Hdfc Mutual Fund

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ABSTRACT The economy is highly influenced by the Financial System of the country. The Indian Financial System has been broadly divided into two segments: the organized and unorganized. An investor has a wide array of investment avenues available. Economic well being in the long run depends significantly on how wise he invests.

Due to uncertainty in share market and low returns due to global economy downturn investor are puzzled, i.e. to spend the money or save the money. If to save the money then where to save it, so that they can get better return with flexibility, tax benefit and as well as capital appreciation. So it is necessary for investor to find the answer and way of capital growth with better return rather than uncertain share market and other low yield investment avenues.

All investments involve risk in varying degrees, and hence it is necessary to understand risk profile of each investment avenues and know how it can affect your investments. There should be trade off between risk and return. There are also risks that are not in our control like inflation risk, credit risk, risk of sudden rise in oil prices, risk pertaining to political environment for instance. In present financial system, investment has lost their potential to earn additional income, which can help for growth of their capital because the interest return which varies from approx 4% to 8% and the inflation rate hovering in and around 5%-6% so the real return is varying between (-)2% to 2% so this is the real return what a investor gets by investing in FIXED DEPOSIT, GOVERNMENT SECURITY ,KVP,NSC,PPF,MIS and also blocking there money for min of 2-5 years ,in these instruments ,which is not very encouraging for an investor to invest in these instruments .So the investor is likely to spend his earnings than invest(save), which what is happening in our country. Mutual fund is indeed of great benefit in this respect. They provide the services of experienced and skilled professionals who determine this risk and monitor them on going basis they are also backed up by research, done by individual asset Management Company based on the fund objectives.

When investors are confronted with an outstanding range of products, from traditional bank deposits to downright shady money-multiples schemes, it has to be judged on the yardsticks of returns, liquidity, safety, convenience and tax efficiency. An important question facing many

investors across the country today is whether one should invest in a bank fixed deposit or in a debt-oriented Mutual Fund. Mutual fund gives an opportunity to the IFA¶s to select from different investment options ranging from liquid funds to diversified equity ,based on there clients appetite for risk and and the return they want . The data is contained from insurance advisors, income tax consultant, and post office agent. So the basic objective of the study was to test the potentiality and develop the business of mutual funds by obtaining the data from Independent financial advisors.

During the training period and interaction with people it was found that awareness of Mutual Fund among IFA¶s was there to a limited extent but there was lot of misconceptions among them about mutual fund as I had meet few who had lost there money in UTI scam and others though where aware of mutual fund where not suggesting this to there clients as they thought it as to be to risky for there clients and those who where aware where really aggressive to take the opportunity offered by mutual fund to earn a high return. On the whole if I have to conclude my survey I would like to say that if we have to create awareness about diversified portfolio, professional management and SEBI Regulations and benefits it offers to IFA¶s and there clients and also we have to clear few misconception which IFA¶s have, to tap the huge potential which mutual fund market has to offer

NEED FOR THE STUDY: The main purpose of doing this project was to know about mutual fund and its functioning. This helps to know in details about mutual fund industry right from its inception stage, growth and future prospects. It also helps in understanding different schemes of mutual funds. Because my study depends upon prominent funds in India and their schemes like equity, income, balance as well as the returns associated with those schemes. The project study was done to ascertain the asset allocation, entry load, exit load, associated with the mutual funds. Ultimately this would help in understanding the benefits of mutual funds to investors.

OBJECTIVE:  To give a brief idea about the benefits available from Mutual Fund investment.  To give an idea of the types of schemes available.  To discuss about the market trends of Mutual Fund investment.  To study some of the mutual fund schemes.  To study some mutual fund companies and their funds.  Observe the fund management process of mutual funds.  Explore the recent developments in the mutual funds in India.  To give an idea about the regulations of mutual funds.  To compare and analyze the performance of different products of Mutual Funds.  To ascertain ranks to different mutual fund schemes on their risk and return perspective.

History of Mutual Fund in India

The Evolution The formation of Unit Trust of India marked the evolution of the Indian mutual fund industry in the year 1963. The primary objective at that time was to attract the small investors and it was made possible through the collective efforts of the Government of India and the Reserve Bank of India. The history of mutual fund industry in India can be better understood divided into following phases:

Phase 1. Establishment and Growth of Unit Trust of India - 1964-87 Unit Trust of India enjoyed complete monopoly when it was established in the year 1963 by an act of Parliament. UTI was set up by the Reserve Bank of India and it continued to operate under the regulatory control of the RBI until the two were de-linked in 1978 and the entire control was transferred in the hands of Industrial Development Bank of India (IDBI). UTI launched its first scheme in 1964, named as Unit Scheme 1964 (US-64), which attracted the largest number of investors in any single investment scheme over the years. UTI launched more innovative schemes in 1970s and 80s to suit the needs of different investors. It launched ULIP in 1971, six more schemes between 1981-84, Children's Gift Growth Fund and India Fund (India's first offshore fund) in 1986, Master share (India¶s first equity diversified scheme) in 1987 and Monthly Income Schemes (offering assured returns) during 1990s. By the end of 1987, UTI's assets under management grew ten times to Rs 6700 crores.

Phase II. Entry of Public Sector Funds - 1987-1993 The Indian mutual fund industry witnessed a number of public sector players entering the market in the year 1987. In November 1987, SBI Mutual Fund from the State Bank of India became the first non-UTI mutual fund in India. SBI Mutual Fund was later followed by Canbank Mutual Fund, LIC Mutual Fund, Indian Bank Mutual Fund, Bank of India Mutual Fund, GIC Mutual Fund and PNB Mutual Fund. By 1993, the assets under management of the industry increased seven times to Rs. 47,004 crores. However, UTI remained to be the leader with about 80% market share.

199293

Assets Amount Under Mobilised Management 11,057 1,964 13,021 38,247 8,757 47,004

Mobilisation as % of gross Domestic Savings 5.2% 0.9% 6.1%

UTI Public Sector Total

Phase III. Emergence of Private Sector Funds - 1993-96 The permission given to private sector funds including foreign fund management companies (most of them entering through joint ventures with Indian promoters) to enter the mutal fund industry in 1993, provided a wide range of choice to investors and more competition in the industry. Private funds introduced innovative products, investment techniques and investorservicing technology. By 1994-95, about 11 private sector funds had launched their schemes. Phase IV. Growth and SEBI Regulation - 1996-2004 The mutual fund industry witnessed robust growth and stricter regulation from the SEBI after the year 1996. The mobilization of funds and the number of players operating in the industry reached new heights as investors started showing more interest in mutual funds. Inventors¶ interests were safeguarded by SEBI and the Government offered tax benefits to the investors in order to encourage them. SEBI (Mutual Funds) Regulations, 1996 was introduced by SEBI that set uniform standards for all mutual funds in India. The Union Budget in 1999 exempted all dividend incomes in the hands of investors from income tax. Various Investor Awareness Programmes were launched during this phase, both by SEBI and AMFI, with an objective to educate investors and make them informed about the mutual fund industry. In February 2003, the UTI Act was repealed and UTI was stripped of its Special legal status as a trust formed by an Act of Parliament. The primary objective behind this was to bring all mutual fund players on the same level. UTI was re-organized into two parts: 1. The Specified Undertaking, 2. The UTI Mutual Fund

Phase V. Growth and Consolidation - 2004 Onwards

The industry has also witnessed several mergers and acquisitions recently, examples of which are acquisition of schemes of Alliance Mutual Fund by Birla Sun Life, Sun F&C Mutual Fund and PNB Mutual Fund by Principal Mutual Fund. Simultaneously, more international mutual fund players have entered India like Fidelity, Franklin Templeton Mutual Fund etc. There were 29 funds as at the end of March 2006. This is a continuing phase of growth of the industry through consolidation and entry of new international and private sector players. Mutual Funds: Introduction: A mutual fund is a mechanism for pooling the resources by issuing units to the investors and investing funds in securities in accordance with objectives as disclosed in offer document. Investments in securities are spread across a wide cross-section of industries and sectors and thus the risk is reduced. Diversification reduces the risk because all stocks may not move in the same direction in the same proportion at the same time. Mutual fund issues units to the investors in accordance with quantum of money invested by them. Investors of mutual funds are known as unit holders. The profits or losses are shared by the investors in proportion to their investments. The mutual funds normally come out with a number of schemes with different investment objectives which are launched from time to time. A mutual fund is required to be registered with Securities and Exchange Board of India (SEBI) which regulates securities markets before it can collect funds from the public. The flow chart below describes broadly the working of a mutual fund:

Figure 1.Mutual Fund Operation Flow Chart Why Select Mutual Fund?

The risk return trade-off indicates that if investor is willing to take higher risk then correspondingly he can expect higher returns and vise versa if he pertains to lower risk instruments, which would be satisfied by lower returns. For example, if an investors opt for bank FD, which provide moderate return with minimal risk. But as he moves ahead to invest in capital protected funds and the profit-bonds that give out more return which is slightly higher as compared to the bank deposits but the risk involved also increases in the same proportion. Thus investors choose mutual funds as their primary means of investing, as Mutual funds provide professional management, diversification, convenience and liquidity. That doesn¶t mean mutual fund investments risk free. This is because the money that is pooled in are not invested only in debts funds which are less riskier but are also invested in the stock markets which involves a higher risk but can expect higher returns. Hedge fund involves a very high risk since it is mostly traded in the derivatives market which is considered very volatile.

RETURN RISK MATRIX
HIGHIER RISK MODERATE RETURNS HIGHER RISK HIGHIER RETURNS

Venture Capital

Equity

Bank FD Postal Savings
LOWER RISK LOWER RETURNS

Mutual Funds

LOWER RISK HIGIER RETURNS

Types of Mutual Fund Schemes: Schemes according to Maturity Period A mutual fund scheme can be classified into open-ended scheme or close-ended scheme depending on its maturity period. Open-ended Fund/ Scheme An open-ended fund or scheme is one that is available for subscription and repurchase on a continuous basis. These schemes do not have a fixed maturity period. Investors can conveniently buy and sell units at Net Asset Value (NAV) related prices which are declared on a daily basis. The key feature of open-end schemes is liquidity.

Close-endedFund/Scheme A close-ended fund or scheme has a stipulated maturity period e.g. 5-7 years. The fund is open for subscription only during a specified period at the time of launch of the scheme. Investors can invest in the scheme at the time of the initial public issue and thereafter they can buy or sell the units of the scheme on the stock exchanges where the units are listed. In order to provide an exit route to the investors, some close-ended funds give an option of selling back the units to the mutual fund through periodic repurchase at NAV related prices. SEBI Regulations stipulate that at least one of the two exit routes is provided to the investor i.e. either repurchase facility or through listing on stock exchanges. These mutual funds schemes disclose NAV generally on weekly basis.

Schemes according to Investment Objective A scheme can also be classified as growth scheme, income scheme, or balanced scheme considering its investment objective. Such schemes may be open-ended or close-ended schemes as described earlier. Such schemes may be classified mainly as follows:

Growth / Equity Oriented Scheme The aim of growth funds is to provide capital appreciation over the medium to long- term. Such schemes normally invest a major part of their corpus in equities. Such funds have comparatively

high risks. These schemes provide different options to the investors like dividend option, capital appreciation, etc. and the investors may choose an option depending on their preferences. The investors must indicate the option in the application form. The mutual funds also allow the investors to change the options at a later date. Growth schemes are good for investors having a long-term outlook seeking appreciation over a period of time.

Income/Debt Oriented Scheme The aim of income funds is to provide regular and steady income to investors. Such schemes generally invest in fixed income securities such as bonds, corporate debentures, Government securities and money market instruments. Such funds are less risky compared to equity schemes. These funds are not affected because of fluctuations in equity markets. However, opportunities of capital appreciation are also limited in such funds. The NAVs of such funds are affected because of change in interest rates in the country. If the interest rates fall, NAVs of such funds are likely to increase in the short run and vice versa. However, long term investors may not bother about these fluctuations.

Balanced Fund The aim of balanced funds is to provide both growth and regular income as such schemes invest both in equities and fixed income securities in the proportion indicated in their offer documents. These are appropriate for investors looking for moderate growth. They generally invest 40-60% in equity and debt instruments. These funds are also affected because of fluctuations in share prices in the stock markets. However, NAVs of such funds are likely to be less volatile compared to pure equity funds.

Money Market or Liquid Fund These funds are also income funds and their aim is to provide easy liquidity, preservation of capital and moderate income. These schemes invest exclusively in safer short-term instruments such as treasury bills, certificates of deposit, commercial paper and inter-bank call money, government securities, etc. Returns on these schemes fluctuate much less compared to other funds. These funds are appropriate for corporate and individual investors as a means to park their surplus funds for short periods.

Gilt Fund

These funds invest exclusively in government securities. Government securities have no default risk. NAVs of these schemes also fluctuate due to change in interest rates and other economic factors as is the case with income or debt oriented schemes.

