mutual funds final aassignment

8/13/2019 MUTUAL FUNDS FINAL AASSIGNMENT

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SMT. CHANDIBAI HIMATHMAL

MANSUKHANI COLLEGE

NAME : NAVIN JETHWANI

STD : TY B.F.MSEM : VI

ROLL NO : 43

SUBJECT : MUTUAL FUNDS MANAGEMENT

TOPIC : BANKING SECTOR [HDFC]

DATE: 21/02/2014

SUBMITED TO

(PROF.MANISHA GUR)


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INTRODUCTION TO MUTUAL FUND

A mutual fund is a type of professionally managed collective investmentscheme that pools money from many investors to purchase securities. While there

is no legal definition of the term "mutual fund", it is most commonly applied only

to those collective investment vehicles that are regulated and sold to the general

public. They are sometimes referred to as "investment companies" or "registered

investment companies. Most mutual funds are "open-ended," meaning

stockholders can buy or sell shares of the fund at any time. Hedge funds are not

considered a type of mutual fund.

In the United States, mutual funds must be registered with the Securities and

Exchange Commission, overseen by a board of directors (or board of trustees iforganized as a trust rather than a corporation or partnership) and managed by a

registered investment adviser. Mutual funds, like other registered investment

companies, are also subject to an extensive and detailed regulatory regime set

forth in the Investment Company Act of 1940. Mutual funds are not taxed on their

income and profits if they comply with certain requirements under the U.S.

Internal Revenue Code.

Mutual funds have both advantages and disadvantages compared to direct

investing in individual securities. They have a long history in the United States.Today they play an important role in household finances, most notably in

retirement planning.

There are 3 types of U.S. mutual funds: open-end, unit investment trust, and

closed-end. The most common type, the open-end fund, must be willing to buy

back shares from investors every business day. Exchange-traded funds (or "ETFs"

for short) are open-end funds or unit investment trusts that trade on an exchange.

Open-end funds are most common, but exchange-traded funds have been gaining

in popularity.

Mutual funds are generally classified by their principal investments. The fourmain categories of funds are money market funds, bond or fixed income funds,

stock or equity funds and hybrid funds. Funds may also be categorized as index or

actively managed.


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COMPANY DETAIL

MAN WITH A MISSION

If ever there was a man with a mission it was Hasmukhbhai Parekh, Founder and

Chairman-Emeritus, of HDFC Group who left this earthly abode on November 18,

1994. Born in a traditional banking family in Surat, Gujarat, Mr. Parekh started his

financial career at Harkisandass Lukhmidass a leading stock broking firm. The

firm closed down in the late seventies, but, long before that, he went on to become

a towering figure on the Indian financial scene.

In 1956 he began his lifelong financial affair with the economic world, as General

Manager of the newly-formed Industrial Credit and Investment Corporation of

India (ICICI). He rose to become Chairman and continued so till his retirement in

1972.

At the ripe age of 60, Hasmukhbhai started his second dynamic life, even more

illustrious than his first. His vision for mortgage finance for housing gave birth to

the Housing Development Finance Corporation it was a trend-setter for housingfinance in the whole Asian continent.

He was also a writer in his own right. There are over 200 published articles by

him...

In 1992, the Government of India honoured him with the Padma Bhushan Award.

The London School of Economics & Political Science conferred on him an

Honorary Fellowship.

He was one of the Founder Members of the Centre for Advancement of

Philanthropy, and its Chairmantill 1993.

He took active interest in the Bombay Community Public Trust, designed

specifically to serve the needs of the citys underprivileged citizens.

When Mr. Deepak Parekh took over as Chairman from Hasmukhbhai, he said:

Taking over from H.T. Parekh is a formidable task; his vision brought about not

only an institution, but an entire concept which has proved itself to be of lastingimportance.

Today we are the largest residential mortgage finance institution in India, with a

net worth of Rs. 2,703 cores as of March 31, 2006 and an asset base of over Rs.


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22,000 cores. We also aim to increase the flow of resources to the housing sector

by integrating the housing finance sector with the overall domestic financial

markets.

