BHARATHIDASAN UNIVERSITY TIRUCHIRAPPALLI A PROJECT REPORT ON DETAIL STUDY OF HDFC MUTUAL FUND SUBMITTED FOR THE PARTIAL FULFILLMRNT OF THE REQUIREMENT FOR THE DEGREE OF MBA SUBMITTED BY: HARISH SINGH NEGI REGISTRATION NO.-13295294 MBA-IV SEMESTER SESSION (2013-2015) INTERNAL GUIDE GAURAV GILLBONOFIDE CERTIFICATE This is to certify that the Report on Project Work titled “RISK RETURN ANALYSIS AND. COMPARATIVE STUDY OF MUTUAL FUNDS” for HDFC Asset Management Company Ltd. is a bonafide record of the work done by HARISH SINGH NEGL Studying in Master of Business Administration in Bharathidasan University Tiruchirappalli 2013-15, Project Viva-Voce held on Internal examiner External examinerEXECUTIVE SUMMARY ‘The performance evaluation of mutual fund is a vital matter of concern to the fund managers, investors, and researchers alike. The core competence of the company is to meet objectives and the needs of the investors and to provide optimum return for their isk. This study tries to find out the risk and retum allied with the mutual funds. This project paper is segmented into three sex ns to explore the link between conventional subjective and statistical approach of Mutual Fund analysis. To start with, the first section deals with the introductory part of the paper by giving an overview of the Mutual fund industry and company profile. This section also talks about the theory of portfolio analysis and the different measures of risk and return used for the comparison. The second section details on the need, objective, and the | tations of the study. It also discusses about the sources and the period for the data collection. It also deals with the data interpretation and analysis part wherein all the key measures related to risk and return are done with the interpretation of the results. In the third section, an attempt is made to analyse and compare the performance of the equity mutual fund. For this purpose p-value, standard deviation, and risk adjusted performance measures such as Sharpe ratio, Treynor measure, Jenson Alpha, and Fema measure have been used, The portfolio analysis of the selected fund has been done by the measure return for the holding period. At the end, it illustrates the suggestions and findings based on the analysis done in the previous sections and finally it deals with conclusion part.ACKNOWLEDGEMENT I take this opportunity to express my deep sense of gratitude to all those who have contributed significantly by sharing their knowledge and experience in the completion of this project work. 1 am greatly obliged to, for providing me with the right kind of opportunity and facilities to complete this venture. My first word of gratitude is due to MrSidhartha Chanergee - Branch Manager, HDFC AMC, Barakhambha Road, my corporate guide, for his kind help and support and his valuable guidance throughout my project. 1 am thankful to him for providing me with necessary insights and helping me out at every single step. | am also thankful to Prof Gaurav Gill Executive Trainee, the former student of Bharathidasan University Tiruchirappali, Above all, I express my words of gratitude to HDFC AMC, Allahabad Branch for proving me with all the knowledge resources and enabling me to pass AMFI-MTUTUAL FUND (ADVISOR) MODULE; NSE’s CERTIFICATION IN FINANCIAL MARKETS (NCFM) with 74.5 percentages Tam extremely thankful to Mr-Gauray Gill my intemal faculty guide under whose able guidance this project work was carried out. I thank her for her continuous support and mentoring during the tenure of the project. Finally, I would also like to thank all my dear friends for their cooperation, advice and encouragement during the long and arduous task of carrying out the project and preparing this report.This is the age of technical up gradation. Nothing remains same for a long period every thing change with a certain span of time, So it is must for every organization to put a birds eye view on it’s over all functioning. This report was preparing during practical training of Master of business administration (M.B.A.) from Bharathidasan University The student of M.B.A. essentially required a practical training of 4to6 weeks in any organization. It gives an opportunity to the student to test their acquired knowledge through practical experiences, ‘The objective of my study was Risk Return Analysis And Comparative Study Of Mutual Funds “HDFC Asset Management Company Ltd.” I however present this report In all my modesty to the readers with a faith that it shall serve the causes of subject Harish Singh Negi TABLE OF CONTENTS Page No. Part-I 137Executive Summary Ti ‘A. Mutual Fund Overview 19 1.1 Mutual Fund an Tavestment Platform 12 T ZAnaaaes ‘of Mutual Fund 3 1.3 Disadvantage of Investing Through Mutual Funds 4 14 Categories of Mutual Fund a8 15 Investment Strategies 8 1.6 Organisation of Mutual Fund O11 1.7 Distribution Channels 12 1.8 HDFC AMC Company Overview [12-19 B. Measuring and Evaluating Mutual Funds Performance 20-37 12.1 Purpose of Measuring and Evaluating 20-21 12.2 Financial Planning for Investors referring to Mutual Funds 2 1.2.3. Why Has It Become One Of The Largest Financial Instruments? | 22-25 124 Evaluating Portfolio Performance 26 12.5 How to Reduce Risk While Investing 26-28 1.2.6 A Study of Portfolio Analysis from The Point Of Fund Manager | 28-29 12.7 Measures of Risk and Return 29-37 Part-II 38-40 Research Methodology 2.1 Need For the Study 38-39 2.2 Objective of the Study 39 23 Limitations of the Study 0 24 Data Collection 40 Part-II 41-102 Case Anal 3.1 Data Interpretation 41-87 3.2 Analysis of the observation 87-97 33 Findings 83.4 Recommendations 99-100 3.5 Conclusion 101 References, 102 PART-I 1.MUTUAL FUND OVERVIEW 1.1 MUTUAL FUND AN INVESTMENT PLATFORM Mutual fund is an investment company that pools money from small investors and invests ina variety of securities, such as stocks, bonds and money market instruments, Most open-end Mutual funds stand ready to buy back (redeem) its shares at their current net asset value, which depends on the total market value of the fund's investment portfolio at the time of redemption, Most open-end Mutual funds continuously offer new shares to investors. It is also known as an open-end investment company, to differentiate it from a closed-end investment company.Mutual funds invest pooled cash of many investors to meet the fund's stated investment objective. Mutual funds stand ready to sell and redeem their shares at any time at the fund’s current net asset value: total fund assets divided by shares outstanding. INVEST THEIR INVEST IN VARIETY OF 7 srocks/a0Nos = = t g 2 2g 3 2 F g g & & 5 e s z & 5 = 2 8 snoRT/DSs FoR RoFT/0ss ROW g poRTrOUO OF inowiouat 3 ' Figure: 1 In Simple Words, 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 not all stocks may move in the same direction in the same proportion at the same time, Mutual fund issues units t © the investors in accordance with quantum of money invested by them, Investors of Mutual fund 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 differen wvestment objectives which are launched from time to time In India, A Mutual fund is required to be registered with Securities and Exchange Boa rd of India (SEBI) which regulates securities markets before it can collect funds from the public.In Short, a Mutual fund is a common pool of money in to which investors with common investment objective place their contributions that are to be invested in accordance with the state d investment objective of the scheme. The investment manager would invest the money collected from the investor in to assets that are defined/ permitted by the stated objective of the scheme. For example, an equity fund would invest equity and equity related instruments and a debt fund would invest in bonds, debentures, gilts ete. Mutual fund is a suitable investment for the common ma na s it offers an Oporto unity to invest in a diversified, profess nally managed basket of securities at a relatively low cost. 1.2 ADVANTAGES OF MUTUAL FUND ‘Tables1.1 Portfolt | Mutual Funds invest in a well-diversified portfolio of securities ft Which enables investor to hold a diversified investment portfolio Diversif ‘ lean (uhether the amount of investment is big or small). Prafesi Fund manager undergoes through various research works and has 2. better investment management skills which ensure higher returns M nage | to the investor than what he can manage on his own. ment Investors acquire a diversified portfolio of securities even with a » | oo small investment in a Mutual Fund. The risk in a diversified portfolio is lesser than investing in merely 2 or 3 securities. 4. | Low Due to the economies of scale (benefits of larger volumes), Transac | mutual funds pay lesser transaction costs. These benefits are tion passed on to the investors.Costs Liguiait | A? investor may not be able to sell some of the shares held by 5. a him very casily and quickly, whereas units of a mutual fund are 2 far more liquid. ‘Gusts Mutual funds provide investors with various schemes with a different investment objectives. Investors have the option of 6. | Someme |) investing in a scheme having a correlation between its investment objectives and their own financial goals. These schemes further m have different plans/options _ Funds provide investors with updated information pertaining to % ze the markels and the schemes, All material facts are disclosed to aes investors as required by the regulator. Investors also benefit from the convenience and flexibility offered by Mutual Funds. Investors ean switeh their holdings from a debt 8. 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 Mutual Fund industry is part of @ well-regulated investment 5 ate environment where the interests of the investors are protected by _ 9 the regulator, All funds are registered with SEBI and complete transparency is forced. 1.3 DISADVANTAGE OF INVESTING THROUGH MUTUAL FUNDS Table:1.2 Costs Conte Investor has to pay investment management fees and fund Not in eee i F ae distribution costs as a percentage of the value of his . e investments (as long as he holds the units), irrespective of the Hands performance of the fund, of an Investor No ‘The portfolio of securities in which a fund invests is a decision Custom | taken by the fund manager. Investors have no right to interfere 2 ized in the decision making process of a fund manager, which some Portfoli | investors find as a constraint in achieving their financial os ‘objectivesDifficult cite Many investors find it difficult to select one option from the b ", | plethora of funds/schemes/plans available. For this, they may Suitable | #2¥6t0 take advice from financial planners in order to invest in ell the right fund to achieve their objectives. Scheme 1.4 CATEGORIES OF MUTUAL FUND EQUITY FUNDS BALANCED -BT FUNDS FUNDS LEQUID FUNDS*. —+ [ences EQUITY ORIENTED ] —.. SS ne SECTOR FUND FLOATING RATE owas ARBITAGE FUNDS ELsS [_ ee | ‘Mutual funds can be classified as follow: Based on their structure: > Open-ended funds: Investors can buy and sell the units from the fund, at any point of time. > Close-ended funds: These funds raise money from investors only once, Therefore, afier the offer period, fresh investments cannot be made into the fund. If the fund is listed on a stocks exchange, the units can be traded like stocks (E.g., Morgan Stanley Growth Fund). Recently, most of the New Fund Offers of close-ended funds provided liquidity window on a periodic basis such as monthly or weekly. Redemption of units can be made during specified intervals, Therefore, such funds have relatively low liquidity. Based on their investment objective: & Equity funds: ‘These funds invest in equities and equity related instruments. With fluctuating share prices, such funds show volatile performance, even losses. However. short term fluctuations in the market, generally smoothens out in the long term, thereby offering higher returns at relatively lower volatility. At the same time, sueh funds can yield great capital appreciation as, historically, equities have outperformed all asset classes in the long term. Hence, investment in equity funds should be considered for a period of at least 3-5 years. It can be further classified as:1. Index funds- In this case a key stock market index, like BSE Sensex or Nifty is tracked. Their portfolio mirrors the benchmark index in terms of both composition and individual stock weightages 2. Equity diversified funds- 100% of the capital is invested in equities spreading across different sectors and stocks. Dividend yield funds- itis similar to the equity-diversified funds except that they invest in companies offering high dividend yields. 