A few words collected about the Reliance Power IPO…

Now for all who have invested in the I PO… something to read !Reliance Power Limited IPO
Opens: 15th January 2008.Closes: 18th January 2008.
Price Band: Rs 405 to Rs 450. Price Band for Retail Investors: Rs 385 to Rs 430. (Rs 20 discount).
Number of shares offered to public: 22,80,00,000 (22.8 crore).+ Number of shares to be subscribed by promoters: 3,20,00,000 (3.2 crore).
Total new shares issued (sum of above two) = (26 crore)
Number of shares for retail investors: 6,84,00000. (6.84 crore).
Issue size (public) = (22.8 – 6.84) X 450 + (6.84 X 430) = 7182 +2941.2
= Rs 10123.2 crore.
Number of shares outstanding pre-IPO: 200 crore. Number of shares outstanding post-IPO: 226 crore.
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Retail Investors and NII can apply with Rs 115 margin per share. (The details of this have already been discussed in earlier posts).
Maximum application possible in retail category = 225 shares.
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Already, a lot has been discussed about Reliance Power and its business (which will be there a few years from now).
This is an extremely rare case where SEBI has allowed a company with almost 0 revenues, to raise money via an IPO.
If this was an IPO by some smaller group, it would have been 100% rejected by SEBI for having no business.
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Business:
The company claims that it will be developing power generation projects of 28200 MW over the next decade.
According to the IPO RHP, some of the projects that it will be developing are:
Rosa-I (to be commissioned in March 2010) – 600 MW – Coal based. Butibori (to be commissioned in June 2010) – 300 MW – Coal based.Rosa-II (to be commissioned in September 2010) – 600 MW – Coal based.Shahpur Gas (to be commissioned in March 2011) – 2800 MW – Gas based. Shahpur Coal (to be commissioned in December 2011) – 1200 MW – Coal based. Dadri (to be commissioned in March 2013) – 7480 MW – Gas based.Krishnapatnam (to be commissioned in September 2013) – 4000 MW – Coal based. Urthing Sobla (to be commissioned in March 2014) – 400 MW – Hydropower based. Tato II (to be commissioned in March 2014) – 700 MW – Hydropower based.MP Power (to be commissioned in July 2014) – 3960 MW – Coal based. Siyom (to be commissioned in March 2015) – 1000 MW – Hydropower based.Kalai II (to be commissioned in March 2016) – 1200 MW – Hydropower based.Sasan (to be commissioned in April 2016) – 3960 MW – Coal based.
If
everything goes as planned, capacity of Reliance Power at end of each year till 2016 will be:
2008: 0 MW. 2009: 0 MW. 2010: 1500 MW.2011: 5500 MW.2012: 5500 MW.2013: 16980 MW.2014: 22040 MW.2015: 23040 MW.2016: 28200 MW.
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Other Similar Companies:
I can think of two companies in the power generation sector that Reliance Power can be compared with:
NTPC and Tata Power.
NTPC has current capacity of 28000 MW and has target to achieve 66000 MW by 2017. ( See this thread on NTPC).
Tata Power has current capacity of 2300 MW.It will be adding 10000 MW of capacity more by 2012. Thus, it will have a capacity of around 12300 MW by 2012 end. The additions will all be coal based. -Mundra Ultra Mega Power Project -4000 MW. -Power plants in Maharastra – 3000 MW. -Captive power plants for Tata Steel – 2000 MW-Maithon Power Plant at Jharkhand – 1000 MW.
Tata Power also has other smaller business and also wants to enter shipping and logistics. Besides that Tata Power has investments valued at Rs 400+ per share of Tata Power. This works out to be Rs 10000 crore. Around 2012 – 2013, both Tata Power is expected to have similar capacity as Reliance Power.
The interesting thing is at current price of Rs 1457, Tata Power is valued at just Rs 30000 crore. Remove Rs 10000 crore of investments and you can have it only for Rs 20000 crore.
At Rs 900, Reliance Power will have market value of 200000 crores….6.67 times that of Tata Power. .
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Financials:
With 2300 MW capacity, Tata Power made standalone profit of Rs 700 crore in FY 2007.
With 28000 MW capacity, NTPC made standalone profit of Rs 6900 crore in FY 2007.
Lets assume Reliance Power turns out to be much more efficient than these two companies. Add to that increased power rates.
With 28200 capacity, assume Reliance Power makes Rs 15000 crore of net profit in 2016-2017. Power companies are considered as utilities and worldwide trade at 10-15 times their earnings.
Lets assume 15 times ratio for Reliance Power in 2016.
What will be its market value?
15000 X 15 = Rs 225000 crore or Rs 995 per share.
This is an optimistic view: -there will be no further equity dilution till 2016. -assuming nearly twice as much efficiency as NTPC.-that all projects will be completed before 2016 end.-the company would have paid back all debt by then and interest costs would be in similar range as NTPC.
(NTPC already has established 28000 MW capacity and comparatively much lesser interest costs. (NTPC’s P&L account states Rs 1800 interest cost for FY 2007).
So what about the debt?
The RHP mentions estimated cost of six projects Rosa I, Rosa II, Butibori, Sasan, Shahpur Coal, Urthing Sobla as Rs 30000 crore+.
Analysts estimate that Reliance Power will need Rs 70000 crore of debt to finance its projects which are estimated to cost 100000 crore+.
Rs 70000 crore of debt is not going to come at 2% interest rate. Even a 6% interest would mean an annual interest cost of Rs 4200 crore. Only in 2013, the company’s capacity will cross 10000 MW. Thus, I do not expect any major debt repayment before 2014. If things don’t go as planned, the debt burden will make a mockery of the balance sheet.
With Rs 12000 crore raised in equity and Rs 70000 crore of debt, these whole business will become a high-risk venture.
Any unforeseen delay/derailment of plans may create major problems for this company.
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Reliance Power – The Overlooked Fact:
Is Reliance Power just “Reliance Power”?
No.
It is actually “Reliance Power Limited” – a limited company.
So what does this mean for Reliance Power Limited?
It means if in the rare case, the calculations of the management go wrong and the company somehow goes to insolvency, none of the shareholders will lose anything expect the value of the shares.
If you are a share holder of Reliance Power and it goes into insolvency (unable to pay back debts), what do you stand to lose?
Rs 430 per share.
Lot of money….right?
What does Anil Ambani’s AAA Project or REL lose?
Both of them had got their 45% (post-IPO) stake for Rs 1000 crore each. Plus they will each subscribe to 1.6 crore shares each at Rs 450 in the IPO……which works out to be Rs 720 crore.
Thus, AAA Project will be getting 101.6 crore shares of Reliance Power for Rs 1720 crore and REL will be getting 101.6 crore shares of Reliance Power for Rs 1720 crore.
Little less than Rs 17 per share.
This is what both the promoters are risking in this project…. Rs 17 per share ; while investors will be risking Rs 450 per share.
This is exactly the reason why Reliance Power was created.
First, by contributing just Rs 1720 crore each to Reliance Power, the promoters have shifted all risk to investors.
Second, by getting 45% stake (in REL’s projects) to AAA Project for a mere Rs 1000 crore, AAA Projects (and Anil Ambani) have created wealth out of thin air.
Anil Ambani’s Rs 1000 crore investment will be worth Rs 100000 crore when Reliance Power lists at Rs 900.
If the gamble works, the promoters (holding 90% stake in Reliance Power) will be worth billions of dollars.
If the gamble doesn’t work, the promoters will lose Rs 1720 crore each and investors will lose Rs 10000+ crore which they will be paying for a mere 10% stake in Reliance Power.
What a way to create wealth…!!!….I don’t have words to describe the brilliance of Anil Ambani’s plans… .
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So what will I do with this IPO?
Firstly, I will subscribe to it,
not because I think it is a good company or is offering great value at Rs 430,
but because I am in this market to make money.
The markets are in such a frenzy, nobody bothers about valuations anymore……..not even QIB and other institutional investors.
Everyone knows that Reliance Power will list at a premium and thus everyone will apply….valuations can wait for some other day…. .
Everyone should wait till last day and apply for it. Just check the subscription levels by 11 AM on last day.========================================
What will I do post-listing?
For bigger IPO’s like Power Grid and Mundra Port, I have followed a sell-half-keep-half strategy.
Assuming listing at Rs 900, for Reliance Power, I will follow sell-all-keep-none strategy.
First, other companies are much cheaper.
Why should I keep a company valued at Rs 200000 crore -
when another company (with similar capacity by 2013) is available at Rs 30000 crore with much smaller debt burden and Rs 10000 crore worth of investments ………..referring to Tata Power.
If Reliance Power (at Rs 900) is available for Rs 200000 crore, why not buy NTPC for a similar price……Rs 225000 crore. NTPC plans to have a capacity of 66000 MW in 2017, while Reliance Power will have 28200 MW capacity in 2016.
Second, the risk is higher than other existing companies.
With marginally cash flows for next 5 years and Rs 70000+ crore of debt, the risk for Reliance Power is high. Tata Power and NTPC have existing cash flows to handle expansions….Reliance Power does not.
Third and the biggest factor is….the valuation of the company doesn’t make much sense.
Why should Reliance Power be valued at Rs 200000 crore, when in highly optimistic scenario, it will not make more than Rs 15000 crore of profit in 2016 ? Even if it touches that figure of Rs 15000 crore, its market value in 2016 will not be much more than 225000-300000 crore. (if given a 15-20 times multiple).
A fixed deposit will make more money than that in 8 years…..and that too without any risk.
Also, I got the optimistic Rs 15000 crore figure by assuming two times margins as NTPC.
The fact is….. at least till 2014, Reliance Power will still be carrying most of its Rs 70000 crore debt and its interest costs will squeeze margins to a large extent.
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Final verdict:
Apply.
I will be selling all shares at 9:55……….not even waiting for a better price.
If you want to try for a better price, hold at your own risk.
The level of insanity in the markets is at a high…
Value and risk mean nothing today….. price and profit are the keywords.
Who knows…..the stock may got to Rs 1100 or more.
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Addendum:
Reliance Power may win more projects in the future.
However, it is unlikely that any new project that Reliance Power gets will be commissioned before 2012. Additional projects will also bring additional costs too.
It doesn’t make much sense to consider future projects before they are actually won.
Also, Reliance Power is winning projects by offering very low rates – another factor that will decrease margins and increase risks for the company.
For example, in case of Krishnapatnam Ultra Mega Power Project, Reliance Power won with a bid of Rs 2.33 per unit.
L&T had bid Rs 2.69 per unit and Sterlite had bid Rs 4.19 per unit. Such aggressive pricing may backfire if costs rise due to some unexpected factors