ABOUT COMPANY HDFC

VISION

To be a dominant player in the Indian mutual fund space, recognized for its high

levels of ethical and professional conduct and a commitment towards enhancing

investor interests.

SPONSORS

HOUSING DEVELOPMENT FINANCE CORPORATION LIMITED (HDFC):

HDFC was incorporated in 1977 as the first specialised housing finance institution

in India. HDFC provides financial assistance to individuals, corporate and

developers for the purchase or construction of residential housing. It also

provides property related services (e.g. property identification, sales services and

valuation), training and consultancy. Of these activities, housing finance remains

the dominant activity.

HDFC currently has a client base of over 8, 00,000 borrowers, 12, 00,000

depositors, 92,000 shareholders and 50,000 deposit agents. HDFC raises funds

from international agencies such as the World Bank, IFC (Washington), USAID,

CDC, ADB and KFW, domestic term loans from banks and insurance companies,bonds and deposits. HDFC has received the highest rating for its bonds and

deposits program for the ninth year in succession. HDFC Standard Life Insurance

Company Limited, promoted by HDFC was the first life insurance company in the

private sector to be granted a Certificate of Registration (on October 23, 2000) by

the Insurance Regulatory and Development Authority to transact life insurance

business in India.

HDFC is India's premier housing finance company and enjoys an impeccable track

record in India as well as in international markets. Since its inception in 1977, the

Corporation has maintained a consistent and healthy growth in its operations to

remain the market leader in mortgages.


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INTRODUCTION

A. RISK FACTORSn STANDARD RISK FACTORS:l Investment in Mutual Fund Units involves investment risks such as trading

volumes, settlement risk, liquidity risk, default risk including the possible loss of

principal.

l As the price / value / interest rates of the securities in which the Scheme investsfluctuates, the value of your investment in the Scheme may go up or down

depending on the various factors and forces affecting the capital markets and

money markets.

l Past performance of the Sponsors and their affiliates / AMC / Mutual Fund doesnot guarantee future performance of the Scheme(s) of the Mutual Fund.

l The name of the Scheme does not in any manner indicate either the quality of theScheme or its future prospects and returns.

l The Sponsors are not responsible or liable for any loss resulting from theoperation of the Scheme beyond the initial contribution of ` 1 lakh each made by

them towards setting up the Fund.

l The present Scheme is not a guaranteed or assured return scheme.n Scheme Specific Risk Factors

Some of the specific risk factors related to the Scheme include, but are not limited

to the following:

(i)Risk factors associated with investing in equities and equity related instrumentsl Equity shares and equity related instruments are volatile and prone to price

fluctuations on a daily basis. Investments in equity shares and equity related

instruments involve a degree of risk and investors should not invest in the

Scheme unless they can afford to take the risks.

l While securities that are listed on the stock exchange carry lower liquidity risk,the ability to sell these investments is limited by the overall trading volume on the

stock exchanges and may lead to the Scheme incurring losses till the security is

finally sold.

l Investment strategy to be adopted by the Scheme may carry the risk of significantvariance between the portfolio allocation of the Scheme and the Benchmark

particularly over a short to medium term period.

l Schemes performance may differ from the benchmark index to the extent of theinvestments held in the equity segment under Savings Plan, as per the investment


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pattern indicated under normal circumstances.

(ii) RISK FACTORS ASSOCIATED WITH INVESTING IN FIXED INCOME SECURITIESl The Net Asset Value (NAV) of the Scheme, to the extent invested in Debt and

Money Market instruments, will be affected by changes in the general level of

interest rates. The NAV of the Scheme is expected to increase from a fall ininterest rates while it would be adversely affected by an increase in the level of

interest rates.

l Money market instruments, while fairly liquid, lack a well developed secondarymarket, which may restrict the selling ability of the Scheme and may lead to the

Scheme incurring losses till the security is finally sold.

l Investment in Debt instruments are subject to the risk of an issuers inability tomeet interest and principal payments on its obligations and market perception of

the creditworthiness of the issuer.

