Project

Project on LIC Mutual Fund
Project Report Entitled:-
“Study of Various Mutual Fund Schemes and

Risk Adjusted Rate of Return with Special
Reference to LIC Mutual Fund”
Submitted for the award of post graduate degree of
Master in Business Administration

(MBA)
To
Pune University
-: Submitted By:-
Shaikh Vasim Rashid
MBA (Finance)
-: The Project Guide:-

Prof. D. D.Walke
NDMVP’S Institute of Management Research and

Technology (IMR&T), Gangapur Road, Nashik-
422002
MBA (Finance) I.M.R.

& T.
----- 2008-09-----
I hereby declare that the project entitled “Study of Various

Mutual Fund Schemes and Risk Adjusted Rate of Return with Special
Reference to LIC Mutual Fund” is an independent analysis work carried out
by me as a part of MBA curriculum, University of Pune under the guidance of
prof. D.D. Walke.
This report has not been submitted for any award of any degree of
this or any other University.
Date: Shaikh Vasim Rashid

(I.M.R. &T., Nashik)

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It is great opportunity to thank all the help, assistance and co-

operation rendered to me by all the people who have the contribution in
bringing up this project work on the topic “Study of Various Mutual Fund
Schemes and Risk Adjusted Rate of Return with Special Reference to LIC
Mutual Fund”
I would like to express my deep gratitude to Mr. Shekhar Buwa
(Area Manager, Nashik) for giving me this opportunity to work in the
company. I am gratetly thankful to Mr. Sujit Jadhav (Relationship
Manager, Nashik) for providing their wholehearted co-operation and
guidance in the successful completion of project.
I am grateful thanks to Prof. D.D. Walke director of I.M.R. &T.
and project guide for the valuable suggestions and support with keen interest
in bringing this project work to existence successfully.
I extend my thanks to the entire staff member whose best wishes
contributed to the completion of the project.
Date: Shaikh Vasim Rashid

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(I.M.R. &T., Nashik)

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Chapter No. Under Particulars

Numbering
I INTRODUCTION
1.1 Need of the project

1.2 Topic selection
1.3 Objective and limitation of study
1.4 Data collection
II COMPANY PROFILE
2.1 Set up of the fund

2.2 Information about the sponsor
2.3 Information about the LIC MF
2.4 Information about the AMC
2.5 (STUDY OF) LIC MF SCHEMES
III ABOUT MUTUAL FUND
3.1 What is Mutual Fund?

3.2 The Mutual Fund Operation flow chart
3.3 Types of Mutual Fund scheme
3.4 Others
IV DATA ANALYSIS AND INTERPRETATION
4.1 Risk adjusted rate of returns of schemes

4.2 Study of Mentioned (4 to 11) Performance
Measures of Mutual Fund:-
V CONCLUSIONS AND F. & R.
VI APPENDICES
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(1.1) Need Of The Project Work:-

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The summer project is an integral part of MBA curriculum it is

very important program as it gives the student their initial exposure to an
organizational set-up. It is essential to have adequate knowledge about every
aspect of the job, so as to handle each and every situation properly.
The main motive behind this project is to learn practical

application of the theoretical knowledge gained so far, at actual business
environment.
It gives an opportunity to observe business and get the experience

of various aspects of the management and also gives practical insight to the
current business scenario. The project helps to appreciate real life business
problem, perceptions and challenges.
The project is good opportunity to interact with the management

personnel and to gain possible knowledge through their experience.
(1.2) Topic Selection:-
The selection of the topic is one of the important aspects of the

project, as it decides the course of action to be followed. The topic selection
should be such that it helps in understanding the concepts clearly, as was given
the topic by the company it self, the topic given by my project guide was
“Study of Various Mutual Fund Schemes and Risk Adjusted Rate of
Return with Special Reference to LIC Mutual Fund” which cover the
things related to various LICMF schemes, Concepts of Mutual Funds and
Performance Measures/Evaluation.

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(1.3) Objective and Limitation of Study
(A) Objectives:-
Decision-Making requires relevant and correct information for

collecting the data which can be used for decision-making. Objective of data
collection should be very clear, objective guide us to collect the right data
from right source. The main objective of the study listed as follow:
• To study the concept of Mutual Fund, Various type of Mutual Fund

schemes and when a particular scheme is ideal for investors.
• To study of various open-ended schemes of LICMF with primary
objective of those scheme and prepare summary of those schemes.
• To study of the fundamental concepts of performance measures to
understand the concept of risk adjusted rate of return for investment
decision.
(B) Limitations:-
The project was conducted in a short span of eight week, which

itself act as a major constraints. More over the time constraint also put
pressure for data collection and the analysis for data. The report includes
Fundamental analysis but doesn’t include deep technical analysis. Hence
study is limited by considering only fundamental factors.

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(1.4) Data Collection:-
The data was collected by using the following sources:-
(A) Primary Data:-
Asking questions and personal visits to Mutual Fund Agents, and

broker houses, local franchisee and customer interaction and feedback report is
collect primary data.
(B) Secondary Data:-
The secondary data is collect through Information Memorandum,

offer document, trade- books, fact sheet, broachers related to Mutual Fund,
website of LICMF and using internet etc.

& T.

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(2.1) SET UP OF THE FUND:-
Life Insurance Corporation of India set up LIC Mutual Fund on

19th June 1989 and contributed Rs. 2 Crores towards the corpus of the Fund.
LIC Mutual Fund was constituted as a Trust in accordance with the provisions
of the Indian Trust Act, 1882. The settlor is not responsible for the
management of the Trust. The settlor is also not responsible or liable for any
loss or shortfall resulting in any of the schemes of LIC Mutual Fund.
The Trustees of the LIC Mutual Fund have exclusive ownership

of Trust Fund and are vested with general power of superintendence,
discretion and management of the affairs of the Trust. LIC Mutual Fund Asset
Management Company Ltd. was formed on 20th April 1994 in compliance
with the Securities and Exchange Board of India (Mutual Funds) Regulations,
1993. The Company commenced business on 29th April 1994. The Trustees of
LIC Mutual Fund have appointed LIC Mutual Fund Asset Management
Company Ltd. as the Investment Managers for LIC Mutual Fund.
The Trustees are responsible for appointing a Custodian. The

Trustees should also ensure that the activities of the Trust and the Asset
Management Company are in accordance with the Trust Deed and the SEBI
Mutual Fund Regulations as amended from time to time. The Trustees have
also to report periodically to SEBI on the functioning of the Fund.
The investors under the schemes can obtain a copy of the Trust
Deed, the text of the concerned Scheme as also a copy of the Annual Report,
on a written request made to the LIC Mutual Fund Asset Management
Company Ltd. at a nominal price of Rs. 10/-.
(2.2) INFORMATION ABOUT THE SPONSOR:-
Life Insurance Corporation of India (LIC), the sponsor of LIC

Mutual Fund is one amongst the largest insurance companies in the world,
serving over 32 crore policy holders and managing a Fund of over Rs.
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560806.33 crore. There are very few organizations in India, which manage
funds of this size. However beyond the initial contribution of Rs. 2 crore
towards setting up of the corpus LIC is not responsible or liable for any loss or
shortfall resulting from the operations of any scheme of the Mutual Fund.
(2.3) INFORMATION ABOUT LIC MUTUAL FUND:-
LIC Mutual Fund was set up as a separate Trust by the Life

Insurance Corporation of India having its central office at Yogakshema,
Jeevan Bima Marg, Mumbai 400 021. The Trust deed dt.20.04.89 was
modified through a deed of modification as mentioned in schedule III of SEBI
(Mutual Fund) Regulations 1996. The Trust Deed will not be modified without
the prior approval of SEBI and Unit holders approval will be obtained where it
affects the interest of the Unit holders. LIC has made an initial contribution of
Rs.2 crore towards Trust Fund. LIC Mutual Fund Trustee Co. Pvt. Ltd. is
formed and appointed to supervise the activities of the Fund. The Trustee
company has entrusted the work of management of the Fund to LIC Mutual
Fund Asset Management Company Ltd., which is a company promoted by
Life Insurance Corporation of India with an authorized capital of Rs.25 crore.
Further details regarding the set up are furnished in the following paragraphs:
A) Objective of LIC Mutual Fund:-
The basic objective of LIC Mutual Fund is to mobilize savings

from investors who are spread in various parts of the country and have no easy
access to the capital market, with a view to providing them a vehicle for
investment of their funds to ensure safety, security, easy liquidity and
reasonably good returns.
B) The Trustee Fees:-
In accordance with the Trust Deed constituting the Mutual Fund,

and the Deed of Modification the Trustee Co. is entitled to receive in addition
to the reimbursement of all costs, charges and expenses a fee not exceeding
0.01% of the weekly / daily average net assets or a sum of 25 lakh per annum
whichever is higher subject to regulations.

