ASSOCIATION OF MUTUAL FUNDS IN INDIA INDIAN MUTUAL FUND INDUSTRY

GROWTH IN ASSETS UNDER MANAGEMENT Compounded Annual Growth Rate to Feb %

Estimates of Investors Survey of Indian Investors - June 2000

UNITHOLDING PATTERN OF MUTUAL FUND INDUSTRY AS ON MARCH 31, 2003 CategoryNumber Of Investors (Accounts) % To Total Investors (Accounts) Net Asset Value % To Total Net Asset Value Individuals 15,557, , NRIs/OCBs 84, FIIs 2, Corporates/ Institutions/ Others 324, , TOTAL 15,968, , Rs. In Crores Source: SEBI

SEGMENTWISE COMPOSITION OF MUTUAL FUND INDUSTRY AS ON FEBRUARY 29, 2004

CATEGORY / TYPE WISE COMPOSITION OF MUTUAL FUND SCHEMES

CURRENT STATUS  The industry is in the institution building phase – setting highest professional standards  Enhancing credibility through transparency of operation and frequency of disclosure  Consolidation through mergers and acquisitions [6+2]  Product range – conventional and new generation funds – sector specific, index funds, exchange traded funds, fixed maturity funds, systematic withdrawal, automatic redemption funds etc.  Since end 1999, moved away from assured return schemes  Predominance of non-individual investor base  Heavy concentration of investors from a limited number of cities

 Emergence of independent research bodies evaluating performance and providing ratings of funds  Generating investor awareness and investor interest in the industry CURRENT STATUS Contd..

REGULATORY FRAMEWORK  Well Regulated - Strictly Regulated Industry.  Regulation is comprehensive, sensitive and supportive of healthy development of industry. In most areas it matches with the best internationally.  Pro-active initiatives from the regulator. The Regulation is constantly reviewed and amended periodically. Guidelines on a variety of subjects such as valuation, benchmarking, disclosure issued regularly to match with best practices.  Yearly inspection of all mutual funds – a support to the healthy development.

 Self regulatory process is in built in Mutual Fund structure and set up.  While Mutual Fund functions in terms of the Trust Deed the AMC functions in terms of the Investment Management Agreement as approved by SEBI.  Separate Auditors for Asset Management Company and for Mutual Fund.  Trustees are first level Regulators.  Their general and specific duties and responsibilities are well spelt out. REGULATORY FRAMEWORK REGULATORY FRAMEWORK contd..

 Predominance of independent (2/3rd) trustees - Role of independent Trustees.  Quarterly compliance test and Certification by Trustees.  AMCs to record investment decisions and investment management process.  Partner relationship of SEBI with AMFI  close interactive working style  AMFI acts as a catalyst and initiator of many new standards and refinements of systems and procedures. REGULATORY FRAMEWORK REGULATORY FRAMEWORK contd..

IMPROVEMENT IN OPERATIONAL AREAS  Standard Offer document with comparative data.  Refinement in the Calculation of NAV.  Daily release of NAVs before 8.00 P.M and posting them on AMFI website.  Uniform methodology for Valuation of Non-Traded Securities – debt & equities.  Valuation of Government Securities.  Setting up Valuation Committee at the AMCs level.  Identification, Provisioning and Disclosure of Non-Performing Assets.  Disclosure standards - Mandatory disclosure of full portfolio twice a year.

 Quarterly and even monthly disclosure of portfolio by many funds.  Keeping investors informed – Audited reports to be sent to investors within a stipulated time – periodic communication to investors.  Release of redemption cheques within stipulated time and payment of penal interests for delayed payment.  Advertisement guidelines- general and those relating to Performance Advertisement.  Adoption of technology for quicker service - Online Transaction.  Suitable benchmarks being developed for different types of schemes.  Minimum level of risk management system being worked out. IMPROVEMENT IN OPERATIONAL AREAS contd….

