04 kxcm6024 hiremath n c

8/8/2019 04 KXCM6024 Hiremath N C

1/118

A

Project Report On

PORTFOLIO ANALYSIS OF BIRLA SUNLIFE ASSET

MANAGEMENT COMPANY

Submitted to Bangalore University, BangaloreIn partial fulfillment of the requirement

For the award of the degree of

MASTER OF BUSINESS ADMINISTRATION

Submitted By

NEELAKANTHAYYA.C.HIREMATH(04KXCM6024)

Under the Guidance ofMR. VIJAYENDRA.S

Department of management studies

SURANA College P G Centre, Bangalore

Affiliated to Bangalore University,

Bangalore

2004-2006

1


2/118

2


3/118

3


4/118

4


5/118

5


6/118

Acknowledgement

I owe a deep sense of gratitude and allegiance to Principal Prof.K.E. Radhakrishna and Dean of Studies Prof. H.R. Appannaiah forthere encouragement and kind advice that came all along thecompletion of this report.

I also express my heartfelt gratitude to HOD Management Dr.H.V.S Raghavan for his enthusiastic co-operation, timely guidanceand copious comments, which helped me to gain deeper insight intothe horizons of this project.

I also thank Mr. Vikas Pathania Branch manager, Mr. Abhishek

Sinha consultant. Of Birla Sunlife Asset Management Company Ltd.,Bangalore. It was there able-guidance and ever forwarding help andassistance, which has enabled me to attain success; I have been ableto achieve this venture.

I would be failing in duty if I do not express my gratitude toMR.VIJAYENDRA.S for his great sense of commitment to make theproject report as systematic as possible. I thank also other members

of teaching and non-teaching for their enriching ideas andsuggestions.

I owe a great deal of indebtedness to all my friends my alteregos. Lack of space prevents me from thanking them individually. Soto all of them I say a big thank you.

Last, but far from least, I express my heartfelt gratitude to my

beloved Parents, family members and those who directly or indirectlycontributed their modicum in preparing this project work.

6


7/118

EXECUTIVE SUMMARY

A study on Financial Performance of Birla Sunlife Asset Management Company

is undertaken in order to know the financial, Portfolio Performance and Position of the

Asset Management Company and to know the strength & weakness of the Company and

to assess the profitability of the BSLAMCL. Absolute Returns and Compound Annual

Return Since Inception is the tools used as a yardstick for evaluating the financial

condition and performance of the BSLAMCL.

Project Title:

PORTFOLIO ANALYSIS OF BIRLA SUNLIFE ASSET MANAGEMENT

COMPANY LIMITED.

This research has been conducted to know and understand the business operations

and Fund Diversification of BSLAMCL. An attempt is made to study the financial

performance and the factors influencing the financial aspects. The researcher also

extended his scope to analyze the liquidity position, strength and weaknesses of the AMC

in handling the financial operations. For a systematic study, Tables and Charts were

drawn wherever required.

Basically the scope of the study was limited to Bangalore Regional office of Birla

Sunlife Asset Management Company Limited. But consolidated financial reports of all

the divisions in India were considered for analysis. Inter branch comparison was not

possible. Limitations of past records, time constraints etc. have their impact on the study.

7


8/118

TABLE OF CONTENTS

SL.NO. PARTICULARS PAGE

NO.

1 INTRODUCTION

Mutual Fund

Direct Investment

13-16

2 HISTORY OF MUTUAL FUND

The Different Types of Fund

18-27

3 PRODUCT PROFILE

Risk Vs Reward

Past Performance

Legal structure of Mutual fund

Systematic Investment plan

Tax benefits of Investing in Mutual Fund

29-39

4 COMPANY PROFILE

Back Ground

Overview

Vision

Mission

Management team

Focus area

Awards

41-51

4.1 The Mckinsys Seven S Model 53-62

5 THE RESERCH DESIGN OF THE STUDY

Statement of the Problem

Plan of the Study

Objective of the Study

Methodology

Limitations

Scope

64-70

8


9/118

Measuring of Mutual Fund

6 DATA ANALYSIS AND INTERPRETATIONS

Equity Fund

Income Fund Balance Fund

Monthly Income Plan

Long term floating rate Fund

Industry AUM above 8000

72-105

7 FINDINGS 107

8 SUGGESTIONS AND CONCLUSION 109-110

9 ANNEXURES 112-119

10 BIBLIOGRAPHY 121

9


10/118

LIST OF TABLE

SL.NO. PARTICULARS PAGE NO.

1 THE DIFFERENT TYPES OF FUND 22

2 TYPES OF RISK 30

3 THE ORGANISATION STRUCTURE 58

4 BIRLA ADVANTAGE FUND 81

5 BIRLA DIVIDEND FUND 82

6 EQUITY FUND 83

7 EQUITY FUND COMPARISION 84

8 BIRLA INCOME PLUS 87

9 INCOME FUND COMPARISION 88

10 BIRLA BALANCE FUND 91

11 BALANCE FUND COMPARISION 92

12 BIRLA SUNLIFE MONTHLY INCOME 95

13 MONTHLY INCOME PLAN COMPARISION 96-97

14 BIRLA FLOTING FUND 99

15 BIRLA FLOTING RATE FUND AND

COMPARISION

100

16 INDUSTRY AUM ABOVE 8000 102

10


11/118

LIST OF DIAGRAM

SL.NO. PARTICULARS PAGE NO.

1 INVESTORS RISK SPECTRUM 28

2 THE MCKEINSYS SEVEN S MODEL 54

11


12/118

12


13/118

INTRODUCTION OF MUTUAL FUNDS

Mutual funds are financial intermediaries, which collect the savings of Investors

and invest them in a large and well-diversified portfolio of securities such as money

market instruments, corporate and government bonds and equity shares of joint stock

companies. A mutual fund is a pool of commingles funds invested by different

Investors, who have no contact with each other. Mutual funds are conceived as

institutions for providing small Investors with avenues of investments in the capital

market. Since small Investors generally do not have adequate time, knowledge,experience and resources for directly accessing the capital market, they have to rely on an

intermediary, which undertakes informed investment decisions and provides

consequential benefits of professional expertise. The raison of mutual funds is their

ability to bring down the transaction costs. The advantages for the Investors are

reduction in risk, expert professional management, diversified portfolios, and liquidity of

investment and tax benefits. By pooling their asse6s through mutual funds, Investors

achieve economies of scale. The interests of the Investors are protected by the SEBI,

which acts as a watchdog. Mutual funds are governed by the SEBI (Mutual Funds)

Regulations, 1993.

WHAT ARE MUTUAL FUNDS?

A mutual fund is a type of financial intermediary that pools the funds of investors who

seek the same general investment objective and invests them in a number of different

types of financial claims e.g., equity shares, bonds, money market instruments). These

pooled funds provide thousands of investors with proportional ownership of diversifiedportfolios managed by professional investment managers. The term mutual is used in

the sense that all its returns, minus its expenses are shared by the funds unit holders.

13


14/118

MUTUAL FUNDS V/S DIRECT INVESTINGUnit holders of mutual funds always have a choice of direct investing. Mutual fund

investing offers certain advantages over direct investing.

Benefits of investing in mutual funds:

1. Professional Investment Management :-

The money pooled in the mutual fund is managed by the professionals who decide the

investment strategy on behalf of the unit holders. These professionals choose the

investments that best match the investment objective of the scheme as described in the

schemes prospectus. Their investment decisions are based on extensive research of the

market conditions and financial performance of the individual company and specific

securities. As the market conditions and /or the expectation about the securities

performance change, these professionals churn their portfolios over accordingly with a

view to provide high returns to the unit holders.

Risk Reduction through Diversification:-

The old axiom that it is not wise to put all eggs into one basket applies here. The

function of mutual fund is notto insure its unit holders against losses by investments, but

to afford them the opportunity of investing small amounts in a large number of securities.

A single event may defy prediction but the mass remains always practically the same orvaries in ways that can be predicted. Elimination of risk by combination is the application

of the so called Law Of Large Numbers. Mutual funds provide diversification benefits

in a manageable, compact way because each unit represents a pro rata share of the entire

portfolio. Diversification may take several forms. It may involve investing in different

types of financial claims e.g., equity shares, bonds etc, or investment in securities offered

by different issuers e.g., investment in bonds issued by different companies. Portfolio

diversification is the major advantage stressed by mutual funds, especially for retail

investors.

