Reliance Capital Asset Management Limited A Reliance Capital Company Annual Report 2005 2006 Reliance Equity Opportunities Fund An openended Diversified Equity Scheme Cont ontent ents 2 Repor eport t of the Trust rustees 5 Auditors Report 6 Abridged Audited Balance Sheet 6 Abridged Audited Revenue Account 7 Historical per Unit Statistics 8 Notes to the Financial Statements 13 Por ortf tfolio Stat atement 14 Addendums Relianc eliance e Mut utual ual Fund und und (A Trust under the Indian Trust Act, 1882) SPONSOR Reliance Capital Limited (Incorporated under the Companies Act, 1956) Corporate Office : Fosbery Road, Off Reay Road Station (E), Mumbai 400 033. Tel.: 02230411000, Fax 02230411064 TRUSTEE Reliance Capital Trustee Co. Limited (Incorporated under the Companies Act, 1956) Corporate Office : Regd. Office : Trade World, B Wing, 7th Floor, EO1, Reliance Greens, Kamala Mills Compound, Village Motikhavdi S.B. Marg, Lower Parel (W), P. O. Digvijaygram, Mumbai 400 013. District Jamnagar 361140 (Gujarat) Tel.: 02230414800 Tel.: 02883011556 Fax: 02230414899 Fax: 02883011598 DIRECTORS OF RELIANCE CAPITAL TRUSTEE CO. LIMITED Mr. S. P. Talwar Mr. A. N. Shanbhag Mr. S. S. Bhandari Mr. Sujal Shah DIRECTORS OF RELIANCE CAPITAL ASSET MANAGEMENT LIMITED* Mr. Amitabh Jhunjhunwala Mr. Amitabh Chaturvedi Mr. Kanu Doshi Mr. Manu Chadha AUDITORS Haribhakti & Co. Chartered Accountants 42, Free Press House, Nariman Point, Mumbai 400 021. CUSTODIAN Deutsche Bank A.G. Kodak House, Ground Floor, 222, D. N. Road, Mumbai 400 001. REGISTRAR Karvy Computershare Private Limited (Formerly known as Karvy Consultants Limited) Karvy Plaza, 21, Road No. 4, Street No. 1, Banjara Hills, Hyderabad500 034. Tel.: 0402331 2454, Fax: 0402331 1968. INVESTMENT MANAGER Reliance Capital Asset Management Limited (Incorporated under the Companies Act, 1956) Corporate Office : Regd. Office : Trade World, B Wing, 7th Floor, EO1, Reliance Greens, Kamala Mills Compound, Village Motikhavdi S.B. Marg, Lower Parel (W), P. O. Digvijaygram, Mumbai 400 013. District Jamnagar 361140 (Gujarat) Tel.: 02230414800 Tel.: 02883011556 Fax: 02230414899 Fax: 02883011598 Call : 30301111 Website : www.reliancemutual.com INTERNAL AUDITORS Price Waterhouse 1104, Raheja Chambers, Nariman Point, Mumbai 400 021. * Mr. Manu Chadha was appointed with effect from January 18, 2006 Ms. Sulajja Firodia Motwani resigned with effect from February 14, 2006. Sponsor : Reliance Capital Limited Trustee : Reliance Capital Trustee Co. Limited Investment Manager : Reliance Capital Asset Management Limited Statutory Details : The Sponsor, the Trustee and the Investment Manager are incorporated under the Companies Act 1956. Risk Factors : Mutual Funds and securities investments are subject to market risks and there is no assurance and no guarantee that the Scheme objectives will be achieved. As with investments in any securities, the NAVs of the units issued under the Scheme can go up or down depending on the factors and forces affecting the securities market. Reliance Equity Opportunities Fund is only the name of the Scheme and does not in any manner indicate either the quality of the Scheme, it s future prospects or returns. Past performance of the Sponsor or its group affiliation is not indicative of future performance of the Scheme. The Sponsor is not responsible or liable for any loss resulting from the operation of the Scheme beyond their initial contribution of Rs.1 lac towards the setting up of the Mutual Fund. The Mutual Fund is not guaranteeing or assuring any dividends/ bonus. The Mutual Fund is also not assuring that it will make periodical dividend/ bonus distributions, though it has every intention of doing so. All dividend/ bonus distributions are subject to the availability of distributable surplus in the Scheme. The liquidity of the Schemes investments may be inherently restricted by trading volumes, settlement periods and transfer procedures. Scheme specific risk factors have been mentioned in the Offer Document. Please read the offer document carefully before investing.
Repor eport t of the Trust rustees Dear Unitholders, The Trustees have great pleasure in presenting the Eleventh Annual Report of Reliance Mutual Fund (RMF) formerly known as Reliance Capital Mutual Fund (RCMF); and its schemes for the year ended March 31, 2006. Fiscal 2006 marked one of the broadest rallies witnessed by Indian markets so far. With Sensex clocking in 73.4% return, the Indian market was among the best performers in the Emerging Markets. This was the third consecutive year of bull run in Indian markets and with the economy conitnuing to remain robust and corporate profits delivering strong growth. The rally during the year was marked by record inflows by both institutions and retail investors. During the year FII s invested a record staggering Rs 48086 crs, the largest inflows in any year since liberalisation. The domestic institutuions also saw a record year on the back of highly successful New Fund Offers collections and invested a record Rs 14163 crs in the market. Engineering and automobile sector were the best performing sectors during the year and was followed by FMCG, a clear trend that buoyancy in the corporate sector is not just lead by exports but also from the strong consumption lead by domestic demand. Of the key factors affecting equity markets, interest rates have marginally hardened during the year but it is still at comfortable levels while inflation at around 4% during the year continues to remain stable. Most of the commodity prices were on an upswing during the year hitting new highs. Higher demand also saw oil prices crossing past the crucial $70 mark and now look set to settle on a higher band in the coming years. Higher crude prices and any major upturns in the US are the key global risks, which India has to take care of. GDP growth for the year grew at a strong clip of 8.43% and the government expects to maintain a rate of above 7% over the coming years. Continued thrust on infrastructure and fiscal discipline by the new government bodes well for continued growth momentum. Overall for the coming year growth prospects for the economy and corporate look to stabilize at higher levels and this augurs well for the equity markets. The