Index Funds Index Funds replicate the portfolio of a particular index such as the BSE Sensitive index, S&P NSE 50 index (Nifty), etcThese schemes invest in the securities in the same weightage comprising of an index. NAVs of such schemes would rise or fall in accordance with the rise or fall in the index, though not exactly by the same percentage due to some factors known as "tracking error" in technical terms. Necessary disclosures in this regard are made in the offer document of the mutual fund scheme.

There are also exchange traded index funds launched by the mutual funds which are traded on the stock exchanges. 7.2.3 Stock Funds: What are stock funds? "Stock fund" and "equity fund" describe a type of investment company(mutual fund), closedend fund, unit investment trust(UIT)) that invests primarily in stocks or "equities" (as contrasted with "bonds"). The types of stocks in which a stock fund will invest will depend upon the fund¶s investment objectives, policies, and strategies. For example, one stock fund may invest in mostly established, "blue chip" companies that pay regular dividends. Another stock fund may invest in newer, technology companies that pay no dividends but that may have more potential for growth. The objective of an equity fund is long-term growth through capital appreciation, although dividends and interest are also sources of revenue. Specific equity funds may focus on a certain sector of the market or may be geared toward a certain level of risk. Stock funds can be distinguished by several properties. Funds may have a specific style, for example, value or growth. Funds may invest in solely the securities from one country, or from many countries. The different types of stock funds are as follows: Aggressive Growth Funds - In Aggressive Growth Funds, fund managers aspire for maximum capital appreciation and invest in less researched shares of speculative nature. Because of these speculative investments Aggressive Growth Funds become more volatile and thus, are prone to higher risk than other equity funds Growth Funds - Growth Funds also invest for capital appreciation (with time horizon of 3 to 5 years) but they are different from Aggressive Growth Funds in the sense that they invest in companies that are expected to outperform the market in the future. Without entirely adopting

speculative strategies, Growth Funds invest in those companies that are expected to post above average earnings in the future. Speciality Funds - Speciality Funds have stated criteria for investments and their portfolio comprises of only those companies that meet their criteria. Criteria for some speciality funds could be to invest/not to invest in particular regions/companies. Speciality funds are concentrated and thus, are comparatively riskier than diversified funds. There are following types of specialty funds: a. Sector Funds: Equity funds that invest in a particular sector/industry of the market are known as Sector Funds. The exposure of these funds is limited to a particular sector (say Information Technology, Auto, Banking, Pharmaceuticals or Fast Moving Consumer Goods) which is why they are more risky than equity funds that invest in multiple sectors. b. Foreign Securities Funds: Foreign Securities Equity Funds have the option to invest in one or more foreign companies. Foreign securities funds achieve international diversification and hence they are less risky than sector funds. However, foreign securities funds are exposed to foreign exchange rate risk and country risk. c. Mid-Cap or Small-Cap Funds: Funds that invest in companies having lower market capitalization than large capitalization companies are called Mid-Cap or Small-Cap Funds. Market capitalization of Mid-Cap companies is less than that of big, blue chip companies (less than Rs. 2500 crores but more than Rs. 500 crores) and Small-Cap companies have market capitalization of less than Rs. 500 crores. Market Capitalization of a company can be calculated by multiplying the market price of the company's share by the total number of its outstanding shares in the market. The shares of Mid-Cap or Small-Cap Companies are not as liquid as of Large-Cap Companies which gives rise to volatility in share prices of these companies and consequently, investment gets risky. d. Option Income Funds*: While not yet available in India, Option Income Funds write options on a large fraction of their portfolio. Proper use of options can help to reduce volatility, which is otherwise considered as a risky instrument. These funds invest in big, high dividend yielding companies, and then sell options against their stock positions, which generate stable income for investors. Diversified equity funds: - Except for a small portion of investment in liquid money market, diversified equity funds invest mainly in equities without any concentration on a particular sector(s). These funds are well diversified and reduce sector-specific or company-specific risk. However, like all other funds diversified equity funds too are exposed to equity market risk. One prominent type of diversified equity fund in India is Equity Linked Savings Schemes (ELSS). As per the mandate, a minimum of 90% of investments by ELSS should be in equities at all times. ELSS investors are eligible to claim deduction from taxable income (up to Rs 1 lakh) at the time of filing the income tax return. ELSS usually has a lock-in period and in case of any redemption by the investor before the expiry of the lock-in period makes him liable to pay income tax on such income(s) for which he may have received any tax exemption(s) in the past.

Equity Index Funds - Equity Index Funds have the objective to match the performance of a specific stock market index. The portfolio of these funds comprises of the same companies that form the index and is constituted in the same proportion as the index. Equity index funds that follow broad indices (like S&P CNX Nifty, Sensex) are less risky than equity index funds that follow narrow sectoral indices (like BSEBANKEX or CNX Bank Index etc). Narrow indices are less diversified and therefore, are more risky. Value Funds - Value Funds invest in those companies that have sound fundamentals and whose share prices are currently under-valued. The portfolio of these funds comprises of shares that are trading at a low Price to Earning Ratio (Market Price per Share / Earning per Share) and a low Market to Book Value (Fundamental Value) Ratio. Value Funds may select companies from diversified sectors and are exposed to lower risk level as compared to growth funds or speciality funds. Value stocks are generally from cyclical industries (such as cement, steel, sugar etc.) which make them volatile in the short-term. Therefore, it is advisable to invest in Value funds with a long-term time horizon as risk in the long term, to a large extent, is reduced. Equity Income or Dividend Yield Funds - The objective of Equity Income or Dividend Yield Equity Funds is to generate high recurring income and steady capital appreciation for investors by investing in those companies which issue high dividends (such as Power or Utility companies whose share prices fluctuate comparatively lesser than other companies' share prices). Equity Income or Dividend Yield Equity Funds are generally exposed to the lowest risk level as compared to other equity funds Debt Funds: What are debt funds? Funds that invest in medium to long-term debt instruments issued by private companies, banks, financial institutions, governments and other entities belonging to various sectors (like infrastructure companies etc.) are known as Debt / Income Funds. Debt funds are low risk profile funds that seek to generate fixed current income (and not capital appreciation) to investors. In order to ensure regular income to investors, debt (or income) funds distribute large fraction of their surplus to investors. Although debt securities are generally less risky than equities, they are subject to credit risk (risk of default) by the issuer at the time of interest or principal payment. To minimize the risk of default, debt funds usually invest in securities from issuers who are rated by credit rating agencies and are considered to be of "Investment Grade". Debt funds that target high returns are more risky. The main investing objectives of a debt fund will usually be preservation of capital and generation of income. Performance against a benchmark is considered to be a secondary consideration to absolute return when investing in a debt fund. The different types of bond funds are as follows: Diversified Debt Funds - Debt funds that invest in all securities issued by entities belonging to all sectors of the market are known as diversified debt funds. The best feature of diversified debt

funds is that investments are properly diversified into all sectors which results in risk reduction. Any loss incurred, on account of default by a debt issuer, is shared by all investors which further reduces risk for an individual investor. Focused Debt Funds* - Unlike diversified debt funds, focused debt funds are narrow focus funds that are confined to investments in selective debt securities, issued by companies of a specific sector or industry or origin. Some examples of focused debt funds are sector, specialized and offshore debt funds, funds that invest only in Tax Free Infrastructure or Municipal Bonds. Because of their narrow orientation, focused debt funds are more risky as compared to diversified debt funds. Although not yet available in India, these funds are conceivable and may be offered to investors very soon. High Yield Debt funds - As we now understand that risk of default is present in all debt funds, and therefore, debt funds generally try to minimize the risk of default by investing in securities issued by only those borrowers who are considered to be of "investment grade". But, High Yield Debt Funds adopt a different strategy and prefer securities issued by those issuers who are considered to be of "below investment grade". The motive behind adopting this sort of risky strategy is to earn higher interest returns from these issuers. These funds are more volatile and bear higher default risk, although they may earn at times higher returns for investors. Assured Return Funds - Although it is not necessary that a fund will meet its objectives or provide assured returns to investors, but there can be funds that come with a lock-in period and offer assurance of annual returns to investors during the lock-in period. Any shortfall in returns is suffered by the sponsors or the Asset Management Companies (AMCs). These funds are generally debt funds and provide investors with a low-risk investment opportunity. However, the security of investments depends upon the net worth of the guarantor (whose name is specified in advance on the offer document). To safeguard the interests of investors, SEBI permits only those funds to offer assured return schemes whose sponsors have adequate net-worth to guarantee returns in the future. In the past, UTI had offered assured return schemes (i.e. Monthly Income Plans of UTI) that assured specified returns to investors in the future. UTI was not able to fulfill its promises and faced large shortfalls in returns. Eventually, government had to intervene and took over UTI's payment obligations on itself. Currently, no AMC in India offers assured return schemes to investors, though possible. Fixed Term Plan Series - Fixed Term Plan Series usually are closed-end schemes having short term maturity period (of less than one year) that offer a series of plans and issue units to investors at regular intervals. Unlike closed-end funds, fixed term plans are not listed on the exchanges. Fixed term plan series usually invest in debt / income schemes and target short-term investors. The objective of fixed term plan schemes is to gratify investors by generating some expected returns in a short period. Figure 2. Broad Mutual Fund types

ADVANTAGES OF MUTUAL FUND

S. No.

Advantage

Particulars

1.

Mutual Funds invest in a well-diversified portfolio of securities Portfolio which enables investor to hold a diversified investment portfolio Diversification (whether the amount of investment is big or small). Fund manager undergoes through various research works and has better investment management skills which ensure higher returns to the investor than what he can manage on his own. Investors acquire a diversified portfolio of securities even with a small investment in a Mutual Fund. The risk in a diversified portfolio is lesser than investing in merely 2 or 3 securities. Due to the economies of scale (benefits of larger volumes), mutual funds pay lesser transaction costs. These benefits are passed on to the investors. An investor may not be able to sell some of the shares held by him very easily and quickly, whereas units of a mutual fund are far more liquid. Mutual funds provide investors with various schemes with different investment objectives. Investors have the option of investing in a scheme having a correlation between its investment objectives and their own financial goals. These schemes further have different plans/options

2.

Professional Management

3.

Less Risk

4.

Low Transaction Costs Liquidity

5.

6.

Choice of Schemes

7.

Funds provide investors with updated information pertaining to the Transparency markets and the schemes. All material facts are disclosed to investors as required by the regulator. Investors also benefit from the convenience and flexibility offered by Mutual Funds. Investors can switch their holdings from a debt scheme to an equity scheme and vice-versa. Option of systematic (at regular intervals) investment and withdrawal is also offered to the investors in most open-end schemes.

8.

Flexibility

9.

Safety

Mutual Fund industry is part of a well-regulated investment environment where the interests of the investors are protected by the regulator. All funds are registered with SEBI and complete transparency is forced.

Disadvantage of Investing Through Mutual Funds

S. Disadvantage No. Costs Control Not in the 1. Hands of an Investor No 2. Customized Portfolios

Particulars Investor has to pay investment management fees and fund distribution costs as a percentage of the value of his investments (as long as he holds the units), irrespective of the performance of the fund. The portfolio of securities in which a fund invests is a decision taken by the fund manager. Investors have no right to interfere in the decision making process of a fund manager, which some investors find as a constraint in achieving their financial objectives. Many investors find it difficult to select one option from the plethora of funds/schemes/plans available. For this, they may have to take advice from financial planners in order to invest in the right fund to achieve their objectives.

Difficulty in Selecting a 3. Suitable Fund Scheme

Mutual Fund Investment Strategies Systematic Investment Plan (SIPs): These are best suited for young people who have started their careers and need to build their wealth. SIPs entail an investor to invest a fixed sum of money at regular intervals in mutual fund scheme the investor has chosen. For instance an investor opting for SIP in xyz mutual fund scheme will need to invest a certain sum of money every month / quarter /half year in the scheme. Systematic Withdrawal Plan (SWPs): These plans are best suited for people nearing retirement. In these plans an investor invests in a mutual fund scheme and is allowed to withdraw a fixed sum of money at regular intervals to take care of expenses. Systematic Transfer Plan (STPs) : They allow the investors to transfer on a periodic basis a specified amount from one scheme to another within the same fund family meaning two schemes belonging to the same mutual fund. A transfer will be treated as redemption of units from the scheme from which the transfer is made .Such redemption or investment will be at the applicable NAV. This service allows the investor to manage his investment actively to achieve his objectives. Many funds do not even charge even any transaction feed for this service an added advantage for the active investor. .

ONE TIME INVESTMENT

The amount that has to be invested in onetime is known as Onetime Investment. The investor has to pay the whole amount at once. The minimum amount is Rs. 5000 and maximum is as per the investor¶s Choice. This investment is generally preferred for the business man who are able to pay at one time.

