CHIEF GENERAL MANAGER
MUTUAL FUNDS DEPARTMENT

MFD/CIR/ 16 / 400 /02
March 26, 2002

All Mutual Funds registered with SEBIUnit Trust of IndiaAssociation of Mutual Funds in India (AMFI)

Dear Sirs,

Sub : Introduction of Benchmarks

As you are aware, all mutual funds are required to disclose the performance of their schemes during the last six months, 1 year, 3 years, 5 years and since the date of launch of the schemes while publishing their half-yearly results in the prescribed format. In order to give the investors objective analysis of the performance of the mutual funds schemes in comparison with the rise or fall in the markets, it has been decided in consultation with AMFI to disclose the performance of benchmark indices also.

For the present, all mutual funds shall disclose the performance of the benchmark indices in case of equity oriented schemes below the yields of the schemes in the format for half-yearly results. The mutual funds may select any of the indices available, e.g. BSE (Sensitive) index, S&P CNX Nifty, BSE 100, BSE 200 or S&P CNX 500, depending on the investment objective and portfolio of the scheme. In case of sector or industry specific schemes, they may select any sectoral indices published by stock exchanges and other reputed agencies. These benchmark indices may be decided by the AMCs and trustees and any change at a later date shall be recorded and reasonably justified.

As the purpose of introducing benchmarks is to indicate the performance of the markets to the investors, the mutual funds may give performance of more than one index if they so desire. Also, they have the option to give their management perception on the performance of their schemes.

In accordance with SEBI circular dated July 27, 2000, the AMCs and trustees are required to review the performance of their schemes on periodical basis. They may compare the performance of their schemes with benchmarks in all of their meetings. They may also review the performance of their schemes in the light of performance of the mutual funds industry as published from time to time by independent research agencies and financial newspapers and journals and may take corrective action in case of unsatisfactory performance. Its compliance may please be reported in the quarterly reports of AMCs and half-yearly reports of trustees to SEBI while reporting compliance of Regulation 25(2) on exercise of due diligence in investment decisions.

These guidelines are being issued in accordance with the provisions of Regulation 77 of SEBI (Mutual Funds) Regulations, 1996.

Yours faithfully,

P.K. NAGPAL

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