debt markets witnessed yields hardening by more than 90 bps on account of rising global and domestic interest rates, higher demand for credit and economy on a growth path. The secondary market in Gsecs witnessed further rise in yields from last year. The continuous rise in yield was punctuated by small rallies due to lower inflation, postponement, and reduction of borrowing program. This resulted in yields rising to settle at 7.54% levels (10 year benchmark yield) by March 2005. The maturity of the IMD Bonds, the subsequent forex outflow, and intervention by RBI on the forex side tightened liquidity considerably from December 05 thereby contributing to the rise in yields. On the whole it was a year which saw debt AUMs for medium, short term, and floating rate funds decline, but this was made up by a rise in AUMs of liquid funds and fixed maturity plans. In the current financial year, interest rates are expected to consolidate with a downward bias. This will be because of a slowing down of global economy some pauses in the Federal Reserve rate tightening cycle and a benign inflation outlook. The tenyear benchmark yield is expected to range between 7.75% to 8.50%. Reliance Mutual Fund posted an exponential growth over the last year. The Assets Under Management (AUM) increased to Rs. 24,670 crores as on March 31, 2006 from Rs.9,543 crores as on March 31, 2005, an increase of Rs. 159%. The aggregate equity corpus under management increased to Rs. 15,010 crores as on March 31, 2006 from Rs. 3991 crores as on March 31, 2005, an increase of 276%. During the year, the Mutual Fund Industry also witnessed a rise of Rs. 82,308 crore in the total AUM from Rs. 1,49,554 crore to Rs. 2,31,862 crore between April 2005 and March 2006 (Source: AMFI Update). Reliance Mutual Fund currently has the following twentyfour schemes: Openended Equity Schemes: Reliance Vision Fund, Reliance Growth Fund, Reliance NRI Equity Fund, Reliance Equity Opportunities Fund, Reliance Equity Fund, Reliance Tax Saver (ELSS) Fund, Reliance Index Fund Openended Debt Schemes: Reliance Income Fund, Reliance Short Term Fund, Reliance Medium Term Fund, Reliance Monthly Income Plan, Reliance Floating Rate Fund, Reliance NRI Income Fund, Reliance Regular Savings Fund Closeended Debt Schemes: Reliance Fixed Maturity Fund Series I, Reliance Fixed Maturity Fund Series II, Reliance Fixed Tenor Fund Openended Liquid Schemes: Reliance Liquid Fund, Reliance Liquidity Fund Openended Government securities Scheme: Reliance Gilt Securities Fund Openended Sector Specific Schemes: Reliance Banking Fund, Reliance Diversified Power Sector Fund, Reliance Pharma Fund, Reliance Media & Entertainment Fund AWARDS AND RECOGNITION: The highlights of the recognition of various schemes of Reliance Mutual Fund are given below: Reliance Mutual Fund has been adjudged as India s Most Trusted Mutual Fund Brand by Economic Times Brand Equity in a survey conducted by A C Nielsen ORGMARG (The Brand Equity supplement published in The Economic Times on February 15, 2006.) The Most Trusted Brands Survey aims to identify the brands that bond the best with consumers. Source: www.economictimes.com.+ Reliance Growth Fund Growth : A consistent performer, this fund has been ranked CRISIL~CPR 1* in all the quarters between April 2005 March 2006 in the openended equity schemes category. CNBC TV18 CRISIL Mutual Fund of the Year Award for Reliance Growth Fund in the Openended Equity Diversified Fund Category++ Reliance Growth FundGrowth Plan won 2 awards at the inaugural Lipper Fund Awards 2006, viz: o Best Fund Over Three Years Equity India o Best Fund Over Five Years Equity India. Reliance Short Term Fund Growth : A consistent performer, this fund has been ranked CRISIL~CPR 1** in all the quarters between April 2005 March 2006 in the openended debt short term schemes category. CNBC TV18 CRISIL Mutual Fund of the Year Award for Reliance Short Term Fund in the in the Open ended Income Short Term Fund Category+++ Reliance Floating Rate Fund Growth: A consistent performer, this fund has been ranked CRISIL~CPR 1# for the three continuous quarters between September 2005 March 2006 in floating rate schemes category. Reliance Gilt Securities Fund Long Term Plan Growth : A consistent performer, this fund has been ranked CRISIL~CPR 1## for the three continuous quarters from September 2005 March 2006 in the openended long term gilt schemes category. Reliance Income Fund awarded : This fund has been ranked CRISIL~CPR 2 for the two continuous quarters from October 2005 March 2006 in the openended income schemes category. ^ Reliance Vision Fund Growth :This fund has been consistently ranked CRISIL~CPR 3 in all the quarters of April 2005 March 2006 in the openended equity schemes category. ^^ Reliance Liquid Fund Treasury Plan Growth: This fund has been consistently ranked CRISIL~CPR 3 in all the quarters of April 2005 March 2006 in the openended liquid schemes category. ^^^ Past performance is no guarantee of future results. METHODOLOGY: +Category: Mutual Fund Ranking. Rating Methodology: Derived from Brand Equity supplement published in The Economic Times on February 15, 2006. The Most Trusted Brands Survey aims to identify the brands that bond the best with consumers. Conducted by AC Nielsen ORGMARG, with a sample of over 7000 distributed across socioeconomic class, age, income and geography. Each brand was evaluated on relatedness, perceived popularity, quality connotation, distinctiveness and repurchase intent. For mutual funds, the total business generated and assets under management were used. These were then further subject to scrutiny to ensure that due to influence of public sector in these sectors, private sector players were not pushed out merely because of size. The final brand rating is arrived at in four steps. First a familiarity weight is attached to each brand for every respondent. Then the brand score is calculated based on the familiarity score, the overall rating of the brand, and the rating of the brand on each of the various parameters. After this, the brand score is multiplied by the familiarity weight and then is averaged across all respondents to get the final overall brand score. Sorting the numbers for all brands in ascending order yields