Investors in Mutual Funds to comply with ‘KNOW YOUR CLIENT’ (KYC)…

The following rule has been brought into force and all MF investors are supposed to comply with it. Its called the KYC. There is a form that you need to fill up and submit. Its very simple and easy too. Just leave a comment with your email ID and I shall send the form to you

Here is more information about the same

KNOW YOUR CLIENT (KYC)
In order to comply with regulatory provisions under the Prevention of Money Laundering Act 2002, Rules issued thereunder and related guidelines/circulars issued by SEBI, KYC formalities are required to be completed for all Unit Holders, including Guardians and Power of Attorney holders, for any investment (whether new or additional purchase) of Rs. 50,000 or more in mutual funds. For the convenience of investors in mutual funds, all mutual funds have made special arrangements with CDSL Ventures Ltd. (CVL), a wholly owned subsidiary of Central Depository Services (India) Ltd. (CDSL))

DOCUMENTS AND INFORMATION TO BE PROVIDED BY INVESTORS
Investors in mutual fund schemes have to provide

1. Proof of Identity
2. Proof of Address
3. PAN Card
4. Photograph

The originals of these documents along with a copy each to be presented and the original will be returned after verification. Alternatively, investors can also provide an attested true copy of the relevant documents. Attestation could be done by Notary Public/ Gazetted Officer/ Manager of a Scheduled Commercial Bank
Instead of providing the required documents again and again to different mutual funds in which one would like to invest, CVL, on behalf of all mutual funds will carry out the process of KYC and issue an acknowledgement
Investors have to provide the relevant documents and information ONLY ONCE for complying with KYC. After that Investors could invest in the schemes of all mutual funds by merely attaching a copy of the KYC acknowledgement slip with the application form / transaction slip when investing for the first time in every folio (Post KYC) in each Mutual Fund house, without the necessity to submit the KYC documents again
Any subsequent changes in address or other details could be intimated to any of the POS (with relevant documentary evidence) and the same will get updated in all the mutual funds where the investor has invested
This facility is being provided absolutely FREE OF COST to the investors. To begin with, investors investing Rs.50,000 or more will have to comply with KYC effective from 1st February, 2008

WHERE TO COMPLETE THE FORMALITIES
Investors could complete the formalities by submitting the KYC form and relevant documents at the Points of Services (POS). To start with, these POS will be the select branches / offices of mutual funds, registrars and select branches of some distributors. The application form for complying with KYC will be available from these POS. The application form could also be downloaded from the websites of all mutual funds and CDSL http://www.cdslindia.com/. Investors could contact offices of mutual funds, registrars and mutual fund distributors (ARN Holders) for further details and assistance

I’m gonna be AMFI certified soon…

Heyyyyyyyyyyyyyyyyyy………………….

I just cleared my AMFI examination!!!

And I am getting registered with them as an independent distributor soon…

It was yet another great moment in life when I got through my AMFI examination

AMFI is the Association of Mutual Funds in India. Any person who wishes to sell mutual funds has to be certified by this body. Only then can he sell them

I have been a big fan of mutual funds from years together. I have done a lot of research on each and everything related to mutual funds. Further, one fine day, I thought, “Why not sell mutual funds alongwith life insurance?” To turn this thought into reality, I started finding the ways to do it. And I got to know that I have to clear this exam

There was a book written by the AMFI which costs Rs 400. However, with the kind of knowledge that I had on mutual funds, I was 100% sure that I will clear the exam without reading this book. However, I did not wish to take a chance as the exam fee was Rs 1000. Even if I fail by 1 mark, I will have to pay another Rs 1000. So, its always good to pay Rs 1400 (400 for the book and 1000 for the exam) and study properly and clear the exam

I ordered the book which arrived in 4-5 days. And I started preparing. The exam was supposed to be held on 8 Feb 08. My preparation was not upto the mark in the beginning. I had a lot of commitments and was tied up with life

However, on the deadline day, 07th Feb, I made a serious venture and studied the book word by word. My God! It was a 350 pages book and I was able to cover about 180-200 pages. The next morning, I just started glancing the remaining portion. Almost everything was known to me. It was mainly dealing with marketing ethics which I had learnt in my classes of BCom and more importantly, I have followed them through life. It dealt with the kinds of funds, their operations, expense ratios, limits, etc which I had in my mind already as I have the habit of reading the offer documents (which are around 100 pages) of almost every mutual fund that comes. So, it was a cakewalk in most of the lessons. However, there were some lessons which I was learning for the first time. I concentrated more on them

And finally, it was 1.30 pm and my exam began. I answered all the questions to the best of my knowledge. The time allotted was 2 hours. However, it was over in 25-30 minutes. I revised everything again. There was a negative marking system too and so, I had to be very careful. It was about an hour now and I was not able to sit. I just submitted the paper and the result flashed on the screen

“Congratulations”

“You cleared the test”

“Your score is 75%”

Well, that was a beautiful moment that delighted me

I believe, I had answered about 90% of the question correctly and the remaining wrong answers brought my score to 75%

Hmmm…

Good going…
.

