearly Div Plan: Annual Div Plan: Rs 25,000; . . . . Rs 10,000 Rs 5,000; Rs 5,000

Fund Manager . . . . . . . . . . . . . . . . . Prashant Pimple Weighted Average YTM . . . . . . . . . 6.85% Weighted Avg. Maturity . . . . . . . . . .. 6.61 Years Benchmark. . . . ………………….. . .Crisil Composite Bond Fund Index

52

MEDIUM-TERM FUND
INVESTMENT OBJECTIVE The primary investment objective of the scheme is to generate regular income in order to make regular dividend payments to unit holders and the secondary objective is growth of capital.

FUND DATA Structure . . ……………………... . Open-ended Income Scheme with no assured returns Date of allotment . . . . . . . . . ………September 14, 2000 Inception Date . . . . . . . . . . . . …….September 25, 2000 Corpus . . . . . . . …………………...Rs 10400.49 crore (30/06/2009) Minimum Investment . . . . . . . . . . . Rs. 5,000 Fund Manager . . . . . . . . . . . . . . . . .Amit Tripathi Weighted Average YTM . . . . . . . . . 7.00% Modified Duration . . . . . . . . . . . . .. . 0.40 Years Weighted Avg. Maturity . . . . . . . . . . 0.43 Years Benchmark. . . . . ………………….. Crisil Short-term Bond Fund Index

53

SHORT-TERM FUND
INVESTMENT OBJECTIVE The primary investment objective of the scheme is to generate stable returns for investors with a short term investment horizon by investing in fixed income securitites of a short term maturity.

FUND DATA Structure . . . . . . . . ……………….. . Open-ended Income Scheme Date of allotment . . . . . . . . . . ………December 18, 2002 Inception Date . . . . . . . . . . . . . ……..December 23, 2002 Corpus . . . . . . . . ……………………Rs 2865.78 crore (30/06/2009) Minimum Investment . . . . . . . . . . . . ..Rs 50,000 Fund Manager . . . . . . . . . . . . . . . . . Prashant Pimple Weighted Average YTM . . . . . . . . . . 6.19% Modified Duration . . . . . . . . . . . . . . . 1.29 Years Weighted Avg. Maturity . . . . . . . . . . . 1.50 Years Benchmark. . . . . . . . . . . ………… . . .Crisil Liquid Fund In

54

MONTHLY INCOME PLAN
INVESTMENT OBJECTIVE The primary investment objective of the scheme is to generate regular income in order to make regular dividend payments to unit holders and the secondary objective is growth of capital.

FUND DATA Structure . . . . . . . . …………….. . . . . . . . . . . Open-ended Fund Date of allotment . . . . . ……………….. . . . . December 29, 2003 Inception Date . . . . . . . . . . . . . . . ……………January 13, 2004 Corpus . . . . . . . . . ……………………………Rs 233.18 crore (30/06/2009) Minimum Investment . . ……………………...For Growth Plan: Rs 10,000; Benchmark. . . . . . . . . . . . …………………… Crisil MIP Blended Index

55

NRI INCOME FUND
INVESTMENT OBJECTIVE The primary investment objective of the scheme is togenerate optimal returns consistent with moderate levels of risk. This income may be complemented by capital appreciation of the portfolio. Accordingly, investments shall predominantly be made in Debt Instruments.

FUND DATA Structure . . . . . . . . . . ……………….Open-ended Income Scheme Date of allotment . . . . . . . . . . ………November 15, 2004 Inception Date . . . . . . . . . . . . . ……..November 16, 2004 Corpus . . . . . . . . . . ………………… Rs 0.39 crore (30/06/2009) Minimum Investment . . . . . . . . . . . . .Rs 50,000 Fund Manager . . . . . . . . . . . . . . . . . Prashant Pimple Weighted Average YTM . . . . . . . . . . 3.98% Modified Duration . . . . . . . . . . . . . . .. 0.11 Years Weighted Avg. Maturity . . . . . . . . . . . 0.12 Years Benchmark. . . . . . ……………………Crisil Composite Bond Fund Index.

56

MONEY MANAGER FUND
INVESTMENT OBJECTIVE The investment objective of the Scheme is to generate optimal returns consistent with moderate levels of risk and liquidity by investing in debt securities and money market securities.