Performance Evaluation

PARAMETERS OF MUTUAL FUND EVALUATION:      Risk Returns Liquidity Expense Ratio Composition of Portfolio

The Role of Risk in Mutual Fund: Let's first define risk. In general, risk refers to the fluctuations in the price of a security -- these fluctuations, known as volatility, can range from stable to very volatile. Identifying individual risk tolerance is one of the basic factors in determining an optimum investment strategy for a mutual fund portfolio. Regardless of the return objectives and time horizon within a portfolio, risk tolerance affects both asset allocation and especially the selection of fund categories (i.e., large value, small growth, international, short-term bond, intermediate-term bond, etc.).

Different mutual fund categories as previously defined have inherently different risk characteristics and should not be compared side by side. A bond fund with below-average risk, for example, should not be compared to a stock fund with below average risk. Even though both funds have low risk for their respective categories, stock funds overall have a higher risk/return potential than bond funds. Of all the asset classes, cash investments (i.e. money markets) offer the greatest price stability but have yielded the lowest long-term returns. Bonds typically experience more short-term price swings, and in turn have generated higher long-term returns. However, stocks historically have been subject to the greatest short-term price fluctuations²and have provided the highest longterm returns. Investors looking for a fund which incorporates all asset classes may consider a balanced or hybrid mutual fund. These funds can be very conservative or very aggressive. Asset allocation portfolios are mutual funds that invest in other mutual funds with different asset classes. At the discretion of the manager(s), securities are bought, sold, and shifted between funds with different asset classes according to market conditions.

Mutual funds face risks based on the investments they hold. For example, a bond fund faces interest rate risk and income risk. Bond values are inversely related to interest rates. If interest rates go up, bond values will go down and vice versa. Bond income is also affected by the change in interest rates. Bond yields are directly related to interest rates falling as interest rates fall and rising as interest rise. Income risk is greater for a short-term bond fund than for a longterm bond fund. Similarly, a sector stock fund (which invests in a single industry, such as telecommunications) is at risk that its price will decline due to developments in its industry. A stock fund that invests across many industries is more sheltered from this risk defined as industry risk. In addition, many different types of specific risk exist which can affect investment value: The Risk associated with Stock Fundsare as follows: y y y Dividend RiskIndustry Risk- The possibility that a group of stocks in a single industry will decline in price due to developments in that industry Market Risk- The possibility that stock fund prices overall will decline over short or even extended periods. Stock and bond markets tend to move in cycles, with periods when prices rise and other periods when prices fall. In foreign stocks,  Currency Risk- The possibility that returns could be reduced for Americans investing in foreign securities because of a rise in the value of the U.S. dollar against foreign currencies. Also called exchange-rate risk  Political Risk - The possibility that political events (a war, national elections), financial problems (rising inflation, government default), or natural disasters (an earthquake, a poor harvest) will weaken a country's economy and cause investments in that country to decline

y

The Risk associated with Bonds are as follows : y y y y y Credit Risk- The possibility that a bond issuer will fail to repay interest and principal in a timely manner. Also called default risk. Inflation Risk- The possibility that increases in the cost of living will reduce or eliminate a fund's real inflation-adjusted returns Interest Rate Risk- The possibility that a bond fund will decline in value because of an increase in interest rates Principal Risk- The possibility that an investment will go down in value, or "lose money," from the original or invested amount. Income Risk. The possibility that a fixed-income fund's dividends will decline as a result of falling overall interest rates.

Market Risk. The possibility that stock fund or bond fund prices overall will decline over short or even extended periods. Stock and bond markets tend to move in cycles, with periods when prices rise and other periods when prices fall. As the level of risk increases, both volatility and total return potential proportionately increase; conversely, as the level of risk decreases, both volatility and total return potential proportionately decrease. This standard risk/reward rule is often illustrated with risk and reward both escalating over a broad spectrum beginning with cash reserves, changing to bonds and then ending with stocks: y

Although stock funds exhibit greater risk and reward compared to bond funds, each has a separate risk/reward spectrum. The following examples depict risk/reward on an escalating basis by fund category:

Stock funds: large value<large growth<mid value<mid growth<small value<small growth<international<sector<emerging markets

Bond funds: short-term<government mortgage<intermediate-term<multisector<long-term<highyield<international<emerging markets.

There are 3 different methods with the help of which we can measure the risk. Measurement of risk I. Beta Coefficient Measure Of Risk :

Beta relates a fund¶s return with a market index. It basically measures the sensitivity of funds return to changes in market index. If Beta = 1 Fund moves with the market i.e. Passive fund If Beta < 1 Fund is less volatile than the market i. e Defensive Fund If Beta > 1 Funds will give higher returns when market rises & higher losses when market falls i.e. Aggressive Fund

II.

Ex ±Marks or R-squared Measure Of Risk :

Ex ±Marks represents co relation with markets. Higher the Ex-marks lower the risk of the fund because a fund with higher Ex-marks is better diversified than a fund with lower Ex-marks. III. Standard Deviation Measure Of Risk :

It is a statistical concept, which measures volatility. It measures the fluctuations of fund¶s returns around a mean level. Basically it gives you an idea of how volatile your earnings are. It is broader concept than BETA. It also helps in measuring total risk and not just the market risk of the portfolio.

How to Calculate the Value of a Mutual Fund: The investors¶ funds are deployed in a portfolio of securities by the fund manager. The value of these investments keeps changing as the market price of the securities change. Since investors are free to enter and exit the fund at any time, it is essential that the market value of their investments is used to determine the price at which such entry and exit will take place. The net assets represent the market value of assets, which belong to the investors, on a given date. Net Asset Value or NAV of a mutual fund is the value of one unit of investment in the fund, in net asset terms.

NAV = Net Assets of the scheme / Number of Units Outstanding Where Net Assets are calculated as:(Market value of investments + current assets and other assets + Accrued income ± current liabilities and other liabilities ± less accrued expenses) / No. of Units Outstanding as at the NAV date NAV of all schemes must be calculated and published at least weekly for closed-end schemes and daily for open-end schemes. The major factors affecting the NAV of a fund are:     Sale and purchase of securities Sale and repurchase of units Valuation of assets Accrual of income and expenses

SEBI requires that the fund must ensure that repurchase price is not lower than 93% of NAV (95% in the case of a closed-fund). On the other side, a fund may sell new units at a price that is different from the NAV, but the sale price cannot be higher than 107 % of NAV. Also the difference between the repurchase price and the sale price of the unit is not permitted to exceed 7% of the sale price. Measuring Mutual Fund Performance: We can measure mutual fund¶s performance by different method:

Absolute Return Method: Percentage change in NAV is an absolute measure of return, which finds the NAV appreciation between two points of time, as a percentage. e .g: If NAV of one fund changes from Rs.20 to Rs.22 in 12 months then Absolute return = (22 ± 20)/20 X 100 =10%

Simple Annual Return Method : Converting a return value for a period other than one year, into a value for one year, is called as annualisation. In order to annualize a rate, we find out what the return would be for a year, if the return behaved for a year, in the same manner it did, for any other fractional period. E .g: If NAV of one fund changes from Rs.20 to Rs.22 in 6 months then Annual Return = (22 ± 20) /20 X 12/6 X 100 = 20% Total Return Method: The total return method takes into account the dividends distributed by the mutual fund, and adds it to the NAV appreciation, to arrive at returns.

Total Return = (Dividend distributed + Change in NAV)/ NAV at the start X 100 e .g: If NAV of one fund changes from Rs.20 to Rs.22 in 6 months if in between dividend of Rs. 4 has been distributed then Total Return = {4 + (22 ± 20)}/20 X 100 = 30%

Total Return when dividend is reinvested: This method is also called the return on investment (ROI) method. In this method, the dividends are reinvested into the scheme as soon as they are received at the then prevailing NAV (ex-dividend NAV). = ((Value of holdings at the end of the period/ value of the holdings at the beginning) ± 1)*100 E.g. An investor buys 100 units of a fund at Rs. 10.5 on January 1, 2007. On June 30, 2007 he receives dividends at the rate of 10%. The ex-dividend NAV was Rs. 10.25. On December 31, 2007, the fund¶s NAV was Rs. 12.25. Value of holdings at the beginning period= 10.5*100= 1050 Number of units re-invested = 100/10.25 = 9.756 End period value of investment = 109.756*12.25 = 1344.51 Rs. Return on Investment = ((1344.51/1050)-1)*100 = 28.05% Compounded Average Annual Return Method: This method is basically used for calculating the return for more than 1 year. In this method return is calculated with the following formula: A = P X (1 + R / 100) N Where P = Principal invested A = maturity value N = period of investment in years R = Annualized compounded interest rate in % R = {(Nth root of A / P) ± 1} X 100 E. g: If amount invested is Rs. 100 & in the end we get return of Rs. 200 & period of investment is 10 years then annualized compounded return is 200 = 100 (1 + R / 100) 10 Rate = 7.2 %

RETURNS:

Returns have to be studied along with the risk. A fund could have earned higher return than the benchmark. But such higher return may be accompanied by high risk. Therefore, we have to compare funds with the benchmarks, on a risk adjusted basis. William Sharpe created a metric for fund performance, which enables the ranking of funds on a risk adjusted basis. Risk Premium Funds Standard Deviation Treynor Ratio = Risk Premium Funds Beta Risk Premium = Difference between the Fund¶s Average return and Risk free return on government security or treasury bill over a given period . Sharpe Ratio LIQUIDITY: Most of the funds being sold today are open-ended. That is, investors can sell their existing units, or buy new units, at any point of time, at prices that are related to the NAV of the fund on the date of the transaction. Since investors continuously enter and exit funds, funds are actually able to provide liquidity to investors, even if the underlying markets, in which the portfolio is invested, may not have the liquidity that the investor seeks. EXPENSE RATIO: Expense ratio is defined as the ratio of total expenses of the fund to the average net assets of the fund. Expense ratio can actually understate the total expenses, because brokerage paid on transactions of a fund are not included in the expenses. According to the current SEBI norms, brokerage commissions are capitalized and included in the cost of the transactions. Expense ratio = Total Expenses Average Net Assets =

COMPOSITION OF THE PORTFOLIO: Credit quality of the portfolio is measured by looking at the credit ratings of the investments in the portfolio. Mutual Fund fact sheets show the composition of the portfolio and the investments in various asset classes over time. Portfolio turnover rate is the ratio of lesser of asset purchased or sold by funds in the market to the net assets of the fund. If Portfolio ratio is 100% means portfolio has been changed fully. When Portfolio ratio is high means expense ratio is high. Portfolio Ratio = Total Sales & Purchase Net Assets of fund

In order to meaningfully compare funds some level of similarity in the following factors has to be ensured:

    

Size of the funds Investment objective Risk profile Portfolio composition Expense ratios

Fund evaluation against benchmark: Funds can be evaluated against some performance indicators which are known as benchmarks. There are 3 types of benchmarks:  Relative to market as whole  Relative to other comparable financial products  Relative to other mutual funds  Relative to market as whole:

There are different ways to measure the performance of fund w.r.t market as Equity Funds y Index Fund ± An Index fund invests in the stock comprising of the index in the same ratio. This is a passive management style. For example, Market Index Fund Nifty Index Fund BSE Sensex NIFTY

The difference between the return of this fund and its index benchmark can be explained by ³TRACKING ERROR´. y Active Equity Funds: The fund manager actively manages this fund. To evaluate performance in such case we have to select an appropriate benchmark. Large diversified equity fund Sector fund BSE 100 Sectoral Indices

y Debt Funds: Debt fund can also be judged against a debt market index e.g. I-BEX

How is a mutual fund set up? A mutual fund is set up in the form of a trust, which has sponsor, trustees, asset management company (AMC) and custodian. The trust is established by a sponsor or more than one sponsor who is like promoter of a company. The trustees of the mutual fund hold its property for the benefit of the unit holders. Asset Management Company (AMC) approved by SEBI manages the funds by making investments in various types of securities. Custodian, who is registered with SEBI, holds the securities of various schemes of the fund in its custody. The trustees are vested with the general power of superintendence and direction over AMC. They monitor the performance and compliance of SEBI Regulations by the mutual fund. SEBI Regulations require that at least two thirds of the directors of trustee company or board of trustees must be independent i.e. they should not be associated with the sponsors. Also, 50% of the directors of AMC must be independent. All mutual funds are required to be registered with SEBI before they launch any scheme. LEGAL FRAME WORK OF SEBI & AMFI

REGULATORY ASPECTS OF MUTUAL FUNDS:

In the year 1992, Securities and exchange Board of India (SEBI) Act was passed. The objectives of SEBI are ± to protect the interest of investors in securities and to promote the development of and to regulate the securities market. SEBI formulates policies and regulates the mutual funds to protect the interest of the investors.