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C) Certificate of Registration:-
In accordance with the Regulation 9 of the Securities &

Exchange Board of India Regulations, the LIC Mutual Fund has obtained a
Certificate of Registration from SEBI on 9/5/94 vide Registration Code
No.MF/012/94/5.
(2.4) INFORMATION ABOUT THE ASSET MANAGEMENT

COMPANY (AMC):-
In terms of Securities & Exchange Board of India (Mutual Fund)

Regulations, an Asset Management Company called the LIC Mutual Fund
Asset Management Company Ltd. With an authorized capital of Rs. 25 crore
has been appointed, as approved by the Securities & Exchange Board of India,
to manage the affairs of LIC Mutual Fund and operate the schemes of the
Fund. Promoted by LIC, LICMFAMC was incorporated in April 1994 and has
since been managing the schemes of LICMF.
A) AMC Fees-
In accordance with the Investment Management Agreement and

the SEBI regulations the AMC is entitled to receive investment management
and advisory fee at the rate of 1.25%, per annum of the weekly average net
assets outstanding in an accounting year, for net assets upto Rs. 100 crore, and
at the rate of 1% per annum of the weekly average net assets outstanding in an
accounting year, for net assets above Rs. 100 crore.
B) CUSTODIANS:-
LIC Mutual Fund has appointed Stock Holding Corporation of

India situated at Mittal Court, ‘B’ Wing, Nariman Point, Mumbai 400021,
having SEBI Regulation no. IN/CUS/011 as per the custodian agreement with
them, signed on 22/4/94 and HDFC Bank Ltd. Situated at Sandoz House, Dr.
Annie Besant road, Worli, Mumbai 400 018, having SEBI Regulation no.
IN/CUS/001 as per the custodian agreement with them, signed on 2/12/2002.

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LIC Mutual Fund may also appoint any other Depository as the custodian for
the scheme.
Functions and Responsibilities of Custodians:-
The custodian is required to take delivery of all properties

belonging to the Mutual Fund schemes and hold them in custody separately
from the assets of the custodian and their other clients. The custodian will
make efforts to have the properties of the Fund registered in the name of the
Fund and will deliver them only as per the instructions of the AMC and on
receipt of the consideration. The custodian shall collect, receive and deposit in
the account or accounts of the Fund with the bank, income, dividends, interest,
rights and other payments of whatever kind with respect to the securities and
other assets and items of a like nature of the Fund held by or to the order of the
custodian and shall execute such ownership and other confirmations as are
necessary. LIC Mutual Fund shall have the right to change the Custodians if at
any point of time it is observed that the service of the appointed Custodians is
not upto the mark.
C) REGISTRARS AND TRANSFER AGENTS:-
All the activities such as processing of applications, issuance of

statement of account / unit certificate and other such activities are proposed to
be carried out by our Registrar and Transfer agents Registrars M/s. Karvy
Mutual Fund Services (A division of Karvy Computershare Pvt. Ltd.)
The address of the Registrar is-
“Karvy Plaza", H.No.8-2-596, Avenue 4, Street No.1,

Banjara Hills, Hyderabad – 500 034
The AMC shall have the right to change the Registrars and Transfer
agent later. The Board of Trustees and the Board of AMC have ensured that
the registrar and transfer agent M/s Karvy Computershare Pvt. Ltd. has
adequate capacity to discharge responsibilities with regard to processing of
applications and dispatching unit certificates to unitholders within the time
limit prescribed in the Regulations and also has sufficient capacity to handle
investor complaints.

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D) AUDITOR:-
M/s. Shah Gupta & Co.,

Chartered Accountants,
38, Bombay Mutual Building,
Fort, Mumbai – 400 001
LIC Mutual Fund shall review the appointment of Auditors after

every three years or at such time as may be deemed fit in the opinion of the
Board.
E) BANKERS:-
Presently HDFC Bank Ltd., Corporation Bank, Kotak Mahindra

Bank, ABN Amro Bank, Standard Chartered Bank, Union Bank of India and
AXIS Bank are the Bankers to the schemes. The AMC reserves the right to
change the Banker or introduce additional banker/s to the scheme at a later
date.
(2.5) STUDY OF LICMF SCHEMES:-
Following are the various Open-Ended LIC MF schemes / Plans

which we will study one by one:-

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1. LICMF BOND FUND

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Investment The primary investment objective of the scheme is to generate reasonable

objective:- LICMF BOND
returns for its investors through FUND
investments mainly in fixed income
securities. This shall be one of the fundamental attributes of the scheme.
10
Asset Allocation Type of Instruments Normal Allocation ( % of net asset )
Return (%)
Pattern of the 8 Debt 60-100
Scheme:- 6 Money market 0-40
4
Note:- Debt includes securitised debt & government securities.
2
0
Plan and option:- 1. Dividend
n
ar
2. Growthar
io
ye
ye
pt
Scheme returns (%)
ce
1
t3
Minimum Plan / option Fresh purchase Additional Repurchase

st
In
s
Benchmark returns (%)

La
La
application amount / Rs. purchase Rs.

e
nc
No.of units:- Dividend 5000 500 NA

Si
Growth 5000 500 NA
Benchmark index:- C Comp Bex
Fund Manager:- Mr. Ashish Kumar

Expenses of the
scheme:-
Load structure:- Entry load: Nil
Exit load:
- 0.50% if exit within 6 months from the date of allotment for

investment <= 50 lakh;
investment > 50 lakh and <= 5 crore;
- 0.10% for investment > 5 crore if exit within 1 month from the date
of allotment.
Recurring First Rs.100 crore 2.25%

expenses :-
Next Rs.300 crore 2.00%
Balance 1.50%
Actual expenses of the previous financial year: 1.79

& T.
Performance of the Compounded annualized Scheme returns Benchmark returns

scheme (as on returns (%) (%)
31.10.2007)
Last 1 year 6.69 6.27
Last 3 year 6.11 5.22
Since inception 9.12 5.78
2. LICMF G-SEC FUND

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Investment The primary investment objective of the scheme is to generate credit risk free
objective:- LICMF
And reasonable G- SEC
returns for itsFUND
investors through investments in sovereign
securities issued by the Central and/or State Government and/or any security
Return (%) 10 unconditionally guaranteed by the Central/State government for repayment of
8 principal and interest and/or reverse repose in such securities as and when
permitted by RBI.
6
Asset Allocation 4 Type of Instruments Normal Allocation ( % of net asset )
Pattern of the 2 G-Sec
Scheme:- Upto 100
0
Debt / Money market Upto 40
n
ar
ar
Note:- Debt includes securitised debt.
io
ye
ye
pt
Plan and option:- Plan:- Options:-
ce
1
3
st
st
In Scheme returns (%)