FUND DATA Structure . . . . . . . ………………….. . .. Open-ended Income Scheme Date of allotment . . . . . . . . . . . . ……….March 20, 2007 Inception Date . . . . . . . . . . . . . . . …… March 21, 2007 Corpus . . . . . . . …………………………Rs 15979.80 crore (30/06/2009) Minimum Investment . . ……………. . . For Retail Plan: Rs 1 lakh Fund Manager . . . . . . . . . . . . . . . . . … . .Amit Tripathi Weighted Average YTM . . . . . . . . . . .. . .6.76% Modified Duration . . . . . . . . . . . . . . . . . . 0.42 Years Weighted Average Maturity . . . . . . . . .. . 0.46 Years Benchmark. . . . . . . . . . . . . . …………….Crisil Liquid Fund Index

57

LIQUID FUND (Treasury Plan)
INVESTMENT OBJECTIVE The primary investment objective of the scheme is to generate optimal returns consistent with moderate levels of risk and high liquidity. Accordingly, investments shall predominantly be made in Debt and Money Market Instruments

FUND DATA Structure . . ………………. . . . . . . ….. . .Open-ended Liquid Scheme Date of allotment . . . . . . . . ………... . . . .March 18, 1998 Inception Date . . . . . . . . . . . . . . . ………March 23, 1998 Corpus . . . . . . . ……………………… .Rs 5494.38 crore (30/06/2009) Minimum Investment . . . . . . . . . . . …….Retail: Rs. 5,000 Istitutional Plan ………………………… Rs. 1,00,00,000 Fund Manager . . . . . . . . . . . . . . . . ………Prashant Pimple Weighted Average YTM . . . . . . . . . . . . . . 6.33% Weighted Avg. Maturity . . . . . . . . . . . . . 0.21 Years Benchmark. . . . . . . . . . . . …………... . .Crisil Liquid Fund Index

58

FLOATING RATE FUND
INVESTMENT OBJECTIVE The primary investment objective of the scheme is to generate regular income through investment in a portfolio comprising substantially of Floating Rate Debt Securities (including floating rate securitized debt, Money Market Instruments and Fixed Rate Debt Instruments swapped for floating rate returns). The scheme shall also invest in Fixed Rate Debt Securities (including floating rate securities debt, Money Market Instruments and Fixed Rate Debt Instruments swapped for fixed returns). ` FUND DATA Structure . . . . . . . . . . . …………….Open-ended Liquid Scheme Date of allotment . . . . . . . . . . . . ….August 27, 2004 Inception Date . . . . . . . . . . . . . ……September 2, 2004 Corpus . . . . . . . . . …………………Rs 667.38 crore (30/06/2009) Minimum Investment . . . . . . . . . . . .Rs 25,000 Fund Manager . . . . . . . . . . . . . . . . Amit Tripathi Weighted Average YTM . . . . . . . . . 6.31% Modified Duration . . . . . . . . . . . . ... 0.14 Years Weighted Avg. Maturity . . . . . . . . . 0.16 Years Benchmark. . . . . . . . . ………... . . .Crisil Liquid Fund Index

59

GOLD EXCHANGE TRADED FUND
INVESTMENT OBJECTIVE The investment objective is to seek to provide returns that closely correspond to returns provided by price of gold through investment in physical Gold (and Gold related securities as permitted by Regulators from time to time). However, performance of the scheme may differ from that of the domestic prices of Gold due to expenses and or other related factors. FUND DATA Structure . . An open ended Gold ETF that tracks the domestic prices of gold through investments in physical gold Date of allotment . . . . . . ……… . . . November 21, 2007 Inception Date . . . . . . . . . . . . . …….November 22, 2007 Corpus . . . . . . . . . ………………….Rs 178.42 crore (30/06/2009) Exchange listed . . . . . . . . . . . . . . . . .NSE NSE Symbol . . . . . . . . . . . . . . . . . . .RELGOLD Fund Manager . . . . . . . . . . . . . . . . Hiren Chandaria Benchmark. . . …………………… .As there are no indices catering

60

ANALYSIS OF RELIANCE MUTUAL FUND SCHEMES
A mutual fund schemes is good, better or best, it depends on some measures. These measures tell us about the volatility of fund, risk of the fund and whether an investor should invest in that particular fund or not. Explanations of these measures are below here:-