GUIDELINES OF SEBI & AMFI

   

Mutual funds are regulated by the SEBI (mutual Fund) Regulations, 1996. SEBI is the regulator of all funds, except offshore funds. Bank-sponsored mutual funds are jointly regulated by SEBI and RBI. The bank-sponsored fund cannot provide a guarantee without RBI Permission.

 RBI regulates money and government securities markets, in which mutual Funds are invested.  Listed mutual funds are subject to the listing regulations of stock exchange.  Since the AMC and Trustee Company are companies, the Department of Company affairs regulate them. They have to send periodic reports to the ROC (Register of Companies) and the CLB (Company Law Board) is the appellate authority.  Investors cannot sue the trust, as they are the same as the trust and can¶t sue themselves.  UTI does not have a separate sponsor and AMC.  UTI is governed by the UTI Act, 1963 and is voluntarily under SEBI Regulations.  UTI can borrow as well as lend also engage in other financial services activities.  Only AMFI certified agents can sell Mutual Fund units.  Mutual Funds Company is required to update the NAV of the scheme on the AMFI website on a daily basis in case of open-ended scheme.

REGULATORY OF MUTUAL FUND IN INDIA SEBI The capital market regulates the mutual funds in India. SEBI requires all mutual funds to be registered with them. SEBI issues guidelines for all mutual funds operations-investment, accounts, expenses etc. Recently, it has been decided that Money Market Mutual Funds of registered mutual funds will be regulated by SEBI through (Mutual Fund) Regulations 1996.

RBI RBI, a supervisor of the Banks owned Mutual Funds-As banks in India come under the regulatory Jurisdiction of RBI, banks owned funds to be under supervision of RBI and SEBI. RBI has supervisory responsibility over all entities that operate in the money markets.

MINISTRY OF FINANCE (MOF) Ministry of Finance ultimately supervises both the RBI and the SEBI and plays the role of apex authority for any major disputes over SEBI guidelines.

COMPANY LAW BOARD Registrar of companies is called Company law Board. AMCs of Mutual Funds are companies registered under the companies Act 1956 and therefore answerable to regulatory authorities empowered by the Companies Act. STOCK EXCHANGE Stock Exchanges are Self-regulatory organizations supervised by SEBI. Many closed ended funds of AMCs are listed as stock exchanges and are traded like shares. OFFICE OF THE PUBLIC TRUSTEE Mutual Fund being public trust is governed y the Indian Trust Act 1882. The Board of trustee or the Trustees Company is accountable to the office of public trustee, which in turn reports to the Charity commissioner. Association of Mutual Funds in India (AMFI) With the increase in mutual fund players in India, a need for mutual fund association in India was generated to function as a non-profit organization. Association of Mutual Funds in India (AMFI) was incorporated on 22nd August, 1995.AMFI is an apex body of all Asset Management Companies (AMC) which has been registered with SEBI. Till date all the AMCs are that have launched mutual fund schemes are its members. It functions under the supervision and guidelines of its Board of Directors. Association of Mutual Funds India has brought down the Indian Mutual Fund Industry to a professional and healthy market with ethical lines enhancing and maintaining standards. It follows the principle of both protecting and promoting the interests of mutual funds as well as their unit holders. The objectives of Association of Mutual Funds in India:--The Association of Mutual Funds of India works with 30 registered AMCs of the country. It has certain defined objectives which juxtaposes the guidelines of its Board of Directors. The objectives are as follows: This mutual fund association of India maintains a high professional and ethical standards in all areas of operation of the industry.  It also recommends and promotes the top class business practices and code of conduct which is followed by members and related people engaged in the activities of mutual fund and asset management. AMFI interacts with SEBI and works according to SEBIs guidelines in the mutual fund industry.

 Association of Mutual Fund of India do represent the Government of India, the Reserve Bank of India and other related bodies on matters relating to the Mutual Fund Industry.  It develops a team of well qualified and trained Agent distributors. It implements a programme of training and certification for all intermediaries and other engaged in the mutual fund industry.  AMFI undertakes all India awareness programme for investors in order to promote proper understanding of the concept and working of mutual funds. At last but not the least association of mutual fund of India also disseminate information on Mutual Fund Industry and undertakes studies and research either directly or in association with other bodies. Mutual FundsPlayers in India:--Bank Sponsored SBI Fund Management Ltd. BOB Asset Management Co. Ltd. Canarabank Investment Management Services Ltd. UTI Asset Management Company Pvt. Ltd. Institutions GIC Asset Management Co. Ltd. JeevanBimaSahayog Asset Management Co. Ltd.

Private Sector: Indian BenchMark Asset Management Co. Pvt. Ltd. Cholamandalam Asset Management Co. Ltd. Credit Capital Asset Management Co. Ltd. Escorts Asset Management Ltd. JM Financial Mutual Fund Kotak Mahindra Asset Management Co. Ltd. Reliance Capital Asset Management Ltd. Sahara Asset Management Co. Pvt. Ltd Sundaram Asset Management Company Ltd. Tata Asset Management Private Ltd. Predominantly India Joint Ventures:Birla Sun Life Asset Management Co. Ltd. DSP Merrill Lynch Fund Managers Limited HDFC Asset Management Company Ltd.

Predominantly Foreign Joint Ventures:ABN AMRO Asset Management (I) Ltd. Alliance Capital Asset Management (India) Pvt. Ltd. Deutsche Asset Management (India) Pvt. Ltd. Fidelity Fund Management Private Limited Franklin Templeton Asset Mgmt. (India) Pvt. Ltd. HSBC Asset Management (India) Private Ltd. ING Investment Management (India) Pvt. Ltd. Morgan Stanley Investment Management Pvt. Ltd. Principal Asset Management Co. Pvt. Ltd. Prudential ICICI Asset Management Co. Ltd. Standard Chartered Asset Mgmt Co. Pvt. Ltd.

Average Assets under Management (AAUM) for the month of MAY-2010 (Rs in Lakhs) Average AUM For The Month Sr No Mutual Fund Name Excluding Fund of Funds - Domestic but including Fund of Funds - Overseas 103086.01 471589.32 475953.43 226315.33 72416.60 7382803.38 1066194.89 1010245.83 2188495.08 26108.90 19822.54 745784.02 753744.45 3577478.72 10186331.18 585110.76 8770981.40

Fund Of Funds Domestic

1 2 3 4 5 6 7 8 9

AIG Global Investment Group Mutual Fund Axis Mutual Fund Baroda Pioneer Mutual Fund Benchmark Mutual Fund Bharti AXA Mutual Fund Birla Sun Life Mutual Fund CanaraRobeco Mutual Fund Deutsche Mutual Fund DSP BlackRock Mutual Fund

0 0 0 0 0 2704.89 0 0 0 0 0 11779.22 0 87389.57 0 0 2709.71

10 Edelweiss Mutual Fund 11 Escorts Mutual Fund 12 Fidelity Mutual Fund 13 Fortis Mutual Fund 14 Franklin Templeton Mutual Fund 15 HDFC Mutual Fund 16 HSBC Mutual Fund 17 ICICI Prudential Mutual Fund

19 IDFC Mutual Fund 20 ING Mutual Fund 21 JM Financial Mutual Fund 22 JPMorgan Mutual Fund 23 Kotak Mahindra Mutual Fund 24 L&T Mutual Fund 25 LIC Mutual Fund 26 Mirae Asset Mutual Fund 27 Morgan Stanley Mutual Fund 28 Peerless Mutual Fund 29 PRINCIPAL Mutual Fund 30 Quantum Mutual Fund 31 Reliance Mutual Fund 32 Religare Mutual Fund 33 Sahara Mutual Fund 34 SBI Mutual Fund 35 Shinsei Mutual Fund 36 Sundaram BNP Paribas Mutual Fund

2661476.88 164541.64 895042.99 378497.80 4065752.12 517069.45 3896281.85 23650.01 225366.91 82338.23 764775.51 10171.98 11897314.38 1546409.96 76523.40 3623576.41 32371.08 1397610.72 2267342.67 305615.73 7861715.13
80355906.69

48542.62 5012.22 0 0 9755.19 0 0 0 0 0 0 137.25 0 0 0 0 0 0 0 0 0
168030.67

37 Tata Mutual Fund 38 Taurus Mutual Fund 39 UTI Mutual Fund
Grand Total

COMPANY DETAILS

MAN WITH A MISSION

If ever there was a man with a mission it was Hasmukhbhai Parekh, Founder and Chairman-Emeritus, of HDFC Group who left this earthly abode on November 18, 1994. Born in a traditional banking family in Surat, Gujarat, Mr. Parekh started his financial career at HarkisandassLukhmidass ± a leading stock broking firm. The firm closed down in the late seventies, but, long before that, he went on to become a towering figure on the Indian financial scene. In 1956 he began his lifelong financial affair with the economic world, as General Manager of the newly-formed Industrial Credit and Investment Corporation of India (ICICI). He rose to become Chairman and continued so till his retirement in 1972. At the ripe age of 60, Hasmukhbhai started his second dynamic life, even more illustrious than his first. His vision for mortgage finance for housing gave birth to the Housing Development Finance Corporation ± it was a trend-setter for housing finance in the whole Asian continent. He was also a writer in his own right. There are over 200 published articles by him... In 1992, the Government of India honoured him with the Padma Bhushan Award. The London School of Economics & Political Science conferred on him an Honorary Fellowship. He was one of the Founder Members of the Centre for Advancement of Philanthropy, and it¶s Chairman till 1993. He took active interest in the Bombay Community Public Trust, designed specifically to serve the needs of the city¶s underprivileged citizens. When Mr. Deepak Parekh took over as Chairman from Hasmukhbhai, he said: ³Taking over from H.T. Parekh is a formidable task; his vision« brought about not only an institution, but an entire concept which has proved itself to be of lasting importance.´ Today we are the largest residential mortgage finance institution in India, with a net worth of Rs. 2,703 cores as Mr. H.T. PAREKH is conferred the Padma Bhushan by the Government of India in the year 1992.

of March 31, 2006 and an asset base of over Rs. 22,000 cores. We also aim to increase the flow of resources to the housing sector by integrating the housing finance sector with the overall domestic financial markets. Over a span of 25 years, HDFC has become the pioneer in housing finance in India and made it possible for over two million Families to own their homes, through housing loans worth over Rs. 42,000 cores.

ABOUT COMPANY HDFC

VISION

To be a dominant player in the Indian mutual fund space, recognized for its high levels of ethical and professional conduct and a commitment towards enhancing investor interests. ORGANIZATION AND MANAGEMENT HDFC Asset Management Company Ltd (AMC) was incorporated under the Companies Act, 1956, on December 10, 1999, and was approved to act as an Asset Management Company for the HDFC Mutual Fund by SEBI vide its letter dated June 30, 2000. The registered office of the AMC is situated at Ramon House, 3rd Floor, H.T. Parekh Marg, 169, Backbay Reclamation, Churchgate, Mumbai - 400 020. In terms of the Investment Management Agreement, the Trustee has appointed the HDFC Asset Management Company Limited to manage the Mutual Fund. The paid up capital of the AMC is Rs. 25.161 crore. The present equity shareholding pattern of the AMC is as follows : Particulars Housing Development Finance Corporation Limited Standard Life Investments Limited % of the paid up equity capital 60 40

Zurich Insurance Company (ZIC), the Sponsor of Zurich India Mutual Fund, following a review of its overall strategy, had decided to divest its Asset Management business in India. The AMC had entered into an agreement with ZIC to acquire the said business, subject to necessary

regulatory approvals. On obtaining the regulatory approvals, the following Schemes of Zurich India Mutual Fund have migrated to HDFC Mutual Fund on June 19, 2003. These Schemes have been renamed as follows: Former Name Zurich India Capital Builder Fund Zurich India Equity Fund Zurich India High Interest Fund Zurich India Liquidity Fund Zurich India Prudence Fund Zurich India Sovereign Gilt Fund Zurich India TaxSaver Fund New Name HDFC Capital Builder Fund HDFC Equity Fund HDFC High Interest Fund HDFC Cash Management Fund HDFC Prudence Fund HDFC Sovereign Gilt Fund* HDFC TaxSaver

Zurich India Top 200 Fund HDFC Top 200 Fund *HDFC Sovereign Gilt Fund has been wound up in March 2006. The AMC is also providing portfolio management / advisory services and such activities are not in conflict with the activities of the Mutual Fund. The AMC has renewed its registration from SEBI vide Registration No. - PM / INP000000506 dated December 21, 2009 to act as a Portfolio Manager under the SEBI (Portfolio Managers) Regulations, 1993. The Certificate of Registration is valid from January 1, 2010 to December 31, 2012.

HDFC is a professionally managed organization with a board of directors consisting of eminent persons who represent various fields including finance, taxation, construction and urban policy & development. The board primarily focuses on strategy formulation, policy and control, designed to deliver increasing value to shareholders.