La
La
1. Regular Plan - Dividend

e
nc

2. PF Plan - Growth
Si

application amount Rs. purchase Rs.
/ No.of units:-
Dividend 10000 1000 NA
Growth 10000 1000 NA
Benchmark index:- I-Sec Composite Gilt
Expenses of the
scheme:-
Exit load: (Regular Plan)

investment <= 50 lakh;
- Nil for investment > 50lakh.
Exit load: (PF plan)
- 1% if exit within 365 days from the date of allotment.

expenses :- Next Rs.300 crore 2.00%
Balance 1.50%

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Performance of the Compounded Scheme returns (%) Benchmark

scheme (as on annualized returns returns (%)
31.10.2007)
Last 1 year 5.75 7.31
Last 3 year 5.00 6.67
3. LICMF CHILDREN’S FUND

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Investment The primary

LICMF investment objective
CHILDREN'S FUND of the LICMF Children’s Fund is to
objective:- provide for long term growth of capital through a judicious mix of
investments in quality debt securities and equities with relatively low levels of
40 risk.
Asset Allocation
35 Type of Instruments Normal Allocation ( % of net asset )
Pattern of the
30
Scheme:- Debt / MM Upto 100
Return (%)
25
Equity Upto 70
20
15
Plan and option:- Growth
10
5
/ No.of units:-0
Growth 5000 500 NA
Inception
Last 3
Last 1
year
year
Since
Benchmark index:- C Balance Ex Scheme returns (%)
Fund Manager:- Mr. Ashish Kumar Benchmark returns (%)
Expenses of the
scheme:-
Exit load:
- 1.00% if exit within 3 months from the date of allotment;
- Nil after 3 years from the date of allotment;

expenses :-
Balance 1.50%

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Performance of Compounded annualized Scheme returns Benchmark returns

the scheme (as on returns (%) (%)
31.10.2007)
Last 1 year 33.06 34.91
Last 3 year 16.82 30.16
4. LICMF LIQUID FUND

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Investment The primary investment objective of the scheme is to generate reasonable

objective:- returnsLICMF LIQUID
with low risk and highFUND
liquidity through judicious mix of
investments and quality debt instruments.
9
Pattern of the 8
Scheme:- 7Money market 60-100
Return (%)
6Debt 0-40
5
Note:- 4Debt includes securitised debt & government securities.
Plan and option:-
31. Dividend
2
12. Growth
0
ar
ar
application Rs. purchase Rs.

io
ye
ye
pt
amount / No.of Dividend Scheme returns (%)

25000 500 NA
t1
t3
ce
units:-
s
In

La
La
Growth 25000 500 NA

e
nc
Si
Benchmark C Fund - LX
index:-
Expenses of the
scheme:-
Exit load: Nil

expenses :-
Balance 1.50%

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Performance of Compounded annualized Scheme returns Benchmark

the scheme (as on returns (%) returns (%)
31.10.2007)
Last 1 year 7.90 7.47
Last 3 year 6.72 5.95
5. LICMF SHORT TERM PLAN

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Investment
LICMF SHORT TERM PLAN
The primary investment objective of the scheme is to generate income by
objective:- 8 investing in a portfolio of quality short term debt securities. There can be no
assurance that the investment objective of the scheme will be realised.
7
6
Return (%)
Pattern of the 5
Scheme:- Debt / MM Upto 100
4
Note:- 3 Debt includes securitised debt & government securities.
Plan and option:- 2 1. Dividend

1
2. Growth
0
ar
ar
n
io
ye

ye
pt
/ No.of units:- Dividend 10000

Scheme returns (%)1000 NA
1
t3
ce
st
In
La
La
Growth Benchmark returns 1000

10000 (%) NA
e
nc
Si
Benchmark index:- C St Index
Expenses of the
scheme:-
Exit load: Nil

expenses :-
Balance 1.50%

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31.10.2007)
Last 1 year 5.02 7.60
Last 3 year 4.79 5.95
6. LICMF FLOATING RATE FUND

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Investment The primary investment objective of the scheme is to generate consistent

objective:- return by investing mainly in a floating rate instruments/ fixed rate
instruments swapped for floating rate return so as to minimize the interest
rate risk for the investor.
Asset Allocation Type of Instruments Normal

Pattern of the Allocation ( %
Scheme:- of net asset )
Floating rate or fixed rate instruments swapped for floating 65 to 100%
rate debt.
Fixed rate debt or money market instruments such as 0 to 35%

Corporate bonds, Gilts, CP CD, call money market or any
other instruments as permitted by SEBI from time to time.

2. Growth
/ No.of units:- Dividend 5000 500 NA
Growth 5000 500 NA
Benchmark index:- C Fund - LX
Expenses of the
scheme:-
Exit load: Nil

expenses :-
Balance 1.50%

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LICMF FLOATING RATE FUND
9
8
7
6
Return (%)
5
4
3
2
1
0
n
ar
ar
io
ye
ye
pt
Scheme returns (%)

1
ce
st
st
In

La
La
e
nc
Si

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31.10.2007)
Last 1 year 8.50 7.47
Last 3 year 6.97 5.95
7. LICMF MONTHLY INCOME PLAN

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Investment The primary

LICMF MONTHLY investmentINCOME
objective of the scheme is to generate regular returns
PLAN
objective:- by investing mainly in a portfolio of quality debt securities and money market
instruments. The scheme also seeks to generate capital appreciation by
20 investing some percentage in a mix of equity instruments. There can be no
18 assurance that the investment objective of the scheme will be realised.
16
Pattern of the
14 Debt / MM Upto 100
Return (%)
Scheme:-
12 Equity Upto 15
Note:- 10 Debt includes securitised debt.
8
Plan and option:- 1.Monthly Dividend 3.Yearly Dividend
6 2.Quarterly Dividend 4. Growth
Minimum 4 Plan / Option Fresh Additional Repurchase
application 2 purchase purchase
amount/number 0 of Rs. Rs.
units: Monthly dividend 25000 1 NA
Last 1
Last 3
Inception
year
year
Quarterly dividend 15000

Scheme returns (%)1 NA
Since
Yearly dividend 10000returns 1(%)

Benchmark NA
Growth 5000 1 NA
Benchmark index:- C Mipex
Fund Manager:- Mrs. Bichitra Mahapatra
Expenses of the
scheme:-
Exit load:-
- 0.50% for investments <= 25 lakh if exit within 6 months from the
date of allotment;
- 0.25% for investments > 25 lakh if exit within 3 months from the date
of allotment.

Balance 1.50%

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31.10.2007)
Last 1 year 17.51 12.63
Last 3 year 14.17 11.03
8. LICMF EQUITY FUND

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Investment The main investment objective of the scheme is to provide capital growth by
objective:- investing mainly in equities. The investment portfolio of the scheme will be
constantly monitored and reviewed to optimize capital growth.

