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B.M COLLAGE OF B.B.A

→ Sources of funds ←
HDFC was incorporated in 1977 as the first specialized housing
finance institution in India. HDFC provides financial assistance to
individuals, corporates and developers for the purchase or
construction of residential housing. It also provides property
related services (e.g. property identification, sales services and
valuation), training and consultancy. Of these activities, housing
finance remains the dominant activity. HDFC currently has a
client base of over 8,00,000 borrowers, 12,00,000 depositors,
92,000 shareholders and 50,000 deposit agents. HDFC raises
funds from international agencies such as the World Bank, IFC
(Washington), USAID, CDC, ADB and KfW, domestic term loans
from banks and insurance companies, bonds and deposits. HDFC
has received the highest rating for its bonds and deposits
program for the ninth year in succession. HDFC Standard Life
Insurance Company Limited, promoted by HDFC was the first life
insurance company in the private sector to be granted a
Certificate of Registration (on October 23, 2000) by the Insurance
Regulatory and Development Authority to transact life insurance
business in India

→ Application of funds ←

► Investment Objective
The primary objective of the Scheme is to generate positive
returns over medium time frame with low risk of capital loss over
medium time frame.

► Investment Pattern
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The following table provides the asset allocation of the Scheme's

portfolio. The asset allocation under the respective Plans will be
as follows:

Sr Type of Instruments Normal Maximum Allocation(% of Net

No Allocation (% of Net Asset) Asset) Risk Profile of the
Instrument

1 Fixed Income 85% 95% Low to Medium

Securities(including
securitized debt of up to
10% of net assets & Money
Market instruments)
2 Equity & Equity related 15% 25% High
instruments

Pending deployment of funds of the Scheme in securities in terms

of the investment objective of the Scheme, the AMC may invest
the funds of the Scheme in short term deposits of scheduled
commercial banks. The Scheme may seek investment
opportunity in the ADR / GDR / Foreign Equity and Debt Securities,
in accordance with guidelines stipulated in this regard by SEBI
and RBI from time to time. Under normal circumstances, the
Scheme shall not have an exposure of more than 25% of its net
assets in foreign securities subject to regulatory limits.

► CHANGE IN INVESTMENT PATTERN

Subject to SEBI Regulations, the asset allocation pattern
indicated above may change from time to time, keeping in view
market conditions, market opportunities, applicable regulations
and political and economic factors. It must be clearly understood
that the percentages stated above are only indicative and not
absolute. These proportions may vary substantially depending
upon the perception of the AMC, the intention being at all times
to seek to protect the interests of the Unit holders. Such changes
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in the investment pattern will be for short term and only for
defensive considerations.

→Investment Strategy & Risk

Control ←

The net assets of the Scheme will be invested primarily in fixed

income securities and balance in equity and equity related
instruments.

This Scheme targets positive returns over medium time frame

and aims to reduce the chances and extent of a capital
depreciation over medium term holding period for the unit holder.
The Scheme aims to achieve this by adopting the following
investment strategy:

Invest around 85% of the net assets of the Scheme in fixed

income securities of roughly one year maturity and adopt a
predominantly buy and hold strategy. This will mean that over
medium term irrespective of the interest rate movements, the
Scheme will earn returns that are nearly equal to the underlying
yield on the bonds.
Invest the balance nearly 15% of the net assets of the Scheme in
equities where the dividend yields are moderate to high. The
investment focus will be on dividend yield stocks.
Both a) and b) combined together represent two sources of yield
on the entire portfolio. These two yields combined together are
expected to reduce the chances and extent of a capital loss.

In order to implement the investment approach effectively, it

would be important to periodically meet the management face to
face. This would provide an understanding of their broad vision
and commitment to the long-term business objectives. These
meetings would also be useful in assessing key determinants of
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management quality such as orientation to minority

shareholders, ability to cope with adversity and approach to
allocating surplus cash flows. Discussions with management
would also enable benchmarking actual performance against
stated commitments.