2. Availability Of Varied Portfolio Objectives:-

14


15/118

There are more than 400 mutual fund schemes with wide variety of investment

objectives and options available to investors in India. AMFI has classified mutual fund

schemes into 6 broad categories according to their basic investment objectives:

Growth

Income

Balanced

Liquid and money market

Gilt

Equity linked saving schemes (ELSS)

Each of these categories can be further classified into more categories. This wide range of

schemes arose over the years to meet the requirements of the investors with different

financial objectives.

3. Convenience:-

Mutual funds provide investors with variety of products and increasingly broad array

of customer services. The increasing breadth of mutual funds products and services offer

investors a great deal of choice in picking up the scheme that is consistent with his risk-

return-liquidity requirements. Mutual fund units are easy to buy and sell. Investors may

purchase units either from agent or distributor or directly from the fund through its sales

persons. They can also buy and sell over internet, telephone and ATMs.

4. Unit Holders Account Administration And Services:-

A major service offered by the mutual funds is liquidity. Liquidity refers to the speed

with which an asset can be converted into cash without much loss of its economic value.

SEBI requires the open ended fund to stand ready to redeem the units on a daily basis at

its NAV based price. NAV of the scheme is to be calculated and reported daily.

Apart from this, mutual funds provide many other services. These services include

providing a variety of flexible and convenient plans to the investors like SIP, SWP and

SWP. Unit holders are updated on their investment status. They receive periodical

15


16/118

statements of their accounts. Their fund portfolio is disclosed regularly. Half yearly and

annual reports are also published.

5. Reduction In Cost Of Investment:-

Average cost of managing a rupee will be much lower for mutual funds than for an

investor managing a diversified portfolio all on his own. The low costs are due to

standardization and higher economies of scale (arising on account of collective

investment character. Further the SEBI has set ceiling with regard to expenses which can

be charged to the investors. Expenses above the set limits cannot be charged to the unit

holders.

6. Regulatory Protection:-

Mutual funds are subject to strict regulations and oversight by SEBI. As part of this

regulation, all mutual funds provide full and complete disclosures about the funds written

offer document. This document describes the schemes investment objectives, its

investment policies, its investment methods and information about how to purchase and

redeem units and information about risk the scheme is exposed to. SEBI requires the

placement of a fee table at the beginning of every offer document.

7. Higher Returns:-

Mutual funds trade in securities, both equity and bonds. While bank deposits offer

fixed returns, bond funds offer higher returns to investors due to trading in bonds by

funds. Similarly balanced funds and equity funds generally offer higher returns as against

instruments of comparable risk. Although there are no guaranteed returns and protection

of capital, mutual funds are usually able to give better returns to investors than fixed

income product.

16


17/118

17


18/118

HISTORY OF MUTUAL FUND INDUSTRY

GROWTH OF MUTUAL FUNDS:-

The Indian mutual fund industry has passed through three phases. The first phase

was between 1964 and 1987 when unit trust of India was the only player. By the end of

1988,UTI had total asset of Rs 6,700 crores of asset s under the management (AUM).

THE FIRST PHASE 1964 AND 1987 :-

Unit trust of India was established on 1963 by an act of parliament .it was set up by

the reserve bank of India and functioned under regulatory and administrative control of

the reserve bank of India. In 1978UTI was de-linked from the RBI and the industrial

development bank of India (IDBI) took over the regulatory and administrative control

in place of RBI. The first scheme launched by UTI was unit scheme 1964.

THE SECOND PHASE 1987 AND 1993:-

1987 marked the entry non UTI, public sector mutual funds set up by public

sector banks and life insurance corporation India (LIC) and general insurance

corporation of India (GIC). State bank of India mutual fund is the first it is established

in June 1987 followed by can bank mutual fund in December 1987, Punjab national

bank mutual fund in august 1989, Indian bank mutual fund November 1989, bank of

India in June 1990,bank ok Baroda in October 1992.life insurance corporation establish

its mutual fund in June 1989 but general insurance set up its mutual fund in December

1990.The end of second phase was between 1987 and 1993 during which period 8 funds

were established (6 by banks and one each by LIC and GIC).This resulted in the total

assets under management to grow to Rs 61,028 crores at the end of 1994 and the

number of schemes were 167.

18


19/118

THE THIRD PHASE 1993-2000:-

The third phase began with the entry of private and foreign sectors in the mutual

fund industry in 1993. Several private sectors mutual funds were launched in 1993 and

1994. The share of the private players has risen rapidly since then. Currently there are

34 mutual fund organizations in India. Kothari pioneer mutual fund was the first fund to

be established by the private sector in association with a foreign fund.

This signaled a growth phase in the industry and at the end of financial year

2000, 32 funds were functioning with Rs. 1,13,005 crores as total assets under

management. As on august end 2000, there were 33 funds with 391 schemes and assets

under management with Rs. 1,02,849 crores. The securities and exchange board of

India (SEBI) came out with comprehensive regulation in 1993, which defined the

structure of mutual fund and asset management companies for the first time.

THE FOURTH PHASE 2000 TO SINCE:-

In February 2003, following the repeal of the unit trust of India act 1963was

bifurcated into two separate entities. One is the specific under taking of unit trust of

India with asset under management of Rs 29,835 crores as at end of January 2003,representing broadly the assets of us64 scheme, assured returned certain other schemes.

The specific undertaking unit trusts of India and does not come under the purview of

mutual fund regulations.

The second is the UTI mutual fund ltd sponsored by SBI, PNB, BOB, and LIC .Its

registered with SEBI and functions under the purview of the mutual fund regulations.

With bifurcation of the erstwhile UTI, which in March 2000 more tan Rs 76,000 crores of

asset under the management, and with the setting up of a UTI mutual fund, conforming

the SEBI mutual fund regulations and with recent mergers taking place among different

private sector funds, the mutual fund industry has entered its current phase of

consolidation and growth. As at the end of October 31, 2003.the asset is 1,26,726 crores

under 386 schemes

19


20/118

MUTUAL FUND INDUSTRY IN UK:-The very investment trust, Foreign & Colonial, set out its investment aims to give

investors of moderate means, the same advantage as the large capitalist in its prospectus

of 1868. 1880s was the period of boom for this innovate investment opportunity in UK.

Though some investment trusts failed during the British crash of 1890, most of them

survived. By 1900 there were more than 100 investment trusts, many of them are still

around. These investment trusts are close-ended funds.

During the first period of its operation (till mid-1920s) mutual funds were in formative

and experimental conditions. They were incorporated under the Companies Act.

Investment managers enjoyed huge powers about the sale and purchase of securities. The

years from 1900 to 1914 were marked by an increasing tendency on the part of British

investment manager to invest their clients funds in American securities, especially in

stocks and bonds of American railways. With the advent of the First World War, this

situation changed drastically. From 1914-1918, British mutual funds sold a large

proportion of their American investments and a large part of the money obtained from the

sale of the American stocks and bonds was promptly invested in the war loans of the

British government. Though less remunerative, this strategy enabled the survival of the

industry.

In the USA many small investors lost their fortunes in the years following the Wall

Street Crash of 1929. But not even one investment trust failed in those troubled years

(1890s) in UK. However, some structural changes started taking place in the industry.

The most important one was the emergence of unit trusts. The first unit trust appeared in

1931, shortly after the Wall Street Crash. Unit trusts conform to the basic pattern of open-

ended investment funds in UK.

These trusts became popular mainly because of the range of investment opportunities

they made available to the investors. By the end of 1997 there were $237 billion of assets

managed by 1455 open ended funds. In the last decade, lots of changes have been

observed in the industry. The competition in UK fund industry has increased due to low

entry barriers encouraging new players. The pace of changes is very rapid, resulting in

steep increase in volumes. New products are launched and newer distribution methods

20


21/118

are explored. Thus the mutual fund industry in UK is witnessing a restructuring wave and

the outcome is powerful brand leaders.

MUTUAL FUND INDUSTRY IN USA:-The origin of mutual funds in the USA could be traced to the private trustee system in

Boston during the second half of 19th century. One of the first investment trusts, the

Boston Personal Property Trust, was organized in 1893. However it was the Alexander

fund established in Philadelphia in 1907 by W.Wallace Alexander that seems to have

originated many of the ideas adopted by mutual funds. Like 1924s M.I.T and State Street

Investors mutual funds, the Alexander fund began as an investment vehicle for a small

circle of friends and eventually expanded to include the general public. As the economy

of the USA grew, investment companies were formed in Boston, New York and many

other states.