Mr. Deepak S. Parekh is the executive Chairman of the Corporation. He is fellow of the Institute of Chartered Accountants (England & Wales).Mr. Parekh joined the Corporation in a senior management position in 1978.He was inducted as a whole time director of the Corporation in 1985 and was appointed as the Chairman in 1993. He is the chief executive officer of the Corporation Mumbai. The Board of Directors of the HDFC Asset Management Company Limited (AMC) consists of the following eminent persons.

y y y y y y y y y y y y

Mr. Deepak S. Parekh Mr. N. Keith Skeoch Mr. Keki M. Mistry Mr. James Aird Mr. P. M. Thampi Mr. HumayunDhanrajgir Dr. Deepak B. Phatak Mr. Hoshang S. Billimoria Mr. Rajeshwar Raj Bajaaj Mr. Vijay Merchant Ms. Renu S. Karnad Mr. MilindBarve

SPONSORS

HOUSING DEVELOPMENT FINANCE CORPORATION LIMITED (HDFC):

HDFC was incorporated in 1977 as the first specialised housing finance institution in India. HDFC provides financial assistance to individuals, corporate and developers for the purchase or construction of residential housing. It also provides property related services (e.g. property identification, sales services and valuation), training and consultancy. Of these activities, housing finance remains the dominant activity.

HDFC currently has a client base of over 8, 00,000 borrowers, 12, 00,000 depositors, 92,000 shareholders and 50,000 deposit agents. HDFC raises funds from international agencies such as the World Bank, IFC (Washington), USAID, CDC, ADB and KFW, domestic term loans from banks and insurance companies, bonds and deposits. HDFC has received the highest rating for its bonds and deposits program for the ninth year in succession. HDFC Standard Life Insurance Company Limited, promoted by HDFC was the first life insurance company in the private sector to be granted a Certificate of Registration (on October 23, 2000) by the Insurance Regulatory and Development Authority to transact life insurance business in India.

HDFC is India's premier housing finance company and enjoys an impeccable track record in India as well as in international markets. Since its inception in 1977, the Corporation has maintained a consistent and healthy growth in its operations to remain the market leader in

mortgages. Its outstanding loan portfolio covers well over a million dwelling units. HDFC has developed significant expertise in retail mortgage loans to different market segments and also has a large corporate client base for its housing related credit facilities. With its experience in the financial markets, a strong market reputation, large shareholder base and unique consumer franchise, HDFC was ideally positioned to promote a bank in the Indian environment.

STANDARD LIFE INVESTMENTS LIMITED

The Standard Life Assurance Company was established in 1825 and has considerable experience in global financial markets. In 1998, Standard Life Investments Limited became the dedicated investment management company of the Standard Life Group and is owned 100% by The Standard Life Assurance Company.

With global assets under management of approximately US$186.45 billion as at March 31, 2005, Standard Life Investments Limited is one of the world's major investment companies and is responsible for investing money on behalf of five million retail and institutional clients worldwide. With its headquarters in Edinburgh, Standard Life Investments Limited has an extensive and developing global presence with operations in the United Kingdom, Ireland, Canada, USA, China, Korea and Hong Kong. In order to meet the different needs and risk profiles of its clients, Standard Life Investments Limited manages a diverse portfolio covering all of the major markets world-wide, which includes a range of private and public equities, government and company bonds, property investments and various derivative instruments. The company's current holdings in UK equities account for approximately 2% of the market capitalization of the London Stock Exchange.

HDFC MUTUAL FUND PRODUCTS

Equity Funds HDFC Growth Fund HDFC Long Term Advantage Fund HDFC Index Fund HDFC Equity Fund HDFC Capital Builder Fund HDFC Tax saver HDFC Top 200 Fund HDFC Core & Satellite Fund HDFC Premier Multi-Cap Fund HDFC Long Term Equity Fund HDFC Mid-Cap Opportunity Fund

Balanced Funds HDFC Children's Gift Fund Investment Plan HDFC Children's Gift Fund Savings Plan HDFC Balanced Fund HDFC Prudence Fund Debt Funds HDFC Income Fund HDFC Liquid Fund HDFC Gilt Fund Short Term Plan

HDFC Gilt Fund Long Term Plan HDFC Short Term Plan HDFC Floating Rate Income Fund Short Term Plan HDFC Floating Rate Income Fund Long Term Plan HDFC Liquid Fund - PREMIUM PLAN HDFC Liquid Fund - PREMIUM PLUS PLAN HDFC Short Term Plan - PREMIUM PLAN HDFC Short Term Plan - PREMIUM PLUS PLAN HDFC Income Fund Premium Plan HDFC Income Fund Premium plus Plan HDFC High Interest Fund HDFC High Interest Fund - Short Term Plan HDFC Sovereign Gilt Fund - Savings Plan HDFC Sovereign Gilt Fund - Investment Plan HDFC Sovereign Gilt Fund - Provident Plan HDFC Cash Management Fund - Savings Plan HDFC Cash Management Fund - Call Plan HDFCMF Monthly Income Plan - Short Term Plan HDFCMF Monthly Income Plan - Long Term Plan HDFC Cash Management Fund - Savings Plus Plan HDFC Multiple Yield Fund HDFC Multiple Yield Fund Plan 2005

HDFC MUTUAL FUND AT A GLANCE Name of Unit Address : HDFC MUTUAL FUND -Ramonhouse,3rdfloor,h.tparekh

marg,churchgate,Mumbai-400020 , INV SERVICE CENTREForm of Organization : Contact Number Establishment year Sponsors : : : 1st Floor, pradhan tower, main road, Ranchi. Private Sector (0651)-3242077 2000 Housing Development Finance Corporation Limited (HDFC), Standard Life Investments Limited. Management : Trustee. HDFC Asset Management Company Limited (AMC).

Working Hours Web site

: :

9.30 am to 7.00 p.m www.hdfcfund.com

ACHIEVEMENTS AND AWARDS

 ³HDFC Prudence fund´ has been ranked ICRA-MFR 1, and Has Been awarded the Gold Award for µBest Performance¶ in the category of ³Open Ended Balanced Scheme´ for one year Period Ending Dec 31, 2005.

 ³HDFC Tax saver fund´ has been ranked ICRA-MFR 1, and Has Been Silver award for ³Second Best Performance´ in the category of ³Open Ended Equity Linked Saving Scheme(ELSS)´ for Three year Period Ending Dec 31, 2005.

³HDFC MIP~LTP´ has been ranked ICRA-MFR 1, and Has been awarded the Gold Award For ³Best Performance´ in the category of ³Open Ended Marginal Equity Scheme´ for one year Period Ending Dec 31, 2005 ICRA Mutual Fund Awards 2010

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ICRA Gold Award for 'Best Performance' - Seven Star Fund Ranking HDFC Prudence Fund has been ranked ³A Seven Star Fund" # and has been awarded Gold Award # for 'Best Performance' in the category of Open Ended Balanced for one year period ending December 31, 2009 (from amongst 24 schemes). HDFC MF Monthly Income Plan - Long Term Plan has been ranked ³A Seven Star Fund"# and has been awarded Gold Award # for 'Best Performance' in the category of Open Ended Marginal Equity for one year period ending December 31, 2009 (from amongst 46 schemes). HDFC High Interest Fund - Short Term Plan has been ranked ³A Seven Star Fund"# and has been awarded Gold Award# for 'Best Performance' in the category of Open Ended Debt Short Term for three year period ending December 31, 2009 (from amongst 17 schemes).

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ICRA Five Star Fund Ranking HDFC Multiple Yield Fund - Plan 2005 has been ranked ³A Five Star Fund"# indicating performance among top 4.6% in the category of Open Ended Marginal Equity for one year period ending December 31, 2009 (from amongst 46 schemes). HDFC MF Monthly Income Plan - Long Term Plan has been ranked ³A Five Star Fund´# indicating performance among top 4.6% in the category of Open Ended Marginal Equity for three year period ending December 31, 2009 (from amongst 43 schemes).

HDFC Cash Management Fund - Savings Plan has been ranked ³A Five Star Fund´# indicating performance among top 4.6% in the category of Open Ended Liquid for one year period ending December 31, 2009 (from amongst 29 schemes). #Past Performance is no guarantee of future results. Ranking Methodology ICRA ONLINE Mutual Fund (MF) Rankings seek to inform investors and MF intermediaries of the category-wise relative performance of MF schemes. The schemes are ranked using the methodology developed jointly by ICRA Limited and ICRA Online Limited. The rankings, covering the two time horizons of one and three years, have been arrived at following an indepth analysis of critical parameters including:
y y y y y y

Risk-Adjusted Return Portfolio Concentration Characteristics Liquidity Corpus size Average maturity Credit Quality

The Process For the purpose of ranking, the Mutual Fund schemes are classified on the basis of two factors (i.e. their asset allocation and investment pattern) over the ranking periods of one and three years. This is different from the traditional scheme information document based scheme classification. The classification on the basis of asset allocation and investment pattern holds more relevance as these two factors determine the risk level of MF schemes. MF schemes with equity exposure have been classified as Marginal Equity, Balanced, and Equity, on the basis of the extent of the equity exposure. Then they have been sub-classified as Diversified±Defensive, Diversified-Aggressive and Sector schemes on the basis of their sectoral concentration. Debt-based MF schemes have been categorised depending on their average portfolio maturity over the ranking period. Thereafter, the ranks assigned to the schemes are as a result of an in-depth analysis of critical parameters including those as mentioned above. The Criteria
y y

It should have declared a minimum 222 Net Asset Values (NAVs) for one year and 666 NAVs for the three year period; It must have made full portfolio disclosure (monthly/quarterly) during the ranking horizon;

y

y

Its scheme size should be larger than 10% of the category¶s median average assets under management (AUM), except for Liquid and Ultra Short Term schemes where the cut off is set at 20% and There should be at least five schemes in the category.

Note: Only growth options of open-ended MF schemes are considered for ranking, apart from Liquid and Ultra Short Term schemes, where Institutional Plans have also been considered. The categories for ranking are:
y y y y y y y y y y y y

Diversified Equity Schemes-Defensive Diversified Equity Schemes-Aggressive Sector Schemes (Only Banking) Index Funds Equity Linked Savings Schemes (ELSS) Balanced Schemes Marginal Equity Schemes Income Schemes-Long Term and Short Term Gilt Schemes-Long Term and Short Term Liquid Schemes Ultra Short Term Schemes Floating Rate Funds

Ranking: 7 ± Star Gold Award indicates the best performing fund amongst the 5-Star Funds, provided the scheme size is a minimum Rs 100 crore or greater than the category average asset size, whichever is lower. 5 ± Star Ranking indicates schemes whose composite score lies in the top 4.6% confidence * Based on the positioning of a scheme in the category¶s normal distribution.

Disclaimer: The ranks assigned by ICRA Limited (ICRA) /ICRA Online Limited (ICRON) are based on an objective analysis of information obtained from the entities concerned as also other sources considered reliable by ICRA/ICRON. However, the ranks must be construed solely as statements of opinion and ICRA/ICRON shall not be liable for any losses incurred by any user from any use of the ranks. Also, the ranks are neither a certificate of any statutory compliance nor any guarantee on the future performance of the ranked entities/schemes. Ranking and Award Source: ICRA Limited /ICRA Online Limited Lipper Fund Awards 2010

HDFC Equity Fund - Growth Option was awarded the µBest Fund over Ten Years¶# in the µEquity India¶ Category (from amongst 53 schemes) for the 10 year period ending December 31, 2009 at Lipper Fund Awards 2010 (India). HDFC Prudence Fund ± Growth Option was awarded the µBest Fund for over Five years¶# in the µMixed Asset INR Aggressive¶ category (from amongst 24 schemes) for the 5 year period ending December 31, 2009 at Lipper Fund Awards 2010 (India). HDFC Prudence Fund - Growth Option was awarded the µBest Fund over Ten Years¶# in the µMixed Asset INR Aggressive¶ category (from amongst 10 schemes) for the 10 year period ending December 31, 2009 at Lipper Fund Awards 2010 (India). HDFC MF Monthly Income Plan ± Long Term Plan - Growth Option was awarded the µBest Fund over Three Years¶# in the µMixed Asset INR Conservative¶ category (from amongst 58 schemes) for the 3 year period ending December 31, 2009 at Lipper Fund Awards 2010 (India).[View Award] #Past Performance is no guarantee of future results. Ranking Source and Publisher: Lipper. CNBC TV18 - CRISIL Mutual Fund Awards 2010 HDFC Top 200 Fund was among the only two schemes that won the ³Best Performing Mutual Fund of the Year´ Award # in the Large Cap Oriented Funds category at CNBC TV18 - CRISIL Mutual Fund Awards 2010 for the calendar year 2009 (from amongst 24 schemes) HDFC Cash Management Fund - Treasury Advantage Plan was among the only two schemes that won the ³Best Performing Mutual Fund of the Year´ Award # in the Ultra Short Term Debt Funds category at CNBC TV18 - CRISIL Mutual Fund Awards 2010 for the calendar year 2009 (from amongst 28 schemes).