the Most Trusted Brands List. Source: www.economictimes.com. The information contained herein has been obtained from sources published by third parties. While such publications are believed to be reliable, however, neither the AMC, the Trustees, the Fund nor any of their affiliates or representatives assume any responsibility for the accuracy of such information. * CRISIL has assigned a Composite Performance Rank of CRISIL~CPR 1 Open End Equity Schemes, June 2005 to Reliance Growth Fund Growth. The composite performance of Reliance Growth Fund Growth is Very Good in the Open End Equity Category, and ranks within the top 10% of the 47 schemes ranked in this category. The criteria used in computing the CRISIL Composite Performance Rank are Superior Return Score, based on NAVs over the 2year period ended June 30, 2005, Concentration and Liquidity of the scheme. The methodology does not take into account the entry and exit loads levied by the scheme. The CRISIL CPR is no indication of the performance that can be expected from the scheme in future. Ranking Source: CRISIL FundServices, CRISIL CRISIL has assigned a Composite Performance Rank of CRISIL~CPR 1 Open End Equity Schemes, September 2005 to Reliance Growth Fund Growth. The composite performance of Reliance Growth Fund Growth is Very Good in the Open End Equity Category, and ranks within the top 10% of the 47 schemes ranked in this category. The criteria used in computing the CRISIL Composite Performance Rank are Superior Return Score, based on NAVs over the 2year period ended September 30, 2005, Concentration and Liquidity of the scheme. The methodology does not take into account the entry and exit loads levied by the scheme. The CRISIL CPR is no indication of the performance that can be expected from the scheme in future. Ranking Source: CRISIL FundServices, CRISIL CRISIL has assigned a Composite Performance Rank of CRISIL~CPR 1 Open End Equity Schemes, December 2005 to Reliance Growth Fund Growth. The composite performance of Reliance Growth Fund Growth is Very Good in the Open End Equity Category, and ranks within the top 10% of the 53 schemes ranked in this category. The criteria used in computing the CRISIL Composite Performance Rank are Superior Return Score, based on NAVs over the 2year period ended December 31,2005, Concentration and Liquidity of the scheme. The methodology does not take into account the entry and exit loads levied by the scheme. The CRISIL CPR is no indication of the performance that can be expected from the scheme in future.ranking Source: CRISIL FundServices, CRISIL CRISIL has assigned a Composite Performance Rank of CRISIL~CPR 1 Open End Equity Schemes, March 2006 to Reliance Growth Fund Growth. The composite performance of Reliance Growth Fund Growth is Very Good in the Open End Equity Category, and ranks within the top 10% of the 59 schemes ranked in this category. The criteria used in computing the CRISIL Composite Performance Rank are Superior Return Score, based on NAVs over the 2year period ended March 31, 2006, Concentration and Liquidity of the scheme. The methodology does not take into account the entry and exit loads levied by the scheme. The CRISIL CPR is no indication of the performance that can be expected from the scheme in future. Ranking Source: CRISIL FundServices, CRISIL **CRISIL has assigned a Composite Performance Rank of CRISIL~CPR 1* Open End Debt Short Term Schemes, June 2005 to Reliance Short Term Fund Growth. The composite performance of Reliance Short Term Fund Growth is Very Good performance in the Open End Debt Short Term Fund Category, and ranks within the top 10% of the 14 schemes ranked in this category. The criteria used in computing the CRISIL Composite Annual Report 2005 2006 2
Repor eport t of the Trust rustees Performance Rank are Mean Return, Volatility, based on NAVs over the 1year period ended June 30, 2005, Asset size, Concentration, Average Maturity, Asset Quality & Downside Risk Probability of the scheme. The methodology does not take into account the entry and exit loads levied by the scheme. The CRISIL CPR is no indication of the performance that can be expected from the scheme in future. Ranking Source: CRISIL FundServices, CRISIL CRISIL has assigned a Composite Performance Rank of CRISIL~CPR 1* Open End Debt Short Term Schemes, September 2005 to Reliance Short Term Fund Growth. The composite performance of Reliance Short Term Fund Growth is Very Good performance in the Open End Debt Short Term Fund Category, and ranks within the top 10% of the 15 schemes ranked in this category. The criteria used in computing the CRISIL Composite Performance Rank are Mean Return, Volatility, based on NAVs over the 1year period ended September 30, 2005, Asset size, Concentration, Average Maturity, Asset Quality & Downside Risk Probability of the scheme. The methodology does not take into account the entry and exit loads levied by the scheme. The CRISIL CPR is no indication of the performance that can be expected from the scheme in future. Ranking Source: CRISIL FundServices, CRISIL CRISIL has assigned a Composite Performance Rank of CRISIL~CPR 1* Open End Debt Short Term Schemes, December 2005 to Reliance Short Term Fund Growth. The composite performance of Reliance Short Term Fund Growth is Very Good performance in the Open End Debt Short Term Fund Category, and ranks within the top 10% of the 15 schemes ranked in this category. The criteria used in computing the CRISIL Composite Performance Rank are Mean Return, Volatility, based on NAVs over the 1year period ended December 31,2005, Asset size, Concentration, Average Maturity, Asset Quality & Downside Risk Probability of the scheme. The methodology does not take into account the entry and exit loads levied by the scheme. The CRISIL CPR is no indication of the performance that can be expected from the scheme in future. Ranking Source: CRISIL FundServices, CRISIL CRISIL has assigned a Composite Performance Rank of CRISIL~CPR 1* Open End Debt Short Term Schemes, March 2006 to Reliance Short Term Fund Growth. The composite performance of Reliance Short Term Fund Growth is Very Good performance in the Open End Debt Short Term Fund Category, and ranks within the top 10% of the 16 schemes ranked in this