Immediately, I ran to the bank, gathered money and took the next step. I had to register myself with AMFI after this exam. I took a copy of the scorecard and the form that I was supposed to fill up. I had to take another DD of Rs 500 for the registration fee. A lot of cash outflow…

I got the DD and sent the application for registration

I am now awaiting for my ARN (AMFI Registration Number)

Once I get that, I shall be an independent mutual fund distributor

Yet another value addition to the services that I offer to my clients

And a lot of thank yous to the people who helped me in the process!!!

Life has been beautiful as well as ugly. On the negative note, I would also like to say that I have not been able to clear my CA examination. The struggle is on. However, its getting more tougher

Lets see, where life takes me…

LIC Health Plus Presentation…

LICs Health Plus!!! A must buy…

LICs Health Plus is an awesome plan in line with other ULIPs of LIC. It is specially designed to cater the ever growing need of covering hospitalization and major surgeries, etc. Any person, male or female, aged between 18 & 55 years, called Principal Insured (PI), can take policy under this plan, cover him/herself and/or his/her spouse and/or one or all dependent children. The point should be noted here that if existing spouse and/or one or more dependent children are eligible for inclusion and not covered at the inception itself, they will not be allowed to be covered in future. On the other hand, if they are not eligible for Inclusion at the time of inception, can be included from the first anniversary of the policy

As mentioned earlier, the very purpose of this plan is to cover health related expenses rather than life Insurance. As result, this plan provides 3 benefits for health risks i.e.,

• Hospital Cash Benefit (HCB)
• Major Surgical Benefit (MSB)
• Domiciliary Treatment Benefit (DTB)

These benefits are inbuilt in the plan. First two benefits are chargeable and the third one is payment from the unit fund of the policy. Hence, charges for the first two benefits are recovered alongwith usual charges like in any other ULIP by cancelling appropriate number of units as on the particular date based on NAV. The details of these benefits, relative charges, conditions and exclusions are explained in the subsequent parts

There’s only one type of fund available, the pattern of investment of which is as follows

• Fund Type
  Health Plus
• Fund Investment
  a. Govt/Govt guaranteed securities/corp. debt
  Not less than 50%
  b. Short term investments, ie, money market instruments (including govt. securities and corp. debt)
  Not more than 90%
  c. Investment in listed securities
  Not less than 10% and not more than 50%
• Objective of fund for risk/return
  Income & Growth at Low Risk

Minimum Premium

Single life of PI

6 times HCB of PI but subject to minimum of Rs 5000 pa

2 lives

6 times HCB of PI plus 3 times HCB of another insured but subject to minimum of Rs 7500 pa

More than 2 lives

6 times HCB of PI plus 3 times HCB of each of other insureds but subject to minimum of Rs 10000 pa

*Annualized premium shall be in multiples of Rs 500

Maximum Premium

No limit

Minimum Age at Entry

PI & Insured Spouse

18 years (last birthday)

Insured dependent children

3 months completed

Maximum Age at Entry

PI & Insured Spouse

55 years (nearer birthday)

Insured dependent children

17 years (nearer birthday)

Policy Term

65 years (nearer birthday) minus age at entry of PI

Benefits on death (When all the due premiums have been paid)

On Single Life

In case of death of the PI, Policy Fund value will be paid to the nominee or legal heir

If one or more insured lives (Other than PI) covered

On death of PI before completion of 3 years from Date of Commencement (DOC)
Policy will be terminated and Fund Value in the Policy Fund will be paid to the nominee

After completion of 3 years from DOC
The payment of premiums shall cease & the cover shall continue for the surviving lives till the maximum benefit ceasing age or till the fund is sufficient to recover the charges for HCB & MSB, whichever is earlier

On death of Other insured members

Payment of premiums and cover for PI & other insured members, if any, will continue

On death of PI & spouse (whether insured or not under the policy)

The benefits of the children, if any, shall continue and can be claimed by the eldest major child covered under the policy. If all children are minor, benefits will be claimed by the legal guardian

Hospital Cash Benefit (HCB)

It is based on per day basis. Charges of Rs. 100 per day HCB is prescribed. The amount of daily benefit due to hospitalisation as prescribed in the policy schedule is Initial Daily Benefit (IDB) amount & it will be in multiples of Rs 50. This will increase by 5% every polIcy year commencing at policy anniversary after the first anniversary till it reaches 1.5 times the IDB. It is called as applicable daily benefit for that policy year. This benefit is payable by LIC, subject to exclusions, in the event of accidental bodily injury or sickness first occurring or manifesting itself after the date of cover commencement. The following points should be noted carefully

Minimum IDB (Non-ICU Ward*)

Rs 250 for each insured

Maximum IDB

For PI
Rs 2500

For Insured Spouse, if any
Less than or equal to PI, but maximum of Rs. 1500

For Insured Dependent Children
Less than or equal to Insured Spouse (PI, if there is no insured Spouse), but maximum Rs 1500

*In case of ICU Ward, it is 2 times the Non-ICU benefit

Maximum Cover Ceasing Age

For PI & Insured Spouse

65 years (nearer birthday)

For Dependent Children

25 years (nearer birthday)

Maximum Annual Benefit Period

For PI, Insured Spouse & Dependent Children, if any

18 days in 1st year, 60 days per year thereafter inclusive of stay at ICU

Maximum number of days in ICU is restricted to 9 days in 1St year, 30 days per year thereafter within the overall limit as explained above

Maximum Lifetime Benefit Period

For PI & Insured Spouse & Dependent Children, if any

365 days (90 days until the child completes 5 years of age)

Benefit Limits

• Benefit will be paid only after 48 hours (2 days) of hospitalization, whether admited in a general ward or in ICU
• Benefit shall be payable only if hospitalization has occurred within India
• In case the insured is covered under multiple policies, benefits under all the policies should not exceed the maximum cap on benefits under the plan

Major Surgical Benefit(MSB)

It is a percentage of sum assured depending on the type of surgical procedure. Charges per Rs. 1000 SA is prescribed. This benefit is payable by LIC, subject to exclusions, in the event of an insured undergoing any surgery in a hospital due to accidental bodily injury or sickness first occurring or manifesting itself after the date of cover commencement. Various surgical procedures and the relevant percentage of SA payable is prescribed. Exclusions will also apply to this benefit. The following points should be noted carefully

Sum Assured

For PI

200 times the IDB of PI

For Insured Spouse

200 times the IDB of the Insured Spouse

Dependent Children, if any

200 times the IDB of each child

This benefit is fixed and shall not increase in subsequent year

Minimum age for commencement of cover

For PI, Insured Spouse & Dependent Children

18 years (last birthday)

Maximum cover ceasing age

For PI & Insured Spouse

65 years (nearer birthday)

For Dependent Children, if any

25 years (nearer birthday)

Maximum Annual Benefit

For PI, Insured Spouse & Dependent Children, if any

100% of SA

Maximum lifetime Benefit

For PI, Insured Spouse & Dependent Children, if any

3 times the SA

Benefit Limits

• Claim becoming eligible for payment under this benefit, will be paid regardless of the actual amount spent. It will be paid in lump sum after providing proof of surgery being carried out. If multiple surgeries performed at the same incision or by different incisions, during the same surgical session, benefit will be payable for that surgery in respect of which the largest benefit becomes payable. Claim cannot be made for the same surgery performed again during the term of the policy
• No payment shall be made for the operations performed, which are not prescribed & the surgical procedures so performed should be confirmed as essential and required, by a qualified physician or Surgeon
• Minor children, if covered, will automatically be covered for MSB from the policy anniversary on which age at last birthday is 18 years. There is no option to PI to exclude the cover
• Surgery should have been performed in the hospitals within India
• Benefits unclaimed for one Insured cannot be transferred
• In case the insured is covered under multiple policies, benefits under all the policies should not exceed the maximum cap on benefits under the plan

Benefit Termination (Applicable to HCB and MSB)

• On date of cover expiry (i.e. from the next anniversary when PI & insured spouse becoming 65 years and in case of insured child 25 years)
• When maximum lifetime claim limit of 365 days reached
• On death of Insured
• At the end of policy term
• On divorce or legal separation of the PI & Insured Spouse
• On termination of policy due to any reason
• When premiums is paid for full 3 years, till the end of auto-cover i.e. 2 years from FUP or till such period Policy Fund Value reduces to 1 annualized premium, whichever is earlier

