Mutual funds are a mechanism for pooling the resources of different investors and investing the collected funds in accordance with specific objectives, in securities so as to realise the investment objective. The investment objective is based largely upon the investors’ capacity to take risk.The profits or losses are shared by the investors in proportion to their investments. The mutual funds normally come out with a number of schemes with different investment objectives which are launched from time to time.
The concept of pooling money for investment purposes started in the mid 1800s in Europe.The first pooled fund in the U.S. was created in 1893 for the faculty and staff of Harvard University.On March 21st 1924 three securities executives from Boston pooled their money to create the first mutual fund in the world known as the Massachusets Investors Trust. Unit Trust of India was the first mutual fund to be set up in India in the year 1963. In early 1990s, Government allowed public sector banks and institutions to set up mutual funds. It was at this time that LIC Mutual Fund came into existence..
In accordance with the Securities & Exchange Board of India (Mutual Fund) LIC Mutual Fund was set up as a separate Trust by the Life Insurance Corporation of India (who is the Sponsor). LIC has made an initial contribution of Rs.2 crores towards Trust Fund and has appointed a Trustee company to supervise the activities of the Fund. The Board of Trustees have entrusted the work of management of the Fund LIC Mutual Fund Asset Management Ltd., which is a company promoted by Life Insurance Corporation of India with an authorised capital of Rs.25 crores. LIC MF AM Ltd. is responsible for promoting different schemes on behalf of LIC Mutual Fund and also to manage them. The day to day operations of the AMC are looked after by experienced and qualified professionals, consisting of senior officials on deputation from Life Insurance Corporation of India as well as directly recruited officials of the AMC. LIC Mutual Fund has appointed Stock Holding Corporation of India and HDFC Bank as the custodian for the scheme to take delivery of all properties belonging to the Mutual Fund schemes and hold them in custody and separately from the assets of the custodian and their other clients.
NSDL/CDSL offers following facilities :
An open-ended fund or scheme is one that is available for subscription and repurchase on a continuous basis.
A close-ended fund or scheme has a stipulated maturity period e.g. 5-7 years. The fund is open for subscription only during a specified period at the time of launch of the scheme. Investors can invest in the scheme at the time of the initial public issue and thereafter they can buy or sell the units of the scheme on the stock exchanges where the units are listed. In order to provide an exit route to the investors, some close-ended funds give an option of selling back the units to the mutual fund through periodic repurchase at NAV related prices.
A scheme can also be classified as growth scheme, income scheme, or balanced scheme considering its investment objective. Such schemes may be open-ended or close-ended schemes as described earlier. Such schemes may be classified mainly as follows:
The aim of income funds is to provide regular and steady income to investors. Such schemes generally invest in fixed income securities such as bonds, corporate debentures, Government securities and money market instruments. Such funds are less risky compared to equity schemes. These funds are not affected because of fluctuations in equity markets. However, opportunities of capital appreciation are also limited in such funds. The NAVs of such funds are affected because of change in interest rates in the country. If the interest rates fall, NAVs of such funds are likely to increase in the short run and vice versa. However, long term investors may not bother about these fluctuations.
The aim of balanced funds is to provide both growth and regular income as such schemes invest both in equities and fixed income securities in the proportion indicated in their offer documents. These are appropriate for investors looking for moderate growth. They generally invest 40-60% in equity and debt instruments. These funds are also affected because of fluctuations in share prices in the stock markets. However, NAVs of such funds are likely to be less volatile compared to pure equity funds.
These funds are also income funds and their aim is to provide easy liquidity, preservation of capital and moderate income. These schemes invest exclusively in safer short-term instruments such as treasury bills, certificates of deposit, commercial paper and inter-bank call money, government securities, etc. Returns on these schemes fluctuate much less compared to other funds. These funds are appropriate for corporate and individual investors as a means to park their surplus funds for short periods.
These funds invest exclusively in government securities. Government securities have no default risk. NAVs of these schemes also fluctuate due to change in interest rates and other economic factors as is the case with income or debt oriented schemes.
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. NAVs of such schemes would rise or fall in accordance with the rise or fall in the index, though 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.
There are also exchange traded index funds launched by the mutual funds which are traded on the stock exchanges.
These are the funds/schemes which invest in the securities of only those sectors or industries as specified in the offer documents. e.g. Pharmaceuticals, Software, Fast Moving Consumer Goods (FMCG), Petroleum stocks, etc. The returns in these funds are dependent on the performance of the respective sectors/industries. While these funds may give higher returns, they are more risky compared to diversified funds. Investors need to keep a watch on the performance of those sectors/industries and must exit at an appropriate time. They may also seek advice of an expert.
