MANAGEMENT DISCUSSION AND ANALYSIS

The Fiscal year 2015-2016 has shown mixed emotions. On one count, it's been a tumultuous year for the investors and for the economy and therefore, there is a sense of relief that the year is behind us. However, the markets and economy remain optimistic about the future.

Since the Economic Survey and Budget were brsented earlier this year, the Indian economy has consolidated the gains achieved in restoring macroeconomic stability from the beginning of last fiscal year (FY2015).

The Economic Survey 2015-2016 brsented in the Parliament by the Finance Minister Mr. Arun Jaitley on February 26, 2016 projects India's economic growth rate in the range of 7 to 7.5% in 2016-2017, after 7.2% in 2014-2015 and 7.6% in 2015-2016. The growth rate of over 7% makes India the fastest growing major economy in the world. Further, Indian economy has taken imbrssive strides with reduction in macro-vulnerability due to reforms in key areas, pursuit of fiscal prudence and focus on price stability.

In spite of challenges and projection of lower GDP growth for 2015-2016 at current prices, the fiscal deficit target of 3.9% of GDP seems achievable. This became possible as the Gross Tax Revenue (GTR) targets were achieved, due to improved tax buoyancy and prudent expenditure management, assisted by declining oil prices.

Also despite volatility in global financial markets, the Indian equity market has been relatively resilient during this period compared to the other major emerging market economies. It is expected that as the global financial market settle down, India can become the leading investment destination owing to its robust macroeconomic fundamentals.

Mutual Fund Industry as it was in FY 2015-2016:

Assets under management (AUMs) of mutual funds rose 14 percent to Rs. 13.53 lakh crore, in the financial year 2015­2016, driven largely by inflows into equity schemes and higher participation from small town investors.

The mutual fund (MF) industry added 53 lakh investor accounts during financial year 2015-2016, taking the total number of folios to 4.7 crore. Despite a choppy market, Equity schemes attracted a net inflow of Rs. 75,000 crore and smaller towns contributed 44% to such inflows reflecting higher participation from retail investors.

Of the 43 fund houses, 32 MFs witnessed growth in their assets base, while the remaining 11 saw a decline in their AUMs.

ICICI Prudential MF topped the chart with an asset base of Rs. 1,75,881 crore (excluding fund of funds) followed by HDFC MF (Rs. 1,75,779 crore), Reliance MF (Rs. 1,58,408 crore), Birla Sun Life MF (Rs. 1,36,503 crore) and SBI MF (Rs. 1,06,781 crore). UTI MF (Rs. 1,06,309 crore) slipped out of the top five asset management companies.

Mutual Fund Industry- Steps taken by the Regulators in FY 2015-2016:

There were some important changes in the regulation pertaining to the mutual fund industry during FY 2015-2016; the highlights of such changes are as given below:

• Restrictions on Investments in debt instruments issued by a single issuer: The Board has issued circular putting restrictions on investments in debt instruments issued by a single issuer to 10% which may be extended to 12% with the prior approval of the Board of Trustees & AMC. Earlier the investment restriction in the rated debt instruments issued by a single issuer was 15% of NAV which could be further extended to 20% with the prior approval of the Board of Trustees & AMC. Further, the limit for investment in money market instruments has now been included in the aforesaid limit of 10% which can be extended to 12%.

• Treatment of unclaimed dividend and redemption amounts: The amount of unclaimed redemption and dividend, which was earlier allowed to be deployed only in call money market or money market instruments, can now be invested in a separate plan of Liquid scheme / Money Market Mutual Fund scheme floated by Mutual Funds specifically for deployment of the unclaimed amounts as well. However, no exit load is permitted to be charged in such plan and TER (Total Expense Ratio) of such plan shall be capped at 50 bps.

Further, SEBI has also mandated that list of names & addresses of investors, in whose folios there are unclaimed amounts, shall be posted on the website of the AMCs along with the information on the process of claiming the unclaimed amount and the necessary forms / documents required for the same.

Also, the information on unclaimed amount along-with its brvailing value (based on income earned on deployment of such unclaimed amount), needs to be separately disclosed to investors through the periodic statement of accounts / Consolidated Account Statement sent to the investors.

Increasing transparency of information to investors: To increase transparency of information to investors SEBI has mandated to enhance certain disclosures in the Consolidated Account Statement issued to investors in accordance with Regulation 36(4) of SEBI (Mutual Funds) Regulations, 1996 and circulars thereof.

Further, to increase transparency of information to investors as well as ease of access to Mutual Fund scheme related information, SEBI has mandated to enhance scheme related disclosure and also mandated to disclose executive remuneration with the underlying objective to promote transparency in remuneration policies so that executive remuneration is aligned with the interest of investors.

Performance of your Company:

The performance of the Company for year ended March 31, 2016 is given in brief below:-

During the year under review, the total income of the Company increased by 26.02% to Rs. 179.75 lakh from Rs. 142.64 lakh in 2014-2015 mainly due to increase in management fees from Rs. 35.02 lakh to Rs. 76.95 lakh (increase of 120%). Correspondingly, the total expenditure increased from Rs. 212.71 lakh to Rs. 294.28 lakh (38%) mainly contributed by increase in marketing expenses, mutual fund expenses and expenses on account of one time corporate action.

The net effect of the above is an increase in loss of the Company by Rs. 44.47 lakh as compared to brvious year.

Performance of Maiden Scheme "Shriram Equity and Debt Opportunities Fund":

The Group restarted its Mutual Fund business with the launch of our maiden product on November 29, 2013 Shriram Equity and Debt Opportunities Fund, an open ended equity oriented asset allocation scheme.

The NFO of the scheme opened on November 08, 2013 and closed on November 22, 2013. Your company has mobilized Rs. 23.67 crore during NFO from 22 states and 872 cities. Large mobilization was from retail and high net worth individual. The Asset Under Management (AUM) as on March 31, 2016 of the Scheme is Rs. 38.06 crore. You will be pleased to note that, during the year 2015-2016 your Company as the Investment Manager of Shriram Mutual Fund has declared a dividend of Rs. 1.15 for its Scheme Shriram Equity and Debt Opportunities Fund.

Risks and concern:

The Risk Management Manual sets out an enterprise wise risk management framework for Shriram Asset Management Company Limited and Shriram Mutual Fund. This Manual is intended to serve as a model, which will help the AMC and the Mutual Fund to monitor and mitigate the risks faced by the Company in the discharge of its business and also use risk management to increase value for investors.

Internal control system:

The Company has adequate system of internal controls commensurate with its size and level of operations to ensure that all assets of the Company are safeguarded and protected and that transaction of the Company are authorised, recorded and reported correctly, and also to ensure the efficiency of operations, compliance with internal policies and applicable laws and regulations as well as protection of resources. Moreover, the Company continuously upgrades these systems in line with the best available practices. The internal control system is supplemented by internal audits, regular reviews by management and standard policies and guidelines to ensure reliability of financials and all other records to brpare financial statements and other data. The Audit Committee of the Board reviews internal audit reports given along with management comments. The Audit Committee also monitors the implementation of suggestions given by the Committee.

Human Resources:

During the financial year ended March 31, 2016, the human resources aspects and built in Management Team of the Company remain unchanged.