Exclusions for HCB & MSU

• Pre-existing condition, ie, illnesses, symptoms, treatments, pains etc. arisen or arising due to these, prior to commencement of the cover. It also includes the conditions arising between signing of the application form and confirmation of acceptance
• Waiting period of 180 days from the commencement of cover and 90 days from the date of revival will apply. Not applicable in case of Accidental Bodily Injury
• Treatment/Surgery not performed by a Physician/Surgeon
• Routine medical check up or examination, diagnosis. X – ray or laboratory examinations
• An epidemic sickness as classified by State or Central Govt
• Circumcision, cosmic or aesthetic treatments of any description, change of gender surgery, plastic surgery (unless it is necessary for treatment of illness or accidental bodily injury as direct result of the insured event and performed within 6 months of the same)
• Hospitalization for donation of an organ or correction of birth defects or congenital anomalies
• Dental treatment or surgery unless necessitated by Accidental Bodily Injury
• Self afflicted injuries or conditions, attempted suicide and use/misuse of alcohol or any drugs
• Sexually transmitted diseases or any condition directly or indirectly caused by HIV or commonly referred as AIDS

Domiciliary Treatment Benefit(DTB)

This is a adhoc benefit available over and above those paid through HCB & MSB incurred in respect of PI or any other insured lives at any time after atleast 3 years’ premiums have been paid and subject to availability of sufficient amount in Policy Fund. This benefit takes care of the actual amount spent for domiciliary treatment or any other medical expenses. This benefit is available for a policy as a whole and not for individual insureds. Minimum benefit claim should be Rs 2500 and maximum 50% of the Policy Fund at the time of payment and there should be a minimum balance of one annualized premium after the payment. In the last policy year, this condition will be waived. If the balance in the Policy Fund is less than Rs 2500, then the payment of entire amount shall be made in one lump sum only. Maximum number of claims allowed per policy during a policy year is 2 times. Payments shall be made subject to production of medical treatment and supporting bills for expenses incurred for treatment. Further, expenses being claimed should not be older than a year

Premium Allocation Charges

First Year- 30%

Thereafter- 6%

Increase in Premium

Allowed in multiples of Rs. 500, if requested by PI in writing. But there will not be any increase in benefit amounts under HCB & MSB

Reduction in Premium

Allowed subject to minimum premium and benefit limits required. No change in benefit amounts provided to PI & other insurds

Premium Holidays

After 3 years’ premium payment, if the policy lapses, the PI may pay all due premiums in full. He may also choose to pay atleast the latest instalment due without interest and avail premium holidays for the period for which premiums have not been paid subject to a minimum balance of one annualized premium

Loan Facility

Not available

Mode of premium payment

Yearly, Half-yearly or Monthly (only through ECS)

Other Charges

Fund Management Charge (FMC)

1.25% pa (on the date of computation of NAV only daily basis). NAV thus calculated will be net of FMC

Policy Administration Charge

Rs 75 pm during 1st policy year & Rs 25 pm thereafter

Service Tax Charge

On Health Insurance Charges @ 12.36% (present rate)

Claim Requirements

HCB & MSB should be claimed within 15 days of discharge from the hospital with written notification in the prescribed forms along with supporting evidences, if any

Discharge card with details of diagnosis & treatment received

Certificate from the Physician for being admitted to ICU with reasons & exact date, time of admission to & discharge from ICU along with confirmation from a Physician appointed by the LIC

Any otiier document that may be called in the course of claim evaluation

Medical Underwriting Required (with respect to sum assured and age)

Rs. 50,000 to 1 Lakh

Upto 35- NM

36 to 40- NM

41 to 50- NM

51 to 55- MER, FBS, RUA
Rs. 1.00,001 to 2 Lakhs

Upto 35- NM

36 to 40- NM

41 to 50- MER, FBS, RUA

51 to 55- MER, FBS, RUA, HbA1c, ECG
Rs. 2,00,001 to 3 Lakhs

Upto 35- NM

36 to 40- MER, FBS, RUA

41 to 50- MER, FBS, RUA

51 to 55- MER, FBS, RUA, HbA1c, ECG
Rs. 3,00,001 to 5 Lakh

Upto 35- MER, FBS, RUA

36 to 40- MER, FBS, RUA, HbA1c, ECG

41 to 50- MER, FBS, RUA, HbA1c, ECG

51 to 55- MER, FBS, RUA, HbA1c, TMT

Daily Hospital Cash Benefit (HCB) Charges of Rs 100 per day

Excel

Major Surgical Benefit (MSB) Charges per Rs 1000 SA

Excel

List of Surgical Procedures & Percentage of SA Payable

Cardiovascular System

Major surgery of Aorta, CABG (2 or more coronary arteries must be bypassed) via open chest surgery, Valve replacement using mechanical prosthesis via chest surgery, Pericardiotomy/Pericardectomy done in chronic constrictive pericarditis, Open chest surgery for repair of any of the heart valves- 100%

Initial implantation of permanent pacemaker in the heart- 60%

Coronary Angioplasty with stent implantation (2 or more coronary atteries must be stented)- 40%

Haemic and Lymphatic System

Bone marrow transplant (as recepient), Splenectomy for hematogical conditions- 60%

Nervous System

Surgery to remove cerebral tumors (benign or malignant) and space occupying lesions requiring ‘craniotomy’, Repair of Cerebral or Spinal Arterio-Venous Malformations and Cerebral Aneurysms, Other intra-cranial operations requring craniotomy, Excision of pineal gland, Excision of the pituitary gland- 100%

Operations on Surbaracahnoid space of brain, Intracranial transection of Cranial nerve- 60%

Drainage of Extradural space, Drainage of Subdural space- 40%

Respiratory System

Lung Transplant or combined Heart-Lung Transplant, Isolated Heart Transplant, Pneumonectomy or Pleuropneumonectomy-total lung of one side- 100%

Pleurectomy or Pleural decortication, Thoracotoplasty, Open Lobectomy of Lung, Excision of benign medistinal mediastinal lesions (evidence of thoractomy needs to be ascertained), Partial Extripation of Bronchus, Partial or Total Pharyngectomy, Total Laryngectomy- 60%

Digestive System

Excision of esophagus & stomach- 100%

Resection & Anastomosis of any part of digestive tract, Open Surgery for treatment of Peptic Ulcer, Total excision of oesophagus, Total excision of stomach- 60%

Artificial opening into stomach- 40%

Endocrine System

Complete excision of adrenal glands, Complete excision of Thyroid gland, Complete excision of Parathyroid gland, Thyrnectomy- 60%

Partial excision of the above-40%

Eye

Any eye surgery requiring corneal or retinal repair due to accident- 40%
Liver, Gall Bladder and PancreasPartial Resection of Liver, Partial Paricreatectomy- 40%

Musculoskeletal System

Total replacement of Hip or knee joint following accident, Amputation of Arm or hand or Foot or Leg due to trauma or accident- 60%

Oro Maxillafacial Surgery

Major reconstructive oro-maxillafacial surgery due to trauma or burns and not for cosmetic purpose- 60%

Kidney & Urinary Tract

Renal transplant(recipient)-100%Nephrectomy due to medical advice (not as a transplant donor)- 60%

Other features

Method of Calculation of Unit price

Units will be allotted based on the Net Asset Value (NAV) of the respective fund as on the date of allotment. There is no Bid-Offer spread (the Bid price and Offer price of units will both be equal to the NAV). The NAV will be computed on daily basis and will be based on investment performance, Fund Management Charge and whether fund is expanding or contracting under each fund type and shall be calculated as under