In the USA, mutual fund industry evolved in three phases.

The first stage i.e., the period before 1940s was the stage of infancy of the mutual fund

industry. Close ended funds were the dominant form of mutual funds to mobilize money.

However, by the end of 1940s, the share of close ended funds started shrinking in favor

of open ended fund.

In the second stage, assets managed by mutual funds witnessed rapid and steady

growth and mutual fund evolved into an established industry. During this phase open

ended funds became the dominant form of mutual funds.

The third stage began in the 1970s; the most striking feature of this phase has been

the innovation in the investment objectives. Till this phase most of the money was

mobilized under the objective of providing the benefit of diversification in equity

investing. The money market mutual fund was launched in this phase and this was in

many respects close to the products offered by the banks. This widened the scope of

competition for mutual funds with banks on account of similarity in the product. Another

important happening of that time was the innovative steps taken by the funds to improve

the quality of investor servicing, eg., exchange privilege given to the investors to shift

from one fund to another. Another significant development post 1970s has been the

21


22/118

reduction or elimination of sales load, thereby increasing the mobility of investors. The

total assets under management by the end of 1997 were $4465 billion managed by 6900

funds.

THE DIFFERENT TYPES OF FUNDS

22

Growth & income funds Fixed income funds Balanced /equity fundGrowth funds

Money market funds/ liquidsSpecialty / sector funds

Open EndedSchemes

Close EndedSchemes

Capitalization Funds

Types of Funds

Investments Funds


23/118

There are wide verities of mutual fund schemes that cater to investor need.

Whatever the age, financial position, risk tolerance and return expectations. The mutual

funds schemes can be classified according to their investment objective (like income

fund, growth fund and tax saving) as well as the number of units.

OPEN-ENDED SCHEMES:-

Open-ended schemes do not have a fixed maturity period. Investors can buy or

sell units at NAV-related prices from and to the mutual fund on any business day.

These schemes have unlimited capitalization, open-ended schemes do not have a fixed

maturity, there is no cap on the amount you can buy from the fund and the unit capital

can keep growing. These funds are not generally listed on any exchange.

Open-ended schemes are preferred for their liquidity. Such funds can issue and

redeem units any time during the life of a scheme. Hence, unit capital of open-ended

funds can fluctuate on a daily basis. The advantages of open-ended funds over close-

ended are as follows:

A) Any time exit option, the issuing company directly takes the responsibility of

providing an entry and an exit. This provides ready liquidity to the investors and

avoids reliance on transfer deeds, signature verifications and bad deliveries.

B) Tax advantage though budget 2000 proposal envisage a tax rate of 20%

dividend on distribution made by debt funds, the fund continue to remain

authorized investment vehicles. In equity plans there is no distribution tax.

Any time entry option, the issuing company directly takes the responsibility of

providing an entry and an exit. This provides ready liquidity to the investors and avoids

reliance on transfer deeds, signature verifications and bad deliveries. Any time entry

option, an open-ended fund allows one to enter the fund at any time and even to invest

at regular intervals.

23


24/118

CLOSE-ENDED SCHEMES:-

Close-ended schemes have fixed maturity periods. Investors can buy into these

funds during the period when these funds are open in the initial issue. After those such

schemes cannot issue new units except in case of bonus or rights issue. However, after

the initial issue, you can buy or sell units of the scheme on the stock exchanges where

they are listed. The market price of the units could vary from the NAV of the scheme

due to demand and supply factors, investors expectations and other market factors

CLASSIFICATION ACCORDING TO INVESTMENT

OBJECTIVES:-

Mutual funds can be further classified based on their specific investment

objective such as growth of capital, safety of principal, current income or tax-exempt

income.

In general mutual funds fall into three general categories:

1] Equity Funds are those that invest in shares or equity of companies.

2] Fixed-Income Funds invest in government or corporate securities that offer

fixed rates of return are

3] While funds that invest in a combination of both stocks and bonds are called

Balanced Funds.

1. GROWTH FUNDS:-

Growth funds primarily look for growth of capital with secondary emphasis on

dividend. Such funds invest in shares with a potential for growth and capital

appreciation. They invest in well-established companies where the company itself and

the industry in which it operates are thought to have good long-term growth potential,

and hence growth funds provide low current income. Growth funds generally incur

higher risks than income funds in an effort to secure more pronounced growth.

24


25/118

Some growth funds concentrate on one or more industry sectors and also invest

in a broad range of industries. Growth funds are suitable for investors who can afford to

assume the risk of potential loss in value of their investment in the hope of achieving

substantial and rapid gains. They are not suitable for investors who must conserve their

principal or who must maximize current income.

2. GROWTH AND INCOME FUNDS:-

Growth and income funds seek long-term growth of capital as well as current

income. The investment strategies used to reach these goals vary among funds. Some

invest in a dual portfolio consisting of growth stocks and income stocks, or a

combination of growth stocks, stocks paying high dividends, preferred stocks,

convertible securities or fixed-income securities such as corporate bonds and money

market instruments. Others may invest in growth stocks and earn current income by

selling covered call options on their portfolio stocks.

Growth and income funds have low to moderate stability of principal and

moderate potential for current income and growth. They are suitable for investors who

can assume some risk to achieve growth of capital but who also want to maintain a

moderate level of current income.

3. FIXED-INCOME FUNDS:-

Fixed income funds primarily look to provide current income consistent with the

preservation of capital. These funds invest in corporate bonds or government-backed

mortgage securities that have a fixed rate of return. Within the fixed-income category,

funds vary greatly in their stability of principal and in their dividend yields. High-yield

funds, which seek to maximize yield by investing in lower-rated bonds of longer

maturities, entail less stability of principal than fixed-income funds that invest in

higher-rated but lower-yielding securities.

Some fixed-income funds seek to minimize risk by investing exclusively in

securities whose timely payment of interest and principal is backed by the full faith and

25


26/118

credit of the Indian Government. Fixed-income funds are suitable for investors who

want to maximize current income and who can assume a degree of capital risk in order

to do so.

4. BALANCED FUND:-

The Balanced fund aims to provide both growth and income. These funds invest

in both shares and fixed income securities in the proportion indicated in their offer

documents. Ideal for investors who are looking for a combination of income and

moderate growth.

5. MONEY MARKET FUNDS/LIQUID FUNDS:-

For the cautious investor, these funds provide a very high stability of principal

while seeking a moderate to high current income. They invest in highly liquid, virtually

risk-free, short-term debt securities of agencies of the Indian Government, banks and

corporations and Treasury Bills. Because of their short-term investments, money

market mutual funds are able to keep a virtually constant unit price; only the yield

fluctuates.

Therefore, they are an attractive alternative to bank accounts. With yields that

are generally competitive with - and usually higher than yields on bank savings

account, they offer several advantages. Money can be withdrawn any time without

penalty. Although not insured, money market funds invest only in highly liquid, short-

term, top-rated money market instruments. Money market funds are suitable for

investors who want high stability of principal and current income with immediate

liquidity.

6. SPECIALTY/SECTOR FUNDS:-

These funds invest in securities of a specific industry or sector of the economy

such as health care, technology, leisure, Utilities or precious metals. The funds enable

26


27/118

investors to diversify holdings among many companies within an industry, a more

conservative approach than investing directly in one particular company.

Sector funds offer the opportunity for sharp capital gains in cases where the

fund's industry is "in favor" but also entail the risk of capital losses when the industry is

out of favor. While sector funds restrict holdings to a particular industry, other specialty

funds such as index funds give investors a broadly diversified portfolio and attempt to

mirror the performance of various market averages.

Index funds generally buy shares in all the companies composing the BSE

Sensex or NSE Nifty or other broad stock market indices.

27


28/118

28


29/118

RISK VS. REWARD:-

Having understood the basics of mutual funds the next step is to build a

successful investment portfolio. Before you can begin to build a portfolio, one should

understand some other elements of mutual fund investing and how they can affect the

potential value of your investments over the years. The first thing that has to be kept in

mind is that when you invest in mutual funds, there is no guarantee that you will end up

with more money when you withdraw your investment than what you started out with.

That is the potential of loss is always there. The loss of value in your investment is

what is considered risk in investing.

Even so, the opportunity for investment growth that is possible through

investments in mutual funds far exceeds that concern for most investors. Heres why.

At the cornerstone of investing is the basic principal that the greater the risk you take,

the greater the potential reward. Or stated in another way, you get what you pay for and

you get paid a higher return only when you're willing to accept more volatility.

