HDFC Asset Management Company Limited Q3 FY18-19 1 Strong Macro - - PowerPoint PPT Presentation

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HDFC Asset Management Company Limited Q3 FY18-19 1 Strong Macro - - PowerPoint PPT Presentation

HDFC Asset Management Company Limited Q3 FY18-19 1 Strong Macro Fundamentals and Industry Growth Enablers High Savings Culture ..Shift to Financial Assets.. Growing Household Savings (Rs trn) (1) % of Gross Household Savings (1) 100% 0.5


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HDFC Asset Management Company Limited

Q3 FY18-19

1

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High Savings Culture…

Growing Household Savings (Rs trn) (1)

____________________ (1) Source: MOSPI, CRISIL Research; (2) Source: RBI, CSO, CRISIL Research; (3) Excluding Trade debt (Net); (4) Source: AMFI, RBI, CRISIL Research; Note: Bank deposits includes nationalised banks, private sector banks and foreign banks

..Shift to Financial Assets..

Strong Macro Fundamentals and Industry Growth Enablers

…With Increasing Preference for Mutual Funds

Mutual Fund AUM Reducing the Gap with Bank deposits(4)

7.0 12.3 21.4 67.2 91.9 104.0 0.0 50.0 100.0 150.0 FY13 FY16 FY18 Mutual Fund AUM Bank Deposits

(Rs. trn)

10.4% 40% 41% 45% 45% 54% 49% 60% 59% 55% 55% 46% 51% 0% 20% 40% 60% 80% 100% FY12 FY13 FY14 FY15 FY16 FY17 Gross financial savings Savings in physical assets (inc Gold/Silver)

% of Gross Household Savings(1)

9.3 10.6 11.9 12.6 15.2 14.0 18.8 13.9 14.7 14.2 15.1 12.7 14.0 0.3 0.4 0.4 0.5 0.5 0.5 (2.9) (3.3) (3.6) (3.8) (3.9) (3.7) (6.7) (5) 5 10 15 20 25 30 FY12 FY13 FY14 FY15 FY16 FY17 FY 18 Gross Financial Savings Savings in Physical Assets Gold and Silver Financial Liabilities

  • Rs. bn

Financial Savings Equity-oriented MF Net Sales Currency Share (%) Total Deposits’ Share (%) Total Financial Savings(3) FY12 11% 58% 9,282 5 FY13 11% 57% 10,609 (144) FY14 8% 56% 11,859 (113) FY15 11% 49% 12,531 809 FY16 13% 42% 15,167 938 FY17 (23%) 69% 14,005 1,070 FY18 25% 26% 18,767 2,608 Financial Savings and Equity Inflows into Mutual Funds (2)

20.6% 13.4%

2

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____________________ (1) Source: IMF (GDP, CY 2018), IIFA (MF AUM, CY 2018:Q1); only open-ended funds have been considered. (2) Source: Bloomberg (Market-Cap CY 2018:Q1), IIFA (MF AUM, CY 2018:Q1); only open-ended funds have been considered; balanced/mixed funds are assumed to be composed of 70% equity and 30% debt.

72% 48% 45% 31% 28% 28% 27% 19% 13% 7% 6% 5% 4% 4%

World Average 33%

0% 10% 20% 30% 40% 50% 60% 70% 80%

Australia USA Germany UK Brazil France Japan

  • S. Africa

Italy Mexico Korea India China Chile

Strong Macro Fundamentals and Industry Growth Enablers

Structural Shift in Savings Habit Supporting the Future Growth Runway for the Mutual Fund Industry

Mutual Fund AUM as a % of GDP(1) Mutual Fund - Equity AUM as a % Market Cap.(2)

149% 108% 85% 68% 67% 59% 49% 37% 29% 20% 15% 13% 11% 10%

World Average 59%

0% 20% 40% 60% 80% 100% 120% 140% 160%

Australia USA France UK Brazil Germany S.Africa Japan Korea Chile China Italy India Mexico