category. The criteria used in computing the CRISIL Composite Performance Rank are Mean Return, Volatility, based on NAVs over the 1year period ended March 31, 2006, Asset size, Concentration, Average Maturity, Asset Quality & Downside Risk Probability of the scheme. The methodology does not take into account the entry and exit loads levied by the scheme. The CRISIL CPR is no indication of the performance that can be expected from the scheme in future. Ranking Source: CRISIL FundServices, CRISIL #Reliance Floating Rate Fund Growth CRISIL has assigned a Composite Performance Rank of CRISIL~CPR 2* Floating Rate Schemes, September 2005 to Reliance Floating Rate Fund Growth. The composite performance of Reliance Floating Rate Fund Growth is Good in the Floating Rate Fund Category, and ranks within the top 30% of the 24 schemes ranked in this category. The criteria used in computing the CRISIL Composite Performance Rank are Mean Return, based on NAVs over the 1year period ended September 30, 2005, Volatility, Asset Size, Concentration, Asset Quality and Downside Risk Probability of the scheme. The methodology does not take into account the entry and exit loads levied by the scheme. The CRISIL CPR is no indication of the performance that can be expected from the scheme in future. Ranking Source: CRISIL FundServices, CRISIL CRISIL has assigned a Composite Performance Rank of CRISIL~CPR 1* Floating Rate Schemes, December 2005 to Reliance Floating Rate Fund Growth. The composite performance of Reliance Floating Rate Fund Growth is Very Good in the Floating Rate Fund Category, December 2005 and ranks within the top 10% of the 28 schemes ranked in this category. The criteria used in computing the CRISIL Composite Performance Rank are Mean Return, based on NAVs over the 1year period ended December 31,2005, Volatility, Asset Size, Concentration, Asset Quality and Downside Risk Probability of the scheme. The methodology does not take into account the entry and exit loads levied by the scheme. The CRISIL CPR is no indication of the performance that can be expected from the scheme in future. Ranking Source: CRISIL FundServices, CRISIL CRISIL has assigned a Composite Performance Rank of CRISIL~CPR 1* Floating Rate Schemes, March 2006 to Reliance Floating Rate Fund Growth. The composite performance of Reliance Floating Rate Fund Growth is Very Good in the Floating Rate Fund Category, and ranks within the top 10% of the 9 schemes ranked in this category. The criteria used in computing the CRISIL Composite Performance Rank are Mean Return, based on NAVs over the 1year period ended March 31, 2006, Volatility, Asset Size, Concentration, Asset Quality and Downside Risk Probability of the scheme. The methodology does not take into account the entry and exit loads levied by the scheme. The CRISIL CPR is no indication of the performance that can be expected from the scheme in future. Ranking Source: CRISIL FundServices, CRISIL ##CRISIL has assigned a Composite Performance Rank of CRISIL~CPR 1* Open End Long Term Gilt Schemes, September 2005 to Reliance Gilt Securities Fund Long Term Plan Growth. The composite performance of Reliance Gilt Securities Fund Long Term Plan Growth is Very Good in the Open End Long Term Gilt Category, and ranks within the top 10% of the 15 schemes ranked in this category. The criteria used in computing the CRISIL Composite Performance Rank are Superior Return Score, based on NAVs over the 2year period ended September 30, 2005, Average Maturity and Liquidity of the scheme. The methodology does not take into account the entry and exit loads levied by the scheme. The CRISIL CPR is no indication of the performance that can be expected from the scheme in future. Ranking Source: CRISIL FundServices, CRISIL CRISIL has assigned a Composite Performance Rank of CRISIL~CPR 1* open ended Gilt Securities schemes, December 2005, to Reliance Gilt Securities Fund Long Term Plan Growth. The composite performance of Reliance Gilt Securities Fund Long Term Plan Growth is Very Good in the Open End Long Term Gilt Category, and ranks within the top 10% of the 14 schemes ranked in this category. The criteria used in computing the CRISIL Composite Performance Rank are Superior Return Score, based on NAVs over the 2year period ended December 31,2005, Average Maturity and Liquidity of the scheme. The methodology does not take into account the entry and exit loads levied by the scheme. The CRISIL CPR is no indication of the performance that can be expected from the scheme in future. Ranking Source: CRISIL FundServices, CRISIL CRISIL has assigned a Composite Performance Rank of CRISIL~CPR 1* open ended Gilt Securities schemes, March 2006, to Reliance Gilt Securities Fund Long Term Plan Growth. The composite performance of Reliance Gilt Securities Fund Long Term Plan Growth is Very Good in the Open End Long Term Gilt Category, and ranks within the top 10% of the 16 schemes ranked in this category. The criteria used in computing the CRISIL Composite Performance Rank are Superior Return Score, based on NAVs over the 2year period ended March 31, 2006, Average Maturity and Liquidity of the scheme. The methodology does not take into account the entry and exit loads levied by the scheme. The CRISIL CPR is no indication of the performance that can be expected from the scheme in future. Ranking Source: CRISIL FundServices, CRISIL ^CRISIL has assigned a Composite Performance Rank of CRISIL~CPR 2* Open ended Income schemes, December 2005, to Reliance Income Fund Growth. The composite performance of Reliance Income Fund is Good in the Open End Debt Category, and ranks within the top 30% of the 16 schemes ranked in this category. The criteria used in computing the CRISIL Composite Performance Rank are Superior Return Score, based on NAVs over the 2year period ended December 31,2005, Average Maturity, Concentration, Liquidity and Asset Quality of the scheme. The methodology does not take into account the entry and exit loads levied by the scheme. The CRISIL CPR is no indication of the performance that can be expected from the scheme in future. Ranking Source: CRISIL FundServices, CRISIL CRISIL has assigned a Composite Performance Rank of CRISIL~CPR 2* Open end Debt schemes, March 2006, to Reliance Income