Sharpe Ratio
A ratio developed by Nobel laureate William F. Sharpe to measure risk-adjusted performance. The Sharpe ratio is calculated by subtracting the risk-free rate - such as that of the 10year .Treasury bond - from the rate of return for a portfolio and dividing the result by the standard deviation of the portfolio returns. The Sharpe ratio formula is:

The Sharpe ratio tells us whether a portfolio's returns are due to smart investment decisions or a result of excess risk. This measurement is very useful because although one portfolio or fund can reap higher returns than its peers, it is only a good investment if those higher returns do not come with too much additional risk. The greater a portfolio's Sharpe ratio, the better its risk-adjusted performance has been. A negative Sharpe ratio indicates that a risk-less asset would perform better than these security being analyzed. A variation of the Sharpe ratio is the Sortino ratio, which removes the effects of upward price movements on standard deviation to measure only return against downward price volatility.

Alpha
Alpha is a risk-adjusted measure of the so-called active return on an investment. It is the return in excess of the compensation for the risk borne, and thus commonly used to assess active managers' performances. Often, the return of a benchmark is subtracted in order to 61

consider relative performance; the alpha coefficient (αi) is a parameter in the capital asset pricing model (CAPM). It is the intercept of the Security Characteristic Line (SCL). Alternatively, it is also the coefficient of the constant in a market model regression. It can be shown that in an efficient market, the expected value of the alpha coefficient equals the return of the risk free asset: E(αi)

= r f.

Therefore the alpha coefficient indicates how an investment has performed after accounting for the risk it involved:

αi < rf: the investment has earned too little for its risk (or, was too risky for the
return)

• •

αi = rf: the investment has earned a return adequate for the risk taken αi > rf: the investment has a return in excess of the reward for the assumed risk

Beta

Where ra measures the rate of return of the asset, rp measures the rate of return of the portfolio, and Cov

(ra, rp) is the covariance between the rates of return. In the CAPM

formulation, the portfolio is the market portfolio that contains all risky assets, and so the rp terms in the formula are replaced by rm, the rate of return of the market. Beta is also referred to as financial elasticity or correlated relative volatility, and can be referred to as a measure of the sensitivity of the asset's returns to market returns, its nondiversifiable risk, its systematic risk, or market risk. On an individual asset level, measuring beta can give clues to volatility and liquidity in the marketplace. In fund management, 62

measuring beta is thought to separate a manager's skill from his or her willingness to take risk.

• • •

Volatility is measured by the standard deviation of a stock or a portfolio’s return from the mean. Thus, beta is one important measure of volatility. Ideally, alternative investment strategies will not only minimise downside risk, they will also aim to achieve low levels of volatility. Many managers perform statistical analysis to rank securities according to their expected returns and risk factors, this is called quantitative risk analysis.

From this analysis, they make judgments on stock selection—to enhance alpha and minimise beta risk. The mathematical analysis is usually performed by computer generated models, earning the epithet black box investing.

Standard Deviation
A measure of the dispersion of a set of data from its mean. The more spread apart the data, the higher the deviation. Standard deviation is calculated as the square root of variance. Standard deviation is a statistical measurement that sheds light on historical volatility. For example, a volatile stock will have a high standard deviation while the deviation of a stable blue chip stock will be lower. A large dispersion tells us how much the return on the fund is deviating from the expected normal returns.

63

TABELS WITH DIFFERENT MEASURES Volatility Measures
Fund Risk Grade Std Dev. -40.7 -39.22 29.35 36.29 37.32 9.12 0.36 0.19 0.19 0.2 0.51 0.51 0.32 40.95 0.28 10.33 0.2 0.2 36.73 Sharpe RRatio Beta Alpha Square 0.78 0.81 9.67 0.94 0.88 1.07 22.32 0.91

Fund Name
Reliance Banking Retail Reliance Diversified Power Sector Retail Reliance Equity Opportunities Reliance Growth Reliance Income Reliance Liquid Cash Reliance Liquid Treasury Reliance Liquid Treasury Inst Reliance Liquidity Reliance M Interval Series I Inst Reliance M Interval Series I Retail Reliance M Interval Series II Retail Reliance Media & Entertainment Reliance Medium Term Reliance MIP Reliance Money Manager Inst Reliance Money Manager Retail Reliance NRI Equity

Avg. Avg. Above Avg. High Low Low Below Avg. ----Low Above Avg. Below Avg. Below Avg. Avg.