3

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Net Sales (₹ bn) AUM (₹ trn) 1.9 2.1 3.7 4.3 6.3 9.4 9.2 9.8 10.2 4.0 4.7 5.3 5.8 7.6 8.3 8.0 7.3 7.0 0.9 1.3 1.6 2.0 3.1 2.9 3.4 3.9 4.5 0.2 0.2 0.2 0.2 0.5 0.8 0.8 1.0 1.1 7.0 8.3 10.8 12.3 17.5 21.3 21.4 22.0 22.9 Mar-13 Mar-14 Mar-15 Mar-16 Mar-17 Dec-17 Mar-18 Sep-18 Dec-18

Mar-14 to Dec-18 CAGR: Overall: 23%; Equity: 34%; Debt: 10%; Liquid: 32%

34% 35% 36% 43%

Equity as a % of Total

____________________ Source: AMFI AUM excluding FOF – domestic; equity includes balanced funds; others include Liquid / Money Market, Gold ETFs, other ETFs and FOF – investing overseas

Industry - AUM and Net Sales

Equity Debt Liquid Others

(144) (113) 809 938 1,070 2,608 1,026 870 395 128 159 1,173 (88) (1,359) 32 241 98 171 958 (29) 933 7 17 (1) 74 229 227 268 FY13 FY14 FY15 FY16 FY17 FY18 FYTD19 44% Dec-18 Arbitrage AUM: ₹ 0.57 trn FYTD19 Arbitrage net flows: ₹ 16.68 bn Quarterly net sales 45% 44% 757 314 308 (112) (486) (478) (744) (711) 425 122 2 154 Q3FY18 Q2FY19 Q3FY19 Yearly net sales 25% 27%

4

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MAAUM of B-15/B-30(1)(2)

31 37 43 62 71 77 80 Apr-16 Sep-16 Mar-17 Dec-17 Mar-18 Sep-18 Dec-18

SIP Flows(1)

(SIP contribution in ₹ bn)

7,572 10,185 11,365 15,487 18,442 20,743 20,457 1,392 1,892 2,187 3,091 4,265 3,570 3,628

Mar-14 Mar-15 Mar-16 Mar-17 Mar-18 Sep-18 Dec-18 T-15 B-15 MAAUM in ₹ bn Individual Folios (mm)

MAAUM of Individual Investors(1)(2)(3)

(MAAUM ₹ trn) Share of B-15 MAAUM

____________________ (1) Source: AMFI, (2) Based on monthly average AUM of the last month of the period; (3) Percentages in brackets denote % share of total

3.9 5.6 6.2 8.5 11.4 11.7 13.0 12.9 5.0 6.5 7.4 10.1 11.2 11.0 11.3 11.2

Mar-14 Mar-15 Mar-16 Mar-17 Dec-17 Mar-18 Sep-18 Dec-18 Individual Investors Institutional Investors

(49%) (51%) (46%) (54%) (55%) (45%) (54%) (46%)

Individual / Institutional MAAUM, SIP Flows, B-15/B30

41.4 47.2 54.8 66.1 77.5 16% 16% 17% 19% 15% T-30 B-30 B15 B30 79.8 15% 70.9 10.1 11.3 13.5 18.8 24.4 25.4 21.1

  • No. of SIP Accounts (mm)

(47%) (53%) (51%) (49%) (46%) (54%)

16%

(54%) (46%)

39.2

5

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HDFC AMC at a glance

____________________ (1) As of Dec 31, 2018 / for Dec 2018; (2) Includes one representative office in Dubai; (3) Includes advisory mandates; (4) USD/INR conversion rate: ₹69.7675 Source: Internal

Assets Under Management(1)

₹ 3,291 bn

US$ 47.2 bn

48%

Equity-Oriented

Assets

₹ 1,580 bn

US$ 22.7 bn

52%

Non-Equity Oriented

Assets

₹ 1,710 bn

US$ 24.5 bn

₹ 91.6 bn

PMS & SMA AUM(1) (3)