Pattern of the
Scheme:- Equity Upto 100
2. Growth

Growth 2000 200 NA
Benchmark index:- BSE Sensex

Fund Manager:- Mr. Nagendra Singh
Expenses of the
scheme:-
Load structure:- Entry load:
- Investment upto 1 crore : 2.25%
- Investment above 1 crore: Nil
Exit load : Nil

expenses :-
Balance 1.75%

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LICMF EQUITY FUND

70
60
50
Return (%)
40
30
20
10
0 n
ar
ar
ar
io
ye
ye
ye
pt
ce
t1
t3
5
st
In
s
s
La
La
La
Scheme returns (%)

e
nc

Si
Performance of the Compounded annualized Scheme returns Benchmark

scheme ( as on returns (%) returns
31.10.2007) (%)
Last 1 year 58.57 53.05
Last 3 year 38.78 51.68
Last 5 year 41.56 46.37
Since Inception 15.06 20.80

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9. LICMF GROWTH FUND

Investment objective:- The main investment objective of the scheme is to provide capital
growth by investing mainly in equities and also in debt and other
permitted instrument of capital and money market. The investment
portfolio of the scheme will be constantly monitored and reviewed to
optimize capital growth.
Asset Allocation Pattern Type of Instruments Normal Allocation ( % of net asset )

of the Scheme:-
Equity Upto 100

2. Growth
Minimum application Plan / option Fresh purchase Additional Repurchase
amount / No.of units:- Rs. purchase Rs.
Dividend 2000 Re.1 NA
Growth 2000 Re.1 NA

Expenses of the scheme:-

Exit load : Nil
Recurring expenses :- First Rs.100 crore 2.50%
Balance 1.75%

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LICMF GROWTH FUND

70
60
50
Return (%)
40
30
20
10
0
ar
ar
ar
n
io
ye
ye
ye
pt
t3
t5
t1
ce
s
s
In
La
La
La
Scheme returns (%)

e
nc

Si

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10. LICMF BALANCED FUND
Investment An open-ended income and growth scheme which seeks to provide regular
objective:- returns and capital appreciation according to the selection of plan by investing
in debt and equity instruments.

Pattern of the
Scheme:- Equity / Equity related 65-80
Debt / Money market 20-35
2. Growth
Growth 1000 500 NA
Benchmark index:- C BalanceEx

Expenses of the
scheme:-

Performance of the Exit
Compounded
load : annualized
Nil Scheme returns Benchmark returns
scheme ( as on returns (%) (%)
31.10.2007)
expenses :- Last 1 year 28.54 53.05
Last 3 year 34.24 51.68
Last 5 year 48.08 46.37
Balance 1.75%

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LICMF BALANCED FUND

45
40
35
30
Return (%)
25
20
15
10
5
0
ar
ar
ar
n
io
ye
ye
ye
pt
t1
t5
t3
ce
s
s
s
In
La
La
La
Scheme returns (%)

e
nc

Si
Performance of the Compounded annualized Scheme returns Benchmark

scheme ( as on returns (%) returns
31.10.2007) (%)
Last 1 year 38.49 34.91
Last 3 year 34.12 30.16
Last 5 year 28.59 27.94

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11. LICMF TAX PLAN

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Investment Investment objective of the scheme is to provide capital growth along with tax
objective:- rebate and tax relief to our investors through prudent investment in the stock
markets.

Pattern of the
Scheme:- Equity 80 - 100
Debt / Money market 0 - 20
2. Growth

Growth 500 100 NA
Expenses of the
scheme:-
Load structure:- Entry load: 2.25%
Exit load : Nil

expenses :-
Balance 1.75%

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LICMF TAX PLAN

70
60
50
Return (%)
40
30
20
10
0 n
ar
ar
ar
io
ye
ye
ye
pt
1
ce
st
st
st
In
La
La
La
Scheme returns (%)

e
nc

Si

31.10.2007)
Last 1 year 40.75 53.05
Last 3 year 33.18 57.68
Last 5 year 39.44 46.37

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12. LICMF OPPORTUNITIES FUND
Investment The investment objective of the scheme is to provide capital growth in long-
objective:- term with reasonable risk levels by investing mainly in companies which are
in sectors/s, which have a high growth potential at that point of time.

Pattern of the Allocation
Scheme:- ( % of net
asset )
Equity and Equity related. Instruments such as convertible 85 to

debentures, warrants, derivatives of ‘opportunities’. 100%
Fixed rate Debt / Money market instruments corporate bonds, 0 to 15%

Gilts, CP, CD, call money market or any other instruments as
permitted by SEBI from time to time.
2. Growth
application Rs. purchase Rs.
amount / No.of Dividend 5000 1 NA
units:- Growth 5000 1 NA
Benchmark BSE 200
index:-
Expenses:-
Load structure:- Entry load: - Investment upto 1 crore : 2.25%
Exit load : Nil

expenses :-
Balance 1.75%

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13. LICMF LIQUID PLUS FUND

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Investment An open ended debt scheme which seeks to provide reasonable possible
objective:- current income-consistent with preservation of capital and providing liquidity-
from investing in a diversified portfolio of short-term money market and debt
securities.
Pattern of the
Scheme:- Money market 65 - 100
Debt 0 - 35
Note:- Debt includes securitised debt upto 35%

Plan and option:- Options Dividend Frequency
1.Dividend-Payout & reinvestment 1. Daily
2. Growth 2. Weekly
3. Monthly

/ No.of units:- Dividend 500000 Re.1 NA
Growth 500000 Re.1 NA
Benchmark index:- C Fund ~ LX

Expenses of the
scheme:-
Load structure:- Entry load : Nil
Entry load : Nil
expenses :-
Balance 1.75%

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14. LICMF INDEX FUND
Investment The main investment objective of the fund is to generate returns

objective:- commensurate with the performance of the index either Nifty/Sensex based
on the plans, by investing in the respective index stocks subject to tracking
errors.
scheme:- of net assets)
Equity (Index stocks) Upto 100
Equity (Outside Index stocks-only for Sensex Advantage 10-20

plan)
Money market Upto 10
Note: Debt includes securitised debt & government securities.
Plan And Option:- Plan: Option:
Sensex plan Dividend
Nifty plan Growth
Sensex Advantage plan
Minimum Plans/Option Fresh Additional Repurchase
application purchase purchase
amount/number of Rs. Rs.
unit:- Sensex 2000/- Re.1/- NA
Nifty 2000/- Re.1/- NA
Sensex Advantage 2000/- Re.1/- NA

Benchmark index:- BSE Sensex ( for Sensex & Sensex Advantage plan)
NSE Nifty ( For Nifty plan)
Expenses of the
scheme:-
Load structure:- Entry load : Nil
Exit load: 0.5% if exit within 6 months from the date of investment.

Balance 1.75%
MBA (Finance) Actual expenses of the previous financial year: - I.M.R.
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Sensex plan - 2.50
Nifty plan – 2.50
Sensex Advantage plan – 2.50
LICMF INDEX FUND- SENSEX PLAN

60
50
Return (%)
40
30
20
10
0
n
a r
io
ye
pt
1
ce
st
Scheme returns (%)

In
La
e
nc

Si
LICMF INDEX FUND- NIFTY PLAN

70
60
Return (%)
50
40
30
20
10
0
n
ar
io
ye
pt
1
ce
Scheme returns (%)

st
In
La
e
nc

Si

& T.

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LICMF INDEX FUND- SENSEX ADVANTAGE PLAN

60
Return (%)
50
40
30
20
10
0
n
ar
io
ye
pt
Scheme returns (%)
1
ce
st
In
La
e
nc
Si
Performance of the Compounded annualized Scheme returns (%) Benchmark

scheme (as on returns returns
31.10.2007) (%)
Sensex plan:-
Last 1 year 45.35 53.05

Nifty plan:-
Last 1 year 53.61 57.60

Sensex advantage plan:-
Last 1 year 37.42 53.05


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15. LICMF ULIS

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Investment The schemeLICMF

seeks toULIS
generate long term capital appreciation and other tax
objective:- benefits u/s 80C of the income tax act as well as additional benefits of a cover
and free accidental insurance cover.
50
Return (%)
40
scheme:- 30 of net assets)
20 Equity / Equity Related 65-80
10 Debt /Money market 20-35
0 Note: Debt includes securitised debt & government securities.
Inception
Last 1
Last 3
Last 5
year
year
year
Since
Plan and Option:- Plan:- Dividend Reinvestment
Option:
Scheme returns (%)
single contribution – 5 year term
single contribution – 10 year term
regular contribution – 5 year term
regular contribution – 10 year term
Minimum Option Target Additional Repurchase

application Amount purchase
amount/number of Rs. Rs.
unit:- Single contribution – 5 year term 10000 NA NA
Single contribution – 10 year term 10000 NA NA
Regular contribution – 5 year term 10000 NA NA
Regular contribution –10 year term 10000 NA NA

Benchmark index:- C Balance Ex
Expenses:-
Load structure:- Entry load : 2.25%
Exit load: Nil
Balance 1.75%
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31.10.2007)
Last 1 year 40.76 34.91
Last 3 year 33.78 30.16
Last 5 year 28.87 27.94

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NOTE:-
Daily The NAV will be declared on all business days and will
NAV Publication:- be published in 2 news papers. NAV can also be viewed
on www.licmutual.com and www.amfiindia.com
Unitholders’ Account statement (on each transaction), Annual

Information:- financial results, and Half yearly portfolio disclosures
shall be provided to investors by post.
Risk Profile:- Mutual Fund investments are subject to market risk.