4, Thematic funds- Invest 100% of the assets in sectors which are related through some theme. e.g. -An infrastructure fund invests in power, construction, cements sectors etc. 5. Sector funds- Invest 100% of the capital in a specific sector. e.g. - A banking sector fund will invest in banking stocks. 6, ELSS- Equity Linked Saving Scheme provides tax benefit to the investors. > Balanced fund: Their investment portfolio includes both debt and equity. As a result, on the risk-return ladder, they fall between equity and debt funds. Balanced funds are the ideal mutual funds vehicle for investors who prefer spreading their risk across various instruments. Following are balanced funds classes: 2 Debt-oriented funds -Investment below 65% in equities. 3. Equity-oriented funds -Invest at least 65% in equities, remaining in debt. > Debt fund: They invest only in debt instruments, and are a good option for investors averse to idea of taking risk associated with equities. Therefore, they invest exclusively in fixed-income instruments like bonds, debentures, Government of India securities; and money market instruments such as certificates of deposit (CD), commercial paper (CP) and call money. Put your money into any of these debt funds depending on your investment horizon and needs. 1. Liquid funds- These funds invest 100% in money market instruments, a large portion being invested in call money market.2 3. 4. 6. Gilt funds ST- They invest 100% of their portfolio in government securities of and T- bills. Floating rate funds - Invest in short-term debt papers. Floaters invest in debt instruments, which have variable coupon rate. Arbitrage fund- They generate income through arbitrage opportunities due to miss- pricing between cash market and derivatives market. Funds are allocated to equities, derivatives and money markets. Higher proportion (around 75%) is put in money markets, in the absence of arbitrage opportunities. it funds LT- They invest 100% of their portfolio in long-term government securities. Income funds LT- Typically, such funds invest a major portion of the portfolio in long-term debt papers. MIPs- Monthly Income Plans have an exposure of 70%-90% to debt and an exposure of 10%-30% to equities. FMPs- fixed monthly plans invest in debt papers whose maturity is in line with that of the fund High level of retum, but has a high level of risk too ‘Returns comparative! sky than equity funds Liquid Market funds and Money | Provide siable but low level of retum 1.5 INVESTMENT STRATEGIES:1, Systematic Investment Plan: Under this, a fixed sum is invested each month on a fixed date of a month, Payment is made through post-dated cheques or direct debit facilities. The investor gets fewer units when the NAV is high and more units when the NAV is low. This is called as the benefit of Rupee Cost Averaging (RCA) 2. Systematic Transfer Plan: Under this, an investor invest in debt-oriented fund and give instructions to transfer a fixed sum, at a fixed interval, to an equity scheme of the same mutual fund. 3. Systematic Withdrawal Plan: if someone wishes to withdraw from a mutual fund then he can withdraw a fixed amount each month, 1.6. ORGANISATION OF MUTUAL FUND: (emosree ([seenson] (BUND HanAGeR | + MKT. / SALES + MKT. / SALES| L__»["muruar FunD 1 SCHEMES DISTRIBUTOR, INVESTO! + Figures. THE STRUCTURE CONSISTS OF: SPONSOR Sponsor is the person who acting alone or in combination with another body corporate establishes a mutual fund. Sponsor must contribute at least 40% of the net worth of theInvestment managed and meet the eligibility criteria prescribed under the Securities and Exchange Board of India (Mutual Fund) Regulations, 1996. The sponsor is not responsible or liable for any loss or shortfall resulting from the operation of the Schemes beyond the initial contribution made by it towards setting up of the Mutual Fund. TRUST The Mutual Fund is constituted as a trust in accordance with the provisions of the Indian Trusts Act, 1882 by the Sponsor. The trust deed is registered under the Indian Registration Act, 1908. TRUSTEE ‘Trustee is usually a company (corporate body) or a Board of Truste (body of individuals). ‘The main responsibility of the Trustee is to safeguard the interest of the unit holders and ensure that the AMC functions in the interest of investors and in accordance with the Securities and Exchange Board of India (Mutual Funds) Regulations, 1996, the provisions of the Trust Deed and the Offer Documents of the respective Schemes, At least 2/3rd directors of the Trustee are independent directors who are not associated with the Sponsor in any manner. ASSET MANAGEMENT COMPANY (AMC) The AMC is appointed by the Trustee as the Investment Manager of the Mutual Fund. The AMC is required to be approved by the Securities and Exchange Board of India (SEBD to act as an asset management company of the Mutual Fund, At least 50% of the directors of the AMC are independent directors who are not associated with the Sponsor in any manner. The AMC must have a net worth of at least 10 cores at all times. REGISTRAR AND TRANSFER AGENT The AMC if so autho ed by the Trust Deed appoints the Registrar and Transfer Agent to the Mutual Fund. The Registrar processes the application form, redemption requests and dispatches account statements to the unit holders. The Registrar and Transfer agent also handles communications with investors and updates investor records.ASSET UNDER MANAGEMENT: Tablel.4 ASSET UNDER MANAGEMENT OF TOP AMGS as on Jun 30, 2009 ‘Mutual Fund Name No. oF] Compus (Rs.Grores) schemes Reliance Mutual Fund 263 708,332.36 HDFC Mutual Fund 22 (78,197.90 TCICTPridentiat Muwal Fund [325 | 70,160.46 UTI Mutual Fund 207 | 67 978.19 Birla Sun Life Mutual Fund 283 56,280.87 ‘SBT Mutual Fund 130 | 34,061.08 TIC Mutual Fund 7m 32AIa OD Kotak Mahindra Mutual Fund | 134 | 30,833.02 Franklin Templeton Mutual Fund | 19] BATLAS IDFC Mutual Fund 164 | 21,676.29 Tata Mutual Fund 175 2122281 The graph indicates the growth of assets over the years.GROWTHIN ASSETS UNDER MANAGEMENT 5 2 é % $_.8.feh & 2 2 © & F OF CS obs be i 2 3 2 «4 OE i Oe 0 ee i 2 = Years PhaseIV Since Feb-03 Figure:1.5 1.7 DISTRIBUTION CHANNELS: Mutual funds posses a very strong distribution channel so that the ultimate customers doesn’t face any difficulty in the final procurement. The various parties involved in distribution of mutual funds are: 1. Direct marketing by the AMCs: the forms could be obtained from the AMCs directly. The investors can approach to the AMCs for the forms, some of the top AMCs of India are; Reliance Birla Sunlife, Tata, SBI magnum, Kotak Mahindra, HDFC, Sundaram, ICICI, Mirae Assets, Canara Robeco, Lotus India, LIC, UTI etc. whereas foreign AMCs include: Standard Chartered, Franklin Templeton, Fidelity, JP Morgan, HSBC, DSP Merill Lynch, ete. 2. Broker/ sub broker arrangements: the AMCs can simultaneously go for broker/sub- broker to popularize their funds. AMCs can enjoy the advantage of large network of these brokers and sub brokers3. Individual agents, Banks, NBFC: investors can procure the funds through individual agents, independent brokers, banks and several non- banking financial corporations too, whichever he finds convenient for him, 1.8 HDFC AMC COMPANY OVERVIEW HDFC ASSET MANAGEMENT COMPANY LIMITED (AMC) AMC was i approved to act as an AMC for the Mutual Fund by SEBI on July 30, 2000, corporated under the Companies Act, 1956, on December 10, 1999, and was ‘The registered office of the AMC is situated at Ramon House, 3rd Floor, H.T. Parekh Marg, 169, Back bay Reclamation, Church gate, Mumbai - 400 020, In terms of the Investment Management Agreement, the Trustee has appointed HDFC Asset Management Company Limited to manage the Mutual Fund As per the terms of the Investment Management Agreement, the AMC will conduct the operations of the Mutual Fund and manage assets of the schemes, including the schemes launched from time to time. The present share holding pattern of the AMC is as follows: Table:1.5 Particulars % of the paid up capital ‘Housing Development Finance Corporation Limited 50.10 Standard Life Investments Limited 49.90Zurich Insurance Company (ZIC), the Sponsor of Zurich India Mutual Fund, following a r in India. -w of its overall strategy, had decided to divest its Asset Management business ‘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 Schemes of Zurich India Mutual Fund has now migrated to HDFC Mutual Fund on June 19, 2003 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 22, 2000 to act as a Portfolio Manager under the SEBI (Portfolio Managers) Regulations, 1993. The Certificate of Registration is valid from January 1, 2004 to December 31, 2006. Board of Directors The Board of Directors of the HDFC Asset Management Company Limited (AMC) consists of the following eminent persons. Table:1.6 | Mr Deepak S. Parekh Chairman of the board Mr_N. Keith Skeoch CEO of Standard Life Investments Ltd. Mr. Keki M. Associate director Mr. James Aird Investment director Mc. P.M. Thampi Independent director Mr, Humayun Dhanrajgir Independent director Dr Deepak B. Phatak “Independent director ‘Me. Hoshang S. Billimoria. Independent director Mr. Rajeshwar Raj Bajaaj Independent director Mr, Vijay Merchant Independent director [ Ms. Renu S. Karnad Joint managing directorMe Milind Barve Managing director Mr. Deepak Parekh, the Chairman of the Board, is associated with HDFC Ltd. in his capacity as its Executive Chairman. Mr. Parekh joined HDFC Ltd. in a senior management position in 1978. He was inducted as Wholetime Director of HDFC Ltd. in 1985 and was appointed as the Executive Chairman in 1993, Mr. N. Keith Skeoch is associated with Standard Life Investments Limited as its Chief Executive and is responsible for all company business and investment operations within Standard Life Investments Limited, Mr. Keki M. Mistry is an associate director on the Board. He is the Vice-Chairman & Managing Director of Housing Development Finance Corporation Limited (HDFC Ltd.) He is with HDFC Lid. since 1981 and was appointed as the Executive Director of HDFC Lid. in 1993. He was appointed as the Deputy Managing Director in 1999, Managing Director in 2000 and Vice Chairman & Managing Director in 2007. 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, Tt 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 js India's premier housing finance company and enjoys an impeccable track record in India as well as in intemational 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 L1 TED 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 inyestment 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 tisk 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.