l Government securities where a fixed return is offered run price-risk like anyother fixed income security. Generally, when interest rates rise, prices of fixed

income securities fall and when interest rates drop, the prices increase. The extent

of fall or rise in the prices is a function of the existing coupon, days to maturity

and the increase or decrease in the level of interest rates. The new level of interest

rate is determined by the rates at which government raises new money and / or

the price levels at which the market is already dealing in existing securities. The

price-risk is not unique to Government Securities. It exists for all fixed income

securities. However, Government Securities are unique in the sense that their

credit risk generally remains zero. Therefore, their prices are influenced only by

movement in interest rates in the financial system.

l Different types of fixed income securities in which the Scheme would invest asgiven in the Scheme Information Document carry different levels and types of risk.

Accordingly, the Scheme risk may increase or decrease depending upon its

investment pattern. e.g. corporate bonds carry a higher level of risk than

Government securities. Further even among corporate bonds, AAA rated bonds,

are comparatively less risky than AA bonds.

l The AMC may, considering the overall level of risk of the portfolio, invest in lowerrated / unrated securities offering higher yields as well as zero coupon securities

that offer attractive yields. This may increase the absolute level of risk of the

portfolio.

l As zero coupon securities do not provide periodic interest payments to the holderof the security, these securities are more sensitive to changes in interest rates.Therefore, the interest rate risk of zero coupon securities is higher. The AMC may

choose to invest in zero coupon securities that offer attractive yields. This may

increase the risk of the portfolio.


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l Schemes performance may differ from the benchmark index to the extent of theinvestments held in the debt segment under Investment Plan, as per the

investment pattern indicated under normal circumstances.

l The Scheme at times may receive large number of redemption requests, leading toan asset-liability mismatch and therefore, requiring the investment manager tomake a distress sale of the securities leading to realignment of the portfolio and

consequently resulting in investment in lower yield instruments.

(iii) General Risk Factors

l Trading volumes, settlement periods and transfer procedures may restrict theliquidity of the investments made by the Scheme. Different segments of the Indian

financial markets have different settlement periods and such periods may be

extended significantly by unforeseen circumstances leading to delays in receipt of

proceeds from sale of securities. The NAV of the Units of the Scheme can go up ordown because of various factors that affect the capital markets in general.

l As the liquidity of the investments made by the Scheme could, at times, berestricted by trading volumes and settlement periods, the time taken by the

Mutual Fund for redemption of Units may be significant in the event of an

inordinately large number of redemption requests or restructuring of the Scheme.

In view of the above, the Trustee has the right, in its sole discretion, to limit

redemptions (including suspending redemptions) under certain circumstances, as

described onPage 30 under Right to Limit Redemptions in Section Restrictions, if any, on the

right to freely retain or dispose of units being offered.

l At times, due to the forces and factors affecting the capital market, the Schememay not be able to invest in securities falling within its investment objective

resulting in holding the monies collected by it in cash or cash equivalent or invest

the same in other permissible securities / investment amounting to substantial

reduction in the earning capability of the Scheme.

l Securities, which are not quoted on the stock exchanges, are inherently illiquid innature and carry a larger amount of liquidity risk, in comparison to securities that

are listed on the exchanges or offer other exit options to the investor, including a

put option. The AMC may choose to invest in unlisted securities that offer

attractive yields. This may increase the risk of the portfolio.

l Performance of the Scheme may be affected by political, social, and economicdevelopments, which may include changes in government policies, diplomatic

conditions, and taxation policies.

(iv) RISK FACTORS ASSOCIATED WITH INVESTING IN FOREIGNSECURITIES


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traditional investments.