Please read the offer document carefully for detail on
risk factors.

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(3.1) WHAT IS A MUTUAL FUND?
A mutual fund is a pool of money that is managed on behalf of

investors by a Professional Money Manager. The manager uses the money to
buy stocks, bonds or other securities according to specific investment
objectives that have been established for the fund. In return for putting money
into the fund, you’ll receive either units or shares that represent your
proportionate share of the pool of fund assets. In return for administering the
fund and managing its investment portfolio, the fund manager charges fees
based on the value of the fund’s assets.
Simply, A Mutual Fund is a trust that pools the savings of a number

of investors who share a common financial goal. Anybody with an investible
surplus of as little as a few thousand rupees can invest in Mutual Funds. These
investors buy units of a particular Mutual Fund scheme that has a defined
investment objective and strategy.
The money thus collected is then invested by the fund manager in

different types of securities. These could range from shares to debentures to
money market instruments, depending upon the scheme's stated objectives.
The income earned through these investments and the capital appreciation
realised by the scheme are shared by its unit holders in proportion to the
number of units owned by them. Thus a Mutual Fund is the most suitable
investment for the common man as it offers an opportunity to invest in a
diversified, professionally managed basket of securities at a relatively low
cost.
Mutual funds are ‘open-ended’ investment funds, meaning that new

investors can contribute money to the fund at any time, and existing investors
can return their units or shares to the fund for redemption at any time. When
you redeem your units or shares of a mutual fund you will receive a cheque
based on the current market value of the fund’s portfolio.

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(3.2) THE MUTUAL FUND OPERATION FLOW CHART:-

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INVESTORS ↓
↑ Poll
Passed Their
Back To Money
With
Funds
Returns Managers
Generate Invest in
Securities

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(3.3) TYPES OF MUTUAL FUND SCHEMES:-
There are a wide variety of Mutual Fund schemes that cater to

your needs, whatever your age, financial position, risk tolerance and return
expectations. Whether as the foundation of your investment programme or as a
supplement, Mutual Fund schemes can help you meet your financial goals.
(A) By Structure:-
1) Open-Ended Schemes:-
These do not have a fixed maturity. You deal directly with the
Mutual Fund for your investments and redemptions. The key feature is
liquidity. You can conveniently buy and sell your units at Net Asset Value
("NAV") related prices. These Mutual Fund schemes disclose NAV on daily
basis.
2) Close-Ended Schemes:-
Schemes that have a stipulated maturity period (ranging from 2 to

15 years) are called close-ended schemes. You can invest directly in the
scheme at
the time of the initial issue and thereafter you can buy or sell the units of the
scheme on the stock exchanges where they are listed. The market price at the
stock exchange could vary from the scheme's NAV on account of demand and
supply situation, unit holder’s expectations and other market factors.
One of the characteristics of the close-ended schemes is that they

are generally traded at a discount to NAV; but closer to maturity, the discount
narrows. Some close-ended schemes give you an additional option of selling
your units directly to the Mutual Fund through periodic repurchase at NAV
related prices. SEBI Regulations ensure that at least one of the two exit routes
is provided to the investor. These Mutual Fund schemes disclose NAV
generally on weekly basis.
3) Interval Schemes:-

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These combine the features of open-ended and close-ended

schemes. They may be traded on the stock exchange or may be open for sale
or redemption during predetermined intervals at NAV related prices.
(B) By Investment Objective:-
1) Growth Schemes:-
Aim to provide capital appreciation over the medium to long term.

These schemes normally invest a majority of their funds in equities and are
willing to bear short-term decline in value for possible future appreciation.
These schemes are not for investors seeking regular income or needing their
money back in the short term.
Ideal for:-
• Investors in their prime earning years.

• Investors seeking growth over the long-term.
2) Income Schemes:-
Aim 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.
Ideal for:-
• Retired people and others with a need for capital. Stability and regular
income.
• Investors who need some income to supplement their earnings.
3) Balanced Schemes:-
Aim to provide both growth and income by periodically

distributing a part of the income and capital gains they earn. They invest in
both shares and fixed income securities in the proportion indicated in their

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offer documents. In a rising stock market the NAV of these schemes may not
normally keep pace, or fall equally when the market falls.
Ideal for:-
• Investors looking for a combination of income and moderate growth.
4) Money Market/Liquid 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 Interbank call
money. Returns on these schemes may fluctuate, depending upon the interest
rates prevailing in the market.
Ideal for:-
• Corporate and individual investors as a means to park their surplus

funds for short periods or awaiting a more favorable investment
alternative.
c) Other Schemes:-
1) Tax Saving Schemes:-
These schemes offer tax rebates to the investors under tax laws as
prescribed from time to time. This is made possible because the Government
offers tax incentives for investment in specified avenues. For Example: -
Equity Linked Savings Schemes (ELSS) and Pension Schemes. The details of
such tax saving schemes are provided in the relevant offer documents.
Ideal for: - Investors seek tax rebates.
2) Index Funds:-

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Index Funds replicate the portfolio of a particular index such as

the BSE sensitive index, S&P, NSE 50 index (Nifty), etc. These schemes
invest in the securities in the same weightage comprising of an index. NAV’s
of such schemes would rise or fall in accordance with the rise or fall in the
index, thought not exactly by the same percentage due to some factors known
as “Tracking Error” in technical terms. Necessary disclosures in this regard are
made in the offer document of the mutual fund scheme.
3) Sector Specific Schemes:-
These are the funds which invest in the securities of only those
sectors or industries as specified in the offer documents. E.g. Pharmaceutical,
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.
They may also seek advice of an expert.
4) Global and Foreign Funds:-
May be fixed income, growth or balanced funds that invest in

foreign securities. These funds can offer investors international diversification
and exposure to foreign companies, but are subject to risks associated with
investing in foreign countries and foreign currencies.
5) Gilt Fund:-
These funds invest exclusively in government securities.

Government securities have no default risk. NAV’s of these schemes also
fluctuate due to change in interest rates and economic.