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 HDEC 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 HDEC 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 HDEC Multiple Yield Fund Plan 2005 ACHIEVEMENT AND AWARDS CNBC - TV 18 - CRISIL Mutual Fund of the Year Awards 2008 : HDFC Prudence Fund was the only scheme that won the CNBC - TV 18 - CRISIL Mutual Fund of the Year Award 2008 in the Most Consistent Balanced Fund under CRISIL ~ CPR for the calendar year 2007 (from amongst 3 schemes). HDFC Cash Management Fund - Savings Plan was the only scheme that won the CNBC - TV 18 - CRISIL Mutual Fund of the Year Award 2008 in the Most Consistent Liquid Fund under CRISIL ~ CPR for the calendar year 2007 (from amongst 5 schemes). HDFC Cash Management Fund - Savings Plan was the only scheme that won the CNBC -TV 18 - CRISIL Mutual Fund of the Year Award 2008 in the Liquid Scheme — Retail Category for the calendar year 2007 (from amongst 19 schemes). Lipper Fund Awards 2008: HDEC Equity Fund - Growth has been awarded the 'Best Fund over Ten Years' in the "Equity India Category’ at the Lipper Fund Awards 2008 (form amongst 23 schemes). It was awarded the Best Fund over ten years in 2006 and 2007 as well. 2008 makes it three in arow. Lipper Fund Awards 2009 : HDEC Equity Fund - Growth has been awarded the 'Best Fund over Ten Years' in the 'Equity India Category’ (form amongst 34 schemes) and HDFC Prudence Fund — Growth Plan in the ‘Mixed Asset INR Aggressive Category” (fom amongst 6 schemes), have been awarded the “Best Fund over 10 Years’ by Lipper Fund Awards India 2009. ICRA Mutual Fund Awards — 2008 : HDFC MF Monthly Income jan - Long Term Plan - Ranked a Seven Star Fund and has been awarded the Gold Award for "Best Performance" in the category of "Open Ended Marginal Equi for the three year period ending December 31, 2007 (from amongst 27 schemes) HDFC High Interest Fund - Short Term Plan - Ranked a Five Star Fund indicating, performance among the top 10% in the category of "Open Ended Debt - Short Term" for one year period ending December 31, 2007 (from amongst 20 schemes). HDFC Prudence Fund - Ranked a Five Star Fund indicating performance among the top 10% in the category of "Open Ended Balanced" for the three year period ending December 31, 2007 (from amongst 16 schemes)B. MEASURING AND EVALUATING MUTUAL FUNDS PERFORMANCE: 1.2.1 PURPOSE OF MEASURING AND EVALUATING Every investor investing in the mutual funds is driven by the motto of either wealth creation or wealth increment or both. Therefore it’s very necessary to continuously evaluate the funds” performance with the help of factsheets and newsletters, websites, newspapers and professional advisors like HDFC AMC. If the investors ignore the evaluation of funds? performance then he can lose hold of it any time. In this ever-changing industry, he ean face any of the following problems: 1. Variation in the funds’ performance due to change in its management) objective. 2. The funds’ performance can slip in comparison to similar funds.3. There may be an increase in the various costs associated with the fund. 4 -Beta, a technical measure of the risk associated may also surge. S. The funds’ ratings may go down in the various lists published by independent rating, agencies. 6. It can merge into another fund or could be acquired by another fund house. Performance measures: Equity funds: the performance of equity funds can be measured on the basis of, NAV Growth, Total Return; Total Return with Reinvestment at NAV, Annualized Retums and Distributions, Computing Total Retum (Per Share Income and Expenses, Per Share Capital Changes, Ratios, Shares Outstanding), the Expense Ratio, Portfolio Tumover Rate, Fund Size, Transaction Costs, Cash Flow, Leverage. Debt fund: Likewise, the performance of debt funds can be measured on the basis of: Peer Group Comparisons, The Income Ratio, Industry Exposures and Concentrations, NPAs, besides NAV Growth, Total Return and Expense Ratio. Liquid funds: the performance of the highly volatile liquid finds can be measured on the Fund Yield, besides NAV Growth, Total Return and Expense Ratio, basis of: Concept of benchmarking for performance evaluatio Every fund sets its benchmark according to its investment objective. The funds performance is measured in comparison with the benchmark. If the fund generates a greater retum than the benchmark then it is said that the fund has outperformed benchmark , if it is equal to benchmark then the correlation between them is exactly 1. And if in case the return is lower than the benchmark then the fund is said to be underperformed.Some of the benchmarks are: 1. Bquity funds: market indices such as S&P CNX nifty, BSE100, BSE200, BSE-PSU, BSE 500 index, BSE bankex, and other sectoral indices. 2. Debt funds: Interest Rates on Alternative Investments as Benchmarks, I-Bex Total Return Index, JPM T-Bill Index Post-Tax Returns on Bank Deposits versus Debt Funds 3. Liquid funds: Short Term Government Instruments’ Interest Rates as Benchmarks, JPM T- Bill Index. To measure the fund’s performance, the comparisons are usually done with: 1) with a market index. ii) Funds from the same peer group. Other similar products in which investors invest their funds. 1.2.2: FINANCIAL PLANNING FOR INVESTORS REFERRING TO MUTUAL FUNDS: Investors are required to go for financial planning before making investments in any mutual fund. The objective of financial planning is to ensure that the right amount of money is more than available at the right time to the investor to be able to meet his financial goals. mere tax planning. Steps in financial planning are: Asset allocation. Selection of fund. Studying the features of a scheme. In case of mutual funds, financial planning is concemed only with broad asset allocation, leaving the actual allocation of securities and their management to fund managers. A fundmanager has to closely follow the objectives stated in the offer document, because financial plans of users are chosen using these objectives. 1.2.3 WHY HAS IT BECOME ONE OF THE LARGEST FINANCIAL INSTRUMENTS? If we take a look at the recent scenario in the Indian financial market then we can find the market flooded with a variety of investment options which includes mutual funds, equities, fixed income bonds, corporate debentures, company fixed deposits, bank deposits, PPF, life insurance, gold, real estate ete. all these investment options could be judged on the basis of various parameters such as- return, safety convenience, volatility and liquidity. Measuring these investment options on the basis of the mentioned parameters, we get this in a tabular form ‘Table:1.7 High Low High High’ ‘Moderate Moderate High Moderate Moderate High Moderate Moderate Modenite Low Low Moderate Low Low Low ModerateModerate High Low Moderate High Low High Low Low Moderate Moderate High Moderate Moderate Gold High We can very well see that mutual funds outperform every other investment option. On three parameters, it scores high whereas it’s moderate at one, comparing it with the other options, wwe find that equities gives us high returns with high liquidity but its volatility too is high with low safety which doesn't makes it favourite among persons who have low risk- appetite. Even the convenience involved with investing in equities is just moderate. Now looking at bank deposits, it scores better than equities at all fronts but lags badly in the parameter of utmost important ie; it scores low on return , so it’s not an happening option for person who can afford to take risks for higher return, The other option offering high retum is real estate but that even comes with high volatility and moderate safety level, even the liquidity and convenience involved are too low. Gold have always been a favourite among Indians but when we look at it as an investment option then it definitely doesn’t gives a very bright picture, Although it ensures high safety but the returns generated and liquidity are moderate. Similarly, the other investment options are not at par with mutual funds and serve the needs of only a specific customer group. Straightforward, wwe can say that mutual fund emerges as a clear winner among all the options available. The reasons for this being:1)Mutual funds combine the advantage of each of the investment produets: mutual fund is one such option which can invest in all other investment options. Its principle of diversification allows the investors to taste all the fruits in one plate. just by investing in it, the investor can enjoy the best investment option as per the investment objective. Il) Dispense the shortcomings of the other options: every other investment option has more or less some shortcomings. Such as if some are good at retum then they are not safe, if some are safe then either they have low liquidity or low safety or both....likewise, there exists no single option which can fit to the need of everybody. But mutual funds have definitely sorted out this problem, Now everybody can choose their fund according to their investment objectives IID) Returns get adjusted for the market movemen s the mutual funds are managed by experts s0 they are ready to switch to the profitable option along with the market movement, ‘Suppose they predict that market is going to fall then they can sell some of their shares and book profit and can reinvest the amount again money market instruments. IV) Flexibility of invested amount: Other then the above mentioned reasons, there exis one more reason which has established mutual funds as one of the largest financial intermediary and that is the flexibility that mutual funds offer regarding the investment amount. One can start investing in mutual funds with amount as low as Rs. 500 through SIPs and even Rs. 100 in some cases. Not all award-winning funds may be suitable for ev ryone Many investors feel that a simple way to invest in Mutual funds is to just keep investing in award winning funds, First of all, itis important to understand that more than the awards; it is the methodology to choose winners t at is more relevant. A rating firm generally claborates on the criteria for deciding the winner's ic. consistent performance, risk adjusted returns, total returns and protection of capital. Eachof these factors is very important and ha s its significance for different categories of funds. Besides, each of these factors has varying degree of significance for different kinds of investors. For example, consistent return re ally focuses on risk. If someone is aftaid of negative returns, consistency will be a more import ant measure than tot al ret urn ix Growth in NAV as well as dividend received. A fund can have very impressive total ret ums overtime, but can be very volatile and tough for a risk adverse investor. Therefore, all the ward winning funds in different categories may not be suitable for everyone. Typically, when one has to select funds, the first step should be to consider personal goals and objectives. Invest ors need to decide which clement they value the most and the n prioritize the other criteria Once one knows what one is looking for, one should go about selecting the funds according to the asset allocation, Most investors need just a few funds, carefully picked, watched and managed over period of time. 1.2.4 EVALUATING PORTFOLIO PERFORMANCE It is important to evaluate the performance of the portfolio on an on-going basis, The following factors are important in this proce Consider long-term record of accomplishment rather than short -term performance. It is important because long-term track record moderates the effects which unusually good or bad short -term performance can have on a fimnd’s track record. Besides, longer-term track record compensates for the effects of a fund manager's particular investment style Evaluate the record of accomplishment against similar funds, Success in managing a small or in a fund focusing on a particular segment of the market cannot be re lied upon as an evidence of anticipated performance in managing a large or a broad based fund. Discipline in investment approach is an important factor as the pressure to perform can make aa fund manager susceptible to have a n urge to change tracks in terms of stock selection as well a s investment strategy.The objective should be to differentiate investment skill of the fund manager from luck and to identify those funds with the greatest potential of future