(vi) Risk factors associated with investing in Securitised Debt

The Risks involved in Securitised Papers described below are the principal ones

and do not represent that the statement of risks set out hereunder is exhaustive.

l Limited Liquidity & Price RiskThere is no assurance that a deep secondary market will develop for the

Certificates. This could limit the ability of the investor to resell them.

l Limited Recourse, Delinquency and Credit RiskThe Credit Enhancement stipulated represents a limited loss cover to the

Investors. These Certificates represent an undivided beneficial interest in the

underlying receivables and do not represent an obligation of either the Issuer or

the Seller or the originator, or the parent or any affiliate of the Seller, Issuer and

Originator. No financial recourse is available to the Certificate Holders against the

Investors Representative. Delinquencies and credit losses may cause depletion of

the amount available under the Credit Enhancement and thereby the Investor

Payouts to the Certificate Holders may get affected if the amount available in the

Credit Enhancement facility is not enough to cover the shortfall. On persistent

default of an Obligor to repay his obligation, the Servicer may repossess and sell

the Asset. However many factors may affect, delay or prevent the repossession of

such Asset or the length of time required to realise the sale proceeds on such

sales. In addition, the price at which such Asset may be sold may be lower than the

amount due from that Obligor.

l Risks due to possible prepayments and Charge OffsIn the event of prepayments, investors may be exposed to changes in tenor and

yield. Also, any Charge Offs would result in the reduction in the tenor of the Pass

Through Certificates (PTCs).

l Bankruptcy of the Swap BankIf the Swap Bank, becomes subject to bankruptcy proceedings then an Investorcould experience losses or delays in the payments due under the Interest Rate

Swap Agreement.

l Risk of Co-minglingWith respect to the Certificates, the Servicer will deposit all payments received

from the Obligors into the Collection Account. However, there could be a time gap

between collection by a Servicer and depositing the same into the Collection

account especially considering that some of the collections may be in the form ofcash. In this interim period, collections from the Loan Agreements may not be

segregated from other funds of originator. If originator in its capacity as Servicer

fails to remit such funds due to Investors, the Investors may be exposed to a


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potential loss.

(vii) Risk factors associated with Securities Lending

l As with other modes of extensions of credit, there are risks inherent to securitieslending, including the risk of failure of the other party, in this case the approved

intermediary, to comply with the terms of the agreement entered into between

the lender of securities i.e. the Scheme and the approved intermediary.

II. INFORMATION ABOUT THE SCHEME

A.TYPE OF THE SCHEME :HDFC Childrens Gift Fund is an open-ended balanced scheme. Investors /Unitholders in the Scheme are not being offered any guaranteed / assured returns

The Scheme offers investors two Plans:

(i) Investment Plan (Equity oriented)(ii) Savings Plan (Debt oriented)The Plans will be managed as separate portfolios. In other words, there will beseparate investment portfolios each with its own NAV.

Investment Plan:The net assets of the Plan will be primarily invested in Equities and Equity relatedinstruments. The AMC will also invest the net assets of the Plan in Debt / Moneymarket instruments with an objective of generating long term returns andmaintaining risk under control.

Savings Plan:The net assets of the Plan will be primarily invested in Debt and Money marketinstruments. The AMC will also invest the net assets of the Plan in Equities andEquity related instruments. This Plan seeks to generate steady long term returnswith relatively low levels of risk.

The Investment Plan (Equity oriented) offers the following Options forsubscription:

Investment Plan* Investment Plan - Direct Option

The Savings Plan (Debt oriented) offers the following Options for subscription: Savings Plan* Savings Plan - Direct Option

*Regular OptionThe Option already in existence prior to the introduction of Direct Option underthe Scheme is referred to as Regular Option in this SID. Effective, January 1, 2013this Option is offered only to investors who wish to route their investmentthrough any distributor.

Direct Option

Direct Option was introduced under the Scheme with effect from January 1, 2013.The Option offered under the Scheme prior to January 1, 2013 is also available for

subscription under the Direct Option. This Option is offered only to investors who

wish to invest directly without routing the investment through any distributor.


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This Option shall have a lower expense ratio excluding distribution expenses,

commission, etc., and no commission for distribution of Units will be paid /

charged under the Direct Option.

B.WHAT IS THE INVESTMENT OBJECTIVE OF THE SCHEME?The primary objective of both the Plans (viz. Investment Plan and Savings Plan)offered under the Scheme is to generate long term capital appreciation.

