ANNUAL REPORT 2008-09 BOARD OF TRUSTEES Justice S Mohan, Independent Trustee Amitabha Ghosh Associate Trustee S R Hegde ,Independent

Trustee P V Rao ,Independent Trustee SAHARA MUTUAL FUND 97-98, ATLANTA Nariman Point Mumbai-400 021. SPONSOR Sahara India Financial Corporation Limited Sahara India Bhavan Kapoorthala Complex Lucknow-226024 INVESTMENT MANAGER Sahara Asset Management Company Private Limited 97-98, ATLANTA Nariman Point Mumbai-400 021. REGISTRAR AND TRANSFER AGENT Karvy Computer Share Private Limited 21, Avenue 4, Street No 1 Banjara Hills, Hyderabad -500034. CUSTODIAN HDFC BANK LTD Kamala Mills Compound Senapati Bapat Marg Lower Parel Mumbai-400013 STATUTORY AUDITORS Chaturvedi & Co

Chartered Accountants 81, Mittal Chambers Nariman Point Mumbai- 400.21

REPORT OF THE TRUSTEES W e are pleased to present before you the ANNUAL REPORT of SAHARA MUTUAL FUND for the year ended March 31, 2009. Sahara Mutual Fund (formerly known us First India Mutual Fund) has been constituted as a Trust on 18 July, 1996 in th accordance with the provisions of the Indian Trust Act, 1882 and is duly registered under the Indian Registration Act, 1908. The Fund is registered with SEBI under Registration No.:MF/030/96/0. The Trustees have entered into an Investment Management Agreement dated 18 July 1996 with Sahara Asset Management Company Private Limited Ltd (formerly First India Asset th Management (P) Ltd to function as the Investment Manager for all the Schemes of Sahara Mutual Fund. The Sponsor to the Mutual Fund is Sahara India Financial Corporation Limited and has contributed an initial amount of Rs.1 lakh as the Trust Corpus. The Board of Trustees is the exclusive owner of the Trust Fund and holds the same in trust for the benefit of the unit holders. The Board of Trustees has been discharging its duties and carrying out the responsibilities as provided in the Regulations and the Trust Deed. The Board of Trustees seeks to ensure that the Fund and the Schemes floated there under are managed by the

AMC in accordance with the Trust Deed, the Regulations, directions and guidelines issued by the SEBI, the Stock Exchanges, the Association of Mutual Funds in India and other regulatory agencies. OVERVIEW OF DEBT MARKETS IN 2008-09 The year was one of the toughest for the world economies since World War II. We saw centuries old institutions failing, one of the biggest corporations going bankrupt, millions losing their job worldwide. It began with valuing the sub-prime mortgage derivatives and home foreclosure causing problem to financial institutions. The RBI began the year with policy rate tightening and CRR and Repo rate both touched a high of 9%. The central banks across the world cut policy rates which apart from bring some relief to the financial system, fuelled commodity prices of crude, steel, gold and food prices. Inflation started sky rocketing starting the year with 7% and touched a thirteen year high of 12.63%. Banks suffered losses on account of mark-to-market their investment portfolios which called for fresh capitalization of various banks. Failure of Lehman Brothers resulted in interbank credit almost drying up. The economic activity came to literal stand still. The only activity could be seen was in sovereign bonds. In India, corporate started to feel the heat with their drawing limits either curtailed or not renewed. The demand for credit from corporate could not be met due to the fear of NPAs and future prospects. To counter this situation RBI kept on easing policy rates like CRR and Repo in an attempt to make the credit availability on easy terms. The Reserve bank of India in its July review had forecasted the GDP growth at 7.7% got revised to 7.1% in January09 got again revised to 6.5 7%. W ith the fall in consumption in developed economies, exports of developing nations took a hit. The Rupee which began the year at Rs.39.88 / USD depreciated around 27% closing at Rs.50.64 / USD on 31st March09. The gilt prices also witnessed volatile trend during the year mirroring the liquidity conditions. OVERVIEW OF EQUITY MARKETS IN 2008-09 The equity markets in India and across the world went through a phase of turbulence in 2008-09. Indian equity markets, which were increasingly getting integrated with the world financial system, could not escape the growing uncertainty in the world financial markets and thus reacted with volatility wiping out most of the gains of the last three years and closing 2008-09 with a loss of 36%. Globally, growth seems to have slowed down considerably as fundamentally economies have been weakening on the back of the global turmoil. Even India and China have not been able to escape the bearish trend on the back of manufacturing slump, exports plunge, job losses and weak consumer confidence. Though the investors across the world still believe in long term growth story of India, the liquidity problems in their home countries and growing risk averseness led them to withdraw money from India thus resulting in a prolonged correction in the equity markets. The major concern at the beginning of the financial year were the high commodity and oil prices which rendered the inflation in the Indian economy run into double digit figures which in turn prompted the RBI to respond with increasing its benchmark rates repo & reverse repo to as high as 9.00%. High commodity prices coupled with high interest rates began to eat into the profitability of the corporates especially those belonging to the SME segment. The oil price correction led to the conclusion that the world financial crises that originated in the US and some European Banks has now come to the fore and thus have caused