Risk then, refers to the volatility -- the up and down activity in the markets and

individual issues that occurs constantly over time. This volatility can be caused by a

number of factors -- interest rate changes, inflation or general economic conditions. It is

this variability, uncertainty and potential for loss, that causes investors to worry. We all

fear the possibility that a stock we invest in will fall substantially. But it is this very

volatility that is the exact reason that you can expect to earn a higher long-term return

from these investments than from a savings account.

Different types of mutual funds have different levels of volatility or potential price

change, and those with the greater chance of losing value are also the funds that can

produce the greater returns for you over time. So risk has two sides: it causes the value

of your investments to fluctuate, but it is precisely the reason you can expect to earn

higher returns. You might find it helpful to remember that all financial investments will

fluctuate. There are very few perfectly safe havens and those simply don't pay enough

to beat inflation over the long run.

29


30/118

TYPES OF RISKS

All investments involve some form of risk. Consider these common types of risk

and evaluate them against potential rewards when you select an investment.

30

TYPES OF RISK

Market Inflation

Credit

Interest rate

EmployeeExchange rate

investment

Government policy


31/118

1. MARKET RISK:-

At times the prices or yields of all the securities in a particular market rise or fall

due to broad outside influences. When this happens, the stock prices of both an

outstanding, highly profitable company and a fledgling corporation may be affected.

This change in price is due to "market risk". Also known as systematic risk.

2. INFLATION RISK:-

Sometimes referred to as "loss of purchasing power." Whenever inflation rises

forward faster than the earnings on your investment, you run the risk that you'll actually

be able to buy less, not more. Inflation risk also occurs when prices rise faster than your

returns.

3. CREDIT RISK:-

In short, how stable is the company or entity to which you lend your money

when you invest? How certain are you that it will be able to pay the interest you are

promised, or repay your principal when the investment matures?

4. INTEREST RATE RISK:-

Changing interest rates affect both equities and bonds in many ways. Investors are

reminded that "predicting" which way rates will go is rarely successful. A diversified

portfolio can help in offsetting these changes.

5. EXCHANGE RISK:-

A number of companies generate revenues in foreign currencies and may have

investments or expenses also denominated in foreign currencies. Changes in exchange

rates may, therefore, have a positive or negative impact on companies which in turn

would have an effect on the investment of the fund.

31


32/118

6. INVESTMENT RISKS:-

The sect oral fund schemes, investments will be predominantly in equities of

select companies in the particular sectors. Accordingly, the any of the schemes are

linked to the equity performance of such companies and may be more volatile than a

more diversified portfolio of equities.

7. CHANGES IN THE GOVERNMENT POLICY:-

Changes in government policy especially in regard to the tax benefits may

impact the business prospects of the companies leading to an impact on the investments

made by the fund

Effect of loss of key professionals and inability to adapt business to the rapid

technological change.

An industries' key asset is often the personnel who run the business i.e.

Intellectual properties of the key employees of the respective companies. Given the

ever-changing complexion of few industries and the high obsolescence levels,

availability of qualified, trained and motivated personnel is very critical for the success

of industries in few sectors. It is, therefore, necessary to attract key personnel and also

to retain them to meet the changing environment and challenges the sector offers.

Failure or inability to attract/retain such qualified key personnel may impact the

prospects of the companies in the particular sector in which the fund invests.

CHOOSING A FUND:-

Mutual fund is the best investment tool for the retail investor as it offers the twinbenefits of good returns and safety as compared with other avenues such as bank

deposits or stock investing. Having looked at the various types of mutual funds, one has

to now go about selecting a fund suiting your requirements. Choose the wrong fund and

you would have been better off keeping money in a bank fixed deposit. Keep in mind

the points listed below and you could at least marginalize your investment risk.

32


33/118

PAST PERFORMANCE:-

While past performance is not an indicator of the future it does throw some light

on the investment philosophies of the fund, how it has performed in the past and the

kind of returns it is offering to the investor over a period of time. Also check out the

two-year and one-year returns for consistency. How did these funds perform in the bull

and bear markets of the immediate past? Tracking the performance in the bear market is

particularly important because the true test of a portfolio is often revealed in how little

it falls in a bad market.

KNOW YOUR FUND MANAGER:-

The success of a fund to a great extent depends on the fund manager. The same

fund managers manage most successful funds. Ask before investing, has the fund

manager or strategy changed recently? For instance, the portfolio manager who

generated the funds successful performance may no longer be managing the fund.

DOES IT SUIT YOUR RISK PROFILE?

Certain sector-specific schemes come with a high-risk high-return tag. Suchplans are suspect to crashes in case the industry loses the market mens fancy. If the

investor is totally risk averse he can opt for pure debt schemes with little or no risk.

Most prefer the balanced schemes, which invest in the equity and debt markets. Growth

and pure equity plans give greater returns than pure debt plans but their risk is higher.

READ THE PROSPECTUS:-The prospectus says a lot about the fund. A reading

of the funds prospectus is a must to learn about its investment strategy and the risk that

it will expose you to. Funds with higher rates of return may take risks that are beyond

your comfort level and are inconsistent with your financial goals. But remember that all

funds carry some level of risk. Just because a fund invests in government or corporate

bonds does not mean it does not have significant risk. Thinking about your long-term

investment strategies and tolerance for risk can help you decide what type of fund is

best suited for you.

33


34/118

HOW WILL THE FUND AFFECT THE DIVERSIFICATION OF YOUR

PORTFOLIO?

When choosing a mutual fund, you should consider how your interest in that

fund affects the overall diversification of your investment portfolio. Maintaining a

diversified and balanced portfolio is key to maintaining an acceptable level of risk.

WHAT IT COSTS YOU?

A fund with high costs must perform better than a low-cost fund to generate the

same returns for you. Even small differences in fees can translate into large differences

in returns over time.

Finally, dont pick a fund simply because it has shown a spurt in value in the current

rally. Ferret out information of a fund for at least three years. The one thing to

remember while investing in equity funds is that it makes no sense to get in and out of a

fund with each turn of the market. Like stocks, the right equity mutual fund will pay off

big -- if you have the patience. Similarly, it makes little sense to hold on to a fund that

lags behind the total market year after year.

LEGAL STRUCTURE OF MUTUAL FUNDS:-

Mutual funds have a unique structure not shared with other entities such as

companies or firms. It is important for employees, agents and investors to be aware of the

special mature of this structure, because it determines the rights and responsibilities of the

funds constituents viz. sponsors, trustees, custodians, transfer agents and of course, the

fund and the asset management company (AMC). The legal structure also drives the

inter-relationships between these constituents. It is useful to understand the mutual fund

structure in two developed markets-USA and the UK before discussing the structure in

India.

34


35/118

Mutual Fund Structure in the USA and UK:-

In the USA, mutual funds are set up as investment companies, which may be thought

of as the fund sponsors. An investment company may be a corporation, partnership or a

unit investment trust. For our purposes, all these legal entities may be broadly understood

as mutual funds. The Investment Company in turn appoints a management company,

which may be either a closed-end management company or an open-end management

company. Only open-end management companies are technically called mutual funds

in the USA.

The constituents of mutual funds in the USA are the Management Company,

Underwriter, Management Group and Custodian. The Management Company is the

Indian equivalent of an AMC. Underwriter of a fund is the distributor or the marketing

company that sells the shares to brokers or to the public. A Management Group is a

family of management companies owned by a group of people or a corporation.

Custodian is the entity that holds the funds assets on behalf of the Management

Company.

In the UK, mutual funds have two alternative structures. Open-end funds are in the

form of Unit Trusts, while close-end funds are in the form of corporate entities although

called Investment Trusts. Separate regulatory mechanisms exist for both types of entities.

Unit Trusts are regulated by the Securities and Investment Board. They must also be

authorized by the relevant Self-regulatory Organizations. Investment Trusts are

structured as companies and provisions of the Companies Act are applicable to them.

Structure of Mutual Funds in India:-

Like other countries, India has a legal framework within which mutual funds must be

constituted. Unlike in the UK, where two distinct trust and corporate structures are

followed with separate regulations, in India, open-end and closed-end funds operate

under the same regulatory structure, and are constituted along one unique structure as unit

trusts. A mutual fund in India is allowed to issue open-end and closed-end schemes under

a common legal structure. Therefore, a mutual fund may have several different schemes

(open and close-end) under it i.e. under one unit trust, at any point of time.