0.23 0.48 0.76 0.82 14.18 15.37 14.68 6.45 6.09 10.07 0.24 7.92 0.72 15.97 15.07 0.41

0.99 1.02 0.91 0.02 0.01 0.01 0.01 0.01 0.01 0.01 0.99 0.02 0.8 0.01 0.01 1

-3.1 6.13 4.02 0.25 2.61 2.89 2.91 3.29 3.06 3.21 -1.51 2.18 10.75 3.2 2.94 3.66

0.92 0.93 0.25 0.01 0.02 0.02 0.02 0 0 0.01 0.72 0.09 0.45 0.01 0.01 0.91

64

Reliance NRI Income Reliance Pharma Reliance Regular Savings Balanced Reliance Regular Savings Debt Ret Reliance Regular Savings Equity Reliance Short-term Reliance Tax Saver Reliance Vision

--Avg. -Avg. Avg. Avg. Avg.

0.41 35.1 27.88 2.44 42.1 2.44 33.29 34.5

-8.83 0.48 0.41 0.57 0.6 2.6 0.28 0.36

0 1.07 1.01 0.04 1.12 0.02 0.88 0.95

-3.6 13.34 3.58 1.26 12.31 6.38 -0.99 1.51

0 0.76 0.87 0.01 0.87 0 0.86 0.93

Investment Details
Fund Name Reliance Banking ETF Reliance Banking Retail Reliance Diversified Power Sector Inst Reliance Diversified Power Sector Retail Reliance ELSS Series I Reliance Equity Mim Expense Entry Exit Initial Ratio % Load % Load % Inv. (Rs) 0.35 0.00 0.00 -2.14 1.72 2.25 0.00 0.00 0.00 5,000 5 crore Portfolio Manager Krishan Daga Sunil B. Singhania Sunil B. Singhania Tenure (Yrs.) 1 4 1

1.82

2.25

0.00

5,000

Sunil B. Singhania

5

2.46 1.89

0.00 2.25 0.00

0.00 0.00 0.00

500 5,000 5 crore

Reliance Equity 1.73 Advantage Inst Reliance Equity 1.93

2.25

0.00

5,000

Sailesh Raj Bhan Sunil B. Singhania Ashwani Kumar, Sailesh Raj Bhan Ashwani

2 3 2, 2

2, 2 65

Fund Name Advantage Retail

Mim Expense Entry Exit Initial Ratio % Load % Load % Inv. (Rs)

Portfolio Manager Kumar, Sailesh Raj Bhan

Tenure (Yrs.)

Reliance Equity 1.99 Opportunities Reliance Gilt Securities Inst Reliance Gilt Securities Inst PF Reliance Gilt Securities Retail Reliance Gilt Securities Retail PF Reliance Gold ETF Reliance Growth 1.40 --

2.25

0.00

5,000

Sailesh Raj Bhan Prashant R Pimple Prashant R Pimple Prashant R Pimple Prashant R Pimple Hiren Chandaria Sunil B. Singhania Sunil B. Singhania Prashant R Pimple Sunil B. Singhania Sunil B. Singhania Amit Tripathi Prashant R Pimple Prashant R Pimple Amit Tripathi

4

0.00 0.00

0.00 0.00

1 crore 1 crore

1 1

1.50 --

0.00 0.00

0.00 0.00

10,000

1 1

1.00 1.82

-2.25 0.00 0.00 0.00

-0.00 0.00 0.00 0.00

1 5 2 1 0

Reliance Growth 1.62 Inst Reliance Income 1.48 Reliance Infrastructure Inst Reliance Infrastructure Retail Reliance Liquid Cash Reliance Liquid Treasury Reliance Liquid Treasury Inst Reliance Liquidity --

--

2.25

0.00

0

0.38 1.13 0.89 0.68

0.00 0.00 0.00 0.00

0.00 0.00 0.00 0.00

6 1 1 4

66

Fund Name

Reliance Long Term Equity Reliance Media 2.46 & Entertainment Reliance 0.81 Medium Term Reliance MIP 2.00