• Appropriation price is applied (when fund is expanding)
  Market value of investments held by the fund plus the expenses incurred in the purchase of the assets plus the value of any current assets plus any accrued income net of fund management charges less the value of any current liabilities less provisions, if any divided by the number of units existing at the valuation date (before any new units are allocated)
• Expropriation price is applied (when fund is contracting)
  Market value of investments held by the fund less the expenses incurred in the sale of assets plus the value of any current assets plus any accrued income net of fund management charges less the value of any current liabilities less provisions, if any divided by the number of units existing at the valuation date (before any units redeemed)

Applicability of Net Asset Value (NAV)

The premiums received up to a particular time (presently 3 p.m.) by the servicing branch of the Corporation through ECS or by way of a local cheque or a demand draft payable at par at the place where the premium is received, the closing NAV of the day on which premium is received shall be applicable. The premiums received after such time by the servicing branch of the Corporation through ECS or by way of a local cheque or a demand draft payable at par at the place where the premium is received, the closing NAV of the next business day shall be applicable

Similarly, in respect of the valid applications received for surrender, partial withdrawal, death claim, switches etc up to such time by the servicing branch of the Corporation closing NAV of that day shall be applicable. For the valid applications received in respect of surrender, partial withdrawal, death claim, switches etc after such time by the servicing branch of the Corporation the closing NAV of the next business day shall be applicable

In respect of maturity claim, NAV of the date of maturity shall be applicable.The timing given is as per the existing guidelines and changes in this regard shall be as per the instruction from IRDA

Discontinuance of Premiums
If premiums are payable either yearly, half-yearly, quarterly or monthly (ECS) and the same have not been duly paid within the days of grace under the Policy, the Policy will lapse. A lapsed policy can be revived during the period of two years from the due date of first unpaid premium

Where atleast 3 years’ premiums have been paid

The Life Cover and Accident Benefit rider, if any, shall continue during the revival period. During this period, the charges for Mortality and Accident Benefit cover, if any, shall be taken, in addition to other charges, by cancelling an appropriate number of units out of the Policyholder’s Fund Value every month. This will continue to provide relevant risk covers for

• Two years from the due date of first unpaid premium, or
• Till the date of maturity, or
• Till such period that the Policyholder’s Fund Value reduces to Rs 5000, whichever is earlier

The benefits payable under the policy in different contingencies during this period shall be as under

• In case of Death
  Higher of Sum Assured under the Basic Plan or the Policyholder’s Fund Value. The Sum Assured shall be subject to provisions of Partial Withdrawals made, if any
• In case of Death due to accident
  Accident Benefit Sum Assured in addition to the amount under A above, if Accident Benefit is opted for
• On Maturity
  The Policyholder’s Fund Value
• In case of Surrender (including Compulsory Surrender)
  The Policyholder’s Fund Value. The Surrender value, however, shall be paid only after the completion of 3 policy years
• In case of Partial Withdrawals
  For 2 years period from the date of withdrawal, the sum assured under the basic plan shall be reduced to the extent of the amount of partial withdrawals made

Where the policy lapses without payment of at least 3 years’ premiums
The Life Cover and Accident Benefit rider cover, if any, shall cease and no charges for these benefits shall be deducted. However, deduction of all the other charges shall continue. The benefits under such a lapsed policy shall be payable as under

• In case of Death
  The Policyholder’s Fund Value
• In case of death due to accident
  Only, the amount as under previous point
• In case of Surrender (including Compulsory Surrender)
  Policyholder’s Fund Value / monetary value as the case may be, shall be payable after the completion of the third policy anniversary. No amount shall be payable within 3 years from the date of commencement of policy
• In case of Partial withdrawal
  Partial Withdrawals shall not be allowed under such a policy even after completion of 3 years period

Compulsory Surrender

The policy shall be surrendered compulsorily in following cases

• Where the policy is not revived during the period of revival, the policy shall be terminated after completion of 3 years from the date of commencement of the policy or on expiry of revival period, whichever is later. However, if the date of maturity falls before the expiry of revival period, then the policy shall be terminated on the date of maturity
• Where premiums have been paid for less than 3 years and the balance in policyholder’s fund value is not sufficient to recover the relevant charges
• Where premiums have been paid for at least 3 years and the balance in policyholder’s fund value falls below Rs 5000

The conversion in monetary value shall be as under

The NAV on the date of application for surrender or on the date when revival period is over (in case of compulsory surrender), as the case may be, multiplied by the number of units in the Policyholder’s Fund as on that date

Revival

• If due premium is not paid within the days of grace, the policy lapses. A lapsed policy can be revived during the period of two years from the due date of first unpaid premium or before maturity, whichever is earlier. The period during which the policy can be revived will be called “Period of revival” or “revival period”
• If premiums have not been paid for at least 3 full years, the policy may be revived within two years from the due date of first unpaid premium. The revival shall be made on submission of proof of continued insurability to the satisfaction of the Corporation and the payment of all the arrears of premium without interest
• If atleast 3 full years’ premiums have been paid and subsequent premiums are not paid, the policy may be revived within two years from the due date of first unpaid premium but before the date of maturity. No proof of continued insurability shall be required but all arrears of premium without interest shall be required to be paid

The Corporation reserves the right to accept the revival at its own terms or decline the revival of a lapsed policy. The revival of a lapsed policy shall take effect only after the same is approved by the Corporation and is specifically communicated in writing to the Proposer/Life Assured

Irrespective of what is stated above, if less than 3 years’ premiums have been paid and the Policyholder’s Fund Value is not sufficient to recover the charges, the policy shall be terminated and thereafter revival will not be entertained. If 3 years’ or more than 3 years’ premiums have been paid and the Policyholder’s Fund Value reduces to Rs. 5000/-, the policy shall terminate and Policyholder’s Fund Value as on such date shall be refunded to the Life Assured and thereafter revival will not be allowed

Assignment

Allowed

Nomination

Compulsory

For excellent service, support and everything required to get your LIC Health Plus, just contact me on 9986627367 or send an email to puneet3210@yahoo.co.in

All comments, critics, suggesstions, requests, queries are welcome

Birla Sun Life Special Situations Fund… Expect MORE than the usual!!!

Expect MORE than the usual ……………. From your Equity Portfolio

The investors never had it so good. Over the last three years, the equity markets have generated very good returns. During this period, many companies within India Inc. turned around, struck Mergers & Acquisitions (M & A) deals, inducted Private Equity (PE) players and de-merged

Companies undergoing these and many more such special situations unlocked more value to shareholders than they would have otherwise done

Do these special situations exist in India? Well, yes, special Situations in India are actually on a rise

The vibrant Indian Economy is driving M&A and PE Deals to a higher level and is proving as a hot bed for Private Equity Investments. The Following Table shows the rise in the number of special situations in the Indian Market

Special Situations like these have a positive impact on the stock price of the companies and thus provides an opportunity to the investor to get incremental gains than their regular diversified equity investments

Special Situations – Bringing Significant Extra Gains in a High growth Equity Portfolio
Special Situations may occour in companies irrespective of their Sector, size or market condition. Special Situations can occour at any point of time in the Life-cycle of a company. They can also occour multiple times for a company
Some of these special situations which may have a positive impact on the Company’s stock are

• Turnaround Stories
  Strong but under performing companies with potential to turnaround
• Mergers, PE & Takeovers
  Potential candidates of M&A or attracting PE investments
• De-mergers
  Diversified companies that intend to de-merge its existing businesses
• Restructuring Businesses
  Companies entering into new business streams or restructuring the existing portfolio
• Buy Back / Open Offers
  Potential candidates for delisting or promoters increasing the stake
• Asset Plays
  Intrinsic Value is greater than the market price of Stock i.e. Companies with land banks etc
• Out of Favor Stocks
  Companies that are currently out of favor but are fundamentally strong
• Sector Related Developments
  Companies in sunrise sectors Sectors affected by favorable policy announcements

Have you benefited from any of these Special Situations?
Special Situations like the ones mentioned, provide an opportunity to the investor to get incremental gains than their regular diversified equity investments. However the key lies in identifying these situations…
Let us see three actual cases of Special Situations in the recent Past and how the investors have benefited from each of these