35


36/118

The structure which is required to be followed by mutual funds in India is laid down

under SEBI (Mutual Fund) Regulations, 1996.

Systematic Investment Plan (SIP):-

A SIP is nothing but a planned investment programme, which takes a small sum of

money from you and invests it in mutual funds at regular intervals. The minimum amount

can be as small as Rs 500 and the frequency of investment is usually monthly or

quarterly. This simple programme has a number of advantages. Firstly this is good for

those who find saving an arduous task. Even if each investment is small, in due course of

time, it can grow into a significant amount. Secondly, an SIP does away with the need or

effort to time the market. When the market is falling, there may be a doubt whether to

wait for the circumstances to be better and when the markets are rising, it is scary toinvest. a situation may improve before you actually notice it and an opportunity is lost.

So trying to find out the best time to invest is a tough task. This is where SIP helps the

investor. By the process of regular investing one gets to invest in the highs as well as

lows, and this helps in averaging out the volatility in the market. Thus, an SIP imparts

discipline to investing. Whether it is the regular act of saving or investing, an SIP does

both automatically. while there certain benefits of an SIP, there are certain investment

related ailments too. A SIP does not guarantee returns or positive returns. If you opt for a

SIP in a falling market and the market continues to fall, then your investments will suffer

a loss on the whole. The emphasis on averaging out in a SIP obviously makes it most

useful in case of an equity fund, as the volatility is greater here. A SIP can be useful for a

debt fund as well, to help build a pool of savings. It can be thought of something akin to a

recurring deposit where a part of your savings is automatically deducted from your

account. Overall a SIP is a simple device that helps you to save and invest in a disciplined

manner without having to time the market.

An Example:-

Month

Amount

Invested Purchase Price No. of Units

1 1000 10 100

2 1000 12 83.33

3 1000 15 66.667

4 1000 18 55.556

5 1000 15 66.67

Total 5000 70 372.223

36


37/118

Average Sale Price = 70/5 = Rs.14.00

What you actually pay = 5000/372.223 = Rs. 13.43

Unit price at the beginning of the next month = Rs.16

Therefore, the market value of investment = 372.223 * 16 = 5955.568

Thus for an investment of 5000, the investor gets back Rs.5955.568 on liquidation.

Tax Benefits of Investing in Mutual Funds:-The Tax benefits that are available to the investors investing in the Units of the Plans

are stated as follows:-

1. Tax Benefits to the Mutual Fund:-

Birla Sunlife Mutual Fund is a Mutual Fund registered with the Securities and

Exchange Board of India and hence the entire income of Mutual fund will be exempt

from Income-Tax in accordance with the provisions of the Section 10(23d) of the

Income-Tax Act, 1961, (the Act).

The Mutual Fund will receive all income without any deduction at source under the

provisions of the Section 196(iv), of the Act.

(a) Securities Transaction Tax:-

The Mutual Fund is liable to pay securities transaction tax at the prescribed rates on

the value of transactions of purchase or sale of specified securities.

(b) Income Distribution Tax:-

No income distribution tax is payable by the Fund, being an open ended equity

oriented fund

(c) Service Tax:-

The Mutual Fund shall be liable for payment of service tax as recipient of services

on Business Auxiliary Service provided by distributors of mutual funds/agents. The

rate of service tax is 10.2%.

37


38/118

To the Unit holders:-

(a) Tax on income:-In accordance with the provisions of section 10(35) (a) of the Act, income received

by all the categories of unit holders in respect of units of the Fund will be exempt from

income tax in their hands.

Exemption from income tax under section 10(35) of the Act would however, not apply to

any income arising from the transfer of these units.

(b) Tax on Capital Gains:-

As per the provisions of section 2(42A) of the Act, a unit of Mutual Fund, held by

the investor as a capital asset, is considered to be a short term capital asset, if it is held for

12 months or less from the date of its acquisition by the unit holder. Accordingly, if the

unit of a Mutual Fund is held for a period of more than 12 months, it is treated as a long-

term capital asset.

(c) Long term Capital Gains:-

As per section 10(38) of the Act, long term capital gains arising from the sale of

unit of an equity oriented fund entered into a recognized stock exchange or sale of such

unit of an equity oriented fund to the mutual fund would be exempt from income-tax,

provided such transaction of sale is chargeable to securities transaction tax.

38


39/118

Short-term Capital Gains:-

Wealth Tax:-

Units held under the Schemes of the Fund are not treated as assets within the

meaning of Section 2(ea) of the Wealth Tax Act, 1957 and therefore, not liable to wealth

tax.

Gifting of Units:-

Units of Mutual Fund may be given as a gift and no gift tax and/or income tax will be

payable by the donor or done.

39


40/118

40


41/118

COMPANY PROFILE:-

Background:-

Birla Sun Life Asset Management Company Limited (the Company) wasincorporated on 5th of September 1994. The Company is a joint venture between the

Aditya Birla Group and Sun Life Financial Services of Canada. The share capital of the

Company is equally owned by Birla Global Finance Limited - Flagship company of

Aditya Birla Groups Financial Services activities and Sun Life (India) AMC Investments

Inc., Canada, which is a wholly owned subsidiary of Sun Life Financial Services

Company Inc., Canada. The Company is registered with Securities and Exchange Board

of India (SEBI) under the SEBI (Mutual Funds) Regulations, 1996 and the principal

activity is to act as an investment manager to Birla Sun Life Mutual Fund. The Company

manages the investment portfolios of Birla Mutual Fund, India Advantage (Offshore)

Fund, Mauritius and is providing investment advisory services to offshore funds,

insurance companies and high net worth investors. The Company is also registered under

the SEBI (Portfolio Managers) Regulations, 1993 and provides portfolio management

services to high net worth investors.

Overview :-

With the opening up of the Indian Economy, the Aditya Birla Group promoted BirlaGlobal Finance Limited (BGFL) and became a committed player in the Financial Sector.BGFL is listed on The National Stock Exchange and The Stock Exchanges, Mumbai. TheCompany encompasses a range of services, each catering to a specific need or segment.BGFL has the following major activities:- Capital Market

Corporate Finance

Retail Finance

General Insurance Advisory

On behalf of the Aditya Birla Group, BGFL has been responsible for setting up

successful joint ventures with Sun Life of Canada viz: Birla Sun Life Insurance Company

Limited, Birla Sun Life Asset Management Company Limited, Birla Sun Life

Distribution Company Limited and Birla Sun Life Trustee Company Private Limited.

41


42/118

Management Team:-

The company has a very competent team of professional headed by Mr. S.K. Mitra,

Managing Director, who has over 30 years of experience in corporate banking,

investment banking and fund management.

Board of Directors:-

Mr. B. N. Puranmalka, Vice Chairman

Mr. E. B. Desai, Director

Mr. Arvind C Dalal, Director

Mr. G. M. Dave, Director

Mr. Kamlesh Vikamsey, Director

Senior Management :-

Mr. Sushil Agarwal, Joint Executive President & COO

Mr. Ravi Bubna, Senior Vice President Corporate Finance

Mr. Sanjeev Bhargava, Senior Vice President Retail finance

Mr. K.G.Ajmera, Vice President, CFO

Company Secretary and Compliance Officer:-

Mr. Parind Badshah

Vision:-

To be the most trusted name in investment and wealth management, to be thepreferred employer in the industry and to be a catalyst for growth and excellence of the

asset management business in India.

Vision statement:

42


43/118

To be the first reference of our customers as a leading integrated provider of

complete financial services through superior value creation and technology.

Mission:

To consistently pursue investor's wealth optimization by :

Achieving superior and consistent investment results

Creating a conducive environment to hone and retain talent

Providing customer delight

Institutionalizing system-approach in all aspects of functioning

Upholding highest standards of ethical values at all times

Vision of BSLAMCL:

"To actively contribute to the social and economic development of the

communities in which we operate. In so doing, build a better, sustainable way of life for

the weaker sections of society and raise the country's human development index."

Mrs.RajashreeBirla, Chairperson

The Aditya Birla Centre for Community Initiatives and Rural Development

Making a difference:

Before Corporate Social Responsibility found a place in corporate lexion, it was

already textured into our Group's value systems. As early as the 1940s, our founding

father Shri G.D Birla espoused the trusteeship concept of management. Simply stated,

this entails that the wealth that one generates and holds is to be held as in a trust for our

multiple stakeholders. With regard to CSR, this means investing part of our profitsbeyond business, for the larger good of society.