These schemes offer tax rebates to the investors under specific provisions of the Income Tax Act, 1961 as the Government offers tax incentives for investment in specified avenues. e.g. Equity Linked Savings Schemes (ELSS). Pension schemes launched by the mutual funds also offer tax benefits. These schemes are growth oriented and invest pre-dominantly in equities. Their growth opportunities and risks associated are like any equity-oriented scheme.
Investment in LIC MF schemes can be made either directly or through any of our empanelled distributors. Applications for allotment of LIC MF units should be made in the prescribed form only. Cheques / DDs should be drawn in favour of "the respective scheme" names. You can also make online investment on our website. Please visit www.licmf.com and click on Invest Online to make online transactions.
Domestic investors –
Duly filled in applications with subscriptions can be submitted at the authorized collection centres (list given at the end of this document) along with local cheques/DD payable at the authorized centres only. Payment by cash will not be accepted.
In case of NRIs, payment may be made by means of a Draft in Indian Rupees purchased abroad or by cheque/DD drawn on Non resident (External) /FCNR Accounts, payable at the authorized centres only. Payments may also be made through Demand drafts or other instruments permitted under the Foreign Exchange Management Act.
NRIs can invest by cheques/DD’s drawn out of Non resident (Ordinary) Accounts.
FIIs shall pay their subscription by way of direct remittance from abroad or out of their special Non resident Rupee account maintained with designated bank in India or as may be permitted by law.
In case of an application under POA or by a limited company, body corporate, registered society trust or Partnership etc., the relevant POA or the resolution or authority to make the application as the case may be, or duly certified copy thereof, along with the memorandum and articles of association /bye-laws must be lodged at the authorized centre along with the application form.
Note: The application form no. should be noted on the reverse of all Cheques and bank drafts accompanying the application form.
Investment in LIC MF schemes can be made either directly or through any of our empanelled distributors. Applications for allotment of LIC MF units should be made in the prescribed form only. Cheques / DDs should be drawn in favour of "the respective scheme" names. You can also make online investment on our website. Please visit www.licmf.com and click on Invest Online to make online transactions.
Domestic investors –
Duly filled in applications with subscriptions can be submitted at the authorized collection centres (list given at the end of this document) along with local cheques/DD payable at the authorized centres only. Payment by cash will not be accepted.
In case of NRIs, payment may be made by means of a Draft in Indian Rupees purchased abroad or by cheque/DD drawn on Non resident (External) /FCNR Accounts, payable at the authorized centres only. Payments may also be made through Demand drafts or other instruments permitted under the Foreign Exchange Management Act.
NRIs can invest by cheques/DD’s drawn out of Non resident (Ordinary) Accounts.
FIIs shall pay their subscription by way of direct remittance from abroad or out of their special Non resident Rupee account maintained with designated bank in India or as may be permitted by law.
In case of an application under POA or by a limited company, body corporate, registered society trust or Partnership etc., the relevant POA or the resolution or authority to make the application as the case may be, or duly certified copy thereof, along with the memorandum and articles of association /bye-laws must be lodged at the authorized centre along with the application form.
Note: The application form no. should be noted on the reverse of all Cheques and bank drafts accompanying the application form.
In order to protect unit holder interest from fraudulent encashment of cheques, the current SEBI Regulations, has made it mandatory for investors to mention in their application/repurchase-redemption request, the bank name and account number of the unit holders .The AMC will not be responsible for any loss arising out of fraudulent encashment of cheques and or any delay /loss in transit. In the absence of these details, applications are liable for rejection.
Investment in Mutual Fund is subject to standard and specific risk factors.For scheme specific risk factors please refer to the full offer documents of the respective scheme.
Mutual funds and securities are subject to market risks and there is no assurance and no guarantee that the objectives of the Mutual Fundwill be achieved. The NAV of the units issued under the scheme may go up or down depending on the factors and forces affecting capital markets. Past performance of the Sponsor/AMC/Mutual Funddoes not indicate the future performance of the schemes of the Mutual Fund.
The name of the scheme does not in any manner indicate either the quality of the scheme or its future prospects and returns. The sponsor is not liable for any loss resulting from the operation of the scheme beyond the initial contribution made by it for an amount of rupees 2 Crores towards setting up of the Mutual Fund. Investors in the scheme are not being offered any assured /guaranteed returns.