success. ad e 1.2.5 HOW TO REDUCE RISK WHILE INVESTING: Any kind of investment we make is subject to risk. In fact. we get retum on our westment purely and solely because at the very beginning we take the risk of parting with our funds, for getting higher value back at a later date. Partition it self is a risk. Well known economist and Nobel Prize recipient William Sharpe tried to segregate the total risk faced in any kind of investment into two parts - systematic (Systemic) risk and unsystematic (Unsystematie) risk. System: fic risk is that risk which exists in the system, Some of the biggest examples of systematic risk are inflation, recession, war, political situation etc. Inflation erodes returns generated from all investments ¢ .g. If return from fixed deposit is 8 pervent and if inflation is 6 per cent then real rate of retum from fixed deposit is reduced by 6 percent, Similarly if returns generated from equity market is 18 percent and inflation is still 6 per cent then equity returns will be lesser by the rate of inflation. Since inflation exists in the system there is no way one can stay away from the risk of inflation. Economic cycles, war and political situations have effects on all forms of investments. Also these exist in the system and there is no way to stay away from them, Itis like leaming to walk. Anyone who wants to lear to walk has to first fall; you cannot learn to walk without falling, Similarly, anyone who wants to invest has to first face systematic risk. ‘Therefore, one can never make any kind of investment without systematic risk, Another fonn of risk is unsystematic risk. This risk does not exist in the system and hence is not applicable to all forms of investment Unsystematic risk is associated with particular form of investment. Suppose we invest in stock market and the market falls, then only our investment in equity gets affected OR if we have placed a fixed deposit in particular bank and bank goes bankrupt, than we only lose money placed in that bank. While there is no way to keep away from risk, we canalways reduce the — impact of risk. Diversification helps in reducing the impact of unsystematic risk. If our investment is distributed across various asset classes, the impact of unsystematic risk is reduced. If we have placed fixed deposit in several banks, then even if one of the banks goes bankrupt our entire fixed de posit investment is not lost, Similarly if our equity investment is in Tata Motors, HLL, Infosys, adverse news about Infosys will only impact investment in Infosys, all other stocks will not have any impact . To reduce the impact of systematic risk, we should invest regularly, By investing regularly, we average out the impact of risk. Mutual find, as an investment vehicle gives us benefit of both diversification and averaging. Portfolio of mutual funds consists of multiple securities and hence adverse news about single security will have nominal impact on overall portf By systematically inves ing in mutual fund, we get benefit of rupee cost averaging. Mutual fund as an investment vehicle helps reduce, both, systematic as well as unsystematic risk 1.2.6 A STUDY OF PORTFOLIO ANALYSIS FROM THE POINT OF FUND MANAGER: Effective use of portfolio management disciplines improves customer satisfaction, reduces the number of risks problems, and increases to success. The goal of portfolio analysis realize these same benefits at the portfolio level by applying a consistent structured management approach. The considerations underlying the portfolio analysis is a matter of concern to the fund managers, investors, and researchers alike. This study attempts to answer two ques relating to the portfolio analysis: © Make an average (or fair) retum for the level of risk in the portfolio * To find out the portfolio which best meets the purpose of the investor.At a minimum, any comprehensive mutual fund selection and analysis approach should include the following generalized processes: * Fund selection © Fund prioritize’ reprioritize * Selection of the acceptable and required fund © Fund analysing and monitoring * Corrective action management The fund portfolio analysis gives the ability to select funds that are aligned with the investor's strategies and objectives. It helps the fund manager to make the best use of available opportunities by applying to the highest priority of the investor. A fund manager can regularly assess how securities and stocks are contributing to portfolio health and can make the corrective action to keep the portfolio in compliance with the investor’s interest and objectives. Mutual funds do not determine risk preference. However, once investor determines his/her retum preferences, he/she can choose a mutual fund a large and growing variety of alternative funds designed to meet almost any investment goal. Studies have showed that the funds generally were consistent in meeting investors stated goals for investment strategies, risk, and return, The major benefit of the mutual fund is to diversify the portfolio to eliminate unsystematic risk. The instant diversification of the funds is especially beneficial to the small investors who do not have the resources to acquire 100 shares of 12 or 15 different issues required to reduce unsystematie risk. Mutual funds have generally maintained the stability of their correlation with the market because of reasonably well diversified portfolios. There are some measures for the analysis and each of them provides unique perspectives. These measures evaluate the different components of performance.1.2.7 MEASURES OF RISK AND RETURN: Risk is variability in future cash flows. It is also known a uncertainty in the distribution of possible outcomes. A risky situation is one, which has some probability of loss or unexpected results. The higher the probability of loss or unexpected results is, the greater the risk It is the uncertainty that an investment will earn its expected rate of return, For an investor, evaluating a future investment alternative expects or anticipates a certain rate of return is very important. Portfolio risk management includes processes that identify, analyse, respond to, track, and control any risk that would prevent the portfolio from achieving its business objectives. These processes should include reviews of project level risks with negative implications for the portfolio, ensuring that the project manager has a responsible risk mitigation plan. Additionally, it is important to do a consolidated risk assessment for the portfolio overall to determine whether it is ithin the already specified limits. Since portfolio and their environments are dynamic, managers should review and update their portfolio risk management plans on a regular basis through the fund life cycle. Simple measure of returns: The return on mutual fund investment includes both income (in the form of dividends or investment payments) and capital gains or losses (increase or decrease in the value of a security). The return is calculated by taking the change in a fund’s Net Asset Value, which is the market value of securities the fund holds divided by the number of the fund’s shares during a given time period, assuming the reinvestment all income and capital gains distributions, and dividing it by the original net asset value. The return is calculated net of management fees and other expens: charged to the fund. Thus, a fund’s monthly retum ean be expressed as follows: Rt= (NAVt- NAVt-D/NAVEL Where, Rtis the return in month tNAVt is the closing net asset value of the fund on the last trading day of the month NAV¢-| is the closing net asset value of the find on the last day of the previous month Measure of risk Investors are interested not only in fund’s retum but also in risk taken to achieve those returns, So risk can be thought as the uncertainty of the expected return, and uncertainty is generally equated with variability. Variability and the risk are corelated; hence high retums will tend to high variability. > Standard deviation: in simple terms standard deviation is one of the commonly used statistical parameter to measure risk, which determines the volatility of a fund. Deviation is defined as any variation from a mean value (upward & downward). Since the markets are volatile, the reums fluctuate every day. High standard deviation of a fund implies high volatility and a low standard deviation implies low volati S.D. =V1/Tx (Rt-AR)? Where, the periodic standard deviation, AR is the average periodic return, T is the number of observations in the period for which the standard deviation is being calculated, Rtis the return in month t > Beta analysis: ) B (Beta) Co-efficient: Systematic risk is measured in terms of Beta, which represents fluctuations in the NAV of the fund vis-i-vis market. The more responsive the NAV of a Mutual Fund is to the changes in the market; higher will be its beta. Beta is calculated by relating the returns on a Mutual Fundwith the retums in the market. While unsystematic risk can be diversified through investments in a number of instruments, systematic risk cannot. By using the risk return relationship, we try to assess the competitive strength of the Mutual Funds vis-i-vis one another in a better way. B(Beta) is calculated as = [N (ZXY) -EXEYJ/ [N (EX?) - (LX)?] Beta is used to measure the risk. It basically indicates the level of volatility associated with the fund as compared to the market. In case of funds, as compared to the market. In case of funds, beta would indicate the volatility against the benchmark index. It is used as a short term decision making tool. A beta that is greater than 1 means that the fund is more volatile than the benchmark index, while a beta of less than 1 means that the fund is more volatile than the benchmark index. A fund with a beta very close to 1 means the fund’s performance closely matches the index or benchmark. The success of beta is heavily dependent on the correlation between a fund and its benchmark. Thus, if the fund's portfolio doesn’t have a relevant benchmark index then a beta would be grossly inappropriate, For example if we are considering a banking fund, we should ook at the beta against a bank index. > R-Squared (R2): R squared is the square of ‘R’ (ic.; coefficient of correlation). It describes the level of juared: ranges from0 tol, A high R- squared (more than 0.80) indicates that beta can be used as a association between the fun’s market volatility and market risk. The value of R- si reliable measure to analyze the performance of a fund. Beta should be ignored when the r- Jow as it indicates that the fund performance is affected by factors other than the For example: RD 0.65 0.88 w 09In the above tableR2 is less than 0,80 in case 1, implies that it would be wrong to mention that the fund is aggressive on account of high beta. In case 2, the r- squared is more than 0.85 and beta value is 0.9. it means that this fund is less aggressive than the market. > Portfolio turnover ratio: Portfolio turnover is a measure of a fund's trading activity and is caleulated by dividing the lesser of purchases or sales (excluding securities with maturities of less than one year) by the average monthly net assets of the fund. Tumover is simply a measure of the pereentage of portfolio value that has been transacted, not an indication of the percentage of a fund's holdings that have been changed. Portfolio turnover is the purchase and sale of securities in a fund's portfolio. A ratio of 100%, then, means the fund has bought and sold all its positions within the last year, Tumover i important when investing in any mutual fund, since the amount of turnover affects the fees and costs within the mutual fund. Total expenses ratio: A measure of the total costs a sociated with managing and operating an investment fund such as a mutual fimd, These costs consist primarily of management fees and additional expenses such as trading fees, legal