Savings Plan

Each of the respective Plan(s) may take derivatives position (both equity and

fixed income) based on the opportunities available subject to the guidelines

issued by SEBI from time to time and in line with the investment objective of the

Scheme. These may be taken to hedge the portfolio, rebalance the same or to

undertake any other strategy as permitted under SEBI (MF) Regulations fromtime to time. The maximum derivative position will be restricted to 20% of the

Net Assets (i.e. Net Assets including cash) of the respective Plans.

Each of the respective Plan(s) may seek investment opportunity in the Foreign

Securities, in accordance with guidelines stipulated in this regard by SEBI and RBI

from time to time. Under normal circumstances, each Plan shall not have an

exposure of more than 50% and 20% of its net assets in Foreign Debt Securities

and in ADRs / GDRs / Foreign Equity Securities respectively subject to regulatory

limits. However, the AMC with a view to protecting the interest of the investors

may increase or decrease this exposure as deemed fit from time to time subject to

regulatory limit.

In addition to the instruments stated in the table above, the Scheme may enterinto repos / reverse repos as may be permitted by RBI / SEBI. From time to time,the Scheme may hold cash. A part of the net assets may be invested in theCollateralised Borrowing & Lending Obligations (CBLO) or repo or in analternative investment as may be provided by RBI / SEBI to meet the liquidityrequirements.

Pending deployment of funds of the Scheme in securities in terms of the

investment objective of the Scheme, the AMC may park the funds of the Scheme in

short term deposits of scheduled commercial banks, subject to the guidelines

issued by SEBI vide its circular dated April 16, 2007, as amended from time to

time.

Change in Asset Allocation PatternSubject to SEBI (MF) Regulations, the asset allocation pattern indicated abovemay change from time to time, keeping in view market conditions, marketopportunities, applicable regulations and political and economic factors. It must

be clearly understood that the percentages stated above are only indicative andnot absolute. These proportions may vary substantially depending upon theperception of the AMC, the intention being at all times to seek to protect theinterests of the Unit holders. Such changes in the investment pattern will be forshort term and for defensive considerations.


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DEBT MARKET IN INDIAThe instruments available in Indian Debt Market are classified into two

categories, namely Government and Non - Government debt. The instruments

available in these categories includes:

A] GOVERNMENT DEBT -

n CENTRAL GOVERNMENT DEBTn Treasury Billsn Dated Government Securities

Coupon Bearing Bonds Floating Rate Bonds Zero Coupon Bonds

n

STATE GOVERNMENT DEBT State Government Loans Coupon Bearing Bonds

B] NON-GOVERNMENT DEBT -n INSTRUMENTS ISSUED BY GOVERNMENT AGENCIES AND OTHER STATUTORY

BODIES

n Government Guaranteed Bondsn PSU Bondsn INSTRUMENTS ISSUED BY PUBLIC SECTOR UNDERTAKINGSn Commercial Paper

PSU Bonds

Fixed Coupon Bonds

Floating Rate Bonds

Zero Coupon Bonds

n INSTRUMENTS ISSUED BY BANKS AND DEVELOPMENT FINANCIALINSTITUTIONS

n Certificates of Depositn Promissory Notesn Bondsn Fixed Coupon Bondsn Floating Rate Bondsn Zero Coupon Bonds

INSTRUMENTS ISSUED BY CORPORATE BODIESn Commercial PaperNon-Convertible Debentures

Fixed Coupon Debentures

Floating Rate Debentures


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Indian debt securities. However, in case valuation for a specific debt security is

not covered by SEBI (MF) Regulations, then the security will be valued on fair

value basis.

Due to difference in time zones of different markets, closing price of overseas

securities / units of overseas mutual fund may be available only after the

prescribed time limit for declaration of NAV in India. In such cases, the NAV of theScheme for any Business Day (T day) will be available on the next Business Day

(T+1 day) and the same shall be posted, on each Business Day, on the Funds

website and on the AMFI website - www.amfiindia. com on date of computation of

NAV.