 World over intermediaries selling mutual funds are licensed and regulated.  Beginning made towards regulation-AMFI’s initiatives  Launched Certification programme since July 2000 in association with NSE  Certification made mandatory from November 2001  Launched registration of certified intermediaries as AMFI Registered Mutual Fund Advisors (ARMFA)  Provided a broad set of guidelines known as AMFI Guidelines and Norms for Intermediaries (AGNI)  Registration of AMFI Certified Agents made mandatory from November 2002  Extensive training programmes being conducted countrywide REGULATION OF INTERMEDIARIES

 To promote and protect the interests of Mutual Funds and their unit holders.  To define and maintain high ethical and professional standards in the industry.  To enhance public awareness of Mutual Funds.  To represent industry views and suggestions to the Regulator, Government and the Central Bank ROLE ANDACTIVITIES OF ASSOCIATION OF MUTUAL FUNDS IN INDIA ROLE AND ACTIVITIES OF ASSOCIATION OF MUTUAL FUNDS IN INDIA AMFI is the industry association of all mutual funds operating in India. It is not a Self-Regulatory Organisation. It is a non- profit organisation whose objectives are:

PERFORMANCE (EQUITY DIVERSIFIED FUNDS) P2P Returns1 year (74 Sch) 3 years (65 Sch) 5 years (43 Sch) MF Average Returns BSE Sensex S&P CNX Nifty S&P CNX 500 Equity Index Equity mutual funds have outperformed all major indices over 1 year, 3 years & 5 years CRISIL FUND SERVICES * Data for year ending June 30, 2003

PERFORMANCE (EQUITY DIVERSIFIED FUNDS BASED ON AUM) * Data for year ending June 30, 2003 CRISIL FUND SERVICES OutperformanceUnderperformance PeriodNo. of SchCorpusNo. of SchCorpus 1 Year % % 3 Years % % 5 Years %61.86% Over 5 year period 98.14% of AUM has outperformed BSE Sensex Over a longer investment horizon a majority of schemes have outperformed BSE Sensex As of 30 th June 2003, out of 86 schemes 21 schemes are below par value, which amounts to 17.12% of AUM Over 5 year period 98.14% of AUM has outperformed BSE Sensex

PERFORMANCE (IT SECTOR FUNDS) IT mutual funds have managed to outperform the benchmark index with 2 of the schemes giving positive returns CRISIL FUND SERVICES * Data for year ending June 30, 2003 P2P Returns1 Year (10 Sch) MF Average Returns-7.28 BSE IT-22.49

PERFORMANCE (DEBT FUNDS) P2P Returns1 year (32Sch) 3 years (22 Sch) 5 years (14Sch) MF Average Returns FD Rates Small Saving Scheme Rates Debt mutual funds have consistently given better returns than the other fixed income investment avenues CRISIL FUND SERVICES * Data for year ending June 30, 2003

PERFORMANCE (DEBT FUNDS BASED ON AUM) * Data for year ending June 30, 2003 CRISIL FUND SERVICES OutperformanceUnderperformance PeriodNo. of SchCorpusNo. of SchCorpus 1 Year %20.65% 3 Years % 00.00% 5 Years %10.02% Almost 100% of AUM has given returns more than the prevalent FD rates.

PERFORMANCE (LIQUID FUNDS) P2P Returns1 year (26 Sch) 3 years (15 Sch) 5 years (9 Sch) MF Average Returns SB Rates Liquid mutual funds have consistently given much higher returns than Savings Bank A/C rates CRISIL FUND SERVICES * Data for year ending June 30, 2003

PERFORMANCE (BALANCED FUNDS) Balanced mutual funds have given much higher returns than the composite benchmarks constituting S&P CNX Nifty and the prevalent FD rates CRISIL FUND SERVICES * Data for year ending June 30, 2003 P2P Returns1 Year (30 Sch) MF Average Returns14.91 Composite Returns (Equity 60: Debt 40)7.51 Composite returns (Equity 40: Debt 60)7.67

PERFORMANCE (GILT FUNDS) Gilt mutual funds have given returns more than double the prevalent FD rates. CRISIL FUND SERVICES * Data for year ending June 30, 2003 P2P Returns1 Year (24 Sch) MF Average Returns year FD Rates8.00 Small saving schemes9.50

THANK YOU ASSOCIATION OF MUTUAL FUNDS IN INDIA