United Breweries Holding: The Acquisition story

UB Holding is the holding company in United Spirits & Breweries and Kingfisher Airlines apart from having stakes in Chemical, Infrastructure and other diversified businesses

Special Situations

• Sep ’06: UB Group plans to consolidate all spirits business under United Spirits
• June ’07: Acquires 26% stake in Deccan Aviation and makes open offer to acquire additional stake of 20% thus consolidated market share to over 30%

Result
Stock price appreciation of 395.31% * in 14 months

(Absolute returns from September ’06 to 30th November ’07)

Aban Offshore: Listing of Subsidiary
Aban Offshore is one of India’s largest offshore drilling contractor in the private sector, offering drilling and oil field services for offshore exploration and production of hydrocarbons to the oil industry in India and abroad

Special Situations

• June ’06: Acquires stake in Sinvest ASA (a Norweign company in the same sector)
• September ’07: Acquires rigs from another norweign company and in October ’07 it announced plans to list it’s subsidiary Aban Singapore on Singapore Stock Exchange

Result
Stock price has appreciation of 300%* in 17 months

(Absolute returns from April ’06 to 30th November ’07)

Balaji Telefilms: Adding New business line
Founded in 1994, Balaji Telefilms Limited, a media company, engages in the production of television serials in various Indian Languages

Special Situations

• April ’07: Announced a JV with Star TV for rollout of new TV channels in South India

Result
Stock price appreciation of 117%* in 7 months

(Absolute returns from April ’07 to 30th November ’07)

Unique Value Proposition

• A dedicated fund for Special Situations to evaluate the value unlocking potential of select stocks
• Special situations bring incremental gains
• The number of special situations is growing rapidly which means increasing special situations to take advantage off
• A unique investment strategy to identify potential special situations
• An investment style that focuses on immediate as well as long term gains
• An investment and fund management expertise of over 12 years by Birla Sun Life Asset Management Company Ltd

About the Fund
Birla Sun Life Special Situations Fund endeavors to generate long-term growth by identifying stocks that may have the potential for special situation. Stocks that are undergoing or have undergone such a situation are also potential picks
Most special situations often result in incremental value addition to a stock/business. This may get reflected in the price within a short period or gradually depending on the special situation that the company is in
The objective of the scheme is to generate long-term growth of capital by investing in a portfolio of equity and equity related securities. The scheme would follow an investment strategy that would take advantage of special situations and contrarian investment style

Scheme Features
The Scheme may invest in Foreign equity securities subject to the investment restrictions specified by SEBI / RBI from time to time. Under normal circumstances, the Scheme shall not have an exposure of more than 25% of its net assets in foreign securities, subject to regulatory limits

Type of Scheme
An Open Ended Diversified Equity Scheme

New Fund Offer Price
Rs. 10 per unit plus applicable entry load

Opening Date of NFO
17-Dec-07

Closing Date of NFO
15-Jan-08

Plans & Options Available
Dividend (Reinvestment/Payout/Sweep) & Growth

Subscriptions
Rs. 5,000/- and in multiple of Re. 1 thereafter per application under each plan

Redemption
In Multiples of Re. 1/-

Load Structure
Entry Load (including SIP)

• For purchase of units less than or equal to 5 crores: 2.25% of the applicable NAV
• For purchase of units more than Rs. 5 crores: Nil
• Dividend Reinvestment option: Nil

Exit Load (including SIP)

• For purchase of units less than or equal to 5 crores: 0.5% of the applicable NAV(within 6 months from the date of allotment)
• For purchase of units of more than Rs. 5 crores: Nil

Benchmark Index
BSE 200

Fund Manager
A Balasubramanian

For more details on the Scheme Features, please refer to the Offer Document

Asset Allocation & Investment Pattern
The asset allocation pattern of the scheme under normal circumstances shall be as under: (percent of investible corpus)
Equity and Equity related Instruments- Medium to High risk- 80%-100%
Fixed Income Securities (including Money Market Instruments)- Low risk- 0%-20%
Investment in Securitised Debt papers may be made upto 5% of the net assets of the Scheme

Downloads

• Application Form
• Offer Document
• Presentation
• One Pager

Mutual Fund investments are subject to market risks

Please read the offer document carefully before investing

You may write the ARN Number as ARN-29889 and Sub-broker code as 222370001 for any mutual fund investment

PAN cards must for MF investors from New Year…

And now PAN CARD is MANDATORY for mutual funds too…

If Indian fund houses thought that they could once again plead before the powers-to-be and get another reprieve about accepting investments without a PAN card, they better think again. The finance ministry has told Amfi, a trade body of Indian asset management companies, that every investment made into a fund will compulsorily have to be accompanied by a valid PAN card from January 1, 2008. For the last few months even proof of having applied for a PAN card was sufficient for investing in mutual funds

Amfi members had recently convened a meeting — the agenda under discussion being the fast approaching deadline making PAN mandatory — as these players feared a shift in investments to other instruments. In a letter dated November 5, the ministry has said that unlike what happened in mid-2007 , there would be no relaxation in the deadline. In July 2007, Sebi had relaxed the deadline for compulsory PAN cards for MF investments from July-January 1 of 2008

However Amfi members are not pleased. They believe the government should create a level-playing field among various participants in the financial system. “Why should only the mutual fund industry be singled out, when it is anyways in the lowest risk category,” questions Amfi chairman AP Kurien. Considering that funds accept and pay money only through banks, there is a clear audit trail, he points out. “There is no question of unaccounted money coming in,” he says

SEBI waives load on bonus and reinvested dividends…

Hip Hip Hurray!!!

A mutual fund investment will no longer be such a heavy cross to bear. A small investor’s campaign to keep bonus units and reinvestments free of any charge has borne fruit after three years. The investor, VT Gokhale, told ET that the Securities and Exchange Board of India has written to him saying entry and exit loads should not be charged for units given as bonus or against reinvested dividends. This means only original investments can attract a levy, and all further gains will accrue to the investor — without any cuts

“It’s a major victory for investors who have been helplessly losing a part of their legitimate earnings for no reason,” Mr Gokhale said. SEBI had, a few days back, communicated to Mr Gokhale a decision taken by Association of Mutual Funds in India (AMFI), not to charge entry/exit load on dividends. “SEBI has accepted the AMFI recommendation,” says the communiqué from the market regulator, a copy of which is with ET

SEBI recently proposed that investments done directly — that is, without an agent — shall not attract an entry load, typically about 2% of the proposed investment. That, coupled with the latest communication, should make mutual funds cheaper for investors

An entry load is a charge an investor pays for buying mutual fund units and the exit load is what he pays for selling them. Having entered a scheme once, investors earn dividends that they can take in cash or put back into the scheme to get more units. Occasionally, the fund manager converts earnings from the scheme into units and distributes them to the investor proportionately. Mr Gokhale pointed out that a bonus or dividend would amount to gains from such investments and not a further purchase

Currently, some fund houses charge exit loads on these reward units as well, if redeemed before a certain period. In effect, the fund is charging an exit load on an investor’s initial investment as well as the reward units. “This is highly unethical,” Mr Gokhale said

He took up the matter with SEBI in April 2005. His case related to UTI’s children career plan that had charged him an exit load of Rs 1,198.22 on additional units. After his protest, the fund house refunded him the amount, but didn’t address the issue. Currently, all open ended funds charge an exit load if the investments are redeemed before a certain period — usually six months. This is done to discourage the investor from rapidly churning his investments in the fund, as it could affect the fund’s stability

Source: Economic Times

Gain from the Real Estate Boom in India… ICICI Prudential presents the Real Estate Securities Fund…

ICICI Prudential Real Estate Securities Fund (The scheme will not be directly owning or holding real estate properties.) is a 3-year close-ended debt fund, designed to invest in Real Estate Sector and real estate oriented sectors like Cement, Construction, Metals, Hotels, Retail, Banks & Finance Companies etc

The scheme will

• Predominantly invest (51% to 100%) in high yielding debt securities issued by companies that are associated with or benefitting (directly / indirectly) from the real estate sector
• Invest up to 49% in equity of companies, which are engaged in industries that benefit directly or indirectly from the Real Estate Sector or have substantial investments in property (incl. Land holdings)

The initial allocation of the fund will typically be 70% in debt instruments and 30% in equity and equity related securities

Why Invest in Real Estate Securities?