fees, auditor fees and other operational expenses. The total cost of the fundis divided by the fund's. total assets. to arrive ata_percentage amount, which represents the TER Total expense ratio = (Total fund Costs/ Total fund Assets) ‘The most important and widely used measures of performance are: The Sharpe Measure The Treynor’Measure Jenson Model Fama Model > ‘The Sharpe MeasureIn this model, performance of a fund is evaluated on the basis of 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 According to Sharpe, it is the total risk of the fund that the investors are concerned about. So, the model evaluates funds on the basis of reward per unit of total risk. Symbolically, it can be written as’ Sharpe Ratio (Si) = (Ri - RN/Si Where, standard deviation of the fund, Ri represents return on fund, and Rfis risk free rate of return. While a high and positive Sharpe Ratio shows a superior risk-adjusted performance of a fund, a low and negative Sharpe Ratio is an indication of unfavourable performance. > The Treynor Measure: Developed by Jack Treynor, this performance measure evaluates funds on the basis of Treynor's Index This Index is a ratio of return generated by the fund over and above risk free rate of retum (generally taken to be the retum on securities backed by the government, as there is no credit risk associated), during a given period and systematic risk associated with it (beta), ‘Symbolically, it ean be represented as:Treynor's Index (Ti) = (Ri - RO/Bi. Where, Ri represents return on fund, Rf is risk free rate of return, and Bi is beta of the fund. All risk-averse investors would like to maximize this value. While a high and positive ‘Treynor's Index shows a superior risk-adjusted performance of a fund, a low and negative ‘Treynor's Index is an indication of unfavorable performance. Comparison of Sharpe and Treynor Sharpe and Treynor measures are similar in a way, since they both divide the risk premium by a numerical risk measure. The total risk is appropriate when we are evaluating the risk is the portfolios or retum relationship for well-diversitied portfolios, On the other hand, the systematic ris relevant measure of risk when we are evaluating less than fully diversi individual stocks. For a well-diversified portfolio the total risk is equal to systematic risk. Rankings based on total risk (Sharpe measure) and systematic risk (Treynor measure) should be identical for a well-diversified portfolio, as the total risk is reduced to systematic risk Therefore, a poorly diversified fund that ranks higher on Treynor measure, compared with another fund that is highly diversified, will rank lower on Sharpe Measure. > Jenson Model: Jens s model proposes another risk adjusted performance measure. Thi measure was developed by Michael Jenson and is sometimes referred to as the differential Return Method. This measure involves evaluation of the returns that the fund has generated vs. the returns actually expected out of the fund! given the level of its systematic risk. The surplus between the two returns is called Alpha, which measures the performance of a fund compared with the actual returns over the period. Required return of a fund at a given level of risk (Bi) can be calculated as:E(Ri) = Rf+ Bi (Rm - Rf) Where, E(Ri) represents expected return on fund, and Rm is average market return during the given period, Rfis risk free rate of return, and Bi is Beta deviation of the fund, After calculating it, Alpha can be obtained by subtracting required return from the actual retum of the fund, ap= Ri-| Rf+ Bi(Rm-RO | Higher alpha represents superior performance of the fund and vice versa. Limitation of this model is that it considers only systematic risk not the entire risk associated with the fund and an ordinary investor cannot mitigate unsystematic risk, as his knowledge of market is primitive. > Fama Model: ‘The Eugene Fama model is an extension of Jenson model, This model compares the performance, measured in terms of returns, of a fund with the required return commensurate with the total risk associated with it. The difference between these wo is taken as a measure of the performance of the fund and is called Net Selectivity. ‘The Net Selectivity represents the stock selection skill of the fund manager, as it is the excess retums over and above the retumn required to compensate for the total risk taken by the fund manager. Higher value of which indicates that fund manager has eared returns well above the retum commensurate with the level of risk taken by him.Selectivity: measures the ability of the portfolio manager to earn a return that is consistent with the portfolio’s market (systematic) risk. The selectivity measure i Ri-{ Rf+Bi(Rm- Rf] Diversification: measures the extent to which the portfolio may not have been completely diversified. Diversification is measured as: [Rf+(Rm - RA(ai/ am)|-[Rf+ Bi (Rm - RD] IF the portiolio is completely diversified, contains no unsystematic risk, then diversification measure would be zero. A positive diversification measure indicates that the portfolio is not completely diversified; it would contain unsystematic risk and it represents the extra return that the portfolio should earn for not being completely diversified. The performance of the portfolio can be measured as Net selectivity = selectivity — diversification Net selectivity measures, how well the portfolio mangers did manager did at caming a fair return for the portfolio’ systematic risk and diversifying away unsystematic risk. Positive net selectivity indicates that the fund earned a better return, ‘The comparison, done based on sharpe ratio, Treynor measure, Jensen alpha, and Fema measure notifies that the portfolio performance can be evaluated on the following basis: Sahrpe ratio: measures the reward to total risk trade off ‘Treynor: measures the reward to systematic risk trade off" Jensen’s alpha: measures the average return over and above that predicted. Fema measure: measures return of portfolio for its systematic risk and diversifying away unsystematic risk. Among the above performance measures, two models namely, Treynor measure and Jenson model use Systematic risk is based on the premise that the Unsystematic risk is diversifiable. These models are suitable for large investors like institutional investors with high risk taking capacities as they do not face paucity of funds and can invest in a number of options to dilute some risks. For them, a portfolio can be spread across a number of stocks and sectors.However, Sharpe measure and Fama model that consider the entire risk associated with fund are suitable for small investors, as the ordinary investor lacks the necessary skill and resources to diversify. Moreover, the selection of the fund on the basis of superior stock selection ability of the fund manager will also help in safeguarding the money invested to a great extent. The investment in funds that have generated big returns at higher levels of risks leaves the money all the more prone to risks of all kinds that may exceed the individual RESEARCH METHODOLOGY 2.1 NEED FOR THE STUDY ‘The Mutual Fund Companies periodically build up a study, which can prioritize and analyse the portfolio of the mutual funds. This study is helpful in having a comparison among the mutual funds based on the risk bearing capacity and expected return of the investor and will also carry out an analysis of the portfolio of the selected mutual fund. The mutual fund industry is growing globally and new products are emerging in the market with all captivating promises of providing high return. It has become difficult for the investors to choose the best fund for their needs or in other words to find out a fund which will give maximum return for minimum risk. Therefore, they tum to their financial adviser to get precise direct investment. Hence, the company asked me to prepare a model, which will facilitate them to analyse the fund and to have reasonable estimation for the fund performance. The driving force of Mutual Funds is the ‘safety of the principal” guaranteed, plus the added advantage of capital appreciation together with the income camed in the form of interest or dividend. The various schemes of Mutual Funds provide the investor with a wide range of investment options according to his risk bearing capacities and interest besides; they also givehandy return to the investor. Mutual Funds offers an investor to invest even a small amount of money, cach Mutual Fund has a defined investment objective and strategy. Mutual Funds schemes are managed by respective asset managed companies, sponsored by financial institutions, banks, private companies or international firms. A Mutual Fund is the ideal investment yehicle for today’s complex and modern financial scenario. The study is basically made to analyze the various open-ended equity schemes of HDFC Asset Management Company to highlight the diversity of investment that Mutual Fund offer. Thus, through the study one would understand how a common person could fruitfully convert cording to his a meagre amount into great penny by wisely investing into the right scheme risk taking abilities. Sharpe ratio is a performance measure, which reflects the excess retum eamed on a portfolio per unit of its total risk (standard deviation), Treynor measure indicates the risk premium return per unit risk of the portfolio. While Jensen alpha talks about the deviation of the actual return from its expected one. Fema measure decomposes the portfolio total return into two main components: systematic return and the unsystematic return, It determines whether the portfolio is perfectly diversified or not. Hence, it is a significant measure to evaluate the performance of the fund manager. ‘The analysis of the fund portfolio has been done to find out the influence of the top holdings on the performance of the fund, All these measures give fair implication and results about the portfolio performance and can show the ground reality to a rational investor. 2.2 OBJECTIVE OF THE STUDY > Whether the growth oriented Mutual Fund are eaming higher returns than the benchmark returns (or market Portfolio/Index returns) in terms of risk5 Whether the growth oriented mutual funds are offering the advantages of Diversification, Market timing and Selectivity of Securities to their investors ‘This study provides a proper investigation for logical and reasonable comparison and selection of the funds Italso assists in analysing the portfolio of the selected funds. 