DETAILS OF SOME FAMOUS HDFC MUTUAL FUND SCHEMES: EQUITY SCHEMES

1. HDFC GROWTH FUND Investment objective The primary investment objective of the Scheme is to generate long term capital appreciation from a portfolio that is invested predominantly in equity and equity related instruments. Basic Scheme Information Nature of Scheme Inception Date Option/Plan Entry Load. (as a % of the Applicable NAV) Exit Load. (as a % of the Applicable NAV) Minimum Application Amount Open Ended Growth Scheme Sep 11, 2000 Dividend Option, Growth Option, Not applicable

1% payable if redeemed within 1 yr. No exit load after 1 yr. Rs.5000 and in multiples of Rs.100 thereof to open an account / folio. Additional purchases is Rs. 1000 and in multiples of Rs. 100 thereof Nil Every Business Day Normally despatched within 3 Business days

Lock-In-Period Net Asset Value Periodicity Redemption Proceeds

Investment pattern The corpus of the Scheme will be invested primarily in equity and equity related instruments. The Scheme may invest a part of its corpus in debt and money market instruments, in order to manage its liquidity requirements from time to time, and under certain circumstances, to protect the interests of the Unit holders. The asset allocation under the Scheme will be as follows:

SR NO.

TYPE OF INSTRUMENTS

NORMAL ALLOCATION (%of net asset) 80-100

RISK PROFILE Medium to high Low to medium

1

Equities & Equities related instruments Debt securities, money market instruments & cash

2

0-100

Investment Strategy & Risk Control The investment approach will be based on a set of well established but flexible principles that emphasise the concept of sustainable economic earnings and cash return on investment as the means of valuation of companies. In summary, the Investment Strategy is expected to be a function of extensive research and based on data and reasoning, rather than current fashion and emotion. The objective will be to identify "businesses with superior growth prospects and good management, at a reasonable price". Benchmark Index : SENSEX Fund Manager : Mr. ShrinivasRaoRauri

2.HDFC EQUITY FUND

Investment Objective The investment objective of the Scheme is to achieve capital appreciation. Basic Scheme Information Nature of Scheme Inception Date Option/Plan Open Ended Growth Scheme Jan 01, 1995 Dividend Option, Growth Option,

Entry Load. (as a % of the Applicable NAV) Exit Load. (as a % of the Applicable NAV) Minimum Application Amount

Not applicable.

1% payable if redeemed within 1 yr. No exit load after 1 yr. Rs.5000 and in multiples of Rs.100 thereof to open an account / folio. Additional purchases is Rs. 1000 and in multiples of Rs. 100 thereof Nil Every Business Day Normally despatched within 3 Business days

Lock-In-Period Net Asset Value Periodicity Redemption Proceeds

Investment Pattern The asset allocation under the Scheme will be as follows: SR NO. TYPE OF INSTRUMENTS NORMAL ALLOCATION (%of net asset) 80-100 RISK PROFILE Medium to high Low to medium

1

Equities & Equities related instruments Debt securities, money market instruments & cash

2

0-20

Investment in Securitised debt, if undertaken, would not exceed 20% of the net assets of the scheme. The Scheme may also invest upto 25% of net assets of the Scheme in derivatives such as Futures & Options and such other derivative instruments as may be introduced from time to time for the purpose of hedging and portfolio balancing and other uses as may be permitted under the Regulations. Investment Strategy & Risk Control

In order to provide long term capital appreciation, the Scheme will invest predominantly in growth companies. Companies selected under this portfolio would as far as practicable consist of medium to large sized companies which: are likely achieved above average growth than the industry; enjoy distinct competitive advantages, and have superior financial strengths.

The aim will be to build a portfolio, which represents a cross-section of the strong growth companies in the prevailing market. In order to reduce the risk of volatility, the Scheme will diversify across major industries and economic sectors. Benchmark Index : S&P CNX 500. HDFC Equity, which is benchmarked to S&P CNX 500 Index is not sponsored, endorsed, sold or promoted by Indian Index Service & Products Limited (IISL). Fund Manager : Mr. Prashant Jain

HDFC TAXSAVER Investment Objective The investment objective of the Scheme is to achieve long term growth of capital. Basic Scheme Information Nature of Scheme Open Ended Equity Linked Saving Scheme Mar 31, 1996 Dividend Option, Growth Option, Not applicable

Inception Date Option/Plan Entry Load. (as a % of the Applicable NAV) Exit Load. (as a % of the Applicable NAV) Minimum Application Amount

Nil

Rs.500 and in multiples of Rs.500 thereof to open an account / folio. 3 yrs Every Business Day

Lock-In-Period Net Asset Value Periodicity

Redemption Proceeds

Normally despatched within 3 Business days

Investment Pattern The asset allocation under the Scheme will be as follows: SR NO. ASSET TYPE (% OF PORTFOLIO) Minimum 80% RISK PROFILE Medium to high

1

Equities & Equities related instruments Debt securities, money market instruments & cash

2

Minimum 20%

Low to medium

Investment in Securitized debt, if undertaken, would not exceed 20% of the net assets of the scheme.

The Scheme may also invest up to 25% of net assets of the Scheme in derivatives such as Futures & Options and such other derivative instruments as may be introduced from time to time for the purpose of hedging and portfolio balancing and and other uses as may be permitted under the regulations and guidelines.

The Scheme may also invest a part of its corpus, not exceeding 40% of its net assets, in overseas markets in Global Depository Receipts (GDRs), ADRs, overseas equity, bonds and mutual funds and such other instruments as may be allowed under the Regulations from time to time. The ELSS (Equity Linked Savings Scheme) guidelines, as applicable, would be adhered to in the management of this Fund. If the investment in equities and related instruments falls below 80% of the portfolio of the Scheme at any point in time, it would be endeavoured to review and rebalance the composition. Benchmark Index : S&P CNX 500. HDFC Tax saver, which is benchmarked to S&P CNX 500 Index is not sponsored, endorsed, sold or promoted by Indian Index Service & Products Limited (IISL). Fund Manager :Vinaykulkarni

HDFC TOP 200 FUND

Investment Objective The investment objective is to generate long term capital appreciation from a portfolio of equity and equity linked instruments. The investment portfolio for equity and equity linked instruments will be primarily drawn from the companies in the BSE 200 Index. Further, the Scheme may also invest in listed companies that would qualify to be in the top 200 by market capitalisation on the BSE even though they may not be listed on the BSE This includes participation in large IPO¶s where in the market capitalisation of the company based on issue price would make the company a part of the top 200 companies listed on the BSE based on market capitalisation. Basic Scheme Information

Nature of Scheme Inception Date Option/Plan Entry Load. (as a % of the Applicable NAV) Exit Load.

Open Ended Equity Growth Scheme Oct 11, 1996 Dividend Option, Growth Option, Not applicable

1% payable if redeemed within 1 yr. No exit load after 1 yr.

Minimum Application Amount

Rs.5000 and in multiples of Rs.100 thereof to open an account / folio. Additional purchases is Rs. 1000 and in multiples of Rs. 100 thereof. Nil

Lock-In-Period

Investment Pattern The asset allocation under the Scheme will be as follows: SR NO. ASSET TYPE (% OF PORTFOLIO) RISK

PROFILE 1 Equities & Equities related instruments Upto 100% (including use of derivatives for hedging and other uses as permitted by prevailing SEBI Regulations) Balance in Debt & Money Market Instruments Medium to high

2

Debt securities, money market instruments & cash

Low to medium

Investment in Securitised debt, if undertaken, would not exceed 20% of the net assets of the scheme. The Scheme may also invest upto 25% of net assets of the Scheme in derivatives such as Futures & Options and such other derivative instruments as may be introduced from time to time for the purpose of hedging and portfolio balancing and other uses as may be permitted under the regulations and guidelines. Investment Strategy & Risk Control The investment strategy of primarily restricting the equity portfolio to the BSE 200 Index scrips is intended to reduce risks while maintaining steady growth. Stock specific risk will be minimised by investing only in those companies / industries that have been thoroughly researched by the investment manager's research team. Risk will also be reduced through a diversification of the portfolio. Benchmark Index : BSE 200 Fund Manager : Mr. Prashant Jain

BALANCED SCHEMES

1. HDFC BALANCED FUND Investment Objective The primary objective of the Scheme is to generate capital appreciation along with current income from a combined portfolio of equity and equity related and debt and money market instruments. Basic Scheme Information Nature of Scheme Open Ended balanced Scheme

Inception Date Option/Plan Entry Load. (as a % of the Applicable NAV) Exit Load.

Sep 11, 2000 Dividend Option, Growth Option, Not applicable.

1% payable if redeemed within 1 yr. No exit load after 1 yr.

Minimum Application Amount

Rs.5000 and in multiples of Rs.100 thereof to open an account / folio. Additional purchases is Rs. 1000 and in multiples of Rs. 100 thereof.

Lock-In-Period Net Asset Value Periodicity

Nil Every Business Day

Investment Pattern The Scheme will be invested in equity and equity related instruments as well as in debt and in money market instruments in normal circumstances. The following table provides the asset allocation of the Scheme¶s portfolio. The asset allocation under the Scheme will be as follows: SR NO. TYPE OF INSTRUMENT Equity & Equity related instruments Debt securities & Money Market instruments) Normal Allocation (% of Net Assets) Normal Deviation (% of Normal Allocation) RISK PROF ILE Mediu m to high Low to mediu m

1.

60

20

2.

40

20

Investment Strategy & Risk Control The balanced product is positioned as a lower risk alternative to a pure equities scheme, while retaining some of the upside potential from equities exposure. The Scheme provides the Investment Manager with the flexibility to shift allocations in the event of a change in view regarding an asset class. Asset allocation between equities and debt is a critical function in a balanced fund. It is proposed to continuously monitor the potential for both debt and equities to arrive at a dynamic allocation between the asset classes.

The equity and debt portfolios of the Scheme would be managed as per the respective investment strategies detailed herein. The investment approach would be based on the concept of economic earning power and cash return on investments Risk control The overall portfolio structure would aim to maintain risk at a moderate level. The Fund Manager would avoid adopting either a very defensive or aggressive posture at any point in time. Risk will also be controlled through portfolio diversification and a conscious focus on maintaining adequate levels of liquidity at all points in time. Macro economic risk will be addressed through a constant review of the business and economic environment. The AMC may from time to time, review and modify the Schemes? Investment strategy if such changes are considered to be in the best interest of Unit holders and appropriate to the existing market situation. Investments in securities and instruments not specifically mentioned earlier may also be made, provided they are permitted by SEBI Regulations. Benchmark Index : CRISIL Balanced Fund Index Fund Manager :Mr.Chiragsetalvad 2. HDFC PRUDENCE FUND Investment Objective The investment objective of the Scheme is to provide periodic returns and capital appreciation over a long period of time, from a judicious mix of equity and debt investments, with the aim to prevent/ minimise any capital erosion. Under normal circumstances, it is envisaged that the debt : equity mix would vary between 60:40 and 40:60 respectively. This mix is geared to achieve the investment objective and is expected to result in regular income, capital appreciation and also prevent capital erosion.

Basic Scheme Information Nature of Scheme Inception Date Option/Plan Entry Load. (as a % of the Applicable NAV) Exit Load. (as a % of the Applicable NAV) Open Ended balanced Scheme Feb 01, 1994 Dividend Option, Growth Option, Not applicable.

In Respect of each purchase/ switch in an Exit load of 1% is payable if Units are redeemed / switched out within 1 year from the date of allotment. Rs.5000 and in multiples of Rs.100 thereof to open an account / folio. Additional purchases is Rs. 1000 and in multiples of Rs. 100 thereof.

Minimum Application Amount

Lock-In-Period Net Asset Value Periodicity Redemption Proceeds

Nil Every Business Day Normally despatched within 3 Business days

Investment Pattern The asset allocation under the Scheme will be as follows: SR NO. ASSET TYPE (% OF PORTFOLIO) Upto 100% RISK PROFILE Medium to high

1

Equities & Equities related instruments Debt securities, money market instruments & cash

2

Not more than 20%

Low to medium

Investment in Securitised debt, if undertaken, would not exceed 10% of the net assets of the scheme. In such times when the interest rates are high, investment in debt would be more attractive versus equities and accordingly the Fund is likely to increase the debt component in the Scheme's portfolio. Similarly in times when the interest rates are low and the equity valuations are cheap, the Scheme is likely to reduce exposure to debt and increase exposure to equities. In addition to debt and equities the scheme will also invest in money market instruments. The exact proportion in money market instruments will be a function of the liquidity needs and the attractiveness of the debt/ equity markets. At times when neither the debt market nor equities are attractive for investment, more resources may be temporarily invested in money market investments to be invested in debt/ equities at a more appropriate time. Investment Strategy & Risk Control As outlined above, the investments in the Scheme will comprise both debt and equities. The Fund would invest in Debt instruments such as Government securities, money market instruments, securitised debts, corporate debentures and bonds, preference shares, quasi Government bonds, and in equity shares Benchmark Index : CRISIL Balanced Fund Index Fund Manager : Mr. Prashant Jain

FINANCIAL ANALYSIS

IMPORTANCE OF FINANCE

Finance is regarded as the life blood of a business enterprise. This is because in the modern money oriented economy. Finance is the one of the basic foundation of all kind of electronic activity. It is the master key which provides access to the entire source for being employed in manufacturing and merchandizing activities. It has rightly been said the business needs money to make more money. However it is also true that money begets more money, only when it is properly managed. Hence, efficient management of every business enterprise is closely linked with efficient management of its finance.