With the economy growing rapidly, demand for real estate across various market segments has been growing exponentially. In FY03, there were a few regional players in the sector and the market capitalisation of the sector was about Rs.100 cr. Developers are acquiring national footprint and the market capitalisation of the sector is over Rs.3,00,000 cr

Real estate in India has broadly 4 segments: Residential, Commercial, Retail and Hospitality. We believe that there are various growth drivers that would catalyze the demand in these segments

Residential

• Shortage of over 20 million housing units and an incremental demand of 8-10 mn units p.a
• Falling household sizes, increasing urbanisation and affordability are driving the growth of residential real estate

Commercial

• Over 300 mn sq ft of demand by 2010.3 Investment of $ 36bn to meet demand by 2010
• India’s services sector is fuelling the increase in employment opportunities leading to explosion of commercial (office complexes) real estate. As per Nasscom reports, 2mn jobs will translate into 200mn sq ft of IT / ITES office space demand
• As an example, existing office area of Infosys stands at 11.5msf whereas its projects under development include 9.4msf

Retail

• Investment of $ 25bn required to meet demand by 2010
• 700 malls expected to come up by 2010 in India. This translates to 212 msf space of organized retail space
• Organised retail market to grow from current US $7 bn to US $35 bn in 2010
• For example, Pantaloon from 1.9m of retail space in CY05 and 3.1msf in CY06, plans to ramp up to 9.7msf in 2007 and 29.2msf in 2010
• Increase in spending power has led to demand for malls and multiplexes adding to the boom in Retail Real Estate

Hospitality

• The hotel room supply has not been able to keep the desired pace with the growing need for hotel accommodation
• Total number of hotel rooms in India is less than the number of rooms in Tokyo
• India is becoming a popular tourist and commercial destination, which is pushing the growth in Hospitality sector. According to Department of Tourism, Govt of India reports international arrivals are expected to grow from 3.9mn in 2005 to 9mn in 2016

As a result of all these, the demand potential for real estate in India is estimated to be huge. We believe that such a demand – supply scenario presents a huge investment opportunity in Real Estate

*Sources: Bloomberg, NHB, UBS Research, Deutsche bank research report – Building up India May 2006, Motilal Oswal Securities, Real Estate Gold Rush SSKI

Why Invest in this fund?

The Fund aims to capture the benefit of

• High yield offered by debt securities issued by reputed real estate developers
  Real estate developers broadly depend on two major sources of finance (besides net owned funds) to sustain their growth i) borrowing from banks (loans) and ii) borrowing from the market (raising funds). The amount of loan they can receive from banks is subject to RBI norms and evidently is not adequate to capitalize their plans. Thus, the source that can facilitate developers to scale up their expansion is market borrowing. It is because of this and the high margin potential, the real estate companies are in a position to offer a higher yield as compared to traditional manufacturing businesses

High Demand – High Growth – High Margin – Need for More Capital – High Yield

• Relatively high-growth oriented infrastructure-related sectors
  The fund will invest in equity of companies, which are engaged in industries that benefit directly or indirectly from the Real Estate Sector or have substantial investments in property (incl. Land holdings), which might affect overall business valuations. Such industries include Real Estate Development, Banks & Finance Companies, Cement, Construction, Metals, Hotels, Retail etc

What are the key risks to the investors in this fund?

• Credit risk
  Credit Rating of real estate companies is generally lower compared to the similar sized companies with similar growth rates. This happens because the rating is assigned to the issuer based on its ability to make ‘timely payments’, rather than ‘ultimate payments’. Since time cycle of completing a development project involves a lot of steps including several types of approvals, obtaining title, development, selling etc. The longer chain of actions implies a potential delay of completing the project and consequent possibility of delayed payment. We propose to minimize the risk by seeking to invest only in companies that have large and established businesses and have a proven credit track record
• Market risk
  Real estate sector is cyclical in nature and sensitive to short-term demand-supply and prevailing interest rates. The sector is vulnerable to time decay resulting in conversion risk. Moreover, there is no entry barrier for a low scale real estate business that may affect the pricing capacity of the corporate / organized players. Due to these factors, the real estate sector is perceived to be more risky than its traditional counterparts. To mitigate the risks, we seek to invest debt component of the portfolio only with large and established players, who have been into real estate business for long and have weathered different real estate cycles and provide unencumbered assets as security towards the borrowing from us
• Liquidity Risk
  Debt securities issued by real estate companies have relatively lower liquidity. To manage this risk, the Fund is designed as a close ended Fund

Key Features

Type

A 3 year close-ended Debt fund

Options

• Retail Option and Institutional Options
• Sub-options: Growth or Dividend
• Default option: Retail
• Default sub-option: Growth
• Under Dividend sub-option dividend payout facility is only available

Minimum Application Amount

• Retail Option- Rs 5,000 and in the multiples of Re.1 thereafter
• Institutional Option- Rs 5,00,00,000 and in the multiples of Re.1 thereafter

Entry Load (Both Options)

Nil

Exit Load (Both Options)

Nil on Maturity. Redemptions made during the repurchase facility period will attract, for the present, an exit load of 3% of the amount sought to be redeemed under the Scheme. In addition, being a close-ended scheme, for redemptions made during the repurchase facility period, the balance proportionate unamortized new fund offer expenses will be recovered in accordance with SEBI Circular dated April 4, 2006

*The indicative list of Industries in which the Scheme will not invest are Software, Petroleum Products, Media & Entertainment, Oil, Industrial Products, Consumer non durable, Pharmaceuticals, Industrial capital goods, Auto, Transportation, Telecom, Fertilizers, Auto Ancillaries

To download the Offer Document, click here
To download the Application Form, click here
To Invest Online, click here

When investing into a mutual fund, you may wish to use the the following codes

Distributor Code: ARN 29889

Sub Broker Code: 222370001

Disclaimer

Mutual Fund Investments are Subject to Market Risks

Please Read the Offer Documents CAREFULLY Before Investing

LIC Presents the Top 100 Fund…

Economic Indicators

• Economy has grown at 9.3 % in Q1 07 – 08
• Index of Industrial Production (IIP) for Q1 07 – 08 has been encouraging on the back of robust manufacturing growth
• Inflation hit a five-year low of 3.23% (on 15th September 2007). Latest figure as on 22nd September 2007 is 3.42%
• Interest rates have remain unchanged
• Tax collection figure surpasses estimation
• STT have added Rs 3100 crores to the Government’s kitty
• Exports grew by 18.36% over previous year
• Fiscal deficit targeted to be contained at 3.3% of GDP

Global Scenario

• Fed cuts rate – both overnight lending rate as well as the discount rate by 50 basis points each
• A further cut by 25 basis points in Fed rate has been announced on 31st Oct 07
• Unprecedented FII’s inflows of Rs 6,61,460 Crores till Oct 07 into our system

Recent Events

• Q2 results have been in line with the market expectations barring some sectors/companies may get affected due to Rupee fluctuation
• A further softening in rate by the US Federal Reserve would bring in abundant money into our system

Concerns

• Despite strong fundamentals, liquidity driven rally is likely to have unpredictable volatility in the market
• Sub-prime related issues may affect the market occasionally
• Political risk remains the main challenge – events will determine the market response

Risk vs. Opportunities

• Inherent strength in the Indian economy beats the risks attached to it
• Intermittent volatility/corrections in the capital market are unlikely to hamper the growth prospects in the economy
• The only investment that gives inflation-adjusted return – “EQUITY”

Key Measures

• GDP growth projected to remain between 8.5 – 9%
• Agricultural growth to be accelerated to 4 % from the present rate of 2 %
• FY 08 inflation to be contained at 5% and the same for the medium term to be maintained at 3%
• Appropriate steps to be taken to tackle excess liquidity