2,3 LIMITATIONS OF THE STUDY v ‘The study is limited only to the analysis of different schemes and its suitability to different investors according to their risk-taking ability The study is based on secondary data available from monthly fact sheets, websites and other books, as primary data was not accessible. ‘The study is limited by the detailed study of six schemes of HDFFC Many investors are all price takers The assumption that all investors have the same information and beliefs about the distribution of returns, Banks are free to accept deposits at any interest rate within the ceilings fixed by the Reserve Bank of India and interest rate can vary from client to client. Hence, there can be inaccuracy in the risk free rates. The study excludes the entry and the exit loads of the mutual funds 2.4 DATA COLLECTION The Methodology involves the selected Open-Ended equity schemes of HDFC mutual fund for the purpose of risk return and comparative analysis the competitive funds. The data collected for this project is basically from secondary sources, they are;The monthly fact sheets of HDFC AMC fund house and research reports from banks, The NAVs of the funds have been taken from AMFI websites for the period starting from 31° jan 2007 to 31* May, 2009. For the Benchmark prices, data has been taken from BSE and NSE sites. Part-II CASE ANALYSIS 3.1 DATA INTERPRETATION Risk returns analysis and comparative study of funds In this section, a sample of HDFC equity related funds have been studied, evaluated and analysed. This study could facilitate to get a fair comparison The expectations of the study are to give value to the funds by keeping the risk in the view. Here equity funds are taken as they bear high retum with high risk. Following are the products of HDFC Mutual Fund, which have been taken the evaluation purpose. HDFC Equity Fund Growth option HDFC Capital Builder HDFC Growth Fund HDFC Long Term Advantage Fund HDFC Top 200 FundHDFC EQUITY FUND Investment Objective ‘The investment objective of the Scheme is to achieve capital appreciation, Basic Scheme Information Table:3.1 ‘Nature of Scheme ‘Open Ended Growth Scheme Inception Date Jan 01, 1995 Option/Plan Dividend Option, Growth Option, Entry Load NIL (purchase / additional purchase / switeh- | (With effect from August 1, 2009) in) Exit Load. Nil (as a % of the Applicable NAV) Minimum Application Amount Rs.5000 and in muliiples of Rs.100 thereof to open an account / folio. Additional purchases is Rs. 1000 and in multiples of Rs, 100 thereof Lock-In-Period Nil Net Asset Value Periodicity Every Business Day Redemption Proceeds Normally despatched within 3 Businessdays Investment Pattern The asset allocation under the Scheme will be as follows: Table: SRO. | TYPE OF INSTRUMENTS NORMAL RISK ALLOCATION PROFILE (of net asset) 1 Equities & Equities related 80-100 Medium to high instruments, 2 Debt securities, money market | 0-100 Low to medium instruments & cash 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 (ISL). Fund Manager : Mr. Prashant Jain HDFC EQUITY FUND-GROWTH OPTION Table:3.3 NAV [S&P [Ri Rm RiRm [RoR | sq(Rm- | Rm2 CNX av Rmav) 500 2007 151.389 [4899.39 JAN FEB | 141.228 [4504.73 | 6.71185 | -805529 [54.0657 | -9.0864 | 82.5626 | 64.8767 MAR | 142.602 [4605.89 | 0.972895 | 2.24564 | 2.184771 | 1214527 | 1.475077 | 5.042897 APL | 151.16 [4934.46 | 6.001318 | 7.133692 | 42.81156 [6.10258 | 37.24148 | 50.88956 MAY | 161.281 | 5185.95 | 6.695554 | 5.096606 | 34.1246 | 4.065494 | 16.52824 | 25.9754 JUN | 165.313 | 5223.82 | 2.499984 | 0.730242 | 1.825594 | -0.30087 | 0.090523 | 0.533254 JULY | 172.325 | 5483.25 | 4.241651 | 4.966289 | 21.06526 | 3.935177 | 15.48562 | 24.66403 AUG | 168827 | 5411.29 | -2.02089 | -1.31236 | 2.663941 | -2.34347 | 5.491863 | 1.72229 SEP [182.84 [6094.11 | 8300213 | 12.61843 | 104.7357 | 1.58732 | 134.266 | 159.2248 OCT [2103 [71633 | 15.0186 | 17.54465 | 263.4959 | 1651353 | 272.6068 | 307.8146 NOV [206.176 | 6997.6 | -1.96101 | -2.31318 | 4.536164 | -3.34429 | 11.18429 | 53508 DEC | 223.324 | 7461.48 | 8317166 | 6.62913 | 55.13557 | 5598018 | 31.3378 | 43.9536 2008-18842 | 6245.45 | -15.6293 | -16.2974 | 254.7177 | -17.3285 | 300.2786 | 265.6065 JAN FEB | 187.594 | 6356.92 | -0.43838 | 1.784819 | -0.78243 | 0.753707 | 0.568075 | 3.18558 MAR | 165.788 | 5762.88 | -11.624 | -9.34478 | 108.6241 | -10.3759 | 107.6591 | 87.32486 APL | 178.191 | 6289.07 | 7.481241 | 9.130678 | 68.3088 | 8.099566 | 65.60296 | 3.36928 MAY | 169,605 | 5937.81 | 4.81843 | -5.58525 | 26.91209 | -6.61636 | 43.77619 | 31.19497JUN | 143.171 | 4929.98 | -15.5856 | -16.9731 | 264.5363 | -18.0042 | 324.1514 | 288.0859 JULY | 151.715 | $297.47 | 5.967689 | 7.454188 | 4.48428 | 6423076 | 41.5591 | 55.56493 AUG — | 158.924 | 5337.28 | 4.751673 | 0.751491 | 3.570838 | -0.27962 | 0.078188 | 0.564738 SEP | 145.721 | 4807.2 | -8.30774 | -9.93165 | 82.50962 | -10.9628 | 120.1822 | 98.63768 OCT | 110.322 | 3839.57 | -24.2923 | -26.3694 | 640.5738 | -27.4005 | 750.7883 | 695.3455 NOV | 101.808 | 3379.53 | -7.71741 | -452145 | 34.8039 | -5.55257 | 30.83098 | 20.4354 DEC | 112.377 | 3635.87 | 10.38131 | 7.585078 | 78.74302 | 6.553966 | 42.95447 | 57.53341 2009 | 103.754 | 3538.57 | 7.67328 | -2.67611 | 2053456 | -3.70723 | 13.74352 | 7.161582 JAN FEB [98.163 | 3403.33 | 5.38871 | -3.82188 | 20.59501 | -4.85299 | 23.55156 | 14.60679 MAR | 108.852 | 3720.51 | 10.88903 | 9.319696 | 101.4825 | 8288584 | 68.70062 | 86.85673 APL | 127.097 | 4278.54 | 16.7612 | 14.99875 [251.3084 | 1.96764 | 195.0949 | 224.9605 MAY | 169.897 | $480.11 | 33.67507 | 28.08365 | 945.7186 | 27.05253 | 731.8396 | 788.6911 Toul 29.7767 | 2887114 | 3533.466 | 0 MEOATT | 3490.186 average 1063454 | 1.031112 | 126.1952 | 0 123.0077 Return of Fund portfolio and Market portfolio Figure:3.1 e-Portfolio Retum BMarkot Returnom= V123.9077 =11,13239 (Beta) =[N (EXY) - EXEY J N (EX) - (EX)? ] = (98937.047- 859.6872)/( 97977.214- 833.54264) = 98077.36/ 97143.672 = 1.0096 114 Ri Rm RERm | Devimave | sqofDev fimav 2007 JAN FEB ~6.71185 | -8.05529 | 1.34344 | 1.3111 1.71898 MAR | 0.972895 | 2.24564 |-127274 | 1305086 | 1.70325 APL 6.001318 | 7.133692 | -1.13237 | 1.164715 1.356561 MAY _| 6.695354 | 5.096606 | 1.598048 | -1.56661 2.454256 JUN 2.499984 | 0.730242 | 1.769742 | 0.75698 0.573018 JULY | 4.241631 | 4.966289 | -0.72464 [0.75698 0.373018 AUG | -2.02989 | -1.31236 | -0.71753 [0.749866 [0.3623 ‘SEP 8.300213 | 12.61843 | -4.31822 | 4.350562 18.92739 Oct 15.0186 | 17-54465 | -2.52605 [2558302 | 6.545367 NOV | -1.96101 | -2.31318 | 0.352172 | -0.31983 0.102291DEC 8.317166 | 6.62913 | 1.688036 | -1.65569 2.741324 2008 =15,6293 | -16.2974 | 0.668127 | -0.63579 0.404223 JAN FEB ~0.43838 | 1.784819 |-2.2232 [2.255543 | 5.087475 MAR | -11.624 | -934478 |-227926 [2311604 | 5.343511 ‘APL 7.481241 | 9.130678 | 1.64944 | 1.681778 | 2.828377 MAY | -4.81843 | -3.58525 | 0.76682 | -0.73448 0.539459 JUN =15.5856 | -16.9731 | 1.387467 | -1.35513 1.836366 JULY | 5.967689 | 7.454188 | -1.4865 | 1.518841 2.306878 AUG | 4.751673 | 0.751491 | 4.000182 | -3.96784 1574376 ‘SEP -830774 | -9.93165 | 1.623906 | -1.59156 2.533078 OCT | 24.2033 [26.3694 | 2.077092 | 2.04475 4.181006 NOV | -7.71741 | 452145 |-3.19596 [3.228207 [10.4219 DEC TO38131 | 7585078 | 2.796028 | 2.76389 7.639067 2009 “7.67328 | Zee | 4.99717 | 5.020507 | 25.20504 JAN FEB “SS8N71 [-SRDISN [156683 | 1599160 | 2.557333 MAR _| 1088903 | 9.319696 | 1.569336 | -1.53099) 2.302352 ‘APL | 16.76129 | 14,99875 | 1.76254 | -1.7302 2.993588 “3.55008 30,90337 MAY | 33.67507 28.08365 | 5.591422 Total | 29.7767 | 28.8714 | 0.90556 160.2354 avrage | 1.003454 | 1.031112 | 0.032341 5.722694 Standard Deviation for the fund’s excess return (S.D.) oi=V5.722694 =2.392215 Sharpe Index (Si) = (Ri - RO/Si= (1.063454-5)/ 2.392215 =1.64557 ‘Treynor's Index (Ti) = (Ri - RAVBi =(1.063454-5)/ 1.009614 =-3.89907 Jenson alpha (ap)= Ri -[ Rf+ Bi (Rm - Rf) ] 1.063454 - [ $+1.00961 14 (1.031112-5)] =0.070488 Expected return E(Ri) = Rf + Bi (Rm- Rf) =[ 5+1.0096114 (1.031 112-5)] =0.992965 Fema Measures Selectivity =Ri -[ Rf + Bi (Rm - Rf) ] = 1.063454 - [ 5+1,00961 14 (1.031112-5)] =0.070488 Diversification =[Rf + (Rm - RéXai/ am)]-[Rf + Bi (Rm- Rf) ] =[5+(1.031112-5)(2.392215/11.13139)]- [ 5+1,00961 14 (1.0311 12-5)] =3.154092Net selectivity= selectivity- diversification =0.070488-3.15409 =3.0836 HDFC CAPITAL BUILDER FUND Investment Objective The Investment Objective of the Scheme is to achieve capital appreciation in the long term. Basic Scheme Information Nature of Scheme Inception Date Option/Plan Entry Load (purchase / additional purchase / switch-in) Exit Load (as a % of the Applicable NAY) (Other than Systematic Investment Plan (SIPY Systematic Transfer Plan (STP) Open Ended Growth Scheme February 01, 1994 Dividend Option,Growth Option, The Dividend Option offers| Dividend Payout and Reinvestment Facility. NIL (With effect from August 1, 2009) than Rs. 5 crore in value, an Exit Load of 1.00% is payable if Unit re redeemed/switched-out within 1 year from the date of allotment, + Inrespect of each purchase / switch-in of Units equal to or greater than Rs, 5 crore in value, no Exit Load is, payable No Exit Load shall be levied on bonus units and units allotted on dividend reinvestment.Minimum Application For new investors :Rs.5000 and any amount thereafter, Amount For existing investors : Rs. 1000 and any amount thereafter. (Other than Systematic Investment Plan (SIPY Systematic Transfer Plan (STP) Lock-In-Period Nil Net Asset Value Periodicity Every Business Day, Redemption Proceeds Normally despatched within 3 business Days Current Expense Ratio (#) On the first 100 crores average weekly net assets 2.50% (Effective Date 22nd May On the next 300 crores average weekly net assets 2.25% 2009) On the next 300 crores average weekly net assets 2.00% On the balance of the assets 1.75% Pattern The asset allocation under the Scheme will be as follows : SrNo. Asset Type (% of Portfolio) Risk Profile 1 Equities and Equity Related Instruments Upto 100% Medium to High 2) Debt & Money Market Instruments Not more than 20% Low to Medium Investment in Securitised debt, if undertaken, would not exceed 20% of the net assets of the scheme. Investment Strategy This Scheme aims to achieve its objectives by investing in strong companies at prices which are below fair value in the opinion of the fand managers. The Scheme defines a "strong company’ as one that has the following characteristics :+ strong management, characterized by competence and integrity + strong position in its business (preferably market leadership) + efficiency of operations, as evidenced by profit margins and asset turnover, compared to its peers in the industry + working capital efficiency + consistent surplus cash generation + high profitability indicators (returns on funds employed) In common parlance, such companies are also called 'Blue Chips’. The Scheme defines "reasonable prices" as + amarket price quote that is around 30% lower than its value, as determined by the discounted value of its estimated future cash flows + a P/E multiple that is lower than the company's sustainable Return on funds employed + a P/E to growth ratio that is lower than those of the company's competitors + incase of companies in cyclical businesses, a market price quote that is around 50% lower than its estimated replacement cost Fund Manager Mr. Chirag Setalvad (since Apr 2, 07) Mr. Anand Laddha - Dedicated Fund Manager - Foreign Securities HDFC CAPITAL BUILDER FUND Table:3.5NAV [S&P [Ri Rm Rikm [RmRm | sqXRm- | Rm2 NX av Rmav) 500 2007 64.459 | 4899.39 JAN FEB 61.259 | 4504.73 [49044 | -8.05529 | 3998964 |-9.0864 | 82.5626 | G4AB 8g 67 MAR | 603 | 4605.89 |-136548 [224564 [3.51551 | 1.214527 [1.47507 | 5.042 7 897 ‘APL 65.818 | 4934.46 | 9.150912 | 7.133692 | 5.27979 | 6.10258 | 37.2414 | 50.88 8 956 MAY | 9.818 | 5185.95 [6.077365 | 5.096606 | 30.97394 | 4.065494 | 16.5282 | 25.97 4 34 JUN 73.27 | $203.82 [4.944284 | 0.730242 | 3.610525 | -0.30087 | 0.09052 | 0.533 3 254 JOLY | 76914 | S483.25 [4.973386 [4.960289 | 2409927 | 3.935177 | 154856 | 24.66 2 403 AUG | 76.323 | 5411.29 [0.76839 [131236 | 1.008405 | -234347 | S.49186 | 1.722 3 29 ‘SEP 83.09 | 6094.11 | 8.866266 | 12.61843 | 111.8784 | 1158732 | 134266 | 159.2 248 ocT 96.061 | 7163.3 | 15.61078 | 1754465 | 273.8857 | 1651353 | 272.696 | 307.8 & 146 NOV | 99.034 [6997.6 [3.094008 [-231318 | -7.15908 [-334829 [11.1842 | 3.350 9 8 DEC 106.53 | 7461.48 | 7.577196 | 6.62913 | 50.23022 | S598018 | 31.3378 | 43.94 8 536 2008 88367 | 6245.45 [17.0559 [16.2974 [277.9672 |-17.3285 | 300278 | 265.6 JAN 6 065 FEB 87.439 | 6356.92 | -1.05017 | 1.784819 | -1.87436 | 0.753707 | 0.56807 | 3.185 5 58 MAR | 75.967 | 5762.88 [-13.12 | -9.34478 | 122.6035 | -10.3759 | 107.659 | 87.32 1 486 APL FAIS | 6280.07 [4542762 | O.19067R | 4147KS | R906 | 65.6029 | 330 6 928 MAY | 75.065 | 5937.81 | 3.48113 | -3.58525 | 30.61343 |-6.61636 | 43.7761 | 31.19 9 497 JUN 64.169 | 4929.98 |-14.5154 [169731 | 246.3716 | 18,0042 [324.151 | 288.0 4 859JULY | 67.228 [5297.47 [4.767099 | 7.a8di8® [3553486 | 6423076 | 41.2559 | 55.56 1 493 AUG | 70.149 | 5337.28 [4.344916 | 0.751491 | 3.205164 [-0.27962 [0.07818 | 0.504 8 38 ‘SEP 63365 | 4807.2 | -9.67084 |-9.93165 | 9604744 | -10.9628 | 120.182 | 98.63 2 168 OCT [47587 [3539.57 [24.9002 [-263694 [656.603 | 27.4005 | 750.788 | 695.3 3 485 NOV [44536 [3379.53 |-636039 [-A5D145 [DR TORRE | 5.55257 [30.8309 | 2044 8 354 DEC | 48.064 | 3635.87 | 7.873238 | 7.585078 | 59.71913 | 6.553966 | 42.9544 | 57.53 7 34 2009 [45.564 | 353R57 [5.2014 | -2.67611 | 13.91953 | -3.70723 | 13.7435 | 7.161 JAN 2 582 FEB 4334 [3403.33 [488105 |-3.82188 | 1865479 |-485209 [23.5515 | 14.60 6 679 MAR | 46.604 | 3720.51 [7.531149 | 9.319696 | 70.18802 | 8288584 | 68.7006 | 86.85 2 673 APL, 33.006 | 427854 [1.73702 | 1499875 | 206.0381 | 13.96764 | 195094 [2249 9 625 MAY [67.6 _ | 5480.11 [27.53273 [2808365 | 773.2195 | 27.05253 [731.830 | 7886 6 oi TOTAL 2108029 | 2887114 | 3270.029 | 0 3469.41 | 3499. 