8.9 mm

Live Accounts(1)

210 Branches(1)(2); 75k+ Empaneled

Distribution Partners

1,167 Employees(1) ₹ 2,033 bn

Individual MAAUM(1)

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____________________ (1) Source: Internal (2) Source: Internal, AMFI

HDFC MF, 14.4%

Dec-2018

Market Share in Total AUM(2)

Total AUM and Market Share

Total AUM(1)

938 1,089 1,506 1,656 2,306 2,933 2,920 2,926 3,291

Mar-13 Mar-14 Mar-15 Mar-16 Mar-17 Dec-17 Mar-18 Sep-18 Dec-18 YoY 12%

HDFC MF, 13.3%

Sep-2018

HDFC MF, 13.8%

Dec-2017

₹ billion

*Due to sharp increase in AUM of liquid funds

*

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____________________ (1) Source: Internal (2) Source: AMFI, Internal Actively managed equity-oriented AUM excludes index and arbitrage funds from equity-oriented funds

#1 Market Share in Actively Managed Equity-oriented AUM(2)

Actively Managed Equity-oriented AUM and Market Share

Actively Managed Equity-oriented AUM(1)

390 406 675 629 957 1,496 1,449 1,476 1,535 Mar-13 Mar-14 Mar-15 Mar-16 Mar-17 Dec-17 Mar-18 Sep-18 Dec-18

YoY 3 % HDFC MF 16.0%

Dec-2018

HDFC MF 16.0%

Sep-2018

HDFC MF 17.1%

Dec-2017

₹ billion 8

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____________________ (1) Source: Internal (2) Source: AMFI

AUM by Segment – HDFC AMC and Industry

Industry AUM by Segment(2) HDFC AMC MF AUM by Segment (1)

Equity 48.0% Debt 27.8% Liquid 23.9% Others 0.3%

Dec-2018

Equity 51.9% Debt 32.3% Liquid 15.6% Others 0.2%

Sep-2018

Equity 53.0% Debt 36.0% Liquid 10.8% Others 0.3%

Dec-2017

Equity 44.8% Debt 30.7% Liquid 19.5% Others 5.0%

Dec-2018

Equity 44.4% Debt 33.3% Liquid 17.9% Others 4.4%

Sep-2018

Equity 44.1% Debt 38.8% Liquid 13.5% Others 3.6%

Dec-2017

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54.6% 56.3% 52.8% 56.0% 62.2% 62.2% 64.5% 61.8% 53.6% Mar-14 Mar-15 Mar-16 Mar-17 Dec-17 Mar-18 Sep-18 Dec-18 Industry (Dec-18) 4.44 5.14 5.55 6.15 7.56 8.05 8.62 8.86 Mar-14 Mar-15 Mar-16 Mar-17 Dec-17 Mar-18 Sep-18 Dec-18

____________________ (1) Source: Internal (2) Source: AMFI

Individual Investors – no of Accounts & MAAUM

Individual customer prefer equity-oriented schemes and stay invested for longer periods

Mar-14 to Dec-18 CAGR: 28% Individual MAAUM (Rs bn)(1)

Number of Live Individual Accounts (in millions) (1)

YoY 17% YoY 10%

931 945 1,350 1,863 1,985 2,033

Individual MAAUM % of Total(1)

(2)

1,850 624

10

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Source: AMFI , based on monthly average AUM

Most Preferred Choice of Individual Investors

15.4% 13.9% 9.5% 9.4% 9.3%

HDFC MF ICICI Pru MF ABSL MF SBI MF Reliance MF

Individual Assets Market Share (Dec-18) Individual Assets Market Share (Sep-18) 16.0% 14.7% 9.9% 9.8% 8.3%