While carrying forward this philosophy, his grandson, Aditya Birla weaved in the

concept of 'sustainable livelihood', which transcended cheque book philanthropy. In his

view, it was unwise to keep on giving endlessly. Instead, he felt that canalizing resources

to ensure that people have the wherewithal to make both ends meet would be more

43


44/118

productive. He would say, "Give a hungry man fish for a day, he will eat it and the next

day, he would be hungry again. Instead if you taught him how to fish, he would be able to

feed himself and his family for a lifetime."

Taking these practices forward, our chairman Mr. Kumar Mangalam Birla

institutionalized the concept of triple bottom line accountability represented by economic

success, environmental responsibility and social commitment. In a holistic way thus, the

interests of all the stakeholders have been textured into our Group's fabric.

The footprint of our social work today straddles over 3,700 villages, reaching out to

more than 2 million people annually. Our community work is a way of telling the people

among whom we operate that We Care.

Strategy of BSLAMCL

Our projects are carried out under the aegis of the "Aditya Birla Centre for Community

Initiatives and Rural Development", led by Mrs. Rajashree Birla. The Centre provides the

strategic direction, and the thrust areas for our work ensuring performance management

as well.

Our focus is on the all-round development of the communities around our plants

located mostly in distant rural areas and tribal belts. All our Group companies -

Grasim, Hindalco, Indian Rayon, Indo Gulf and UltraTech have Rural Development Cells

which are the implementation bodies.

Projects are planned after a participatory need assessment of the communities around

the plants. Each project has a one-year and a three-year rolling plan, with milestones and

measurable targets. The objective is to phase out our presence over a period of time and

hand over the reins of further development to the people. This also enables us to widen

our reach. Along with internal performance assessment mechanisms, our projects are

audited by reputed external agencies, who measure it on qualitative and quantitative

parameters, helping us gauge the effectiveness and providing excellent inputs.

44


45/118

Our partners in development are government bodies, district authorities, village

panchayats and the end beneficiaries -- the villagers. The Government has, in their 5-year

plans, special funds earmarked for human development and we recourse to many of

these. At the same time, we network and collaborate with like-minded bilateral and

unilateral agencies to share ideas, draw from each other's experiences, and ensure that

efforts are not duplicated. At another level, this provides a platform for advocacy. Some

of the agencies we have collaborated with are UNFPA, SIFSA, CARE India, Habitat for

Humanity International, Unicef and the World Bank.

Focus Areas Of BSLAMCL:-

Our rural development activities span five key areas and our single-minded goal here

is to help build model villages that can stand on their own feet.

Balwadis (pre-school)

Adult education

Non-formal education

Continuing education

Scholarships for girls, merit and technical education, Health and family welfare

Mobile clinics :- Doctors visit once a week

Medical camps :- General and issue-based

Health training and awareness

Sanitation - toilets, training, smokeless chullahs, biogas

Safe drinking water

Mother and child health

Reproductive health

Awareness building

Self-Help Groups:-SGSY :-

Dairy, Readymade garments, Jute project, Basket making, Aggarbati making, bee

keeping, durrie making

Check dam

Irrigation

45


46/118

Land development

Soil and water conservation

Pasture development

Social forestry/ plantation activities/ nursery

Horticulture

Farmer training

Infrastructure Development

Roads

Dams

Community centres

Houses

Culverts

Electricity

Health centres

Water channels

Schools

Social Causes:-

Widow / dowry-less mass marriages

Women empowerment

Awareness drives on knowledge, attitude and practices

Awards

CNBC TV 18 CRISIL MUTUAL FUND OF THE YEAR AWARDS

Open ended Income Fund Birla Income Plus-

Open ended Income Short Term Funds Birla Bond Plus

46


47/118

ICRA ONLINE MUTUAL FUND AWARDS 2005

Birla Gilt Plus - Liquid Plan ICRA-MFR 1 Open Ended Gilt Scheme-Short Term - 1

Year

Birla Gilt Plus - Liquid Plan ICRA-MFR 1 Open Ended Gilt Scheme - Short Term - 3

Year

Birla India Opportunities Fund ICRA-MFR 1 Open Ended Sectoral Schemes-

Technology (3 Year)

Birla Income Plus ICRA-MFR 1 Open Ended Debt Scheme - Long Term (3 Year)

ICRA Online Mutual Fund Awards 2004

Presented to

Birla Income Plus:

Ranked MFR 1 in open-ended debt schemes - long term category (one year)

CNBC - TV 18 - BNP PARIBAS

Mutual Fund of the Year Award 2004

Presented to

Birla Gilt Plus (Regular Plan) (Gr):

Best Performing Open-Ended Gift Fund (three years)


Presented to

Birla Equity Plan:

Best Performing Open-Ended Equity Tax Saving (ELSS) (one year)


Presented to

Birla MIP (Gr):

Best Performing Open-Ended Monthly Income Plan Fund (three years)

47


48/118

ICRA Online Mutual Fund Awards 2004

Presented to Birla India Opportunities Fund:

Ranked MFR 1 in open-ended sectoral schemes - technology category (one year)

Presented to Birla Gilt Plus

Regular Plan: Ranked MFR 1 in open-ended gift schemes - long term category (one

year)

Presented to Birla India Opportunities Fund:

Ranked MFR 1 in open-ended sectoral schemes - technology category (three

Years)

Presented to Birla Gilt Plus - Liquid Plan:

Ranked MFR 1 in open-ended gilt Schemes - short term category (one year)

Presented to Birla Equity Plan:

Ranked MFR 1 in open-ended equity linked savings schemes category (one year)

CRISIL Best Fund Awards 2003

Presented to

Birla Bond Plus:

Best performing Open-end Income-Short Term Fund ICRA Online Mutual Fund

Awards 2004

Presented to

Birla Gilt Plus - Liquid Plan:

Ranked MFR 1 in open-ended gift schemes - short term category (three years)

Standard & Poor's Fund Awards, 2004 Offshore, India Advantage Fund

Presented to

Awarded 1st Place in the Standard & Poor's Five Years Offshore Funds Equity India

Sector.

48


49/118

Standard & Poor's Fund Awards, 2002 Offshore, India Advantage

Fund

Presented to

BIRLA MUTUAL FUND1st place in the standard & Poor's Five Years (Dec 1996-Dec 2001).

R J Bhatt Awards 1999

Presented to

BIRLA MUTUAL FUND

The Best Mutual Fund

the IRIS Mutual Fund Award in memory of R J Bhatt.


Presented to

BIRLA ADVANTAGE FUND

The Best Performing Scheme

The category of Growth Funds

the IRIS Mutual Fund Award in memory of R J Bhatt.


Presented to

BIRLA INCOME PLUS

The Best Performing Scheme

In the category of Income Funds

the IRIS Mutual Fund Award in

memory of R J Bhatt .

Business Standard

Presented to

49


50/118

MR.BHARAT SHAH

Fund Manager of Year 1999.

The Best Equity Mutual Fund Scheme Award 1999

Motilal Oswal institute of wealth Creation

Pioneers in Investor's Education

Presented to


Mr R J BHATT Mutual Funds Awards 2000

Presented to

Birla Sunlife Asset Management Company Limited

In recognition of


The BEST GROWTH SCHEME

Based on three years performance between August 1 ,1997-July 31,2000.

Mr R J BHATT Mutual Funds

Awards 2000

Presented to

Birla Sunlife Asset Management Company Limited

In recognition of BIRLA INCOME PLUS

The Best Scheme Income Scheme

Based on three years performance between August 1 ,1997-July 31,2000.

Standard & Poor's

www.micropal.com 1998 Awards

Presented to

INDIA ADVANTAGE FUND

The award for standing first place in the Standard & Poor's Micropal one year

offshore Territories Equity India sector out of 36 funds.

50


51/118

BANCO

Emerging Markets Awards 2000

Presented toBirla Sun life Asset Management Company Limited

For having secured the first place for its risk-adjusted performance over three years

with the India Advantage Fund in the Standard & Poor's fund Services ,Asia excl.

Japan Equity Sector.

"Birla India Opportunities Fund wins recognition at the CNBC India- BNP Paribas

Mutual Fund of the Year Awards 2002. Birla India Opportunities Fund (G) Plan B

has been ranked by Moody's Investor Services as...