Fund Growth. CRISIL~CPR 2 The composite performance of Reliance Income Fund is Good in the Open End Debt Category, and ranks within the top 30% of the 19 schemes ranked in this category. The criteria used in computing the CRISIL Composite Performance Rank are Superior Return Score, based on NAVs over the 2year period ended March 31, 2006, Average Maturity, Concentration, Liquidity and Asset Quality of the scheme. The methodology does not take into account the entry and exit loads levied by the scheme. The CRISIL CPR is no indication of the performance that can be expected from the scheme in future. Ranking Source: CRISIL FundServices, CRISIL ^^CRISIL has assigned a Composite Performance Rank of CRISIL~CPR 3* Open End Equity Schemes, June 2005 to Reliance Vision Fund. The composite performance of Reliance Vision Fund is Average in the Open End Equity Category, and ranks within the top 70% of the 47 schemes ranked in this category. The criteria used in computing the CRISIL Composite Performance Rank are Superior Return Score, based on NAVs over the 2year period ended June 30, 2005, Concentration and Liquidity of the scheme. The methodology does not take into account the entry and exit loads levied by the scheme. The CRISIL CPR is no indication of the performance that can be expected from the scheme in future. Ranking Source: CRISIL FundServices, CRISIL CRISIL has assigned a Composite Performance Rank of CRISIL~CPR 3* Open End Equity Schemes, September 2005 to Reliance Vision Fund. The composite performance of Reliance Vision Fund is Average in the Open End Equity Category, and ranks within the top 70% of the 47 schemes ranked in this category. The criteria used in computing the CRISIL Composite Performance Rank are Superior Return Score, based on NAVs over the 2year period ended September 30, 2005, Concentration and Liquidity of the scheme. The methodology does not take into account the entry and exit loads levied by the scheme. The CRISIL CPR is no indication of the performance that can be expected from the scheme in future. Ranking Source: CRISIL FundServices, CRISIL CRISIL has assigned a Composite Performance Rank of CRISIL~CPR 3* Open End Equity Schemes, December 2005 to Reliance Vision Fund. The composite performance of Reliance Vision Fund is Average in the Open End Equity Category, and ranks within the top 70% of the 53 schemes ranked in this category. The criteria used in computing the CRISIL Composite Performance Rank are Superior Return Score, based on NAVs over the 2year period ended December 31,2005, Concentration and Liquidity of the scheme. The methodology does not take into account the entry and exit loads levied by the scheme. The CRISIL CPR is no indication of the performance that can be expected from the scheme in future. CRISIL has assigned a Composite Performance Rank of CRISIL~CPR 3* Open End Equity Schemes, March 2006 to Reliance Vision Fund. The composite performance of Reliance Vision Fund is Average in the Open End Equity Category, and ranks within the top 70% of the 59 schemes ranked in this category. The criteria used in computing the CRISIL Composite Performance Rank are Superior Return Score, based on NAVs over the 2year period ended March 31, 2006, Concentration and Liquidity of the scheme. The methodology does not take into account the entry and exit loads levied by the scheme. The CRISIL CPR is no indication of the performance that can be expected from the scheme in future. Ranking Source: CRISIL FundServices, CRISIL ^^^CRISIL has assigned a Composite Performance Rank of CRISIL~CPR 3* Open End Liquid Schemes, June 2005 to Reliance Liquid Fund Treasury Plan Growth. The composite performance of Reliance Liquid Fund Treasury Plan Growth is Average in the Open End Liquid Category, and ranks within the top 70% of the 23 schemes ranked in this category. The criteria used in computing the CRISIL Composite Performance Rank are Mean Return, Volatility, based on NAVs over the 1year period ended June 30, 2005, Asset size, Average Maturity, Downside Risk Probability, Company Concentration & Asset Quality of the scheme. The methodology does not take into account the entry and exit loads levied by the scheme. The CRISIL CPR is no indication of the performance that can be expected from the scheme in future. Ranking Source: CRISIL FundServices, CRISIL CRISIL has assigned a Composite Performance Rank of CRISIL~CPR 3* Open End Liquid Schemes, September 2005 to Reliance Liquid Fund Treasury Plan Growth. The composite performance of Reliance Liquid Fund Treasury Plan Growth is Average in the Open End Liquid Category, and ranks within the top 70% of the 23 schemes ranked in this category. The criteria used in computing the CRISIL Composite Performance Rank are Mean Return, Volatility, based on NAVs over the 1year period ended September 30, Annual Report 2005 2006 3
Repor eport t of the Trust rustees 2005, Asset size, Average Maturity, Downside Risk Probability, Company Concentration & Asset Quality of the scheme. The methodology does not take into account the entry and exit loads levied by the scheme. The CRISIL CPR is no indication of the performance that can be expected from the scheme in future. Ranking Source: CRISIL FundServices, CRISIL CRISIL has assigned a Composite Performance Rank of CRISIL~CPR 3* Open End Liquid Schemes, December 2005 to Reliance Liquid Fund Treasury Plan Growth. CRISIL has assigned a Composite Performance Rank of CRISIL~CPR 3* Open End Liquid Schemes, December 2005 to Reliance Liquid Fund Treasury Plan Growth. The composite performance of Reliance Liquid Fund Treasury Plan Growth is Average in the Open End Liquid Category, December 2005 and ranks within the top 70% of the 23 schemes ranked in this category. The criteria used in computing the CRISIL Composite Performance Rank are Mean Return, Volatility, based on NAVs over the 1year period ended December 31,2005, Asset size, Average Maturity, Downside Risk Probability, Company Concentration & Asset Quality of the scheme. The methodology does not take into account the entry and exit loads levied by the scheme. The CRISIL CPR is no indication of the performance that can be expected from the scheme in future. Ranking Source: CRISIL FundServices, CRISIL CRISIL has assigned a