MEANING OF BUSINESS FINANCE

In general finance may be defined as the provision of money at the time it is wanted. However, as a management function it has a special meaning. Finance function may be defined as the procurement of funds and their effective utilization. Some of the authoritative definitions are as follows:

³Business finance is that business activity which is concerned with the acquisition and conservation of capital funds in meeting financial needs and overall objectives of far business enterprise.´

³Business finance can broadly be defined as the activity concerned with planning rising, controlling and administrating of the funds used in the business.´

MEANING OF FINANCIAL MANAGEMENT

From the various definition of the term business finance given above, it can be conclude that the term business finance mainly involves, rising of funds and their effective utilization keeping in view the overall objectives of the firm. This requires great caution and wisdom on the part of management. The management makes use of various financial techniques, devices, etc. For administrating the financial affairs of the firm in the most effective and efficient way. Financial management, therefore, means the entire gamut of managerial efforts devoted to the management of finance both its sources and uses of the enterprise.

According to somloman ³financial management is concerne4d with the efficient use of an important economic resource, namely, capital funds.´ Phillipppatus has given a more elaborate definition of the term financial management. According to him ³financial management is concerned with the managerial decisions that result in the acquisition and financing of long-term and short-term credits for the firm. As such it seals with the situations that require selection of specific assets (or combination of assets), the selection of specific liability (or combination of liabilities) as well as the problem of size and growth of an enterprise. The analysis of these decisions is based on the executed inflows and outflow of funds and their effects upon managerial objectives.

Thus, financial management is mainly concerned with proper management of funds. The finance manager must see that the funds are procured in a manner that the risk, cost and control consideration are properly balanced in a given situation and there is optimum utilization of funds.

HDFC assets management company LTD.(AMC)was established under company act 1956 on December 10,1999 and approved as to act as an Asset Management Company for the HDFC Mutual fund by SEBI vide its letter dated july3,2000. The present equity share holder pattern of the AMC is HDFC LTD. comprises 60% shares and rest 40% are under standerd life investment limited. The registered office of the AMC is situated at Ramon House, 3rd Floor, H.T. Parekh Marg, 169, Backbay Reclamation, Church gate, Mumbai - 400 020.

In terms of the Investment Management Agreement, the Trustee has appointed the HDFC Asset Management Company Limited to manage the Mutual Fund. The paid up capital of the AMC is Rs. 25.161 crore. The AMC is also providing portfolio management advisory services and such activities are not in conflict with the activities of the Mutual Fund. The AMC has renewed its registration from SEBI vide Registration No. - PM / INP000000506 dated December 8, 2006 to act as a Portfolio Manager under the SEBI (Portfolio Managers) Regulations, 1993. The Certificate of Registration is valid from January 1, 2007 to December 31, 2009. HDFC Mutual Fund is one of the largest mutual funds and well-established fund house in the country with consistent and above average fund performance across categories since its incorporation on December 10, 1999. HDFC have never believed that the experience is enough. HDFC Asset Management Company (AMC) is the first AMC in India to have been assigned the µCRISIL Fund House Level ± 1¶ rating. This is its highest Fund Governance and Process Quality Rating which reflects the highest governance levels and a fund management practice at HDFC AMC It is the only fund house to have been assigned this rating for two years in succession. Over the past, HDFC have won a number of awards and accolades for our performance.

As on 30 April 2010 Average Assets under Management :Rs. 94,702.79crore No. of investors : 32,15,023 No. of ARN certified distributors : 65,656

ACQUISITION OF FUNDS & UTILIZATION OF FUNDS HDFC Asset Management Company is a service sector industry so acquisition of funds is done by introducing various schemes and utilization of fund is done by Fund Manager and fund is invested in market and following is the total AUM (Asset Under Management) and also given % of utilization in equity and debt.

PERFORMANCE ANALYSIS Need of Performance analysis:(1) It enables the investor to appraise how well the portfolio manager has done in achieving desired return target and performance and how well risk has been controlled in the process. It enables the investor to assess how well the manager has achieved the target in comparison with the other manager or, alternatively with some passive investment strategy. It provides a mechanism for identifying weakness in the investment process and for improving these areas.

(2)

(3)

Calculation of returns:Return is defined to include changes in the value of the fund over the performance period. As far as portfolio¶s return in concern, it is mainly defined by cash flows (in-or-out) during the interim valuation. In particular ,contribution to the fund during a period of rising market will inflate value of the fund and hence the calculated rate of return, while withdrawals will reduce the value and calculated return, conversely contribution to the fund during a period of falling will reduce the return, while withdrawals would inflate the return. One-way to adjust for cash inflows and outflows to the fund are to use the unit value method. When cash inflows occur, new issued, and when cash outflow occur, units are retired. As a result, the number of unit change when cash flow occurs but value per unit remains constant. Mutual funds use the unit value method so that cash flows result in changes in units but not net asset value. Let us suppose the one period rate of return is RP then it will define as:RP = {NAV(t-1) - NAV(t) + D(t) +C(t) } / NAV(t-1) Where t=current time period.

t-1 = previous time period. D = Cash disbursement. C= Capital disbursement.

Consideration of Risk:While evaluating the performance of a portfolio or a fund manager, the analysis is incomplete until and unless we also consider the risk undertaken for generating the concerned return. By risk, we mean the variability of return, and standard deviation of the portfolio is taken as a measure of the risk for the portfolio. As we know that standard deviation measures the total risk, or variability. The total risk includes systematic risk and unsystematic risk. Systematic risk is the component of the security¶s or portfolio¶s volatility related to market in general. Systematic risk is measure by Beta of the portfolio. Unsystematic risk measure the residual variability of security after market related risk is removed. Once the risk of the portfolio is quantified and measured, it can then be related to return to determine. For this purpose, there are essentially three major methods for assessing risk-adjusted performance. They are:(1) Return per unit of risk, (2) Differential return

(1) Return Per Unit Of Risk:- This technique relates the absolute level of return achieved to the level of risk incurred to develop a relative risk-adjusted measure for ranking fund performance. There are two alternative:(1) (2) The reward to variability ratio developed by William Sharpe, Know as Sharpe Measure. The reward to volatility ratio developed by Jack Treynor, Known as Treynor Measure.

Sharpe Measure:Under the Sharpe Measure, the performance of a mutual fund is evaluated on the basis of the Sharpe Ratio, which is a ratio of returns, generated by the fund over and above risk free Rate of

return and the total risk associated with it (risk premium). ). According to Sharpe, it the total risk (variability) of the fund, to which the investors are concerned about So, the total model evaluates funds on the basis of reward per unit of the total risk, which is standard deviation of the portfolio return. Symbolically, it can be written as SR, then SR= (RP ± RF) / SD Where RP = Return on the portfolio. RF = Risk free rate of return. (Generally taken to be the return on the securities backed by government, as there no credit risk associated with it) SD = Standard deviation of return on the portfolio. (RP-RF) = Risk premium earn in the portfolio. Note:- While a high and positive SR shows a superior risk adjusted performance of a fund, a low and negative SR is an indication of unfavorable performance.

Treynor Measure:This is a performance measure that evaluates funds on the basis of Treynor¶s ratio. This is a ratio of return generated by the fund over and above the risk free rate (risk Premium) during a given period and systematic risk (volatility, known as beta) associated with it. Symbolically it can be represented as TR, then TR = (RP ±RF) / BT Where RP = Return on the portfolio RF = Risk free rate of return. BT = Beta of the portfolio. Note: - While a high and positive Treynor Ratio (TR) shows the superior risk- adjusted performance of a fund, a low and negative TR is an indication of unfavorable performance. Conflicts Between Sharpe¶s and Treynor¶s Measure:-

The two performance ratios differ only in that one considers total risk as measure by standard deviation, while the other considers only market risk as measure as a beta. When evaluating less than fully diversified portfolios or individual stocks, the relevant measure of risk is beta coefficient. For well-diversified portfolio, total risk is equal to systematic risk. Ranking based on total risk (Sharpe¶s Measure) and systematic risk (Treynor¶s measure) should be identical for the well-diversified portfolio as the total risk is reduced to systematic risk. Therefore, a poorly diversified fund, that rank on Treynor¶s measure compare with another fund that is highly diversified, will lower on Sharpe¶s measure. The choice of the measure depends on the nature of the funds that are being evaluated. For example, sector specific funds have the unsystematic risk so the appropriate to use Sharpe¶s measure. On the other hand, if we compare growth funds, which are by their nature expected to diversified, use of Treynor¶s measure will be appropriate. In short, Sharpe¶s measure will be appropriate for evaluating funds, which are not expected to fully diversified whereas Treynor¶s measure will be more suitable for funds, which are supposed to be well diversified. My Analysis on HDFC schemes:For the calculation of statisticalvariables, which are linked to the market, we are calculating a common index. They are:HDFC GROWTH FUND HDFC EQUITY FUND HDFC TOP 200 HDFC CAPITAL BUILDER FUND HDFC CORE AND SATELLITE FUND HDFC PREMIER MULTI CAP FUND HDFC LONG TERM ADV. FUND HDFC TAX SAVER BSE SENSEX S&P CNX 500 BSE 200 S&P CNX 500 BSE 200 S&P CNX 500 BSE SENSEX S&P CNX 500

TABLE 3 I took ten schemes of HDFC of same market (Equity Diversified), because we have to analyze all this with respect to market risk, hence it is mandatory to choose same risk profile¶s scheme. I collected three year¶s standard deviation of fund to calculate Treynor ratio, beta has used to calculate Sharpe Ratio. The existing risk-free return is 5. Now we see one workout:For HDFC Growth Fund

Risk premium= return of fund in 3 years- risk free rate of return. = 13.67-5= 8.67 Sharpe ratio= Risk premium/Standard deviation. 8.67/10.90=0.80 Treynor Ratio= risk premium/ beta 8.67/0.982=8.83 Similarly, we can calculate Sharpe Ratio &Treynor ratio of all schemes. This is as follow:SCHEME HDFCGROWTH FUND HDFC EQUITY FUND HDFC TOP 200 HDFC CAPITAL BUILDER FUND HDFC CORE AND SATELLITE FUND HDFC PREMIER MULTI CAP FUND HDFC LONG TERM ADV. FUND HDFC TAX SAVER SD 10.90 11.60 10.90 11.00 12.20 BETA 0.9820 0.9390 0.9030 0.8690 1.002 RP 8.67 7.54 10.49 -0.06 -1.53 SR 0.80 0.65 0.96 0.01 0.13 RANK-SR 2 3 1 8 5 TR 8.83 8.03 RANK-TR 2 3

11.62 1 0.07 8 1.53 6

12.10

0.9740

1.53

0.13

6

1.57

5

10.50

0.9350

-2.20

0.21

4

2.35

4

11.10

0.8890

-0.17

0.02

7

0.19

7

TABLE 4 Here SD= Standard Deviation of the scheme for last three years SR= Sharpe Ratio, TR= Treynor ratio, RP= Three Year Return of Scheme, RF= Risk-Free return Taken As 5. Here all funds are of the equity-diversified category. HDFC Top 200 has highest Sharpe ratio among all these funds. That means return per unit of total risk is highest for HT200 hence ranked

one in this category. As we see that for HDFC TOP 200 (15.49) 3-year return is more than HDFC Growth Fund(13.67), but total risk taken by HT200 is more compare to any other fund. Hence, it is ranked first among this category. We ranked fund on the basis of the return from per unit of total risk associated with fund. Here HT200 has 0.96 value of return per unit of the total risk. Hence, ranked first. More the value of Sharpe Ratio we ranked them higher (One is the highest rank in this analysis). Similarly, we can analyze all schemes. On the basis of Treynor Ratio also HT200 is ranked first, because the market risk of HT200 (0.9030) is low compare to HGF (0.9820), however the market risk adjusted return is to HT200 is (10.49) is more compare to that of HGF (8.67), it is ranked first because the value of return per unit of TOP200 (11.62) is higher as compare to that of HGF (8.83) . Higher the value of Treynor ratio, higher the rank (first rank is higher rank in this analysis) We can relatively analyze all the schemes among each other. These two measures are relative measure for the scheme. We can use this for the comparison purpose. We can analyze fund by inter fund comparison as well as intra fund comparison. We can compare the schemes of different fund house of same market. Same market means the risk profile of all scheme should be same. HT200 is ranked first does not mean that it is ranked first in equity diversified market, it may be ranked lower when we compare it with other schemes of all fund houses in same market. (2) Differential Return:- The underlying objective of this technique is to calculate the return that should be expected for the fund given the realized risk of the fund and compare that with the return actually realized over the period. There is a measure for measure of this return known as Jensen¶s measure. Jensen¶s Measure:- Jensen¶s measure provides absolute performance of the portfolio on riskadjusted basis with respect to a define standard against which performance of the various fund can be calculated. The choice of the standard depends on the predictive ability of the portfolio manager, which implies his ability to earn return through the successful forecasting of security prices, which are higher than those, which we would expect given the level of the risk of his portfolio. In other word, this measure try to assess if more than expected return can be earned at the particular level for the portfolio¶s risk. To measure this we have to calculate alpha of the portfolio, because alpha is the excess return from portfolio over the expected return from portfolio. To find the quantified value of Alpha we have to use Capital Asset Pricing Model (CAPM). Hence, we can write it as:Alpha= Realized return on portfolio ± Expected return on portfolio. OR