HDFC MF ICICI Pru MF ABSL MF Reliance MF SBI MF

Individual Assets Market Share (Dec-17) 15.1% 14.0% 9.8% 9.4% 9.1%

HDFC MF ICICI Pru MF ABSL MF Reliance MF SBI MF 11

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Unique Investors- HDFC AMC vs MF Industry

4.3 5.1 5.2 15.7 18.4 19.1

0.0 5.0 10.0 15.0 20.0 25.0

Dec’17 Sep'18 Dec'18 (Unique Investors in million)

HDFC Mutual Fund Mutual Fund Industry

Unique Investors

HDFC MF share in Mutual Fund Industry

28% 28% 27%

Source: CAMS. Note: Unique Investors include PANs/PEKRNs of all unit holders & Guardians

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Strong Growth in Systematic Transactions (₹ mm) Long Tenure SIP Book(1)

Quality Long-term Inflows Through Systematic Transactions

Systematic Transactions

____________________ Source: Internal (1) Based on tenure at the time of registration of all live SIPs during Dec-18

3,082 4,319 4,745 4,999 4,854 5,494 6,768 10,698 11,531 11,470 11,689 Mar-14 Sep-14 Mar-15 Sep-15 Mar-16 Sep-16 Mar-17 Dec-17 Mar-18 Sep-18 Dec-18 3.36

77.1% 64.2% Over 5 Years Over 10 Years

Strong and growing “Order Book” to provide predictable flows

#mm systematic transactions

1.23

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HDFC Bank 12.9% Banks, 20.3% IFAs, 39.9% National Distributors, 24.6% Direct, 15.2%

Dec-2017

Multi-channel Distribution Network

Well Diversified Distribution Channel

Total AUM (Dec-18) Equity-oriented AUM (Dec-18)

HDFC Bank 7.8% Banks, 13.9% IFAs 28.5% National Distributors 18.0% Direct 39.7%

HDFC Bank 9.1% Banks, 15.8% IFAs 29.0% National Distributors 20.8% Direct 34.5%

Sep-2018

HDFC Bank 9.3% Banks, 17% IFAs, 28.4% National Distributors, 22.5% Direct, 32.2%

Dec-2017

Source: Internal HDFC Bank 11.3% Banks, 17.8% IFAs, 40.7% National Distributors, 24.1% Direct, 17.4%

Sep-2018

HDFC Bank 10.9% Banks, 17.2% IFAs 43.1% National Distributors 22.0% Direct 17.7%

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SBI MF, 17.8% HDFC MF, 11.9% Reliance MF, 11.8% UTI MF, 11.2% ICICI Pru MF, 10.9% Others, 36.4%

#2 Player in B-30 Markets(1)

____________________ (1) Source: Internal (2) As of Dec 31, 2018. Includes one representative office in Dubai;

Geographic Spread

  • c. 75k+ empaneled distribution partners

Network of 210 branches with 134 in B-30 cities(2)

B 30, 14.3% T 30, 85.7%

Total MAAUM by T30 and B30 cities(1)

15

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Supported by Integrated Online Platform

30.1% 50.8% 69.9% 49.2% FY15 FY18

Electronic Physical

Electronic and Physical Transaction as % of Total Transactions

Strong online presence - dedicated separate digital platforms distribution partners and customers FY15-18 CAGR of 46.2% for electronic transactions 17.4% transaction are through HDFC MFOnline and mobile application

Strong Digital Presence

Digitization Across Functions

Source: Internal

48.2% 71.2% 51.8% 28.8% Q3FY18 Q3FY19

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  • Amendments in TER as per SEBI notification dated 13th December 2018, effective from

1st April 2019.

  • Effective 22nd October 2018, regulator has made following key changes
  • All scheme related expenses, including distributor commissions, to be paid from

scheme accounts only and not from the AMC accounts.

  • Ban on upfront commission.