demand destruction globally as the sources of money dried up and there was no credit flowing in the system. The subsequent failure of Lehman Brothers, due to fall in asset prices and credit crunch, further exacerbated the credit crisis which catapulted the world economy into the throes of recession. The US economy contracted by over 6.00% (annualized) in the last two quarters and the other developed economies are also now in the recessionary trend - all this despite the massive bailout packages into trillions of dollars date with more to come. The focus of these bailout packages has been to stimulated the demand for early economic recoveries. India too has been impacted by the global economic crisis. After clocking annual growth of 8.9% on an average over the last five years (2003-08), India was headed for a cyclical downturn in 2008-09. But the growth moderation has been much sharper because of the negative impact of the world financial crisis. In fact, in the first two quarters of 2008-09, the growth slowdown was quite modest; the full impact of the crisis began to be felt in the third quarter, which recorded a sharp downturn and registered a low 5.5% GDP growth. For the first time in seven years, exports declined in the second half of the financial year. Recent data indicate that the demand for bank credit has slackened despite comfortable liquidity in the system.

Amidst all the gloomy news surrounding us, in both the Indian as well as global context it is heartening that the regulators as well as governments have responded with measures from time to time to stimulate demand. The Government of India announced three fiscal stimulus packages during December 2008-February 2009 along with RBI easing the monetary policy by reducing its benchmark rates to 4.75% & 3.25% (repo and reverse repo respectively). These stimulus packages came on top of an already announced expanded safety-net program for the rural poor, the farm loan waiver package and payout following the Sixth Pay Commission report, all of which too added to stimulating demand. The inflation levels in the economy declined to 0.26% by March 28,2009 as compared to intra-year high of 12.91% recorded on August 2, 2008. As the economic indicators begin to point towards a recovery, we witnessed equity markets gaining some of the last ground towards the end of the financial year. It seems that markets priced in the worst and are now aligned to consider the underlying growth potential in the Indian economy. It is now increasingly expected that domestic demand clubbed with high rate of savings in the Indian economy, along with highly robust, well regulated banking and financial system would soon propel India back onto the path of growth. TRUSTEES: The Board of Trustees as on date comprise Justice S Mohan, Independent Trustee, PERFORMANCE . (a) EQUITY SCHEMES: Mr. Amitabha Ghosh, Nominee of the Sponsor, Mr. S. R. Hegde, Independent Trustee and Mr. P.V. Rao, Independent Trustee.

1. Sahara Tax Gain Fund Investment Objective : The scheme objective is to provide immediate tax relief and long term growth of capital to investors by investing upto 85 % in equity and equity related instruments. Returns: Performance as of 1 year Inception March 31, 2009 Inception date NAV (%) April 1, 1997 BSE 200 (%) Converted into an open ended fund from November 7, 2002. The 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; 2. Sahara Growth Fund. Investment Objective: The basic objective of Sahara Growth Fund is to achieve capital appreciation by investing in equity and equity related instruments Returns: Performance as of 1 year Inception March 31, 2009 inception date NAV (%) July 22, 2002 CNX Nifty (%) (36.19) (3.89) (11.26) 18.05 The price and redemption value of the units, and income from them, can go up as well as down with the fluctuations in (25.67) 2.75 18.90 26.33 3 years 5 years Since (40.98) (6.89) 9.23 10.80 (32.47) (5.78) 14.84 24.13 3 years 5 years Since

the market value of its underlying investments; 3. Sahara Mid Cap Fund. Investment Objective: The basic objective is to achieve long term capital growth at medium level of risks by investing primarily in Midcap stocks. Returns: Performance as of 1 year March 31, 2009 NAV (%) December 31, CNX 500 (%) 2004 The 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; 4. Sahara Wealth plus Fund. Investment Objective: The primary objective of the scheme would be to invest equity and equity related instruments of companies that would be wealth builders in the long term. Returns: Performance as of 1 year 3 years Since Inception date (45.40) (10.71) 5.36 (45.41) (12.92) 3.60 3 years Since inception Inception date