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(3.4) Other:-
A) A Few Frequently Used Terms:-
1) Net Asset Value ("NAV"):-
Net Asset Value is the market value of the assets of the scheme
minus its liabilities and per unit NAV is the net asset value of the scheme
divided by the number of units outstanding on the Valuation Date.
For example, if the market value of Securities of a mutual fund

scheme is Rs. 200 Lakh and the Mutual fund has issued 10 Lakh units of Rs.
10 each to the investors, then the NAV per unit of the fund is Rs. 20. NAV is
required to be disclosed by the Mutual funds on a regular basis - daily or
weekly depending on the type of scheme.
2) Sale Price:-
Sale price is the price you pay when you invest in a scheme, also
called Offer Price. It may include a sales load.
3) Repurchase Price:-

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Repurchase price is the price at which a close-ended scheme

repurchases its units and it may include a back-end load. This is also called
Bid Price.
4) Redemption Price:-
It is the price at which open-ended schemes repurchase their units

and close-ended schemes redeem their units on maturity. Such prices are NAV
related.
5) Sales Load or Entry Load:-
It is a charge collected by a scheme when it sells the units, also

called, 'Front-end' load. Schemes that do not charge a load are called 'No
Load' schemes.
6) Repurchase or 'Back-end' Load:-
It is a charge collected by a scheme when it buys back the units

from the unit holders, also called, 'Exit Load' load.
7) Fund Offer document:-
A Fund Offer document is a document that offers you all the

information you could possibly need about a particular scheme and the fund
launching that scheme. That way, before you put in your money, you're well
aware of the risks etc involved. This has to be designed in accordance with the
guidelines
stipulated by SEBI and the prospectus must disclose details about:-
• Investment objectives,
• Risk factors and special considerations,
• Summary of expenses,
• Constitution of the fund,
• Guidelines on how to invest,
• Organization and capital structure,
• Tax provisions related to transactions and
• Financial information

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B) The Advantages of Investing in a Mutual Fund are:-
1. Professional Management
2. Diversification
3. Convenient Administration
4. Return Potential
5. Low Costs
6. Liquidity
7. Transparency
8. Flexibility
9. Choice of Schemes
10. Well Regulated
C) Some of the Potential Disadvantages:-
When you invest in a mutual fund you place your money in the
hands of a professional manager. The return on your investment will depend
heavily on that manager’s skill and judgment. Even the best portfolio advisers
are wrong sometimes, and studies have shown that few portfolio advisers are
able to consistently out-perform the market. Check the fund manager’s track
record over a period of time when choosing a fund. As a mutual fund investor,
you will also be paying, through management expenses and commissions, for
management services and for various administrative and sales costs. Those
fees and commissions reduce the return on your investment and are charged, in
almost all cases, whether the fund performs well or not. Sales commissions
and redemption fees can have a very significant impact on your return if you
decide to redeem your mutual fund investment in the short-term.
D) As per SEBI Regulations on Mutual Funds, an Investor is

Entitled to:-

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1. Receive Unit certificates or statements of accounts confirming your

title within 6 weeks from the date your request for a unit certificate is received
by the Mutual Fund.
2. Receive information about the investment policies, investment objectives,

financial position and general affairs of the scheme.
3. Receive dividend within 42 days of their declaration and receive the

redemption or repurchase proceeds within 10 days from the date of redemption
or repurchase.
4. The trustees shall be bound to make such disclosures to the unit holders as
are essential in order to keep them informed about any information, which
may have an adverse bearing on their investments.
5. 75% of the unit holders with the prior approval of SEBI can terminate the
AMC of the fund.
6. 75% of the unit holders can pass a resolution to wind-up the scheme.
7. An investor can send complaints to SEBI, who will take up the matter with
the concerned Mutual Funds and follow up with them till they are resolved.

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(4.1) Risk Adjusted Rate of Returns (As on 2 May 2008)

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COLUMN NO. 1 2 3
Scheme Name FUND NAV % Returns (CAGR)
SIZE 1 2Year 3
(RS.CR) Year Year
1. LIC Balanced - Plan C (Growth) 55.4199 24.53 27.20 11.76 27.45
2. LIC MF Floating Rate Fund- 13.1514 1130.41 8.90 8.42 7.68
ST- Growth
3. LIC G Sec Fund - Growth 20.1965 64.92 6.12 4.90 5.33
4. LIC G Sec Fund - PF Plan - Growth 11.6461 64.92 6.12 4.90 5.33
5. LIC Bond Fund - Growth 21.9826 68.56 9.30 6.82 6.34
6. LIC MF Liquid Fund - Growth 14.8196 3743.76 8.06 7.88 7.29
7. LIC MIP - Cumulative 27.9094 167.30 14.58 8.87 12.89
8. LIC MF FRF - MIP- Plan A - Growth 14.8752 54.84 15.53 10.26 13.10
9. LIC Short Term Plan - Growth 12.9418 10.74 7.57 6.39 5.89
10. LIC Tax Plan - Growth 29.3450 39.54 13.25 3.10 23.03
Average 11.663 7.33 11.433
4 5 6 7 8 9 10 11
Standard 2 Beta Sharpe Treynor Information Sortino Jensen

Deviation R Ratio Ratio Ratio Ratio Ratio
4.4325 0.8126 1.3638 0.1159 0.3767 0.0790 0.1620 0.1439
0.0259 0.0234 0.0585 2.2314 0.9892 0.4514 3.8439 0.0563

0.1579 0.6060 0.2983 0.0682 0.0361 -0.1230 0.1096 -0.0004
0.1579 0.6059 0.2982 0.0681 0.0361 -0.1230 0.1095 -0.0004
0.2455 0.1819 0.4102 0.2689 0.1609 0.0985 0.7179 0.0520
0.0207 0.1075 0.1002 2.0869 0.4317 0.2566 3.1286 0.0406
0.9606 0.8173 1.1894 0.1884 0.1522 0.1674 0.2767 0.0757
1.0467 0.8005 1.2828 0.1895 0.1547 0.1790 0.2732 0.0848
0.2929 0.0828 0.7143 -0.2544 -0.1043 -0.8009 -0.4157 -0.1134
6.5832 0.3747 1.6370 0.1143 0.4597 0.0168 0.2414 0.0627
1.39238 0.4412 0.7352 0.50772 0.2693 0.02018 0.84471 0.04018

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(4.2) Study of Mentioned (4 to 11) Performance Measures

of Mutual Fund:-
Mutual Fund industry today, with about 34 players and more than
five hundred schemes, is one of the most preferred investment avenues in
India. However, with a plethora of schemes to choose from, the retail investor
faces problems in selecting funds. Factors such as investment strategy and
management style are qualitative, but the funds record is an important
indicator too. Though past performance alone can not be indicative of future
performance, it is, frankly, the only quantitative way to judge how good a fund
is at present. Therefore, there is a need to correctly assess the past performance
of different mutual funds.
Worldwide, good mutual fund companies over are known by their

AMCs and this fame is directly linked to their superior stock selection skills.
For mutual funds to grow, AMCs must be held accountable for their selection
of stocks. In other words, there must be some performance indicator that will
reveal the quality of stock selection of various AMCs.
Return alone should not be considered as the basis of measurement

of the performance of a mutual fund scheme, it should also include the risk
taken by the fund manager because different funds will have different levels of
risk attached to them. Risk associated with a fund, in a general, can be defined
as variability or fluctuations in the returns generated by it. The higher the
fluctuations in the returns of a fund during a given period, higher will be the
risk associated with it. These fluctuations in the returns generated by a fund
are resultant of two guiding forces. First, general market fluctuations, which
affect all the securities, present in the market, called market risk or systematic
risk and second, fluctuations due to specific securities present in the portfolio
of the fund, called unsystematic risk. The Total Risk of a given fund is sum of
these two and is measured in terms of standard deviation of returns of the
fund. Systematic risk, on the other hand, is measured in terms of Beta, which
represents fluctuations in the NAV of the fund vis-à-vis market. The more
responsive the NAV of a mutual fund is to the changes in the market; higher
will be its beta. Beta is calculated by relating the returns on a mutual fund with
the returns in the market. While unsystematic risk can be diversified through