Strength & Opportunities

• The economy of India is the fourth largest in the world as measured by purchasing power parity
• XIth plan covers an economic reform program for developing basic infrastructure to improve the lives of the rural poor and boost economic performance
• The Eleventh Five Year Plan has set a target of an average annual GDP growth of 9 per cent
• Huge Infrastructure Development planned for XIth plan. Outlay revised to US $ 490 billion
• The beneficial sectors would be engineering, capital goods, construction, power, telecom, steel, cement, etc
• Outlay for education and healthcare has also been impressive
• Infrastructure development would positively impact the Logistics & Financial service sector besides supporting the rural economy
• The emerging markets i.e. China, India, Russia are driving the world growth and economy
• Investors are convinced that these economies have become decoupled from the US
• The improvements in these economies have attracted a more diverse group of investors like the pension funds, central banks, university funds etc
• India is one among the 12 countries when the stock market capitalization rose to $1000 billion
• Becoming a trillion dollar economy augurs well for the stock market, as stock markets in eight out of ten countries had risen in the one year after their economies first crossed this mark
  (Source : Credit Suisse)

Key Fund Attributes

A 36 -month close-ended equity fund that will get automatically converted into an open-ended equity fund

Investment objective

To provide long-term capital appreciation by investing in equity and equity related instruments from the universe of CNX 100 index

Entry Load

NIL

Exit Load

Units will be redeemed only after recovering the balance unamortised expenses

Minimum Investment

Rs 5000/- & thereafter in multiples of Re 1/-

Options

The Scheme offers two options, i.e., Dividend & Growth Option

New Fund Offer

Rs 10/- per unit during NFO period

NAV

NAV will be released once in a week, i.e., on every Wednesday or immediate next business day if Wednesday happens to be a holiday

Liquidity

Investors can repurchase their investments once in a week during close-ended period and on all business days after the scheme becomes open-ended

Asset Allocation
Equity & equity related: 80 – 100% (Medium to High risk)
Debt & Money Market: Upto 20% (Low to Medium risk)

Why Close-ended?

Equity investments, over a reasonable period (of 3 – 5 yrs) have always yielded higher return

Why LICMF TOP 100?

• CNX 100 is constituted by taking 50 stocks of Nifty and 50 stocks of Jr Nifty
• Captures mid-cap,small-cap as well as large cap stocks
• These companies represent 22 broad sectors lending support to our economy, i.e. Auto, Banks & Financial services, Cement, Power, Metal (ferrous & non-ferrous), Pharma, IT, Telecom, Construction, FMCG, Capital goods, Forging, Hotel, Logistics, Oil & Gas, Petrochemical & Refineries, Textiles etc
• Market Capitalization of CNX 100 represents 62.4% of the total traded Market Capitalization
• The average traded value of the 100 stocks is approximately 56% of all traded stocks on NSE
• Constitutes varied Market Capitalization ,i.e., Minimum Mkt cap being Rs 1003.70 Crs and Maximum Mkt cap is Rs 3,19,022.76 Crs

Major Sectors Under CNX100

BANKS

• Constitute 13 % to CNX 100 having Market capitalization of Rs 4,29,040 Crs
• Represented by 5 private sector and 11 public sector banks
• Credit growth, diversification in agriculture and entry of corporate in agriculture will prove beneficiary to Banks with extensive semi-urban/rural network

FINANCIAL SERVICES

• Constitute 4% to CNX 100 having Market capitalisation of Rs 1,16,523 Crs
• Represented by 6 companies like LIC HFL, HDFC, IDBI, IFCI, IDFC, Reliance Capital
• The sector is likely to remain buoyant with housing and infrastructure financing driving their growth

ENGINEERING

• 2.47% to CNX 100 having Market capitalization of Rs 80,466 Crs

CEMENT

• 2.75% to CNX 100 having Market capitalization of Rs 89,648 Crs. & represented by 4 companies

CONSTRUCTION

• 3.15%to CNX 100 having Market capitalization of Rs 1,02,771 Crs represented by GMR Infra and J P Associates

POWER & POWER EQUIPMENT

• 12.88% to CNX 100 having Market capitalization of Rs 3,95,974 Crs. & represented by 8 companies like NTPC, REL, Tata Power, Suzlon, ABB,BHEL, BEL, Siemens
• Power deficit at present is around 10 % (approx)
• Power for all by 2012 means huge capacity requirement of 1,00,000 MW
• The above sectors have been market performer and are likely to be so with the booming of construction and infrastructure developments

TELECOM

• 10.09% to CNX 100 having Market capitalization of Rs 3,28,952 Crs
• Total subscriber base by September 07 has been 249 mn
• Total telecom and wireless penetration till September 07 is 21.9% and 18% respectively
• Broadband subscriber base as on Sep 07 was 2.67mn
• To meet the target of internet/broadband of 40m/20m by 2010 huge investments are required

OIL N GAS, PETROCHEMICAL & REFINERIES

• 20.06% to CNX 100 ; Market capitalization of Rs 6,53,768 Crs
• Increased oil demand has shot up the prices
• Oil exploration projects are receiving more attention
• Alternate sources like Renewable energy and Gas will be more in demand as the reserves of fossil fuel get consumed

METALS

• 7.09% to CNX 100 ; Market capitalization of Rs 2,30,972 Crs
• Infrastructure and Construction demand will keep the sector buoyant

OTHER SECTORS

• The other sectors which have representation in the CNX 100 are IT, Auto, Logistics, Hotel, Media & Entertainment, Textile products etc

Benefits

• Well-researched and actively traded stocks
• Focused selection of Stocks
• These stocks are the market movers
• At one shot, investment in majority of these stocks take place for the investor
• Focused approach for investment for the fund manager
• Though the stock picking will be from the 100 stocks in the CNX 100,yet it’s not a index fund.The scheme will have the discretion of investing/ not investing in any of the stocks
• Ultimately an opportunity to create wealth with the leaders in the Capital Market

PAN Becomes Mandatory

• ANY INVESTMENT IN THIS NFO AS PER SEBI REGULATIONS WILL REQUIRE PAN CARD OR PROOF OF HAVING APPLIED FOR PAN
• Submission of PAN Card copy / application for PAN in 49A Compulsory
• NFO application form includes Form No. 49A / instructions
• LICMF will bear the cost of PAN Application charges of Rs. 67/-(only for NFO)
• Agents to submit PAN application together with NFO application to Karvy
• Karvy will acknowledge Form No. 49A
• Agents to submit NFO Form with Form No. 49A acknowledgement along with Cheque/DD to Bank

Statutory Details

LIC Mutual Fund has been set up as a Trust sponsored by Life Insurance corporation of India.LIC Mutual Fund Asset Management Co. Ltd is the investment Manager to the Fund

RISK FACTORS

Mutual Funds and Securities investments are subject to market risks and there is no assurance and no guarantee that the objectives of the Mutual Fund will be achieved. As with any investment in stock and shares, the NAV of the units issued under the scheme can go up or down depending on the factors and forces affecting the capital markets. “The Sponsor is not responsible for or liable to any loss resulting from the operations of the scheme beyond their initial contribution of Rs.2 Crore towards the setting up of the Mutual Fund.” Past performance of the sponsor/ AMC/ Mutual Fund does not indicate the future performance of the schemes of the Mutual Fund

SCHEME SPECIFIC RISK FACTORS

LIC MF Systematic Asset Allocation Fund is the name of the scheme and does not in any manner indicate either the quality of the scheme,its future prospects or returns.The NAV of units of the scheme may be affected by change in general level of interest rates.
Please read the Offer Document before investing

Thank You

When applying for a mutual fund, you may use the following codes

Distributor Code: ARN 29889

Sub Broker Code: 222370001

Disclaimer
Mutual Fund Investments are Subject to Market Risks
Please Read the Offer Documents CAREFULLY Before Investing