March 31, 2009 inception NAV (%) VPO (34.87) (7.55) 2.50 September 1, FPO (35.32) (8.18) 1.81 2005 CNX 500 (%) (40.02) (7.61) 6.47 VPO Variable Pricing Option FPO Fixed Pricing Option The 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; 5. Sahara Infrastructure Fund. Investment Objective: The primary objective of the scheme is to provide income distribution and/or medium to long term capital gains by investing predominantly in equity / equity related instruments of companies in the infrastructure sector. Returns: Performance as of 1 year 3 years Since inception Inception date March 31, 2009 NAV (%) VPO (37.57) NA (3.12) April 3,2006 FPO (38.05) NA (3.80) Nifty (%) (36.19) NA (4.90) VPO Variable Pricing Option FPO Fixed Pricing Option The 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; 6. Sahara R.E.A.L Fund: (Retailing, Entertainment & Media, Auto & Auto Ancillaries and Logistics Fund). Investment Objective: The primary objective of the scheme is to provide long term capital gains by investing predominately in equity/equity related instruments of compani es in the Retailing, Entertainment & Media, Auto and Auto Ancillaries and Logistics sector. Returns: Performance as of 1 year 3 years Since

Inception date March 31, 2009 inception NAV (%) (43.99)) (41.00) NA November 27, 2007 (37.06) CNX Nifty (%) (36.19) NA VPO Variable Pricing Option FPO Fixed Pricing Option The 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; (b) DEBT SCHEMES 7. Sahara Income Fund. Investment Objective: The primary objective of the scheme is to generate regular income and growth of capital through investment in debt instruments, money market and related securities while at all times emphasizing the importance of capital preservation. Returns: Performance as of March 1 year 3 years 5 years Since Inception 31, 2009 inception date NAV (%) 16.046 10.561 7.117 7.325 February 22, 2002 CRISIL Composite Bond 7.354 6.418 4.518 NA* Fund Index (%) *as Index launched on March 31, 2002

The 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; 8. Sahara Liquid Fund. Investment Objective : The investment objective is to create a highly liquid portfolio of good quality debt as well as money market instruments with a view to provide high liquidity and reasonable returns to the unit holders, while at all times emphasizing the importance of capital preservation. Returns: Performance as of 1 year 3 years Since Inception date March 31, 2009 inception NAV (%) VPO 9.260 8.125 7.852 February 22, FPO 9.029 7.902 6.640 2002 CRISIL Liquid Fund Index (%) 8.806 7.562 NA*

* As Index launched on March 31,st, 2002. Face Value of Units Rs.1000/

FPO- Fixed Pricing Option VPO Variable Pricing Option The 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; 9. Sahara Gilt Fund. Investment Objective : The investment objective is to generate reasonable returns by investing in sovereign instruments issued by Central / State governments. Returns: Performance as of March 31, 1 year 3 years 5 years Since Inception 2009 inception date NAV (%) 19.481 11.041 6.490 6.803 February 22, I Sec Composite Index (%) 12.833 9.161 6.261 NA* 2002 * As Index launched on March 31,st, 2002. The 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; 10. Sahara Fixed Maturity Plan 395 Days Series 2 and 3 Investors under Sahara Fixed Maturity Plan 395 Days Series 2 and Series 3 were allotted units on March 10, 2008 and March 17, 2008 respectively. The NAV of Sahara FMP 395 Days Seri es 2 as on 31 March, 2009 under the growth st option stood at Rs.10.9790 and under the dividend option stood at Rs.10.9791. The NAV of Sahara FMP 395 Days Series 3 as on 31 March, 2009 under the growth option stood at Rs.11.0081 and under the dividend option stood at st Rs.11.0069.

11. Sahara Classic Fund: Investment Objective : The objective is to generate returns by investing in debt instruments including money market instruments and also to invest in equity and equity related instruments to seek capital appreciation. The one year return as on 31 March 2009 is 17.25 % as against the benchmark return is 7.869 %. st In addition two-equity oriented schemes, Sahara Power and Natural Resources Fund, Sahara Banking & Financial Services Fund and Sahara Interval Fund were launched duri ng the year. The Balance Sheet and the Revenue Account together with the notes thereon 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 and amendments thereto, as applicable. MARKET OUTLOOK FOR 2009-10 DEBT MARKETS The GDP growth rate is projected at 7.0 7.5% for the year 2009-2010. W ith congress Government getting clear mandate, we may expect the reforms to take priority. This growth can be achieved by fiscal stimulus, innovative public spending, comfortable external payments and prudent measures could stimulate demand. The banks may start lending rather than investing in sovereign debt. Considering the widening fiscal deficit situation, we may expect an upward revision in the borrowing programme. We expect the Ten year benchmark yields to harden further in the second half of the fiscal year. On the back of weakening fiscal situation, we expect the yield curve to move up in the year ahead. EQUITY MARKETS In the last year we weathered an unprecedented global liquidity crisis that led to a sharp slowdown in growth. While India was on a better wicket, we could not remain entirely immune to such a severe global contagion. Fortunately, governments internationally were very proactive and large doses of stimulatory medicine have been delivered. Indias growth is amongst the fastest in the world and with a locally driven economy - consensus estimates for Indias GDP growth range from 5- 6% vs. projected contraction in the world GDP by 1-1.5%. The fiscal year 2009-10 is likely to be one where specific sectors and company performances could be much better than broader market indices. The challenge will be to pick these stocks and sectors ahead of the market. The policy initiatives by the new government would be critical for a pick-up in investments in the short-term as well as for overall growth in the economy. The key would be to remain disciplined and focused on quality and well researched investments to deliver healthy results over a long term. Unclaimed Dividends & Redemptions Scheme