7 186 AVERA 0752867 | 1O3TTI2 | 116.7868 | O 123.907 GE 7Return of the Fund and Market Portfolia 40 —eRelurn of Portfolio —a=Aeturn of Market Figure:3.2 om = 123.9077 13239 (Beta) =[N (EXY) — EXSY [N (2X*) (EX)? ] = (91560.82- 608.6119)/ (97977.21- 833.5426) = 90952.21/ 97143.67 = 0.936265Tab Ri Rm RiRm | Dev iim | sqofDev fimav ave 2007 JAN FEB 49044 -8.05529 [3.090803 | -3.36914 | 11.35109 MAR -1.56548 2.24564 | -3.81112 | 3.532879 | 12.48124 APL 9.150912 7.13369 [2.01722 | -2.29546 | 5.269159 MAY 6.077365 5.09660 _| 0.980759 T.S85089 6 JUN 4.944084 0.73024 | 4.214041 | 4.49229 | 20.18063 2 JULY 4973386 4.96628 | 0.007097 | -0.28534 | 0.08142 9 AUG 0.76839 -131236 | 0.54397 | 0.82221 | 0.676037 SEP 8.866266 12.6184 | -3.75217 | 3.473923 | 12.06814 3 oct 15.61078 17.5446 | -1.93386 | 1.685617 | 2.741069 5 NOV 3.094908 “2.31318 | 5.408088 | -5.68633 | 32.33438 DEC 7.577196 6.62913 | 0.948066 | -1.22631 | 1.503837 2008 JAN | -17.0559 -16.2974 | -0.75845 | 0.480204 | 0.230596 FEB =1.05017 1.78481 | -2.83499 | 2.55674 | 6.536922 9 MAR “13.12 “934478 | 3.77523 | 3.490982 | 12.2288 “APL 4542762 9.13007 | 4.58792 [4309671 | 18.57326 8 MAY “S48113 ~5:58525 [0.10412 | -0.38237 | 0.146203 JUN 14.5154 16.9731 | 2.457673 | -2.73592 | 7.485245 JULY 4.767099 7aS418 | -2.68709 | 2.408844 | 5.802531 8 ‘AUG 4344916 0.75149 [3.593425 | -3.87167 | 14.98983 1 SEP “9.67084 “9.93165 | 0.260807 | -0.53905 | 0.290577 ocr “24.9002 26.3094 | 1.409223 | -1.74747 | 3.053042NOV 6.36939 452145 | -1.84793 | 1.569689 | 2.463923 DEC 7.873238 7.58507 | 0.28816 | 0.5664 | 0.320814 8 2009TAN | 5.2014 “267611 | 2.52528 | 2.24704 [5.049189 FEB “488105 “3.82188 | -1,05916 | 0.780919 | 0.609834 MAR 7.531149 9.31969 | -1,78855 | 1.510302 | 2.281012 6 “APL 13.73702 14.9987 | -1.26173 | O.983487 | 0.967247 5 MAY 2753273 28.0836 | -0.55091 | 0.272669 | 0.074348 5 TOTAL | 21.08029 ERT | -7.79085 1813761 4 AVERAGE | 0.75286 103111 | -0.27824 6477719 7 2 Sharpe Index (Si) Ri- ROVSi = (0.752867-5y 2.545136 = 1.66872 Treynor's Index (Ti) = (Ri - RAV/Bi. =(0.752867-5/ 0.936265 =-4,53625 Jenson alpha (ap) Ri -[ Rf + Bi (Rm - Ri) ] =0.752867- [5+0.936265(1.031112-5)] = 0.39357 ion for the fund’s excess return (8.D.) oi=V6.4777 19 =2.545136Expected return E(Ri) = Rf+ Bi (Rm- Rf) =[5+0.936265( 1.031 112-5)] =1.284069 Fema Measures Selectivity i -[ Rf+Bi(Rm- RA) ] =0.752867- [5+0.936265(1.031112-5)] = 0.39357 Diversification =[Rf+ (Rm - RfXai/ am))-[Rf+ Bi (Rm-R ] =[5+(1 031 112-5) 2.545136/11.13139)]- [5+0.936265(1 03 1112-5)) 2.808464 Net selectivity= selectivity- diversification ~-0,39357-2.808464 3.33967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 Table:3.7 ‘Nature of Scheme ‘Open Ended Growth Scheme’ Inception Date ‘Sep 11, 2000 Option/Plan Dividend Option, Growth Option, Entry Load NIL (purchase / additional purchase / switch- | (With effect from August 1, 2009) in) Exit Load. Nil (as a % of the Applicable NAV) 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 Nil Net Asset Value Periodicity Every Business Day Redemiption Proceeds ‘Normally despatched within 3 Businessdays Investment patter 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 : Table:3.8 SR] TYPE OF INSTRUMENTS NORMAL RISK NO. ALLOCATION PROFILE of net asset) 1 Equities & Equities related 80-100 Medium to instruments high 2 Debt securities, money market 0-100 Low to instruments & cash medium 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 retum 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. Shrinivas RaoHDFC GROWTH FUND NAV | SENSEX | Ri Rm Rikm | RaeRm | qnRm | Rm? av Rmav) 2007 | 48.917 | 14090.92 JAN FEB | 45.047 | 12938.09 | 7.91136 |-B1BI37 | 6472575 | 891997 | 79.30584 | 6.93478 MAR [45.461 [130721 | 0.91904 [1.035779 | 0.951922 | 0.297178 | DO8S3I5 | 1.072838 ‘APL [48581 | 1387237 | 6.863025 | 6.12197 | 42.01523 | 5.383309 | 28.98000 | 3747851 MAY [53.198 | 1454446 | 9.503715 | 4.84481 | 46.0437 [4.106209 | 16.86095 | 2347219 JUN [54.695 [1465051 | 2814016 | 0.729144 | 2.051821 | -0.00946 | 8.94E-05 | 0.53165 JULY [38.716 | 15550.99 | 7.351677 | 6.146407 | 45.1864 | 5.407806 | 29.24437 | 37.7832 AUG [5817 [153186 |-0.9299 |-149437 | 1.389618 | 2.23298 | 4.986179 | 2233155 SEP [63.82 [1729.1 [9.71291 | 12.8765 | 125.0683 | 121379 | 147.3287 | 165.8043 OCT [73.682 | 19837.99 | 15.45284 | 14.72949 | 227.6123 | 13.99088 | 195.7448 | 216.9577 NOV [74.895 | 19363.19 | 1.646264 | -2.39339 | -3.94015 [3.13199 | 9.809352 | 5.728304 DEC | 80.576 | 20286.99 | 7.585286 | 4.770008 | 36.1887 [4.032307 | 16.2595 | 22.76156 2008 [68.432 | 17648.71 | -15.0715 | -13.0088 | 196.0015 | -13.7434 | 188.8807 | 169.1245 JAN FEB | 67.827 | 17578.72 | -0.88409 | -0.39657 | 0.350606 | -1.13517 | 1.28862 | 0.15727 MAR | 62.15 | 1564444 | -8.36982 | -11.0035 | 92.09761 [-11.7421 | 137.8777 | 121.0777 APL [66.196 | 17287.31 | 6.510056 | 10.5013 | 6836407 | 9.762702 | 95.31035 | 110.2774 MAY | 62.813 | 16415.57 | -5.11058 | -5.04266 | 25.77091 [5.78126 | 33.42296 | 25.4284 JUN [53.472 [134616 | -14.8711 | -17.9949 | 267.6048 | -18.7335 | 350.9451 | 323.8174 JULY [36.819 | 14355.75 | 6.259351 | 6.642227 | 41.57603 | 5.903626 | 34.8528 | 44.1918 AUG [38871 | 1456453 | 3.611468 | 1.45433 | 5.252267 | 0.715729 | 0.512268 | 2.115076 SEP [5454 | 1286043 | -7.35676 | -11.7003 | 86.07665 | -12.4389 | 1547273 | 136.898 OCT [42.283 | 9788.06 | -22.4734 | 23.8001 | 536.8922 [24.6287 | 6065731 | 370.737NOV [40.089 [9092.72 | -3. 18885 |-7.10396 | 3686137 | -7.84256 | 61.50878 | 50.4627 DEC | 41.652 | 9647.31 | 3.898825 | 6.099275 | 23.7801 | 5.360674 | 28.73683 | 3720116 2009 | 38.443 | 9424.24 | -7.70431 | -2.31225 | 17.8143 | 3.05085 | 9.307696 | 5.346504 JAN FEB | 36.429 [8891.61 | -5.23893 [5.6517 | 29.60885 |-6.3903 | 40.83598 | 31.94174 MAR [3873 | 97085 | 6.316396 [9.1872 | 5803 | 8448599 | 7137883 | 8440405 APL [44.131 | 11403.25 | 13.94526 | 17.45635 | 243.4334 | 16.7175 | 279.4832 | 304.7242 MAY [56.982 | 14625.25 | 29.12012 | 28.2551 | 822.792 [27.5168 | 757.1579 | 798.3508 TOTAL 30.39962 | 2068083 | 3139.6 [0 381.666 | 3396.941 AVG 1.085701 | 0.738601 | 112.1286 | 0 120.7738 40 Return of Fund portfolio and Market portfolio —+Portfoli Return me Market return Figure:3.3 om= V120.7738 =10.98971(Beta) =[N (EXY) — EXZY JN (2X*) (EX)? ] = (87908.8-628.6893)/ (95 1 14.34-427.6966) = 87280, 12/ 94686.64 = 0.921779 Table: Ri Rm RiRm | Dev fmave sqofDev fim | Rm2 av 2007 JAN FEB | -7.91136 | 8.18137 | 0270008 | 0.077092108 (0.005043 66 93478 MAR | 0.91904 | 1.035779 [0.11674 | DAGSRIRO4D 0215146 TO72R38 ‘APL | 6863025 | 6.12197 | 0.741056 | 0303955855 0.155201 37.4 7851 MAY | 9.503715 | 4.84481 | 4.658905 | 4311805316 1859167 2347219 JUN | 2.814016 | 0.729144 | 2.084872 | -1.737772055 3.079852 (0.53165 JULY | 7.351677 | 6.146407 [1.20527 | -0.85817039) 0.736456 37.7 7832 AUG | -0.9299 | -1.49437 | 0.564474 | -0.217374552 | 0.047252 2.233155 SEP [9.71291 | 12.8765 | -3.16359 | 3.510692544 1232496 165.8043 OCT — | 15.45284 / 14.72949 | 0.723351 | -0.376251086 | 0.141565 216.9577 NOV | 1.646264 | 2.39339 | 4.039651 | -3.692551406 13.63494 5.728304 DEC | 7.585286 | 4.770908 | 2.814378 | -2.467278063 6.087461 2.76156 2008 | -15.0715 | -13.0048 | -2.0667 | 2.413797413 5.826418 169.1245 JAN FEB | -0.88409 | 0.39657 | -0.48752 | 0.834616326 0.696584 0.15727 MAR | -8.36982 | -11.0035 [2.633708 | -2.286008411 5.228578 121.0777 ‘APL | 6.510056 | 10.5013 | -3.99125 | 4.338346289 1882125 110.2774 MAY | -5.11058 | -5.04266 | -0.06792 | 0415022146 0.172243 25,4284 JUN |-14.8711 | -17.9949 [3.123803 | -2.776702677 7.710078 323.8174 JULY — | 6.259351 | 6.642227 | -0.38288 | 0.729975995 (0.532865 4411918 AUG [3.611468 | 1.45433 [2.157138 | -1.810037944 | 3276237 2.115076 SEP | -7.35676 | -11.7003 [434358 | -3.996480234 15.97185 136.898OCT | -22.4734 [-23.8001 | 1.416689 | -1.069580295 1.144021 370.737 NOV | -5.18885 | -7.10396 | 1.915115 | -1.568014871 2ASROTI 30.46627 DEC | 3.898825 | 6.090275 | -2.20085 | 2.547549815 6.49001 37.20116 2009 | -7.70431 | -2.31225 | -3.30206 | 5.73016105 3.93797 5.346504 JAN FEB | -5.23893 |-5.6517 | 0.412777 | -0.065677352 | 0.004314 3.94174 MAR | 6.316396 | 9.1872 | -2.8708 | 3.217903695 10.3549 8440465 APL | 13.94526 | 17.45635 | -3.51109 | 3.858190515 1488563, 304.7242 MAY | 29.12012 | 28.2551 [0.865017 | -0.517917027 | 0.268238 798.3508 TOTAL | 30.39962 | 20.68083 | 9.718797 | -4.44089B-15 181.7403 3396941 AVG | 1.085701 | 0.738601 [03471 | -1.58603E-16 6.490725 Standard Deviation for the fund’s excess return (S.D.) oi=V6.490725 =2.54769 Sharpe Index (Si) = (Ri - RO/Si = (1,085701-5y 2.54769 1.53641 ‘Treynor's Index (Ti) = (Ri - RA)/Bi =(1.085701-5)/ 0.921779 =4.24646 Jenson alpha (ap) Ri -[ Rf+ Bi (Rm- Ri) ] =1.085701- [5+0.921779 (0.738601 -5)] = 0.013767 Expected return E(Ri) = Rf + Bi (Rm - Re)=[5+0.921779 (0.738601-5)] =1.071934 Fema Measures =Ri -[ Rf+ Bi (Rm- Ri) ] .085701- [5+0.921779 (0.738601 -5)] = 0.013767 Diversification =[Rf + (Rm - RA ai/ om)}-[RE+ Bi (Rm - RD] =[5+(0.738601-5)( 54769/ 10,9897 1)}- [5+0.921779 (0.738601-5)] =2.940167 Net selectivity= selectivity- diversification =0,013767-2.940167 2.9264HDFC LONG TERM FUND Investment Objective To achieve long term capital appreciation Basic Scheme Information Nature of Scheme Inception Date Closing Date Option/Plan Entry Load (purchase / additional purchase / switch-in) Exit Load (as a % of the Applicable NAY) (Other than Systematic Investment Plan (SIPY Systematic Transfer Plan (sTP) Close Ended Equity Scheme with a maturity period of 5 years with automatis ¢ conversion into an open-ended scheme upon maturity of the Scheme. 