Composite Performance Rank of CRISIL~CPR 3* Open End Liquid Schemes, March 2006 to Reliance Liquid Fund Treasury Plan Growth. The composite performance of Reliance Liquid Fund Treasury Plan Growth is Average in the Open End Liquid Category, and ranks within the top 70% of the 24 schemes ranked in this category. The criteria used in computing the CRISIL Composite Performance Rank are Mean Return, Volatility, based on NAVs over the 1year period ended March 31, 2006, Asset size, Average Maturity, Downside Risk Probability, Company Concentration & Asset Quality of the scheme. The methodology does not take into account the entry and exit loads levied by the scheme. The CRISIL CPR is no indication of the performance that can be expected from the scheme in future. Ranking Source: CRISIL FundServices, CRISIL ++Reliance Growth Fund was among the 4 schemes that won the CNBC TV18 CRISIL Mutual Fund of the Year Award in the Openended Equity Diversified Fund Category. In total 43 schemes were eligible for the award universe. Schemes present in all four quarter CRISIL CPRs were considered for the award. The award is based on consistency of schemes performance in the four quarterly CRISIL CPR rankings released during the calendar year 2005. The individual CRISIL CPR parameter scores averaged for the four quarters and further multiplied by the parameter weight as per the CRISIL CPR methodology to arrive at the final scores. A detailed methodology of the CRISIL CPR is available at www.crisil.com. Rankings and Award Source: CRISIL FundServices, CRISIL Ltd. +++Reliance Short Term Fund was the only scheme that won the CNBC TV18 CRISIL Mutual Fund of the Year Award in the Open ended Income Short Term Fund Category. In total 11 schemes were eligible for the award universe. Schemes present in all four quarter CRISIL CPRs were considered for the award. The award is based on consistency of schemes performance in the four quarterly CRISIL CPR rankings released during the calendar year 2005. The individual CRISIL CPR parameter scores averaged for the four quarters and further multiplied by the parameter weight as per the CRISIL CPR methodology to arrive at the final scores. A detailed methodology of the CRISIL CPR is available at www.crisil.com. Rankings and Award Source: CRISIL FundServices, CRISIL Ltd. >>The Lipper India Fund Awards 2006, Methodology Criteria (Cumulative) Funds registered for sale in India as of 31 December 2005. At least 36 months of performance history as of 31 December 2005. Lipper Global classifications with at least five distinct portfolios, excluding residual classifications and institutional funds. Asset classes: equity, bond, and mixedasset. FUND CLASSIFICATION AWARDS : The currency for the calculation corresponds to the currency of the country for which the awards are calculated and relies on monthly data. Classification averages are calculated for all funds for each eligible classification. The calculation periods extend over 36, 60, and 120 months. The highest Lipper Leader for Consistent Return (Effective Return) value within each eligible classification determines the fund classification winner over three, five, or ten years. For a detailed explanation please review the Lipper Leader methodology document available on www.lipperweb.com. ASSET CLASS GROUP AWARDS: Fund groups with at least three equity, three bond, or three mixedasset portfolios in one of the respective asset classes are eligible for a group award. The Best Equity Group award, the Best Bond Group award and the Best Mixed Asset Group award will be given. The lowest average decile 1 rank of the three years Consistent Return measure of the eligible funds per asset class and group will determine the asset class group award winner over the threeyear period. In cases of identical results the lower average percentile rank will determine the winner. DISCLAIMER: Although Lipper makes reasonable efforts to ensure the accuracy and reliability of the data contained herein, the accuracy is not guaranteed by Lipper. Users acknowledge that they have not relied upon any warranty, condition, guarantee, or representative made by Lipper. Any use of the data for analyzing, managing or trading financial instruments is at the user s own risk. This is not an offer to buy or sell securities. NEW LAUNCHES: During the period under review, RMF launched six schemes. On April 25, 2005, RMF launched the Reliance Fixed Maturity Fund Series II, a closedended income scheme; on May 10, 2005, the Reliance Regular Savings Fund, an openended scheme; on June 15, 2005 the Reliance Liquidity Fund, an openended liquid Scheme; on July 25, 2005 the Reliance Tax Saver (ELSS) Fund, an openended equity linked savings scheme; on November 25, 2005, the Reliance Fixed Tenor Fund, a closeended scheme and on February 6, 2006 the Reliance Equity Fund, an openended diversified equity scheme. A series of Monthly Plans (Series I XI), Quarterly Plans (Series I III) and Annual Plans (Series I III) were launched under Reliance Fixed Maturity Fund Series II. The Fund introduced the Monthly Dividend Option and Quarterly Dividend Option under Reliance Liquidity Fund. The Quarterly Dividend Option was also introduced under Reliance Liquid Fund and Reliance Short Term Fund. The fund introduced numerous customer service initiatives facilitating investors and business partners. Some key initiatives Transact Online: An online transaction facility enabling investors and business partners to buy, redeem and switch RMF units online, from the convenience of their home or office, through www.reliancemutual.com. Apart from these facilities, investors/ business partners can also view their investment details/account statements at the click of a button. Facilitating SIP investments: The fund introduced Electronic Credit Services (ECS) or Auto Debit facility for Systematic Investment Plan (SIP) Transactions, thus making SIP investments extremely convenient for investors. This facility is in addition to the provision to submit post dated cheques for SIP investments. Reliance Any Time Money Card : RMF launched a revolutionary ATM cum debit card, the Reliance Any Time Money Card in December 2005, which makes mutual fund investments accessible at over 1 million VISA enabled