► Pursuant to the SEBI Regulations, the Scheme

shall not make any investment in :→

Any unlisted security of an associate or group company of the

Sponsors; or
Any security issued by way of private placement by an associate
or group company of the Sponsors; or
The listed securities of group companies of the Sponsors which
is in excess of 25% of the net assets.
The Scheme may invest in other schemes managed by the AMC
or in the schemes of any other mutual funds, provided it is in
conformity with the investment objectives of the Scheme and in
terms of the prevailing SEBI Regulations. As per the SEBI
Regulations, no investment management fees will be charged for
such investments and the aggregate inter scheme investment

• Debt Investments :

The companies that will comprise the 'Core' group will have the
following characteristics:

Companies with a long and successful track record.

Companies that enjoy leading positions in their markets (say No.
1/2/3) and have significant competitive advantages.
Companies that are available below their intrinsic value.
Securities issued by Public / Private sector banks and
development financial institutions.

• MARKET INSTRUMENTS INCLUDE

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Commercial paper
Commercial bills
Treasury bills
Government securities having an unexpired maturity upto one
year
Collaterilsed Borrowing & Lending Obligations (CBLO)
Certificate of deposit
Usance bills
Permitted securities under a repo / reverse repo agreement

• Any other like instruments as may be permitted by RBI /

SEBI from time to time

Such companies typically will be large cap companies. Large cap

companies are generally those companies with market
capitalization of more than Rs. 2,500 crore. The number of stocks
in this category is expected to be in the range of 10-20 and the
average exposure per company will thus be between 3-8% of the
portfolio.

• The 'Core' portion is expected to be between 60-80% of the

portfolio.

The companies that will comprise the 'Satellite' group of

companies will be predominantly small-mid cap companies that
offer higher potential returns compared to the companies in the
'Core' group but at the same time will also carry higher risk.
Small-mid cap companies are generally those companies with
market capitalisation of less than Rs. 2,500 crore. The higher
potential for returns will be on account for one or more of the
following reasons:

• Pursuant to the SEBI Regulations, the Scheme shall not

make any investment in:

Higher growth potential either because of presence in an

emerging area or a new business model or because of smaller
size.
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New technology/research driven company without much

commercial success till present.
A turnaround case.
An out-of-favour or an ignored company,i.e. a company facing a
temporary setback as a result of which the stock price is
depressed and / or the stock is not actively covered by analysts.
MONEY MARKET INSTRUMENTS INCLUDE

Commercial paper
Commercial bills
Treasury bills

• Government securities having an unexpired maturity upto

one year

Call or notice money

Certificate of deposit
Usance bills
Permitted securities under a repo / reverse repo agreement
Any other like instruments as may be permitted by RBI / SEBI
from time to time
Investments will be made through secondary market purchases,
initial public offers, other public offers, placements and right
offers (including renunciation). The securities could be listed,
unlisted, privately placed, secured / unsecured, rated / unrated of
any maturity.

The AMC retains the flex

• Scheme Highlights

In such times when the interest rates are high, investment in

debt would be more attractive versus equities and accordingly
the Fund is likely to increase the debt component in the
Scheme's portfolio. Similarly in times when the interest rates are
low and the equity valuations are cheap, the Scheme is likely to
reduce exposure to debt and increase exposure to equities. In
addition to debt and equities the scheme will also invest in
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money market instruments. The exact proportion in money

market instruments will be a function of the liquidity needs and
the attractiveness of the debt/ equity markets. At times when
neither the debt market nor equities are attractive for
investment, more resources may be temporarily invested in
money market investments to be invested in debt/ equities at a
more appropriate time.

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

The Scheme may also invest a part of its corpus, not exceeding
40% of its net assets, in overseas markets in Global Depository
Receipts (GDRs), ADRs, overseas equity, bonds and mutual funds
and such other instruments as may be allowed under the
Regulations from time to time. Also refer to the Section on Policy
on off-shore Investments by the Scheme(s).