Mim Expense Entry Exit Initial Ratio % Load % Load % Inv. (Rs) 1.94 0.00 0.00 2.25 0.00 0.00 0.00 0.00 0.00

Portfolio Manager Sunil B. Singhania Sailesh Raj Bhan Amit Tripathi Ashwani Kumar, Amit Tripathi Amit Tripathi Amit Tripathi Ashwani Kumar, Shiv Chanani Ashwani Kumar, Shiv Chanani Omprakash Kuckian Prashant R Pimple Sailesh Raj Bhan

Tenure (Yrs.) 3 4 1 5, 1

Reliance Money 0.96 Manager Inst Reliance Money 1.16 Manager Retail Reliance Natural -Resources Inst Reliance Natural 1.83 Resources Retail Reliance NRI Equity Reliance NRI Income Reliance Pharma 2.46 1.36 2.50

0.00 0.00 0.00

0.00 0.00 0.00

2 2 1, 1

2.25

0.00

1, 1

3.00 0.00 2.25

0.00 0.00 0.00

1 1 4

67

MUTUAL FUND INDUSTRY AND DISRIBUTION CHANNELS
In the past 25 years, there have been dramatic changes in how mutual funds are sold to the investing public. Before 1980, all funds had a single share class, and shares of a given fund were offered to all investors. Most funds were sold through a broker, who provided advice, assistance, and ongoing service to the fund buyer. The shareholder paid for these distribution services through a front-end sales charge when he or she bought the fund. Other funds sold shares directly to investors without a sales charge. Investors in these funds either did not receive advice and assistance or obtained and paid for these services separately. Funds sold through financial professionals such as brokers have since adopted alternatives to the front-end sales charge. The alternative payment methods typically include a fee based on assets that may also be in combination with a front-end or back-end sales charge. In many cases, funds offer several different share classes — all of which invest in the same underlying portfolio of assets, but each share class may offer shareholders different methods of paying for broker services. The purpose of this paper is to describe the current structure of the distribution system for mutual funds and to analyze trends and developments in distribution cost incurred by mutual fund investors since 1980. The principal findings of the paper include the following:

Distribution of Mutual Funds
_ Mutual funds are sold through five principal distribution channels:

1) The advice channel, 2) The retirement plan channel, 3) The supermarket channel, and 4) The institutional channel.

Distribution Cost
Distribution cost — the combination of sales loads and 12b-1 fees incurred by buyers of mutual funds — decreased 60 percent for equity fund share classes with loads and 43 percent for bond fund share classes with loads between 1980 and 2001. Distribution cost fell as load share classes were sold with greater frequency in retirement plans and other accounts that reduce or waive the load. The decline in cost of purchasing load share classes was also partly in response to competition from no-load fund companies. To meet the competition, load funds reduced front-end sales loads in

68

the 1980s and offered lower-cost alternatives to front-end loads. _For the mutual fund industry as a whole, distribution costs fell as sales of no-load share classes increased through the direct, supermarket, and retirement plan channels. The combination of lower distribution costs among load share classes and increased sales of no-load share classes caused overall distribution costs to fall by 73 percent for equity funds and 60 percent for bond funds between 1980 and 2001. _ Since the adoption of Rule 12b-1 in 1980, asset-based distribution fees have become a significant element of distribution cost. In 2001, 12b-1 fees represented an estimated 48 percent of all distribution costs for equity fund load share classes and 49 percent for bond fund load share classes. The use of 12b-1 fees has not offset reductions in sales loads, however.

Advice Channel:
The principal feature of the advice channel is the provision of investment guidance, assistance, and advice by financial professionals. These include full-service brokers at national wirehouses, independent financial planners and advisers, registered sales representatives at banks and savings institutions, and insurance agents. Such advisers help fund shareholders identify financial goals such as retirement, tax management, education savings, and estate planning. They assess therisk tolerance of their clients and select mutual funds and other investments to meet these goals. As an intermediary between investors and funds, financial professionals conduct transactions for the shareholder, maintain the financial records for the investments under their management, send periodic financial statements to shareholders, and coordinate the distribution of prospectuses, financial reports, and proxy statements to shareholders on behalf of the funds. Shareholders’ questions about their funds and accounts often are handled by the financial professionals rather than by the fund companies themselves.