The Best Performing Open-ended Equity Sector- Technology Fund for One Year

period. "

51


52/118

52


53/118

THE SEVEN S MODEL:-

The Seven Framework first appeared in The Art of Japanese management by

Richard Pascale and Anthony Athos in 1981. They had been looking at how Japanese

industry had been so successful, at around the same time that Tom Peters and Robert

Waterman were exploring what made a company excellent. The Seven S model was born

at a meeting of the four authors in 1978. It went on to appear in In Search of

Excellence by Peters and Waterman, and was taken up as a basic tool by the global

management consultancy McKinsey: Its sometimes known as the McKinsey 7S model.

This is because, Tom Peters and Robert Waterman, were consultants at McKinsey& Co

at that time.

The model starts on the premise that an organization is not just Structure, but consists

of seven elements i.e., Strategy, structure, systems, style, staff, super ordinate goals (also

known as shared values), and skills.

According to them, managers, need to take account of all seven of the factors to be

sure of successful implementation of a strategy-large or small. All the seven Ss are

interdependent, and proper attention should be paid to each one of them.

Those seven elements are distinguished in so called hard Ss and soft Ss. The hard

elements are feasible and easy to identify. They can be found in strategy statement,

corporate plans, organizational charts and other documentations.

The four soft Ss however, are hardly feasible. They are difficult to describe since

capabilities, values and elements of corporate culture are continuously developing and

changing. They are highly determined by the people at work in the organization.

Therefore it is much more difficult to plan or to influence the characteristics of the soft

elements.

Although the soft factors are below the surface, they can have a great impact of the

hard Structures, Strategies and Systems of the organization.

53


54/118

Digram-1

DESCRIPTION:-

The Hard Ss:- Strategy: Actions a company plans in response to or anticipation of

changes in its external environment.

Structure:- Basis for specialization and co-ordination influenced primarily by

Strategy and by organization size and diversity

Systems: Formal and informal procedures that support the strategy and structure.

(Systems are more powerful than they are given credit)

The Soft Ss:-

Style/Culture:-

The culture of the organization, consisting of two components:-

Organizational Culture:- The dominant values and beliefs, and norms, which develop

over time and become relatively enduring features of organizational life

54


55/118

.

Management Style:- More a matter of what managers do than what they say; how do a

companys managers spend their time? What are they focusing attention on?

Symbolism-the creation and maintenance (or sometimes deconstruction) of meaning is a

fundamental responsibility of managers.

Staff:-

The people/human resource management-processes used to develop managers,

socialization processes, and ways of shaping basic values of management cadre, ways of

introducing young recruits to the company, ways of helping to manage the careers of

employees.

Skills:-

The distinctive competences- what the company does best, ways of expanding or

shifting competences Shared Guiding concepts, fundamental ideas around which a

business is build-Values/ must be simple, usually stated at abstract level, have great

meaning Super inside the organization even though outsiders may not see or Ordinate

understand them.

Goals:- If one element changes then this will affect all the others. For example, a

change in HR-systems like internal career plans and management training will have an

impact on organizational culture (management style) and thus will affect structures,

processes, and finally characteristic competences of the organization.

The 7-s Model is a valuable tool to initiate change processes and to give them

direction. A helpful application is to determine the current state of each element and to

compare this with the ideal state; Based in this it is possible to develop action planes to

achieve the intended state.

55


56/118

SEVEN S MODULE OF BSLAML

1. STRATEGY:-

BSLAMCL has also bagged the CNBC TV18 Award:-CRISIL Mutual Fund of the

year Award for Birla Income Plus Plan B and Birla Bond Plus-Rental.The mutual fund

has been won the award for successfully implementing the channels to expand its

geographical pressence despite underdeveloped communications infrastructure. It also

follows the Strategy of building a diversified and derisked asset portfolio.

BSLAMCLs Growth Strategy involves:

Fully tap the growing market through higher incremental market share than

competitor

Adopt innovative strategies to expand the market

Greater geographical penetration

Introduction of new products in various segments.

Provide high quality customer convenience & service

BSLAMCL has pursued the business strategy of becoming a universal mutual

fund.

2. Structure:-

Structure of the Mutual Fund (BSLAMCL)

The Mutual Fund

Sponsors- BSLAMC Limited, Birla sun Life Insurance company Limited

Trustee

The Asset Management Company

Custodian

Statutory Auditors of the Schemes

Legal Advisors

56


57/118

The Mutual Fund: -

BSL mutual fund has been constituted as a trust in accordance with the provisions of

the Indian Trusts Act, 1882, by the Sponsors as per the terms of the Trust deed. The Trust

Deed has been registered under the Indian Registration Act, 1908. The Mutual Fund has

been registered with SEBI, vide registration number Registration No. 80811 State Code 11

dated 1996.

3. Sponsors:-

Sun Life (India)AMC Investments Inc. and Birla Global jFinance Ltd.(Liability

restricted to seed corpus of Rs.1 lac). Birla Sun Life Asset Management Company

Limited (the Company) was incorporated on Sep. 5th 1994. The Company is a joint

venture between the Aditya Birla Group and Sun Life Financial Services of Canada. The

share capital of the Company is equally owned by Birla Global Finance Limited -

Flagship company of Aditya Birla Groups Financial Services activities and Sun Life

(India) AMC Investments Inc., Canada, which is a wholly owned subsidiary of Sun Life

Financial Services Company Inc., Canada.

Trustee: -

Birla Sun Life Trustee Company Pvt.Limited, a company incorporated under the

Companies Act, 1956 is the trustee to the Mutual Fund vide the Trust Deed.

The Asset Management Company:-

BSL Asset Management Company Limited (AMC) was incorporated under the

Companies Act, 1956 on Sep 5th, 1994 and was approved to act as an Asset Management

Company for the Mutual Fund by SEBI on 1996. The registered office of the AMC is

situated in Mumbai.

Liquidity:-The fund offers NAVs, purchases and redemptiojs on all business days.

Statutory Auditors of the Scheme:-This section is managed by S.B.Billimoria & Co., Chartered Accountants of Mumbai.

57


58/118

Legal Advisors:- For and on behalf of the Board

DIR. N. N. Jambusaria, DIR. S. K. Mitra, DIR. S V Prasad, Chief Executive Officer,

Rajesh Ajgaonkar, Manager and Company Secretary.

ORGANIZATION STRUCTURE

4.Systems:-

The decision-making systems within the organization can range from management

intuition, to structured computer systems to complex expert systems and artificial

intelligence. It includes:

Computer Systems

Operational Systems

HR Systems, etc

BSLAMCL uses powerful-networked computer database known as finnacle. The

mutual fund has also needed to manage the technology risks associated with migration

58

Chairman

Managing Director &

CEO

(

Joint ManagingDirector Joint Managing

Director

Exec. Director.Corp. Center

Exec DirectorProject Fin &Spl. Assets

Exec DirectorRetail Banking

Exec. DirectorWholesaleBanking

SeniorGeneralManager






General

Manager

General

Manager

General

Manager

General

Manager


59/118

from its legacy systems to the new technologies necessary to manage the increasing

volumes of transactions at net speed. The mutual fund also has its own performance

review and reward systems, which is very unique and powerful in the industry.

BSLAMCL has used Information Technology as a strategic tool for its business

operations, to gain competitive advantage and to improve overall productivity and

efficiency of the organization. Enhanced level of customer services like 24/7 services,

Internet Mutual fund etc

Cost efficiency like reduction in traditional branch network/service staff, wider and

focused market reach and opportunities for cross selling.

Application of Information Systems to effectively market to their target customers and

to monitor and control risks.

5.Style:-

Style refers to 2 components:

Organizational Culture:- The dominant values and beliefs, and norms, which develop

over time and become relatively enduring features of organizational life.

Management Style:-

More a matter of what managers do than what they say; how do a companys

managers spend their time/ What are they focusing attention on/ Symbolism-the creation

and maintenance (or sometimes deconstruction) of meaning is a fundamental

responsibility of managers behave?

In BSLAMCL, the style adopted is a participative one where in information can flow

upwards to the top management from down. In this way different consumer wants,

attitudes, behavior, etc can be analyzed in a much more effective manner.

6.Staff:-

59


60/118

The management believes that it has a good relationship with its staff. BSLAMCL

has a staff center which serves as a forum for grievances, pay and benefit negotiations

and other industrial relations matters.

BSLAMCL attracts the best graduates from the premier business schools of the

country. It dedicates significant amount of senior management time to ensure that

employees remain highly motivated and perceive the organization as a place where

opportunities abound, innovation is fuelled, teamwork is valued and success is rewarded.