ATMs across the world. The innovative product is first of its kind in the subcontinent, and addresses the retail investors concern of liquidity in mutual fund investments. NEW INITIATIVES: Investor Education As a step towards educating people and increasing awareness about Mutual Funds, an investor education initiative was undertaken under the Reliance Mutual Fund Knowledge Series umbrella. Booklets on various interesting topics The Beginner s Guide to Smart Investing, ELSS An efficient taxsaving tool and Derivatives Aiming to Maximize Returns & Minimize Risk were published and distributed at various distributor and investor meets across the country. Reliance Any Time Money Card: A first of its kind, the Reliance Any Time Money Card was launched at a press conference in Mumbai. The ATM cum Debit card, a first of it s kind in the country, enables investors to redeem their mutual fund units through all VISA enabled ATMs across the world. Investor Service Centres: During the year, additional Designated Investor Service Centres (DISCs) were opened across the country, for increasing the reach of RMF and facilitating easy and convenient access to the investors and distributors. The total number of DISCs of the Company are 57 and the total number of DISCs managed by Karvy Computershare Pvt Limited, Registrar & Transfer Agents are 75, as on March 31, 2006. FUTURE OUTLOOK: Going forward, we expect policy actions to determine the course of interest rates. Inflation, rising global interest rates, flows into and out of the equity market, and the U S Dollar s strength would be carefully tracked. On the domestic front, credit growth and, in turn, liquidity in the system would also be critical to yield movements in the bond markets. RETURNS DELIVERED*: During the financial year 20052006, Reliance Mutual Fund: A) Declared Dividend** Name of the Scheme Rate / Record Cum Div per unit Date NAV Reliance Liquid Fund Treasury Plan Retail Option Monthly Dividend Option Rs. 2.00 October 25, 2005 16.3781 Reliance Vision Fund Rs. 3.00 December 19, 2005 47.825 Reliance Growth Fund Rs. 3.00 December 19, 2005 50.63 Reliance Pharma Fund Rs. 1.00 December 19, 2005 16.8673 Reliance Diversified Power Sector Fund Rs. 4.00 December 29, 2005 22.9884 Reliance Banking Fund Rs. 4.00 December 29, 2005 25.3460 Reliance Media and Entertainment Fund Rs. 1.00 December 29, 2005 15.5694 Reliance Liquid Fund Treasury Plan Retail Option Monthly Dividend Option Rs. 2.00 February 1, 2006 14.5754 Reliance Fixed Maturity Fund Series II Quarterly Plan III Rs.0.1095 March 27, 2006 10.1132 Reliance Vision Fund Rs. 7.50 March 28, 2006 54.89 Reliance Growth Fund Rs. 7.50 March 29, 2006 58.40 Reliance Banking Fund Rs. 5.00 March 30, 2006 21.3225 Note: Post declaration of the dividend, the NAV of the Scheme will fall to the extent of the dividend payout and distribution tax, if any. B) Declared Bonus** A bonus of 1:4 was declared in Reliance Income Fund on the record date of March 9, 2006. Note: Pursuant to the allotment of bonus units, if any, the NAV of the units would fall in proportion to the bonus units allotted and as a result the total value of the units held by the investor would remain the same. * Past performance may or may not be sustained in future. ** Statutory Details of the same are mentioned elsewhere in the Annual Report. The Abridged Balance Sheet as on March 31, 2006 and the Abridged Revenue Account for the period ended March 31, 2006 for the various schemes are annexed to this Report. The Trustees take this opportunity to thank all investors for their continued support. The Directors would also like to place on record their appreciation and gratitude to the Government of India, SEBI, RBI, all other regulatory authorities and AMFI for their encouragement, support and cooperation. The Trustees would also like to thank the Directors and personnel of Reliance Capital Asset Management Ltd., the Investment Manager for their involvement in making RMF schemes a success. For and on behalf of the Board of Trustees Reliance Capital Trustee Co. Limited Place : Mumbai S. P. Talwar Sujal Shah Date : June 27, 2006 Director Director Annual Report 2005 2006 4
Statement of Board of Directors of Relianc eliance e Capit apital al Trust rustee Co. Limited Auditors Report A. The liabilities and responsibility of the Trustee are in accordance with the SEBI (Mutual Funds) Regulations, 1996, Trust deed and the offer documents of the schemes. The liability of the Sponsor/Settlor is limited to the initial contribution of Rs. 100,000/ towards the setting up of Reliance Mutual Fund. B. INVESTMENT OBJECTIVE OF RELIANCE EQUITY OPPORTUNITIES FUND LAUNCHED BY RELIANCE MUTUAL FUND: The primary investment objective of the scheme is to seek to generate capital appreciation & provide longterm growth opportunities by investing in a portfolio constituted of equity & equity related securities and the secondary objective is to generate consistent returns by investing in debt and money market securities. C. Basis and Policy of investments underlying the Scheme of Reliance Mutual Fund Investment policies of the Funds reflect restrictions for mutual fund investments established by SEBI. Avenues for investment in equity are identified on the following criteria: 1. Sound Management 2. Good track record of the Company 3. Potential for future growth 4. Industry scenario 5. Liquidity of the stock 6. Any other in the opinion of RCAM Avenues for investment in debt are identified on the following criteria: 1. Economic Scenario 2. Liquidity 3. RBI Stance 4. Credit Risk 5. Any other in the opinion of RCAM D. All investments in mutual funds are subject to market risks and the NAV, price and redemption value of the units and income from them, can go up as well as down with the fluctuations in the market value of its underlying investments. There can be no assurance that the Scheme s objective will be achieved. Past performance is not necessarily indicative of future results and may not necessarily provide a basis for comparison with other investments. To The Board of Directors of Reliance Capital Trustee Company Limited We have audited the attached Balance Sheet of RELIANCE EQUITY OPPORTUNITIES FUND (the Scheme ) of Reliance Mutual Fund as at 31st March, 2006 and the Revenue Account of the Scheme for the year ended 31st March, 2006 and report thereon as follows: a) The Balance Sheet and the Revenue Account dealt with by this report have been prepared in accordance with the accounting policies and standards specified in the Ninth Schedule of the Securities and Exchange Board of India (Mutual Funds) Regulations, 1996. These financial statements are the responsibility of the Managements of the Trustee and the Asset Management Company. b) Our audit was conducted in accordance with the generally accepted auditing standards in India. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the Financial Statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the Financial Statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the Financial Statements. We believe that our audit provides a reasonable basis for our opinion. c) We have obtained all the information and explanations which to the best of our knowledge and belief were necessary for the purposes of our audit. d) The Balance Sheet and the Revenue Account dealt with by this report are in agreement with the books of account of the Scheme. e) Nontraded securities have been valued in accordance with the guidelines notified by the Securities and Exchange Board of India. In our opinion, these valuations are fair and reasonable. f) In our opinion and to the best of our information and according to the explanations given to us, the said accounts give the information required by the Securities and Exchange Board of India (Mutual Funds) Regulations, 1996 and give a true and fair view in conformity with the accounting principles generally accepted in India: (i) in the case of the Balance Sheet, of the state of affairs of the Scheme as at 31st March, 2006 and (ii) in the case of the Revenue Account, of the Surplus of the Scheme for the year ended 31st March, 2006. For HARIBHAKTI & CO. Chartered Accountants CHETAN DESAI Partner Membership No. 17000 Place: Mumbai Date: 27 th June, 2006 Annual Report 2005 2006 5
Abridged Audited Balance Sheet as at March 31, 2006 31.03.2006 31.03.2005 PARTICULARS Amount in Rs. lacs LIABILITIES 1. UNIT CAPITAL 118,301.08 177,359.09 2. RESERVES AND SURPLUS Unit Premium Reserve (13,198.01) 0.63 Other Reserves 113,555.34 (1,113.59) 3. CURRENT LIABILITIES AND PROVISIONS 20,797.35 13,089.96 TOTAL 239,455.76 189,336.09 ASSETS 1. INVESTMENTS Equity Shares 215,219.47 86,765.61 Futures/Options 542.19 1,631.94 Privately Placed Debentures/ Bonds Debentures/ Bonds Listed/ Awaiting Listing 20,500.00 Commercial Paper / Certificate of Deposit Government Securities Treasury Bills FRN Securitised Debt Public Sector Unit Bonds Zero Coupon Bonds Others (REPO) 9,708.12 26,549.51 2. DEPOSITS Call Deposits with Scheduled Banks Bank Deposits 1,849.98 45,500.00 Margin Money Deposit for CCIL 3. OTHER CURRENT ASSETS Cash & Bank Balance 952.47 1,996.91 Others 6,786.54 895.13 4. DEFERED REVENUE EXPENSES(to the extent not written off) 4,396.99 5,496.99 TOTAL 239,455.76 189,336.09 Abridged Audited Revenue Account and Appropriation Account for the year ended d Mar arch 31, 2006 31.03.2006 31.03.2005 PARTICULARS Amount in Rs. lacs 1. INCOME Dividends 2,385.81 10.10 Interest 1,137.53 363.98 rofit on sale of Investments (Other than Inter Scheme Transfer /Sale) 37,679.25 23.27 Profit on sale of Inter Scheme Investments 2,262.25 Other Income Unrealised Appreciation in the value of Investments TOTAL 43,464.83 397.35 2. EXPENSES AND LOSSES Loss on Sale / Redemption of Investments 2,557.89 (other than Interscheme Transfer / Sale) Loss on InterScheme transfer of Investments 525.33 Management Fees 1,802.82 14.21 Trusteeship Fees 0.68 Custodian Fees 78.22 2.78 Audit Fees 6.83 3.63 Registrar & Transfer Agent s Fees 97.35 0.18 Marketing and Distribution Expenses Other Operating Expenses(Bal Figure) 1,463.84 6.53 Diminution in the value of Investments Loss on Option Preliminary Expenses Written off 1,100.00 3.01 Unrealised Depreciation in the value of Investments 1,521.48 Incentive paid TOTAL 7,632.96 1,551.83 Net Surplus / (Deficit) for the year / period 35,831.87 (1,154.48) APPROPRIATION ACCOUNT Net Surplus / (Deficit) brought forward from previous year (1,154.48) Net Surplus / (Deficit) for the year 35,831.87 (1,154.48) Less:Appreciation in the value of Investments for the previous year Add:depriciation Of Previous year written off. 1,521.48 Net available Surplus / (Deficit) 36,198.88 (1,154.48) Add : Transferred from Equalisation account Add : Transferred from unit Premium Reserve Less : Dividend distributed (Including Distribution Tax) Less : Transferred to Equalisation account 2,564.51 Less : Bonus distributed Net Surplus / (Deficit) carried forward 33,634.36 (1,154.48) Annual Report 2005 2006 6
Historical per unit statistics for the year ended March 31, 2006 PARTICULARS Amount in Rs. lacs Period 01.04.05 01.04.04 31.03.06 31.03.05 Per Unit Particulars (Rupees) Face Value 10.00 10.00 Net Asset Value Growth Plan 18.4779 9.9382 Dividend Plan 18.4779 9.9382 Bonus Plan 18.4779 9.9382 Income Other than profit on sale of investment 0.2978 0.021 From profit on interscheme sales/transfer of Investments 0.1912 0.000 From profit on sale of investment to third party 3.1850 0.001 Gross Income 3.6740 0.022 Expenses & Losses Aggregate of expenses,writeoff,amortisation and Charges 0.3846 0.002 Loss on sale/redemption of Investments 0.2606 0.000 Provision for depreciation in value of investments Provision for Loss on Securities Gross Expenditure 0.6452 0.002 Net Income 3.0289 0.021 Unrealised appreciation in value of investments 6.7523 0.030 Unprovided depreciation in value of investments 0.114 Ratio of expenses to average net assets 1.8860 1.890 Ratio of gross income to average net assets 23.7627 27.440 Repurchase Price Highest Growth Plan 18.4779 10.0000 Dividend Plan 18.4779 10.0000 Bonus Plan 18.4779 10.0000 Lowest Growth Plan 9.6571 9.9382 Dividend Plan 9.6571 9.9382 Bonus Plan 9.6571 9.9382 Resale Price Highest Growth Plan 18.8936 10.1618 Dividend Plan 18.8936 10.1618 Bonus Plan 18.8936 10.0000 Lowest Growth Plan 9.8743 10.0000 Dividend Plan 9.8743 9.9382 Bonus Plan 9.8743 10.0000 Trading Price Highest NA NA Lowest NA NA Price Earning Ratio Highest NA NA Lowest NA NA Annual Report 2005 2006 7