Retirement Plan Channel
In the 1990s, defined contribution retirement plans, such as 401(k) plans, became one of the primary sources through which investors buy mutual funds. In 2002, $1 trillion was invested in mutual funds through defined contribution plans, up from $67 billion in 1990. Furthermore, 62 percent of all household owners of mutual funds held shares in defined contribution plans.5 Employers sponsoring defined contribution plans rely upon third parties to administer the plans and provide plan investments to employees. The third-party administrator (TPA) typically handles the recordkeeping and other administrative Employers sponsoring defined contribution plans rely upon third parties to administer the plans and provide plan investments to employees. The third-party administrator (TPA)

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typically handles the recordkeeping and other administrative services and assists the employer in the selection of the investment options offered to employees. Investment options typically include mutual funds, guaranteed investment contracts, stable value funds, and company stock.6 Among the services provided by these third parties are educational materials and seminars for employees that explain the retirement plan, investment options, and investment principles.

Supermarket Channel
The introduction of the first mutual fund supermarket by a discount broker in 1992 represented a significant innovation in the distribution of mutual funds. Many other discount brokers, some affiliated with mutual fund companies, have since organized fund supermarkets. The most important feature of a fund supermarket is its no transaction- fee (NTF) program, whereby an investor may purchase mutual funds with no transaction fees from a large number of fund companies. The NTF offerings at a discount broker often number in the thousands, providing an investor the convenience of purchasing “no load” funds from different families at a single location. Supermarkets generally do not provide investment advice, and investors must undertake their own research when choosing funds. However, supermarkets provide a variety of products and tools to assist shareholders’ decision making. In addition, the supermarkets provide a convenient platform through which investors can research funds, obtain fund literature, and purchase fund shares. The supermarket platform not only provides fund sponsors with access to a national retail distribution channel, but it also promotes competition among funds because investors can readily compare fund fees, expenses, and returns. The fund supermarket holds a single account with each fund and maintains shareholder transaction records for the mutual fund. The supermarket also provides consolidated reports to fund shareholders, distributes mutual fund proxy statements, financial reports, prospectuses, and tax reports. In addition, because the supermarket maintains the relationship with the investor rather than the fund itself, fund shareholders rely on the supermarket’s telephone representatives and website for account information, reducing the fund’s direct cost for providing these services.

Institutional Channel
The institutional channel comprises a variety of institutions purchasing fund shares for their own accounts. These institutions include businesses, financial institutions, endowments, foundations, and state and local governments. Fund sponsors often create special share classes or funds for

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institutional investors. Because these investors have large average account balances, the cost of managing a fund or share class with institutional accounts is lower than that for funds with a large number of small accounts. Consequently, the expense ratios for institutional funds and share classes tend to be lower than for comparable funds sold to individual investors. Institutional investors can purchase shares directly from fund companies, but they also rely on third parties to purchase their fund shares. For example, banks and other third parties that help institutions manage their cash holdings have created platforms that offer a variety of money market funds. These platforms permit institutional investors to place money in multiple money market funds and to move money between the funds on this platform. These arrangements allow institutional investors, which are often restricted as to the portion of their cash holdings that can be held in any particular mutual fund, to easily diversify their holdings across funds.

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Summary
The Indian mutual fund industry is in a relatively burgeoning stage with respect to its product offerings, and tends to compete with products offered by the government providing fixed guaranteed returns. While the Indian mutual fund industry has shown a striking growth rate in the last few years, the recent developments triggered by the global financial meltdown have impacted the industry resulting in AUM decline, adversely impacting the revenue and profitability. This report discusses about the key issues facing the Indian MF industry and how the penetration of mutual fund could be potentially increased. In order to increase the penetration of MF, it is also imperative to understand the investors buying behavior. At the retail level, investors comprising of a highly heterogeneous group are unique. Hence, their purchasing pattern and behaviour also widely differs. This makes it mandatory for the Asset Management Companies (AMCs) to understand the fund/scheme selection/switching behaviour of the investors in order to design suitable for the end customers. With this background a survey was conducted among 20 Mutual Fund distributors in NCR region to understand the factors influencing the fund/scheme selection behaviour of Retail Investors. This paper discusses the survey findings. It is hoped that the report will have some useful managerial insight for the Reliance AMC in their product and distribution strategy.

Bibliography
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