Robust ability-testing and competency-profiling tools are being used to strengthen the

campus recruitment process and match the profiles of employees to the needs of the

organization. BSLAMCL is one of the most preferred employers at leading business

schools and higher education institutions across the country, offering a wide range ofcareer opportunities across the entire spectrum of financial services.

In addition to campus recruitment, BSLAMCL also undertakes lateral recruitment to

bring new skills, competencies and experience into the organization and met the

requirements of rapidly growing businesses. A Six Sigma initiative has been undertaken

for the lateral recruitment process to improve capabilities in this area. BSLAMCL

encourages cross functional movement, enriching employees knowledge and experience

and giving them a holistic view of the organ9isation while ensuring that the bank

leverages its human capital optimally.

Employee compensation is clearly tied to performance and BSLAMCL encourages the

involvement of all its employees in its overall performance and profitability through

profit sharing incentive schemes based on the financial results. A revised performance

appraisal system has been implemented to assist management in career development and

succession planning.

BSLAMCL views its human capital as a key source of competitive advantage.

Consequently, the development and management of human capital is an essential element

of their strategy and a key management activity.

BSLAMCL boasts of its ability to nurture individuals and provide them the space and

empowerment they need to hope their talents. The size of the organization gives them the

60


61/118

unique ability to provide fast growth and high responsibility early in ones career as well

as multiple avenues to reach the top.

7.Skills:-

A companys skills can includes hard assets such as financial strengths and dominant

market share, but it takes the human and managerial input to translate these into a

sustainable competitive advantage.

BSLAMCL has a training center Khandala, which conducts a series of training

programs designed to meet the changing skill requirements of its employees. These

training programs include orientation sessions for new employees and management

development programs for mid-level and senior executives. The training center regularly

offers courses conducted by faculty, both national and international, drawn from industry,

academia and from the company itself. Training programs are also conducted for

developing functional as well as managerial skills.

The competencies required at the entry level in BSLAMCL include:

Drive for results

Process Orientation

Interpersonal Effectiveness

Analytical Thinking Innovation &

Team Effectiveness

BSLAMCL has played an important role in setting up and supporting various

programs imparting management education.

Shared Values/Super ordinate Goals:-

BSLAMCL has constantly focused on building shareholder value as its primary

objective. Their approach to shareholder value creation has extended beyond delivering

near-term financial results, to developing a sustainable, long-term value proposition. The

key elements of their strategy have been to capitalize on new business opportunities,

61


62/118

build an strong brand and distribution capability, leverage technology, establish robust

systems and processes and develop their human capital. They believe these elements are

essential enablers of future growth.

BSLAMCL constantly endeavors to create products that best met the specific needs of

its clients and investors. In addition, BSLAMCL also seeks to deliver these products

effectively and efficiently. It therefore, sets for itself high standards of service and

constantly strives to improve upon them. The goal is to ensure that dealing with

BSLAMCL is safe, simple and efficient.

62


63/118

THE RESEARCH DESIGN OF THE STUDY

TOPIC:-

PORTFOLIO ANALYSIS OF BIRLA SUNLIFE ASSET MANAGEMENT

COMPANY LIMITED

INTRODUCTION:-

A study on Financial Performance of Birla Sunlife Assset Management Company

limited is under taken in order to know the Financial Performance and Position, liquidity

63


64/118

position of the AMC and to know the strength & weakness of the AMC & to assess the

Profitability of the BSLAMCL.

Absolute Return and Compounded Annual Return Since Inception is the tools used as

a yardstick for evaluating the financial condition and performance of BSLAMCL.

STATEMENT OF THE PROBLEM:-

The Mutual Funds have become a runway success in the Investment Industryat

present because there have moderate risk. The BSLAMCL reduse the risk of no/low

experienced investors by providing right information on concerned Schemes of

BSLAMCL. This AMC is one of the leading Asset Management Company Limited in

India and its doing extremely well in the Bangalore. In BSLAMCL some of the schemes

are not performing upto their potential in Equity Funds, Balanced Funds, Monthly

Income Funds, Long Term Floating Funds. So, these provides an opportunity to study

the Portfolio Analysis of Birla Sunlife Asset Management Company Limited and find out

the better avenues for better growth.

PLAN OF THE STUDY:-

The Data Analysis and Interpretation is used to study the performance of thecompany. The Absolute Return and Compounded Annual Return Since Inceptio

belonging to different Asset Management Companies are calculated and the Return

Percentage of each Scheme is worked out. Graphs are drawn for a better understanding

of the concepts and theories.

OBEJECTIVES OF THE STUDY:-

To study the financial position of the BSLAMCL

To study the Financial Performance of the BSLAMCL.

To compare the Three Months or Six Months, One Year or Two Year

Performance of BSLAMCLs Schemes with Competitors.

To know the strength and weakness of the BSLAMCL.

To assess the Profitability of the BSLAMCL.

64


65/118

METHODOLOGY:-

For the purpose of preparing the report the necessary information collected are

divided into two heads that is primary and secondary data.

Primary data:-

Primary data is collecting from Finance Executive and various departments of Bank.

Secondary Data:-

Past records

Annual reports of the company

Companys publications

Websiteof BSLAMCL

Analytical tools used:-

Absolute Returns of Asset Management Companies

Compound Returs of Asset Management Companies

LIMITATIONS:-

Some data are confidential to the AMC which was not possible to be used in the

project.

Annual Returns are generally calculated on past financial Performance and thus

forecast for the future is based on past data.

SCOPE:-

This project deals with finding out the risk of Investing in the funds, How to Invest in

the Funds/Schemes? Performance of the funds, Features of the funds. The study of

65


66/118

Portfolio Analysis limited to Birla sunlife Asset Management Company Limited,

Bangalore.

Measuring OF Mutual Funds:-The investor would naturally be interested in tracking the value of his investments,

whether he invests directly in the markets or indirectly through mutual funds. He would

have to make intelligent decisions on whether he gets an acceptable return on his

investments in the funds selected by him, or if he needs to switch to another fund. Only

then would he be in a position to judge correctly whether his fund is performing well or

not, and make the right decisions.

There are many measures of fund performance. One must find the most suitable

measure depending on the type of fund, the stated objective of the fund and even

depending on the current financial market conditions. Some of the most common

measure are-

(a) Change in NAV:-

If an investor wants to compute the Return On Investment between two dates, he can

simply use the Per Unit Net Asset Value at the beginning and end periods, and calculate

the change in the value of the NAV between the two dates in absolute and percentage

terms.Formula: For change in Absolute terms-

NAV at the end of the period-NAV at the beginning of the period

For change in percentage terms

(Absolute change in NAV/ NAV at the beginning)* 100

Limitations:-

This measure does not always give the correct picture, in cases where

the fund has distributed to its investors a significant amount of dividend in the

Interim period. It is suitable for evaluating growth funds and accumulation plans of

Equity and debt funds, but should be avoided for income funds and funds with

Withdrawal plans.

(b) Total Return: -

66


67/118

This measure corrects the shortcoming of the NAV Change measure, by taking

account of the dividends distributed by the fund between the two NAV dates, and adding

them to the NAV change to arrive at the total return.

Formula: For Total Return is

[(Distribution + Change in NAV)/NAV at the beginning of the period]*100

Limitations:-

Although more accurate than NAV Change, simple Total Return as calculated here is

still inadequate as a performance measure, because it ignores the fact that distributed

dividends also get reinvested if received during the year. The investors Total Return

should take account of reinvestment of interim dividends.

(c) The Expense Ratio: -

This Ratio is an indicator of the funds efficiency and cost effectiveness.

Formula: Given by ratio of Total Expense to Average Net Assets of the Fund

Limitations: Though an important yardstick, the fluctuations in the ratio across periods

require an average over 3-5 years be used to judge a funds performance. Also, the

expense ratio must be evaluated in the light of fund size, average account size and

portfolio composition- equity or fixed income. For example, funds with small corpus size

will have a higher expense ratio affecting investor returns than a large corpus fund. If a

funds income levels or returns are small, say a debt fund giving a gross return of 8%,

expense ratio becomes important, and differences of even 0.5% between two funds can

affect the investors returns.

(d)The Income Ratio: -

This ratio is a useful measure for evaluating income-oriented funds, particularly debt

funds. It is not recommended for funds that concentrate primarily on capital appreciation.

Formula:- It is defined as its net investment income divided by its net assets for the

period.

67

04 kxcm6024 hiremath n c

Documents