Recent Developments

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Financials

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Ind AS Transition

▪ Adoption of Indian Accounting Standards (Ind AS) with effect from 1st April 2018. ▪ Results of Q3 FY19 & 9M FY19 are prepared as per Ind AS requirements. ▪ Accordingly figures for Q3 FY18 & 9M FY18 have been restated. Key Changes Remarks

Investments Investments are fair valued through P/L except certain debt instruments which are valued at amortised cost. Employee Stock Option Schemes (ESOS) Obligations under outstanding & unvested ESOS have to be fair valued and amortised as part of employee benefit expenses over the period of vesting. Others Interest free refundable security deposits are required to be measured at present value using an appropriate discount rate. Deferred Tax adjustments on GAAP differences (where required).

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PAT Reconciliation- Previous GAAP Vs Ind AS – Q3 FY 18

(Rs. mm) Particulars Q3 FY 18 Net profit after tax as reported under Previous GAAP 1,846 Adjustment increasing / (decreasing) net profit after tax as reported under Previous GAAP (net of tax): Fair value change in investments 139 Fair valuation of employee stock options (33) Others 2 Actuarial (gain) / loss on employee defined benefit plan recognised in 'Other Comprehensive Income' (3) Net Profit after tax as per Ind AS 1,951 Other Comprehensive Income 2 Total Comprehensive Income (net of tax) as per Ind AS 1,953

20

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Financials Summary – Nine months ended Earnings

(Rs. mm) Particulars 9M FY19 9M FY18 Change Revenue from Operations 14,287 12,881 11% Other Income 1,206 817 48% Total Revenue 15,493 13,698 13% Expenses Employee Benefit Expense 1,587 1,422 12% Depreciation and Amortization Expense 94 70 34% Business Development and Other Expenses 4,211 4,394

  • 4%

Total Expenses 5,892 5,886 0% Profit before tax 9,601 7,812 23% Tax Expenses 3,057 2,417 26% Profit after tax 6,544 5,395 21% Other Comprehensive Income (Net of Tax) (7) (5) 44% Total Comprehensive Income 6,537 5,390 21% Particulars 9M FY19 9M FY18 Change Revenue from Operations 14,287 12,881 11% Total Expenses* 5,590 5,886

  • 5%

Operating Profit from core AM business* 8,697 6,995 24% *Adjusted for non recurring expenses

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Financials Summary – Quarterly Earnings

(Rs. mm) Particulars Q3 FY19 Q3 FY18 Change Revenue from Operations 4,771 4,676 2% Other Income 559 276 103% Total Revenue 5,330 4,952 8% Expenses Employee Benefit Expense 505 503 0% Depreciation and Amortization Expense 37 25 49% Business Development and Other Expenses 1,105 1,573

  • 30%

Total Expenses 1,647 2,101

  • 22%

Profit before tax 3,683 2,851 29% Tax Expenses 1,250 900 39% Profit after tax 2,433 1,951 25% Other Comprehensive Income (Net of Tax) (9) 2

  • 453%

Total Comprehensive Income 2,424 1,953 24% Particulars Q3 FY19 Q3 FY18 Change Revenue from Operations 4,771 4,676 2% Total Expenses* 1,557 2,101

  • 26%

Operating Profit from core AM business* 3,214 2,575 25% *Adjusted for non recurring expenses

22

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Operating Profit Margin

34 35 34 21 31 19 29 25 29 44 33 34 63 60 63 65 64 53

9M FY18 9M FY19 HDFC AMC Reliance AMC ICICI Pru AMC ABSL AMC Operating Revenue Operating Expenses PBT&OI

____________________ Based on internal computations

FY18

FY18 as per previous GAAP 9M FY18 as per Ind AS 9M FY19 as per Ind AS

(bps of AAUM) *

*Adjusted for non recurring expenses: 36

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7.22 6.26 5.05 3.31 3.22 FY18 ICICI Pru AMC Reliance AMC SBI AMC ABSL AMC 5.50 4.81 4.05 2.24 2.21 FY17 ICICI Pru AMC Reliance AMC SBI AMC ABSL AMC

Most profitable asset management company in India in terms of net profits since FY14