On the Valuation Day, all assets and liabilities denominated in foreign currency

will be valued in Indian Rupees at the exchange rate available on Bloomberg /

Reuters / RBI at the close of banking hours in India. The Trustee reserve the right

to change the source for determining the exchange rate.

The exchange gain / loss resulting from the aforesaid conversion shall be

recognized as unrealized exchange gain / loss in the books of the Scheme on the

day of valuation.

Further, the exchange gain / loss resulting from the settlement of assets /

liabilities denominated in foreign currency shall be recognized as realized

IV. FEES AND EXPENSES

This section outlines the expenses that will be charged to the Scheme and alsoabout the transaction charges to be borne by the investors. The information

provided under this Section seeks to assist the investor in understanding the

expense structure of the Scheme and types of different fees / expenses / loads the

investor is likely to incur on purchasing and selling the Units of the Scheme.

A. ANNUAL SCHEME RECURRING EXPENSES

These are the fees and expenses incurred for the Scheme. These expenses include

but are not limited to Investment Management and Advisory Fees charged by theAMC, Registrar and Transfer Agents Fees & expenses, Marketing and Selling costs

etc.

The AMC has estimated that the following expenses will be charged to the

respective Plan(s), as permitted under Regulation 52 of SEBI (MF) Regulations.

The expenses are estimated on assets under management of ` 100 crores. For the

actual current expenses being charged, the investor should refer to the website of

the Mutual Fund viz. www.hdfcfund.com

[% of daily net assets ^ (estimated) (p.a.)]


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be borne by the AMC.

Notes:

Trustee Fees and Expenses

In accordance with the Trust Deed constituting the Mutual Fund, the Trustee is

entitled to receive, in addition to the reimbursement of all costs, charges andexpenses, a quarterly fee computed at a rate not exceeding 0.10% per annum of

the daily net assets of the respective Plan(s) or a sum of ` 15,00,000/- per annum,

whichever is higher. Such fee shall be paid to the Trustee within seven working

days from the end of each quarter every year, namely, within 7 working days from

June 30, September 30, December 31 and March 31 of each year. The Trustee may

charge further expenses as permitted from time to time under the Trust Deed and

SEBI (MF) Regulations.

Investor Education and Awareness initiatives

As per Para F of the SEBI Circular No.CIR/IMD/DF/21/2012 dated September 13,

2012, the AMC shall annually set apart at least 2 basis points p.a. (i.e. 0.02% p.a.)

on daily net assets of the respective Plan(s) within the limits of total expenses

prescribed under Regulation 52 of SEBI (MF) Regulations for investor education

and awareness initiatives undertaken.

3 Refer Point (3) below on Service Tax on various expenses / exit load.4Fungibility of expenses: The expenses towards Investment Management andAdvisory Fees under Regulation 52 (2) and the various sub-heads of recurring

expenses mentioned under Regulation 52 (4) of SEBI (MF) Regulations arefungible in nature. Thus, there shall be no internal sub-limits within the expenseratio for expense heads mentioned under Regulation 52 (2) and (4) respectively.Further, the additional expenses under Regulation 52(6A)(c) shall also beincurred towards any of these expense heads.

The purpose of the above table is to assist the Investor in understanding the

various costs and expenses that an Investor in the Plan will bear directly or

indirectly. The figures in the table above are estimates. The actual expenses that

can be charged to the Scheme will be subject to limits prescribed from time to

time under the SEBI (MF) Regulations. Currently these are as under:

(1) Recurring expenses under Regulation 52 (6):On the first ` 100 crores of the daily net assets - 2.25% p.a. On the next ` 300

crores of the daily net assets - 2.00% p.a.


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On the next ` 300 crores of the daily net assets - 1.75% p.a. On the balance of

the assets - 1.50% p.a.