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investments in a number of instruments, systematic risk can not. By using the

risk return relationship, we try to assess the competitive strength of the mutual
funds vis-à-vis one another in a better way.
In order to determine the risk-adjusted returns of investment

portfolios, we have to study composite performance indices to evaluate a
portfolio by comparing alternative portfolios within a particular risk class. The
most important and widely used measures of performance are:-
1. Standard Deviation:-
In probability and statistics, the standard deviation is a measure of

the dispersion of a set of values. It can apply to a probability distribution, a
random variable, a population or a multiset. The standard deviation is usually
denoted with the letter (lower case sigma). It is defined as the root-mean-
square (RMS) deviation of the values from their mean, or as the square root of
the variance.
In finance, standard deviation is a representation of the risk

associated with a given security (stocks, bonds, property, etc.), or the risk of a
portfolio of securities. Risk is an important factor in determining how to
efficiently manage a portfolio of investments because it determines the
variation in returns on the asset and/or portfolio and gives investors a
mathematical basis for investment decisions. The overall concept of risk is that
as it increases, the expected return on the asset will increase as a result of the
risk premium earned – in other words, investors should expect a higher return
on an investment when said investment carries a higher level of risk.
For example, you have a choice between two stocks: Stock A

historically returns 5% with a standard deviation of 10%, while Stock B
returns 6% and carries a standard deviation of 20%. On the basis of risk and
return, an investor may decide that Stock A is the better choice, because Stock
B's additional percentage point of return generated (an additional 20% in
dollar terms) is not worth double the degree of risk associated with Stock A.
Stock B is likely to fall short of the initial investment more often than Stock A
under the same circumstances, and will return only one percentage point more
on average. In this example, Stock A has the potential to earn 10% more than

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the expected return, but is equally likely to earn 10% less than the expected
return. Calculating the average return (or arithmetic mean) of a security over a
given number of periods will generate an expected return on the asset, for each
period subtracting the expected return from the actual return results in the
variance. Square the variance in each period to find the effect of the result on
the overall risk of the asset. The larger the variance in a period, the greater risk
the security carries. Taking the average of the squared variances results in the
measurement of overall units of risk associated with the asset. Finding the
square root of this variance will result in the standard deviation of the
investment tool in question.
2. R-Squared (R2) / Coefficient of Determination:-
R-Squared is a statistical measure that represents the percentage of

a fund portfolio's or security's movements that can be explained by movements
in a benchmark index. For fixed-income securities and their corresponding
mutual funds, the benchmark is the U.S. Treasury Bill and, likewise with
equities and equity funds, the benchmark is the S&P 500 Index. It should be
between 0 and 1, with 0 denoting that model does not explain any variation
and 1 denoting that it perfectly explains the observed variation.
3. Beta:-
Beta, also known as the "beta coefficient," is a measure of the

volatility, or systematic risk, of a security or a portfolio in comparison to the
market as a whole. Beta is calculated using regression analysis, and you can
think of it as the tendency of an investment's return to respond to swings in the
market.
An asset with a beta of 0 means that its price is not at all correlated
with the market; that asset is independent. A positive beta
means that the asset generally follows the market. A negative beta shows that
the asset inversely follows the market; by definition, the market has a beta of
1.0. Individual security and portfolio values are measured according to how
they deviate from the market. A beta of 1.0 indicates that the investment's
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price will move in lock-step with the market. A beta of less than 1.0 indicates
that the investment will be less volatile than the market, and, correspondingly,
a beta of more than 1.0 indicates that the investment's price will be more
volatile than the market.
For example, if a fund portfolio's beta is 1.2, it's theoretically 20%

more volatile than the market. Conservative investors looking to preserve
capital should focus on securities and fund portfolios with low betas, whereas
those investors willing to take on more risk in search of higher returns should
look for high beta investments.
4. Sharpe Ratio:-
The Sharpe ratio or Sharpe index or Sharpe measure or reward-to-

variability ratio is a measure of the excess return (or Risk Premium) per unit of
risk in an investment asset or a trading strategy. Since its revision made by the
original author in 1994, it is defined as:-
Where
R= Asset return,
Rf = Return on a benchmark asset, such as the risk
free rate of return,
E[R − Rf] = Expected value of the excess of the asset

return over the benchmark return, and
σ= Standard deviation of the asset return.
Note: - If Rf is a constant risk free return throughout the period,

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Sharpe's 1994 revision acknowledged that the risk free rate

changes with time. Prior to this revision the definition was
Assuming a constant Rf
The Sharpe ratio is used to characterize how well the return of an

asset compensates the investor for the risk taken. When comparing two assets
each with the expected return E[R] against the same benchmark with return
Rf, the asset with the higher Sharpe ratio gives more return for the same risk.
Investors are often advised to pick investments with high Sharpe ratios. Sharpe
ratios, along with Treynor ratios and Jensen's alphas, are often used to rank the
performance of portfolio or mutual fund managers.
This ratio was developed by William Forsyth Sharpe in

1966.Sharpe originally called it the "reward-to-variability" ratio in before it
began being called the Sharpe Ratio by later academics and financial
professionals. Recently, the (original) Sharpe ratio has often been challenged
with regard to its appropriateness as a fund performance measure during
evaluation periods of declining markets.
5. Treynor Ratio:-
The Treynor ratio is a measurement of the returns earned in excess

of that which could have been earned on a riskless investment (i.e. Treasury
bill) (per each unit of market risk assumed). The Treynor ratio (sometimes
called reward-to-volatility ratio) relates excess return over the risk-free rate to
the additional risk taken; however systematic risk instead of total risk is used,
the higher the Treynor ratio the better the performance under analysis.

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Where
= Treynor ratio,
= Portfolio return,
= Risk free rate
= Portfolio beta
Like the Sharpe ratio, the Treynor ratio (T) does not quantify the
value added, if any, of active portfolio management. It is a ranking criterion
only. A ranking of portfolios based on the Treynor Ratio is only useful if the
portfolios under consideration are sub-portfolios of a broader, fully diversified
portfolio. If this is not the case, portfolios with identical systematic risk, but
different total risk, will be rated the same. But the portfolio with a higher total
risk is less diversified and therefore has a higher unsystematic risk which is
not priced in the market. An alternative method of ranking portfolio
management is Jensen's alpha, which quantifies the added return as the excess
return above the security market line in the capital asset pricing model.
6. Information Ratio:-
Information Ratio measures the active return of an investment

manager divided by the amount of risk the manager takes relative to a
benchmark. It is used in the analysis of performance of mutual funds, hedge
funds, etc. Specifically, the information ratio is defined as active return
divided by tracking error. Active return is the amount of performance over or
under a given benchmark index. Thus, active return can be positive or
negative. Tracking error is the standard deviation of the active return. An
alternative calculation of Information ratio is alpha divided by tracking error,
although it is preferable to use pure active return in the calculation.

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The ratio compares the annualized returns of the Fund in question

with those of a selected benchmark (e.g., 3 month Treasuries).
Since this ratio considers the annualized standard deviation of both series (as
measures of risks inherent in owning either the fund or the benchmark), the
ratio shows the risk-adjusted active return of the Fund over the benchmark.
The higher the Information Ratio, the higher the active return of the Fund,
given the amount of risk involved, and the better a Fund manager.
Information Ratio is calculated as:-
Where
I = Information Ratio
R = Asset return,
Rb = Return on a benchmark asset,
E[R − Rb] = Expected value of the active return over the

benchmark return,
σ = standard deviation of the asset return.

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Information ratio is similar to the Sharpe Ratio, but there is a major

difference. The Sharpe Ratio compares the excess return of an asset against
the return of a risk free asset, but the Information Ratio compares active
return to the most relevant equity (or debt) benchmark index. Excess Return
denotes the return over the risk-free asset while Active Return denotes the
return over the benchmark.
7. Sortino Ratio:-
The Sortino ratio measures the risk-adjusted return of an

investment asset, portfolio or strategy. It is a modification of the Sharpe ratio
but penalizes only those returns falling below a user-specified target, or
required rate of return, while the Sharpe ratio penalizes both upside and
downside volatility equally. It is thus a measure of risk-adjusted returns that
some people find to be more relevant than the Sharpe.
The Sortino ratio is calculated as:-
S = (R - T) / DR
Where
R= Asset or portfolio realized return;
T= Target or required rate of return for the investment

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strategy under consideration, (T was originally known

as the minimum acceptable return, or MAR);
DR = Downside risk.
The downside risk is the target semi deviation = square root of

the target semi variance (TSV). TSV is the return distribution's lower-partial
moment of degree 2 (LPM2).
Where (T) is often taken to be the risk free interest rate and f () is
the pdf of the returns. Thus, the ratio is the actual rate of return in excess of the
investor's target rate of return, per unit of downside risk.
8. Jensen's Alpha:-
In finance, Jensen's alpha (or Jensen's Performance Index, ex-post

alpha) is used to determine the excess return of a stock, other security, or
portfolio over the security's required rate of return as determined by the
Capital Asset Pricing Model. This model is used to adjust for the level of beta
risk, so that riskier securities are expected to have higher returns. The measure
was first used in the evaluation of mutual fund managers by Michael Jensen in
the 1970's.
To calculate alpha, the following inputs are needed:-
 The realized return (on the portfolio),

 The market return,
 The risk-free rate of return and
 The beta of the portfolio.