Subject to the Regulations and the applicable guidelines, the

Scheme may, engage in Stock Lending activities. Also refer to
Section on Stock Lending by the Fund.

If the investment in equities and related instruments falls below

40% of the portfolio or rises above 60% of the portfolio of the
Scheme at any point in time, it would be endeavoured to review
and rebalance the composition.

Notwithstanding anything stated above, subject to the

regulations, the asset allocation pattern indicated above may
change from time to time, keeping in view market conditions,
market opportunities, applicable regulations and political and
economic factors. It may be clearly understood that the
percentages stated above are only indicative and are not
absolute and that they can vary substantially depending upon the
perception of the AMC, the intention being at all times to seek to
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protect the NAV of the scheme. Such changes will be for short
term and defensive considerations.

Provided further and subject to the above, any change in the

asset allocation affecting the investment profile of the Scheme
and amounting to a change in the Fundamental Attributes of the
Scheme shall be effected in accordance with sub-regulation
(15A) of regulation 18 of SEBI regulations.

• Investment Strategy & Risk Control

As outlined above, the investments in the Scheme will comprise

both debt and equities. The Fund would invest in Debt
instruments such as Government securities, money market
instruments, securitized debts, corporate debentures and bonds,
preference shares, quasi Government bonds, and in equity
shares. In the long term, the mix between debt instruments and
equity instruments is targeted between 60:40 and 40:60
respectively. The exact mix will be a function of interest rates,
equity valuations, reserves position, risk taking capacity of the
portfolio without compromising the consistency of dividend pay
out (in the case of Dividend Plan), need for capital preservation
and the need to generate capital appreciation.

Housing Development Finance

Corporation Limited (HDFC)
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Schemes offered by
HDFC
Mutual fund

►Open ended Growth scheme

 HDFC Growth Fund
 HDFC Equity Fund
 HDFC Top 200 Fund
 HDFC Capital Builder Fund
 HDFC Core & Satellite Fund
 HDFC Premier Multi-Cap Fund

►Open ended Balanced Scheme

 HDFC Balanced Fund
 HDFC Prudence Fund

► Open ended Equity linked Saving

Schemes
 HDFC Long Term Advantage Fund
 HDFC Tax Saver
► Open ended Index Linked
Scheme
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 HDFC Index Fund

► Open ended Monthly Income Plan
 HDFC MF Monthly Income Plan

HDFC Equity Fund

Total Net Assets as on 30/09/07(Rs in Lacs):
35932.21

Investment objective: To provide income

distribution and medium to long term capital gains
while at all times emphasizing the importance of capital
appreciation.

Equity portfolio(Top 10 Holdings) As on

30/09/07:

Scrip Name % To Net asset

BHEL 5.39
L&T Ltd 5.05
SBI 4.47
HDFC Bank Ltd 4.21
Bharti Airtel Ltd 4.02
TATA Motors Ltd 3.86
Reliance comm. Ltd 3.77
Reliance Industries Ltd 3.65
Aditya Birla nuvo Ltd 3.59
TATA Iron & Steel Ltd 3.55
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Asset allogation:

Rs in Lacs
Equity 33837.21
Cash,others 2094.69
Total Net Assets 35932.21

NAV Details:

NAV as on NAV as on
30/09/07(Rs 30/09/06(Rs)
)
Growth option 79.5303 54.9680
Dividend Decision 34.0531 26.0259

SIP Returns:
Investment Total Value of inv. Compounded
period Investment on Annualised
Sept.10,07 Return on
Investment(%)
Last 1 year 12000 14340 37.89
Last 3 year 36000 62417 39.17
Last 5 years 60000 192698 48.65
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Since 112000 649990 35.74

disclosure
of 1st NAV,
May 7,1998