____________________ Source: Annual reports, AMFI, CRISIL Research Note- The above is as per previous GAAP.

Profitable…

FY18 Profit after tax (Rs bn) FY17 Profit after tax (Rs bn)

24

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Financials Summary – Historical Trends

Revenue from Operations

9,527 12,260 14,800 17,598 FY15 FY16 FY17 FY18

Operating Profit

5,459 5,487 6,919 9,550 FY15 FY16 FY17 FY18

Profit before tax

5,877 6,005 7,998 10,625 FY15 FY16 FY17 FY18

Profit after tax

3,925 4,074 5,502 7,216 FY15 FY16 FY17 FY18

Note-The above is (Excluding REP Performance Fee). The preparation is as per previous GAAP.

Figures In Rs mm

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ROE and Dividend Payout Ratio

____________________ (1) Calculated as Profit After Tax divided by average Net Worth (2) Including dividend distribution tax

40% + Return on Equity(1) Consistently improving Dividend Payout Ratio(2)

40%

40% + return on average net worth every year since FY15

FY15

41.1%

FY16

42.1%

FY17

42.8%

FY18

40.3%

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Thank You

27

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Disclaimer

This presentation is for information purposes only and does not constitute an offer or invitation to sell or the recommendation or solicitation of an offer or invitation to purchase any securities (“Securities”) of HDFC Asset Management Company Limited (the “Company”) in India, the United States, Canada, the People’s Republic of China, Japan or any other jurisdiction. This document has not been and will not be reviewed or approved by a regulatory authority in India or by any stock exchange in India. The Company has prepared this presentation based on information available to it, including information derived from public sources that have not been independently verified. No representation or warranty, express or implied, is provided in relation to the fairness, accuracy, correctness, completeness or reliability of the information, opinions or conclusions expressed herein. The Company may alter, modify or otherwise change in any manner the contents of this presentation, without obligation to notify any person of such revision or changes. Past performance may or may not be sustained in future and should not be considered as, indicative of future results. The presentation may contain information about HDFC Mutual which has to be read and understood in the context of the Company’s business, its operations and performance, and should not be construed as any form of communication/advertisement of HDFC Mutual Fund. The information contained in this presentation is strictly confidential and is intended solely for your reference and shall not be reproduced (in whole or in part), retransmitted, summarized or distributed to any other persons without Company’s prior written consent This presentation may contain, words or phrases like will”, “aim” “believe”, “expect”, “will continue”, “anticipate”, “estimate” and similar expressions or variations of these expressions, that are “forward-looking statements that involve risks and uncertainties and are based on certain beliefs, plans and expectations

  • f the Company. Actual future performance, outcomes and results may differ materially from those expressed in forward-looking statements as a result of a

number of risks, uncertainties and assumptions. Although the Company believes that such forward-looking statements are based on reasonable assumptions, it can give no assurance that such expectations will be met. Representative examples of factors that could affect the accuracy of forward-looking statements include (without limitation) the condition of, and changes in, India’s political and economic status, government policies, applicable laws, global capital markets, the mutual fund industry in India, and international and domestic events having a bearing on the Company’s business, and such other factors beyond the Company’s

  • control. You are cautioned not to place undue reliance on these forward-looking statements, which are based on current views of the Company’s management on

future events. Further, nothing in this presentation should be construed as constituting legal, business, tax or financial advice or a recommendation regarding the

  • securities. None of the Company or any of its affiliates, advisers or representatives accepts any liability whatsoever for any loss howsoever arising from any

information presented or contained in this presentation. Before acting on any information you should consider the appropriateness of the information having regard to these matters, and in particular, you should seek independent financial advice. Definitions AUM refers to Assets Under Management as on end of any given month/period MAAUM refers to a given month’s average Assets Under Management QAAUM refers to a given quarter’s average Assets Under Management AAAUM refers to a given year’s average Assets Under Management Unless otherwise stated, the above definitions are used for Mutual Fund Assets under management 28