No of Unclaimed No. of Unclaimed Name Investors Dividend (Rs) Investors Redemption (Rs) Sahara Infrastructure Fund 35 239,530.67 25 124,475.22 Sahara Midcap Fund 84 141,400.01 51 267,352.14

2 1289.55 - Sahara Gilt Fund Sahara Growth Fund 7 22,336.71 2 19,528.70 Sahara Income Fund 17 11,286.22 8 36,862.60 Sahara R. E. A. L Fund. - - 1 10,378.70 Sahara Tax Gain Fund 213 281,104.71 7 20,363.42 Sahara Wealth Plus Fund - 58 447,543.01 STATUTORY INFORMATION a. The Sponsors are not responsible or liable for any loss resulting from the operation of the Schemes of the Fund beyond their initial contribution of Rs.1 lakh for setting up the Fund. b. The price and redemption value of the units, and income from them, can go up as well as down with fluctuations in the market value of its underlying investments. c. Full Annual Report is disclosed on the website (www.saharamutual.com) and shall be available for i nspection at the Head Office of the Mutual Fund. Present and prospective unit holders can obtain copy of the trust deed, the full Annual Report of the Fund / AMC. ACKNOWLEDGEMENTS The Trustees would like to thank all the investors for reposing their faith and trust in Sahara Mutual Fund. The

Trustees thank the Securities and Exchange Board of India, the Reserve Bank of India, the Sponsors, the Board of the Sahara Asset Management Company Private Limited, and Association of Mutual Funds in India for their support, operation and guidance during the peri od. W e are also thankful to the Auditors, Registrar and Transfer Agents, Custodian, Banks, AMFI Certified distributors and other service providers for their continuous support. The Trustees also appreciate the efforts made by the employees of Sahara Asset Management Company Private Limited and place on record their contribution in good performance of the schemes. W e look forward for your continued support and assure you of our commitment at all times in managing the schemes of Sahara Mutual Fund. On behalf of the Board of Trustees For SAHARA MUTUAL FUND Justice S Mohan Trustee Place: Mumbai Date: June 22, 2009 _________________________________________________________________________________________________ AUDITORS REPORT TO THE TRUSTEES OF SAHARA MUTUAL FUND 1. W e have audited the Balance Sheet of Sahara Mutual Fund Sahara Tax Gain Fund (the Scheme) as at March 31, 2009, and the related Revenue Account for the year ended on that date, annexed thereto. These financial statements are a responsibility of the Trustees of Sahara Mutual Fund and the management of Sahara Asset Management co-

Company Pri vate Limited (the Management). Our responsibility is to express an opinion on these financial statements based on our audit. 2. W e have conducted our audit in accordance with auditing standards generally accepted 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 the Management, as well as eval uating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. 3. W e have obtained all the information and explanations, which to the best of our knowledge and belief were necessary for the purpose of our audit. The Balance Sheet and the Revenue Account referred to above are in agreement with the books of account of the Scheme. 4. According to the explanations given to us and read with point no. 7.3A of Schedule 8 to the Financial Statements, appropriate amounts have been transferred by the scheme to Unit Premium Reserve Account and Income Equalization Account the basis for which has been changed in the current year from Management estimates to the best practice followed by the Industry. 5. In our opinion and to the best of our information and according to the explanations given to us: 5.1 The Balance Sheet and the Revenue Account together with the notes thereon give the information required by the Securities and Exchange Board of India (Mutual Funds) Regulations, 1996 and amendments thereto, as applicable and give a true and fair vi ew in conformity with the Accounting principles generally accepted in India i). in case of Balance Sheet of the state of affairs of the scheme as at March 31, 2009 and ii). in case of the Revenue account, of the deficit for the year ended on that date.

6. The Balance Sheet and the Revenue Account together with the notes thereon, 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 and amendments thereto, as applicable.