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Jensen's alpha = Portfolio Return - (Risk Free Rate + Portfolio Beta *
(Market Return - Risk Free Rate))
Alpha is still widely used to evaluate mutual fund and portfolio

manager performance, often in conjunction with the Sharpe ratio and the
Treynor ratio.

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Conclusions:-
A Mutual Fund is a trust that pools the savings of a number of

investors who share a common financial goal. Anybody with an investible
surplus of as little as a few thousand rupees can invest in Mutual Funds. There
are a wide variety of Mutual Fund schemes that cater to your needs, whatever
your age, financial position, risk tolerance and return expectations. Whether as
the foundation of your investment programme or as a supplement, Mutual
Fund schemes can help you meet your financial goals.
But Remember one thing All mutual funds involve investment

risk,
including the possible loss of principal. Making an informed decision to
assume some risk also creates the opportunity for greater potential reward.
This fundamental principle of investing is known as the risk/reward tradeoff.

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When forming a plan, examine your personal attitude toward investment risk.
Is stability more important than higher returns or can you tolerate short-term
losses for potential long-term gains? Remember, investments that increase in
value in a short period can just as quickly decrease in value. But if you’ve
considered the risk/reward tradeoff, you know that investment volatility is a
characteristic of a successful long-term plan. Also, Return alone should not be
considered as the basis of measurement of the performance of a mutual fund
scheme, it should also include the risk taken by the fund manager because
different funds will have different levels of risk attached to them. Risk
associated with a fund, in a general, can be defined as variability or
fluctuations in the returns generated by it. The higher the fluctuations in the
returns of a fund during a given period, higher will be the risk associated with
it. Simply before investing in any mutual fund not only see fund returns but
also the risk adjusted rate of return, risk level, fund managers past
performance.
Even Mutual funds is good to make saving and investing simple,

accessible, and affordable. The advantages of mutual funds include
professional management, diversification, variety, liquidity, affordability,
convenience, and ease of recordkeeping—as well as strict government
regulation and full disclosure.
Finding and Recommendations (F. & R.):-
During the study of various LIC Mutual Fund Schemes and Risk
Adjusted Rate of Return of the same I found following things and
recommendation their on.
1) There are a wide variety of Mutual Fund schemes, so before investing

you must know your needs, financial goal, risk tolerance and return
expectation
then select fund which match with your objective.

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2) A Fund Offer document is a document that offers you all the

information you could possibly need about a particular scheme and
the fund launching that scheme. This document gives you overall idea
about fund as well as knowledge so before investing you must read it.
3) When we invest in mutual fund, our investments is diversified in

portfolio of dozens of different securities so before investing in any
mutual fund you have to see that funds portfolio and returns of same.
4) Mutual funds are managed by professionals who are experienced in

investing money and who have the skills and resources to research
many different investment opportunities. So you see the past
performance of the fund manager it gives you idea about return on
investment.
5) Return alone should not be considered as the basis of measurement of

the performance of a mutual fund scheme, it should also include the risk
taken by the fund manager. So before investing or suggesting to any one
for investment check the risk associated with a fund because different
funds will have different levels of risk attached to them. The higher the
fluctuations in the returns of a fund during a given period, higher will be
the risk associated with it.

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ABBREVIATIONS USED:-
LIC Life Insurance Corporation of India

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LICMF LIC Mutual Fund
IMA Investment Management Agreement
AMC Asset Management Company
NAV Net Asset Value
THE TRUSTEE LICMF Trustee Company Private Limited
SEBI Securities and Exchange Board of India
MM Money Market
RBI Reserve Bank of India, Established Under The Reserve Bank of

India Act, 1934
CD Certificate of Depository
CP Commercial Paper
BUSINESS Any day other than a Saturday, a Sunday or a day on which

DAY Banks at Corporate Office are not required or obligated by Law
or Executive order to remain closed.
BIBLIOGRAPHY:-

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S.R.NO. PARTICULARS
1 Making Mutual Funds work for you, AMFI
2 Mutual Fund what you need to know, Canadian Securities

Administrators (CSA)
3 www.wikipedia.com
4 www.licmutual.com
5 www.valueresearchonline.com
6 www.investopedia.com

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Project on LIC Mutual Fund

Project Report Entitled:-

“Study of Various Mutual Fund Schemes and

Submitted for the award of post graduate degree of

Master in Business Administration

-: The Project Guide:-

NDMVP’S Institute of Management Research and

MBA (Finance) I.M.R.

I hereby declare that the project entitled “Study of Various

Date: Shaikh Vasim Rashid

MBA (Finance) I.M.R.

It is great opportunity to thank all the help, assistance and co-

Date: Shaikh Vasim Rashid

MBA (Finance) I.M.R.

(I.M.R. &T., Nashik)

MBA (Finance) I.M.R.

Chapter No. Under Particulars

1.1 Need of the project

2.1 Set up of the fund

III ABOUT MUTUAL FUND

3.1 What is Mutual Fund?

IV DATA ANALYSIS AND INTERPRETATION

4.1 Risk adjusted rate of returns of schemes

V CONCLUSIONS AND F. & R.

(1.1) Need Of The Project Work:-

MBA (Finance) I.M.R.

The summer project is an integral part of MBA curriculum it is

The main motive behind this project is to learn practical

It gives an opportunity to observe business and get the experience

The project is good opportunity to interact with the management

(1.2) Topic Selection:-

The selection of the topic is one of the important aspects of the

MBA (Finance) I.M.R.

(1.3) Objective and Limitation of Study

Decision-Making requires relevant and correct information for

• To study the concept of Mutual Fund, Various type of Mutual Fund

The project was conducted in a short span of eight week, which

MBA (Finance) I.M.R.

(1.4) Data Collection:-

The data was collected by using the following sources:-

(A) Primary Data:-

Asking questions and personal visits to Mutual Fund Agents, and

(B) Secondary Data:-

The secondary data is collect through Information Memorandum,

MBA (Finance) I.M.R.

MBA (Finance) I.M.R.

(2.1) SET UP OF THE FUND:-

Life Insurance Corporation of India set up LIC Mutual Fund on

The Trustees of the LIC Mutual Fund have exclusive ownership

The Trustees are responsible for appointing a Custodian. The

(2.2) INFORMATION ABOUT THE SPONSOR:-

Life Insurance Corporation of India (LIC), the sponsor of LIC

(2.3) INFORMATION ABOUT LIC MUTUAL FUND:-

LIC Mutual Fund was set up as a separate Trust by the Life

A) Objective of LIC Mutual Fund:-

The basic objective of LIC Mutual Fund is to mobilize savings

B) The Trustee Fees:-

In accordance with the Trust Deed constituting the Mutual Fund,

MBA (Finance) I.M.R.

In accordance with the Regulation 9 of the Securities &

(2.4) INFORMATION ABOUT THE ASSET MANAGEMENT

In terms of Securities & Exchange Board of India (Mutual Fund)