10-Feb-06 27-Jan-06 Dividend Option, Growth Option. Dividend Option currently offers payout facility only. NIL. (With effect from August 1, 2009) Redemption / Switch-out fiom the Date of Allotment + Upto 12 months 4% + Afier 12 months upto 24 months 3% + Afier 24 months upto 36 months 2% + Afier 36 months upto 48 months 1% + Afier 48 months upto 54 months 0.5% + After 54 months upto Maturity Nil No Exit Load shall be levied on bonus units and units allotted on dividend reinvestment.Specified Redemption Period Minimum Application Amount (Other than Systematic Investment Plan (SIPY Systematic Transfer Plan (STP)) Lock-In-Period Net Asset Value Periodicity Redemption Proceeds Current Expense Ratio (#) (Effective Date 22nd May 2009) ‘A Unit holder can submit redemption/ switch-out request only during the Specified Redemption Period. Presently, the Specified Reclemption Period is the first five Business Days immediately after the end of each calendar half year. Currently no purchases/ switch-ins are allowed into this, scheme Nil Every Business Day. Normally dispatched within 3 Days On the first 100 crores average weekly net assets 2.50% On the next 300 crores average weekly net assets 2.25% On the next 300 crore: (On the bala erage weekly net assets 2.00% of the assets 1.75% Investment Pattern ‘The following table provides the asset allocation of the Schemes portfolio. Type of Instruments Equity & Equity related instruments Fixed Income Securities Minimum AllocationMinimum Allocation Risk Profile of the Instrument (%oofNet Assets) —(% of Net Assets) 70 100 High 0 30 Low(including money market instruments) Investment Strategy ‘The investment strategy of the Scheme is to build and maintain a diversified portfolio of equity stocks that have the potential to appreciate in the long run, Companies identified for selection in the portfolio will hae demonstrated a potential ability to grow at a reasonable rate for the Iong tenn. The aim will be to build a portfolio that adequately reflects a cross-section of the growth areas of the economy from time to time. While the portfolio focuses primarily on a buy and hold strategy at most times, it will balance the same with a rational approach to selling when the valuations become too demanding even in the face of reasonable growth prospects in the Jong run, Fund Manager Mr. Srinivas Rao Ravuri (since Apr 3, 06) Mr. Anand Laddha - Dedicated Fund Manager - Foreign Securities HDFC LONG TERM FUND. NAV] SENSEX [Ri Rm RiRm [RmRm | squRm | Rmd av Rm av) 2007 95.224 | 1409092 JAN FEB 87.782 | 12938.09 [-7.81526 | -R.18I37 | 63.93949 [-8.91997 | 79.50584 | 66.93478 MAR | 86337 | 130721 | -1.64612 | 1.035779 |-1.70502 [0.297178 | 0.088315 | 1.072838 APL, 91627 | 1387237 [6.127153 | 6.12197 | 3751024 [5.383369 | 2898060 | 3747851 MAY [96561 | 1454446 [5.384876 | 4.84481 | 26.0887 [4.106209 | 16.8095 | 2347219 JUN 100.695 | 1465051 | 4.281232 | 0.729144 [3.121633 |-0.00945 | 894E-05 | 0.53165 JULY | 102.976 | 15550.99 | 2.265256 | 6.146407 | 13.92319 | 5407806 | 2924437 | 37.7832 AUG 102.627 [153186 | -0.33891 | -149437 | 0.506464 |-2.25298 | 4.986179 [2.233155‘SEP 109.68 | 172911 [6.87246 [12.8765 | 8849326 | 12.1379 | 147.3287 | 165.8043 ocT 118.185 | 19837.99 | 7.754376 | 14.72949 | 114.218 | 13.99088 | 195.7448 | 216.9377 NOV 119.445 | 19363.19 | 1.066125 | -2.30339 | 2.55168 | -3.13199 | 9.809352 | 5.728304 DEC 128.983 | 30286.99 | 7.985265 | 4.770908 | 3809697 | 4.032307 | 16.2595 | 22.76156 2008 112.202 [1764871 |-13.0102 | -13.0048 | 169.1954 | -13.7434 | 188.8807 | 169.1245 JAN FEB 110.554 [1757872 |-146878 | -0.39657 | 0.582478 | -1.13517 | 128862 | 0.15727 MAR | 96.105 | 1564444 [-13.0696 |-11.0035 | 143.8121 [-11.7421 | 137.8777 | 121.0777 ‘APL 103.44 [1728731 | 7.632277 | 10.5013 | 80.14885 | 9.762702 | 9531035 | 110.2774 MAY [99.18 | 1641557 |-4.11833 | -5.04266 | 20.76733 |-5.78126 | 33.4296 | 25.4284 JUN 85.045 | 13461.6 | -14.2519 | -17.9949 | 256.4613 ]-18.7335 | 350.9451 | 323.8174 JULY | 88.972 | 14395.75 | 4.617555 | 6.642227 | 30.67085 | 5.903626 | 34.8528 | 44.1918 AUG 93.359 | 1456453 | 4.930765 | 1.45433 [7.17096 [0.715729 | 0.512268 | 2.115076 ‘SEP 82.286 | 12860.43 | -11.8607 | 11.7003 | 138.7739 | -12.4389 | 154.7273 | 136.898 oct 63.504 | 9788.06 | -22.8253 | 23.8901 | 345.298 | -24.6287 | 606.5731 | 570.737 NOV 57.237 | 9092.72 | -9.86867 | -7.10396 | 70.10665 | -7.84256 | 61.50578 | 50.46627 DEC 61.406 [964731 [7.28375 | 6.099275 | 4.42550 | 5.360674 | 8.73683 | 37.20116 2009 38.709 [942424 | -4.39208 | 2.31225 | 10.1555 | -3.05085 | 9.307696 | 5.346504 JAN FEB 535.785 | 8801.61 |-4.9805 | -5.6517 | 2814829 |-6.3003 | 4.83508 | 31.94174 MAR [59.209 [97085 | 6.137851 | 9.1872 | 56.38966 | 8.448599 | 7137883 | 84.40465 APL 68.298 | 11403.25 | 15.35071 | 1745635 | 267.9674 | 16.71775 | 279.4832 | 304.7242 MAY [87.958 | 1462525 | 2878562 | 28.2551 | 813.3403 | 27.5165 | 757.1579 | 798.3508 TOTAL 6.828943 | 20.68083 | 3065.056 | 0 3381,666 | 3396.941 AVG 0.243891 | 0.738601 | 109.4663 | 0 120.7738 |Return of Fund portfolio and Market portfolio 40 —ePortfolio Return Market Return Figure:3.4 om=V120.7738 =10.98971 B(Beta) =[N (EXY) - EXEY JEN (2X°) -(EX)?] = (85821.57- 141.2282)/ (951 14,34- 427.6966) = 85680.34/ 94686.64 = 0.904883 ‘Table:3.12Ri Rm RERm | Devitmave | sqofDev fimav 2007 JAN FEB ~7.81526 [-R.18137 | 0.366111 | -0.860821325 | 0.741013 MAR | -1.04612 | 1.035779 | -2.6819 | 2.187192079 | 4.783809 “APL 6.127153 | 6.12197 | 0.005183 | -0.499893333 | 0.249893 MAY | 5.384876 | 4.84481 | 0.540065 | -1.034775537 | 1.07076 JUN 4.281232 | 0.729144 | 3.552088 | -4.046798071 | 1637657 JULY | 2.265256 | 6.146407 | -3.88115 | 3386440599 | 11.46798 AUG | -0.33891 | -1.49437 | 1.15546 | -1.650170515 | 2.723063 SEP 6.87246 | 12.8765 | 6.00404 | 5.509332488 | 30.35274 ocT 7.754376 | 14.72949 | -6.97511 | 648039862 | 41.9557 NOV | 1.066125 | -2.39339 | 3.459513 | -3.954222903 | 15.63588 DEC 7.985265 | 4.770908 | 3.214357 | -3.709067209 | 13.75718 2008 -13.0102 | 13.0048 | -0.00545 | -0.489256261 | 0.239372 JAN FEB =1.46878 | -0.39657 | -1.07221 | 0577496505 | 0.333502 MAR | -13.0696 | -11.0035 |-2.0661 | 1571389464 | 2.469265 APL 7.632277 | 10.5013 | -2.86903 | 2374315379 | 5.637374 MAY — | -4.11833 | -5.04266 | 0.924329 | -1.419039116 | 2.013672 JUN -14.2519 | -17.9949 | 3.743063 | 4237772814 | 17.93872 JULY | 4.617555 | 6.642227 | -2.02467 | 1529961243 | 2.340781 AUG | 4.930765 | 1.48433 | 3.476435 | -3.971144712 | 15.76999 SEP -11.8607 | 11.7003 | -0.16032 | -0.334386466 | 0.111814 ocT -22.8253 | -23.8901 | 1.064835 | -1.559545364 | 2.432182 NOV | 9.86867 | -7.10396 | -2.76471 | 226000821 | 5.152802 DEC TOR37S | 6.090275 | LIN4A7S | -T6TOIRSIDT | 2819663 2009 ~430208 | 231225 |-2.070R3 | TSRs1180s4 | 2512500 JAN FEB -4.9805 | -5.6517 | 0.671205 | -1.165915514 | 1.359359 MAR | 6.137851 | 9.1872 | -3.04935 | 2554630268 | 6.526182‘APL 15.35071 | 17.43635 | -2.10565 | 1.610935739 [2.595114 MAY | 2878562 | 28.2551 | 0.530813 | -1.025223388 | 1.051083 TOTAL | 6.828943 | 20.68083 | -13.8519 | -4.44089E-15 | 210.478 AVG | 0.243891 | 0.738601 | -0.49471 | -1.58603E-16 | 5.538895 Standard Deviation for the fund’s excess return (S.D.) oi=V5.538895 =2.353486 Sharpe Index (Si) ~ (Ri - R/Si = (0.243891-5y 2.353486 2.02088 ‘Treynor's Index ( Ri-RNV/Bi =(0.243891-S)/ 0.904883 5605 Jenson alpha (up)~ Ri-[ Rf + Bi (Rm - Rd) } .243891- [5+0.904883 (0.738601 -5)] = 0.90004 Expected return E(Ri) = Rf+ Bi (Rm - RO) =[5+0.904883 (0.738601-5)] =1.143932 Fema Measures Selectivity i -[ RE+ Bi (Rm - RE)=0.243891- [5+0.904883 (0.738601-5)] = 0.90004 Diversification =[Rf + (Rm - RA ai/ om)}-[RE+ Bi (Rm - RD] =[5+(0.738601-5)( 2.353486/10.98971)]- [5+0.904883 (0.738601-5)] =2.943474, Net selectivity= selectivity- diversification =0,90004-2.943474 3.84352 HDFC TAXSAVER Investment Objective The investment objective of the Scheme is to achieve long term growth of capital Basic Scheme Information Table: ‘Nature of Scheme ‘Open Ended Equity Linked Saving Scheme Inception Date Mar 31, 1996 Option/Plan Dividend Option, Growth Option, Entry Load NIL (purchase / additional purchase / switch- | (With effect from August 1, 2009) in) Exit Load. Nil (as a % of the Applicable NAV) Minimum Application Amount Rs. 5000 and in multiples of Rs.100thereof to open an account / folio. Lock-In-Period 3 yrs Net Asset Value Periodicity Every Business Day Redemption Proceeds Normally despatched within 3 Busi days Investment Pattern The asset allocation under the Scheme will be as follows: SRNO. ASSET TYPE (%OF RISK PORTFOLIO) PROFILE T Equities & Equities Minimum 80% | Medium to high related instruments 2 Debt securities, money | Minimum 20% | Low to medium’ market instruments & cash 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 als 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 : Dhawal Mehta HDFC TAX SAVER FUND Table:3.15 NAV [S&P [Ri Rm Rikm [RmRm | sq(Rm CNX av Rmav) 500 Rm2 2007 | 146.134 | 4899.39 JAN FEB | 135.133 | 4504.73 | -7.52802 | -8.05529 | 60.64039 | -9.0864 | 82.56268 | 64.88767 MAR | 133.882 | 4605.89 | -0.92575 [2.24564 | -2.07891 | 1.214827 | 1.475077 | 5.042897 APL | 144.308 | 4934.46 | 7.787455 | 7.133692 | 55.5533 | 6.10258 | 37.24148 | 50.88956 MAY | 153,765 | 5185.95 | 6.553344 | 5.096606 | 33.39082 | 4.065404 | 16.2824 | 25.9754 JUN | 156.535 | 302382 | T8145 | 0.730242 [1.375495 | 0.30087 | 0.09053 | 0.533054 JULY | 163.61 | $483.25 [4510756 | 4.966280 [22.4a641 | 3.935177 | 15.4RS62 | 24.66403 AUG | 16481 | $411.29 [-1.30127 [1.31236 [1.707729 | -2.34347 | S491863 | 1.72229 SEP | 173.27 | 609411 | 7.300849 | 12.61843 | 92.12149 [11.58732 | 134.266 | 150.2248 OCT | 198.737 [71633 | 14.60787 | 17.58465 | 257.86R0 | 1651353 | 272.6068 | 307.8146 NOV | 196.735 [6997.6 | -1.00736 [231318 [2.330208 [3.34429 | 11. 18429 | 5.3508 DEC | 204.284 | 7461.48 | 3.837141 | 6.62913 [2543091 | S.59NOI8 | 31.3378 | 43.99536 2008 | 173.27 [6245.45 | -15.1784 | 16.2974 [247.3087 | 17.3285 | 300.2786 JAN 265.6065 FEB | 171.845 | 6356.92 | -0.82642 | 1.784819 | -1.47501 | 0.753707 | 0.568075 | 3.18558 MAR | 152.02 | $762.88 | -11.5366 | -9.34478 | 107.8066 | -10.3759 | 107.6591 | 87.32486 APL | TS8411 | 6289.07 | 4.204052 | 9.130678 | 3838584 | 8.099566 | 65.60296 | 8336928MAY 148,793 | 5937.81 | -6.07155 | -5.58525 | 33.91109 | -6.61636 | 43.77619 | 31.19497 JUN 126.45 | 4929.98 | -15.0162 | -16.9731 | 254.8707 | -18.0042 | 324.1514 | 288.0859 JULY 135,953 | $297.47 | 7.515223 | 7.454188 | 56.01989 | 6.423076 | 41.25591 | 55.56493 AUG 142.358 | $337.28 | 4.711187 | 0.751491 | 3.540414 | -0.27962 | 0.078188 | 0.564738 ‘SEP 132.682 | 4807.2 | -6.79695 | -9.93165 | 67.50492 | -10.9628 | 120.1822 | 98.63768 ocT 99.119 | 3539.57 | -25.2958 | -26.3694 | 667.0357 | -27.4005 | 750.7883 | 695.3455 NOV 90.957 | 3379.53 | -8.23455 | 4.52145 | 37.23212 | -5.55257 | 30.83098 | 20.44354 DEC 98.972 | 3635.87 | 8.811856 | 7.585078 | 6683862 | 6.553966 | 42.95447 | 5753341 2009 93.555 | 3538.57 | -5.47327 | -2.67611 | 14.64708 | -3.70723 | 13.74352 JAN 7.161582 FEB 89.449 | 3403.33 | 4.38886 | -3.82188 | 16.7372 | -4.85299 | 23.55156 | 14.60679 MAR 97.063 | 3720.51 | 8.512113 | 9.319696 | 79.3303 | 8.288584 | 68.70062 | 86.85673 APL 112.05 | 4278.54 | 15.44049 | 14.99875 | 231.588 | 13.96764 | 195.0949 | 224.9625 MAY 144.827 | $480.11 | 29.25212 | 28.08365 | 821.5062 | 27.05253 | 731.8396 | 788.6911 TOTAL 15.36369 | 28.87114 | 3293.627 | 0 3469.417 | 3499.186 AVG 0.548703 | 1.031112 | 117.6295 123.9077 Return of Fund Portfolio and Market return 40 e-Portfolio Return te Market ReturnFigure:3.5 m= V123,9077 =11.13139 B(Beta) =[N (XY) - EXEY JN (EX*) -(EX)?] = (92221.54- 443.5671)/ (97977.21- 833.5426) = 91777.98/ 97143.67 = 0.944765 Table:3.16 Ri Rm RiERm | Deviim | sqof ave Dev frm, av 2007 JAN FEB “7.52802 | 8.05529 | 0.527266 | 1.00968 | 1.019444 MAR | -0.92575 | 2.24564 | -3.17139 | 2.688985 | 7.230641 ‘APL 7.787455 | 7.133692 | 0.653763 | -1.13617 | 1.290886 MAY | 6.553344 | 5.096606 | 1.456738 | -1.93915 | 3.760291 JUN 1.80145 | 0.730242 | 1.071208 | -1.55362 | 2.413726 JULY | 4.519756 | 4.966289 | -0.44653 | -0.03588 | 0.001287 AUG — | -130127 | -1.31236 | 0.011095 | -0.4935 | 0.243546 SEP 7.300849 | 12.61843 | -5.31788 | 4.835475 | 23.38182 ocT 14.69787 | 17.4465 | -2.84678 | 2.364366 | 5.590227 NOV |--1.00736 | -2.31318 | 1.305818 | -1.78823 | 3.197757 DEC 3.837141 | 6.62913 | -2.79199 | 2.30988 | 5.334158 2008 “15.1784 | 16.2974 | 1.119058 | -1.60147 | 2.564696 JAN FEB ~0.82642 | 1.784819 | -2.61124 | 2.128833 | 4.531929 MAR | -11.5366 | -9.34478 | -2.19178 | 1.709373 | 2.921956 ‘APL 4.204082 | 9.130678 | -4.92663 | 4.444217 | 19.75106MAY | -6.07155 | -3.58525 | -0.4863 | 0.003894 | 1.52E-05 JUN =15.0162 | -16.9731 | 1.956929 | -2.43934 | 5.950372 JULY | 7.515223 | 7.454188 | 0.061035 | -0.54344 | 0.295331 AUG | 4.711187 | 0.751491 | 3.959696 | 4.44211 | 19.7323 ‘SEP ~6.79698 | -9.93165 | 3.134702 | 3.61711 | 13.08349 ocT -25.2958 | -26.3694 | 1.073584 | -1.55599 | 2.421115 NOV | -8.23455 | 4.52145 | -3.71309 | 3.230684 | 10.43732 DEC B.817856 | 7.585078 | 1.226778 | 1.70919 | 2.931319 2000 73.7327 | -DeToI1 | 2.79715 | L314743 | 5.358035 JAN FEB -4.38886 | -3.82188 | -0.56698 | 0.08457 | 0.007152 MAR | 8.512113 | 9.319696 | -0.80758 | 0.325174 | 0.105738 APL 15.4049 | 14.9875 | 0.441737 | -0.92415 | 0.354046 MAY | 29.25212 | 28.08365 | 1.168474 | -1.65088 | 2.725415 TOTAL | 1536369 | 28.87114 | -13.5075 147.1251 AVG | 0.548703 | 1.031112 | -0.48241 5.254467 Standard Deviation for the fund’s excess return (S.D.) ai=V 5.254467 Sharpe Index (Si) = (Ri - RO)/Si = (0.548703-5y/ 2.292262 94188 ‘Treynor's Index (Ti) = (Ri - RN/Bi =(0.548703-5)/ 0.944765 4.71154 = 2.292262