Alpha = RP ± { RF + BT ( RM ± RF )} - E Where RP = Average realized return on portfolio. RF = Risk- free return for period t. BT = A measure of systematic risk (Slope of the regression). RM = Average return of the market portfolio for time period t. E = Error term Alpha = Intercept that measures the forecasting ability of the portfolio manager. Note:- The higher value of Alpha means lower value of error means high value of t statistic represent superior performance of fund manager to assess the correct return. Negative or lower value of Alpha means higher value of error means low value of t statistic of regression represent poor performance of fund manager to assess the correct return. Limitation of this method is that it considers only systematic risk not the entire risk associated with the fund. Statistical error is large, because of the large fluctuation observed in the limited sample of data, which statistically significant alphas seldom occur. My Analysis on HDFC Schemes:For analysis purpose, we select the schemes of HDFC MF from the same (equity diversified) risk profile market. There are six HDFC schemes with three year return, standard deviation and beta. All these data we collected from different web sites and magazines. Here we took 5.0 as risk free rate of return. After getting this rest is calculation, here we calculate alpha for HDFC Top 200 Fund:Alpha = RP ± { RF + BT ( RM ± RF )} = 10.49-{5+0.94(14.18-5)} = 2.80 Similarly, we can find the Alpha of all the schemes. Which are as follows:Scheme HDFCGROWTH FUND SD Beta RP 8.67 RPRF 3.67 RMRF 8.71. BT*(RMRF) 8.61 Alpha Rank 1.67 2

33.10 0.92

HDFC EQUITY FUND HDFC TOP 200 HDFC CORE AND SATELLITE FUND HDFC PREMIER MULTI CAP FUND HDFC CAPITAL BUILDER. FUND

36.20 1.01 33.46 0.94 37.42 1.03 37.33 1.03 34.53 0.94

7.54 10.49 6.19 9.00 11.21

2.54 5.49 1.19 4.00 6.21

7.99 9.18 6.61 5.63 5.63

7.50 8.29 6.61 5.80 5.29

0.68 2.80 -7.53 -4.45 -6.03

3 1 6 4 5

SD=Standard Deviation of fund for three year, BT=Market risk or beta of fund of three year, RF= 5.0 Alpha is absolute measure it is not relative measure. Among these funds, HDFC TOP 200 has highest value (2.80); this means that the predictability of the fund manager is better respective to that of other fund manager in this market. HDFC GROWTH has 1.67 alpha value, that means when we compare UMV alpha with respect to HDFC TOP 200 alpha (2.80) then we can say that fund manager of HT200 has predicted market well compare to HGF fund manager. Hence, when we analyze alpha of scheme we can rank them up. Negative value of HDFC CAPITAL BUILDER FUND show that fund manager has adversely predicted the market. More the value of alpha the higher the rank (one is the highest rank in this analysis). HT 200 ranked first does not mean that it will rank same when we compare it with the other scheme of all fund houses. In other word, alpha represents how much the rates of return on the portfolio is attributable to the manager¶s ability to drive above-average returns adjusted for risk. Superior risk-adjusted return indicates that the manager is good at either predicting the market turns or selecting the undervalued issues for the portfolio, or both. Performance Analysis of Different Schemes of Different Fund Houses:-

Due to time constrain and data unavailability I select only five fund house and their three schemes of the same market. Here we suppose that there are only three product of each fund house in this particular market, in other word they are of the same risk profile. They all play in the same market; hence, the market standard deviation is same for all schemes. For giving the weightage to the scheme, we choose only three products from each fund house. We suppose that, in equity-diversified market these fund houses has only these three products. It will give weightage of all five measures to the ranking, so that ranking tells some relationship among schemes. FUND HOUSE SCHEME RP SD BE S RT RAL PH R ALP

TA SBI MUTUAL FUND MAGNUM EQUITY 16. 45 36. 92 1.03

R 0. 3 8 0. 1 1 0. 3 9 0. 3 3 0. 1 9 0. 4 8 0. 3 9 0. 4 2 0. 4 8 0. 3

SR 8

R 0. 3 1 0. 0 1 0. 3 4 0. 2 7 0. 1 3 0. 3 2 0. 3 4 0. 4 0 0. 4 9 0. 3

TR 8

A 6.3 9

HA 1

SBI MUTUAL FUND

MAGNUM GLOBAL

5.4 2

45. 35

1.20

15

15

10. 93 0.3 9

15

SBI MUTUAL FUND

MAGNUM CONTRA

17. 17

35. 92

1.00

7

5

9

RELIANCE MUTUAL FUND RELIANCE \\\MUTUAL FUND RELIANCE MUTUAL FUND HDFC MUTUAL FUND HDFC MUTUAL FUND HDFC MUTUAL FUND UTI MUTUAL FUND

EQUITY

13. 06

29. 35

0.81

11

9

1.2 5 0.1 3

13

EQUITY OPPORTU NITY GROWTH

9.6 8

36. 40

1.00

13

13

10

17. 74

37. 32

1.02

2

6

6.1 3

2

EQUITY

17. 31

36. 20

1.01

6

4

0.6 8

8

GROWTH

18. 25

33. 10

0.92

4

3

1.6 7

6

TOP 200

21. 30

33. 46

0.94

3

1

3.3 6

5

MASTERS HARE

15. 05

31. 60

0.88

10

7

0.9

12

4 UTI MUTUAL FUND MASTER VALUE 6.9 0 39. 82 1.07 0. 1 3 0. 3 2 0. 5 3 0. 3 6 0. 4 2 14

2 0. 0 5 0. 2 0 0. 4 8 0. 2 4 0. 2 5 14

2 9.0 0 0.2 3 5.2 3 14

UTI MUTUAL FUND

EQUITY

10. 69

28. 67

0.80

12

12

11

BIRLA MUTUAL FUND BIRLA MUTUAL FUND BIRLA MUTUAL FUND

FRONTLI NE EQUITY INDIA GENNEXT

21. 30

33. 70

0.95

1

2

3

12. 12

29. 16

0.78

9

11

1.5 4

7

MID CAP

15. 48

41. 80

1.13

5

10

4.5 5

4

I have taken three-year return, standard deviation and beta of all the schemes from web site and magazine. We calculate the Sharpe Ratio, Treynor Ratio, Alpha, according to the above mentioned method and example of HDFC schemes. We ranked all schemes according to Sharpe Ratio, Treyonr Ratio, Alpha, . Here we already suppose that there are only three products, hence the sum of the all five ranking will tell something. Because, we have ranked one for the highest value of Sharpe Ratio, Treynor Ratio, Alpha, , we ranked one whose, sum of all five measure is lowest. Rest fund have ranked according to the sum of the above ranking.

Thus, we finally get the ranking as follow:-

FUND HOUSE

SCHEME

RSR

RTR

R ALPHA

0VER RANK

SBI MUTUAL FUND SBI MUTUAL FUND SBI MUTUAL FUND RELIANCE MUTUAL FUND RELIANCE MUTUAL FUND RELIANCE MUTUAL FUND HDFC MUTUAL FUND HDFC MUTUAL FUND HDFC MUTUAL FUND UTI MUTUAL FUND UTI MUTUAL FUND UTI MUTUAL FUND BIRLA MUTUAL FUND BIRLA MUTUAL FUND BIRLA MUTUAL FUND

MAGNUM EQUITY MAGNUM GLOBAL MAGNUM CONTRA EQUITY EQUITY OPPORTUNITY GROWTH EQUITY GROWTH TOP 200 MASTERSHARE MASTER VALUE EQUITY FRONTLINE EQUITY INDIA GENNEXT MID CAP

8 15 7 11

8 15 5 9

1 15 9 13

5 15 8 11

13

13

10

13

2 6 4 3 10 14 12 1 9 5

6 4 3 1 7 14 12 2 11 10

2 8 6 5 12 14 11 3 7 4

3 6 4 2 10 14 12 1 9 7

Frontline equity of birlasunlifeI Mutual Fund ranked 1 in all measure hence this scheme will get total sum of rank 6. Similarly, we calculate the sum of the respective scheme. According to the sum of the rank, we again rank these funds. Lowest value of the sum has ranked first. The rest schemes ranked accordingly. 6 is the lowest value among these, hence it ranked first. Similarly, we ranked all schemes.

Fund House SBI Mutual Fund Reliance Mutual Fund HDFC Mutual fund UTI Mutual Fund Birla Sunlife Mutual Fund

Total Tally 5+15+18 11+13+3 6+4+2 10+14+12 9+7+1

Over Rank 38 27 12 36 17

Now if we suppose there are only three product of each fund house, then the weighted ranking of scheme will give weight to the fund house ranking. Suppose HDFC mutual fund get weightage by their schemes (4 by Growth, 2 by Top 200 and by 6 Equity), and its weighted rank will be decided by the sum of these ranking. Similarly, we get the sum of all fund house schemes and evaluate the weighted ranking of the fund house. HDFC Mutual Fund has got least value of the sum, hence it ranked first among these five-fund houses. Rest fund house ranked accordingly.

This working is limited to few fund house and few schemes. This will hold good, if we take large number of schemes from different fund house for analyze inter and intra schemes. Nevertheless, when we have to analyze fund house performance with respect to other fund house, we must consider weightage of the scheme.

SWOT ANALYSIS

STRENGTHS      Good Brand Name of the company in all over India. Flexible products Expertise in the field of mutual fund Sound financial resources of the company as well as sponsors. Strong Communication Network all over the country.

WEAKNESSES  Less awareness regarding mutual fund among investors  Yet to build strong distribution network  Cannot tap rural market OPPORTUNITIES:  Untapped rural market  Lack of competitive products to suit clients¶ investment objective THREATS  The numbers of players are increasing which further increases the competition.  Product Innovation done by other Asset Management companies and is able to collect large amounts. Customer mindsets are still rigid and they mostly prefer traditional pattern of investments.

Conclusion& recommendations:
After going through a two months summer training and survey, I have come to know about different aspects of mutual funds and mutual funds industry. India is an emerging market. Consumption level is rising with rising earning level. Economic indicators micro and macro both show a sky facing arrows. Data shows that there will be more number of billionaires from India than any of other country. We know that Indians are earning more therefore spending more, but how much they save/invest in order to secure future. There are numbers of traditional ways of saving. They give guaranteed return with low risk. High risk associated investment options was not considered a right decision. India is a young country having a considerably big part of young people. They are more risk taker. They need a right direction for investment options. This study and survey on mutual funds is a small eye hole to see the picture of mutual funds industry in India. This provides almost clear view to the readers. Mutual funds industry is enlarging its size in India. JVs, foreign JVs and acquisitions are in trend. AUM has gone to $8 trillion, number of investors is rising, and number of AMCs is going up. These changes are likely to happen. Indian monetary policy is supporting new business. Private sector is aggressively participating in mutual funds business. Numbers of schemes are much more than earlier. With such shining sides, double digit inflation rate, bearish stock market, RBI s high bank rates, squeezing liquidity and other dark sides putting pressure on consumers saving. This situation pushes investors back from investment. They wait and hold cash rather than investing. This study found that investors are willing to invest with high rate of return. They know high return always adhere to high risk but market still is not in correction mode. It will take time. Indian market potential is high, investors are willing to pour money in mutual funds, despite some temporary restraints, other economic factors are in favorable mode. Thus we need proper management of advisory services, more schemes, financial advisors and institutions to cater untouched markets. Industry need to revise its business strategy. Investor s perception is not prioritized yet. Instead of completing targets, advisors working under institutions should consider the requirement of investors. We need to change pattern of selling mutual funds schemes. I hope this study will help readers to identify industry s unidentified areas where they need to work out

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