MUTUAL FUNDS

FUND HOUSE

Birla Sun Life Mutual Fund (BSLMF) one of the leading

Mutual Fund houses in India, is celebrating completion of 15 years. Since its inception,
the fund house has registered impressive growth in terms of business (asset under
management) and has offered funds to its investors that have created wealth for them
consistently.

Birla Sun Life Asset Management Company today offers a wide range of products to suit
the wealth and income creation needs of investors across asset classes including
Portfolio Management Services, Offshore Fund and Real Estate Fund. The average
AUM of the fund house as of 31st December was Rs 68,066 crores making it the fifth
largest fund house in India, while the number of investor folios today stands at over 23
Lakh.
 CONCEPT

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

The money thus collected is then invested in capital market instruments such
as shares, debentures and other securities.

The income earned through these investments and the capital appreciation
realised 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.
 History of mutual funds in India

• The first mutual fund to be introduced in India was way back in 1963 when
the Government of India launched Unit Trust of India (UTI).
• UTI enjoyed a monopoly in the Indian mutual fund market till 1987 when
a host of other government controlled Indian financial companies came up
with their own funds.
• These included State Bank of India, Canara Bank, Punjab National Bank
etc. This market was made open to private players in 1993 after the
historic constitutional amendments brought forward by the then Congress
led government under the existing regime of Liberalization, Privatization
and Globalization (LPG).
• The first private sector fund to operate in India was Kothari Pioneer which
was later merged with Franklin Templeton.
Mutual Fund Operation
Flow Chart
Organisation of a Mutual Fund
 Advantages of Mutual Funds
• Professional Management
• Diversification
• Convenient Administration
• Return Potential
• Low Costs
• Liquidity
• Transparency
• Flexibility
• Choice of schemes
• Tax benefits
• Well regulated
 Asset Management Company (AMC)
• Acts as an invest manager of the Trust under the Board Supervision and
direction of the Trustees.
• Has to be approved and registered with SEBI.
• Will float and manage the different investment schemes in the name of Trust
and in accordance with SEBI regulations.
• Acts in interest of the unit-holders and reports to the trustees.
• At least 50% of directors on the board are independent of the sponsor or the
trustees.
 Asset Management Company (AMC)

Obligation of Asset Management Company:

 Float investment schemes only after receiving prior approval from the
Trustees and SEBI.
 Send quarterly reports to Trustees.
 Make the required disclosures to the investors in areas such as calculation of
NAV and repurchase price.
 Must maintain a net worth of at least Rs. 10 crores at all times.
 Will not purchase or sell securities through any broker, which is average of 5%
or more of the aggregate purchases and sale of securities made by the
mutual fund in all its schemes.
 AMC cannot act as a trustee of any other mutual fund.
 Do not undertake any other activity conflicting with managing the fund.
 Evaluating the AMC
While every fund is exposed to market risks, good funds should at least match
major market indices. An AMC or the fund managers must be evaluated on the
following criteria:
 Operate with long-term perspective.
 Do not indulge in excessive trading that generates high transaction costs and
in turn reduce the NAV/risk of loss.
 Turns out a more consistent performance rather than a one time high and
otherwise volatile performance record.
 Team of managers with successful records as against fund that are managed
by one individual.
 The reliability and track record of the sponsors.
 Performance record against competing managers running similar funds.
 Types of Schemes
By Structure
-Open Ended Schemes
-Close Ended Schemes
-Interval Schemes
By Investment Objectives
-Growth Schemes
-Income Schemes
-Balance Schemes
-Money Market Schemes
Other Schemes
-Tax Saving Schemes
Special Schemes
-Index Schemes
-Sector Specific Schemes
1.Equity funds
Equity mutual funds are also known as stock mutual funds. Equity mutual
funds invest pooled amounts of money in the stocks of public companies.
 2.Balanced funds
Balanced fund is also known as hybrid fund. It is a type of mutual fund that
buys a combination of common stock, preferred stock, bonds, and short-
term bonds
3.Growth funds
Growth funds are those mutual funds that aim to achieve capital
appreciation by investing in growth stocks.
 Equity Funds

Equity Funds:
• Invest a major portion of their corpus in equity shares issued by
companies, acquired directly in initial public offering or through secondary
market and keep a part in cash to take care of redemptions.
• Risk is higher than debt funds but offer very high growth potential for the
capital.
• Equity funds can be further categorized based on their investment
strategy.
• Equity funds must have a long-term objective.
 Birla Sun Life Frontline Equity Fund
Plan A - Performance

Birla Sun Life

Frontline Equity Since 
1 Year 3 Years 5 Years
Fund - Plan A - Inception 
Growth

Birla Sun Life

Frontline Equity
Fund - Plan A - 11.9% 6.84% 18.35% 28.75%
Growth
(NAV: Rs. 84.91)

BSE 200 10.71% 0.71% 11.91% 23.4%

Inception - 30-Aug-2002.
Returns calculated for Growth option as on 14-Feb-2011.

Returns are CAGR for 1 year or more and absolute for less than 1 year.

Past performance may or may not be sustained in the future. Load has not been considered
for computation of returns.
Fund Performance Simulator

The below graph simulates the values of Rs.1 Lac invested in the above scheme and its benchmark
index.

Source: Internal

Relative Performance on a base of 1 lac starting 15-Feb-2006.

Performance as on 14-Feb-2011.
Rs. 1 lac invested on 15-Feb-2006 in Birla Sun Life Frontline Equity Fund - Plan A - Growth is
worth  Rs. 232174 as on 14-Feb-2011. 

A similar investment in the benchmark  would have been worth Rs. 175563. Past performance may or
may not be sustained in future.

SIP Performance Simulator

The below table simulates the values of Rs.1000 invested systematically in the above scheme and its
benchmark indices.

Birla Sun Life Frontline Equity Fund - Plan A - Growth

 Value (Rs.) of SIP in Returns (%)

Total
Invstment Period Investment Birla Sun Life
Birla Sun Life Frontline
(Rs.) BSE 200 BSE 200 Frontline
Equity Fund *
Equity Fund *

Since Inception 102000 231251.81 296748.56 18.77 24.91

Last 5 years 60000 77521.11 89084.94 10.36 16.07

Last 3 years 36000 45058.11 48453.55 15.6 20.88

Last 1 year 12000 11590.73 11836.11 -6.82 -2.74

Returns as on 14-Feb-2011. Inception Date: 30-Aug-2002.

Last monthly SIP installment date assumed to be the above date (or the previous day when NAV
was declared if the above day is not a working day). Returns are CAGR for 1 year or more and
absolute for less than 1 year.
Past performance may or maynot be sustained in the future. Load & taxes have not been
considered for computation of returns.
* CAGR Returns are computed after accounting for the cash flow by using the XIRR method
(investment internal rate of return