(2) Additional Expenses under Regulation 52 (6A):(i)To improve the geographical reach of the Scheme in smaller cities / towns as

may be specified by SEBI from time to time, expenses not exceeding 0.30%p.a. of daily net assets, if the new inflows from such cities are at least

(a) 30% of gross new inflows in the respective Plan(s) or(b) 15% of the average assets under management (year to date) of therespective Plan(s), whichever is higher.

In case inflows from such cities are less than the higher of (a) or (b) above,

such expenses on daily net assets of the respective Plan(s) shall be charged

on proportionate basis in accordance with SEBI Circular No.CIR/IMD/

DF/21/2012 dated September 13, 2012.The amount so charged shall be utilised for distribution expenses incurred

for bringing inflows from such cities. However, the amount incurred as

expense on account of inflows from such cities shall be credited back to the

respective Plan(s) in case the said inflows are redeemed within a period of

one year from the date of investment.

Currently, SEBI has specified that the above additional expense may be

charged for inflows from beyond Top 15 cities. Top 15 cities shall mean top

15 cities based on Association of Mutual Funds in India (AMFI) data on AUMby Geography - Consolidated Data for Mutual Fund Industry as at the end of

the previous financial year.

(ii)Brokerage and transaction costs incurred for execution of trades andincluded in the cost of investment not exceeding 0.12% of the value of trades

in case of cash market transactions and 0.05% of the value of trades in case

of derivatives transactions.

In accordance with SEBI Circular No.CIR/IMD/ DF/24/2012 dated

November 19, 2012, any payment towards brokerage and transaction cost,over and above the said 0.12% and 0.05% for cash market transactions and

derivatives transactions respectively, may be charged to the respective

Plan(s) within the maximum limit of Total Expense Ratio (TER) as

prescribed under Regulation 52 (6) of the SEBI (MF) Regulations, 1996.

(iii) Expenses not exceeding 0.20% p.a. of daily net assets towardsInvestment Management and Advisory Fees and the various sub-heads of

recurring expenses mentioned under Regulation 52 (2) and (4) respectively

of SEBI (MF) Regulations.(3) Service Tax

As per Para B of the SEBI Circular No.CIR/IMD/DF/21/ 2012 dated September

13, 2012, Service tax shall be charged as follows:


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1. Service tax on investment management and advisory fees shall be charged tothe respective Plan(s) in addition to the maximum limit of TER as prescribed

in Regulation 52 (6) of the SEBI (MF) Regulations.

2. Service tax on other than investment management and advisory fees, if any,shall be borne by the respective Plan(s) within the maximum limit of TER asprescribed in Regulation 52 (6) of the SEBI (MF) Regulations.

3. Service tax on exit load, if any, shall be paid out of the exit load proceeds andexit load net of service tax, if any, shall be credited to the respective Plan(s).

4. Service tax on brokerage and transaction cost paid for execution of trade, ifany, shall be within the limit prescribed under Regulation 52 of the SEBI

(MF) Regulations.

The total expenses of the respective Plan(s) including the Investment

Management and Advisory Fee shall not exceed the limits stated in Regulation 52

of the SEBI (MF) Regulations. Any expenditure in excess of the SEBI regulatory

limits shall be borne by the AMC or by the Trustee or the Sponsor.

The current expense ratios will be updated on the Mutual Fund website on

www.hdfcfund.com within two working days mentioning the effective date of the

change.

B. TRANSACTION CHARGES

SEBI with the intent to enable investment by people with small saving potential

and to increase reach of Mutual Fund products in urban areas and in smaller

towns, wherein the role of the distributor is vital, has allowed AMCs vide its

Circular No.Cir/ IMD/DF/13/ 2011 dated August 22, 2011, as amended from time

to time, to deduct transaction charges for subscription of ` 10,000/- and above.

The said transaction charges will be paid to the distributors of the Mutual Fund

products.In accordance with the said circular as may be amended from time to time, AMC /

Mutual Fund will deduct the transaction charges from the subscription amount

and pay to the distributors (who have opted-in to receive the transaction charges

for the Scheme type) as shown in the table below. Thereafter, the balance of the

subscription amount shall be invested.

(i)Transaction charges shall be deducted for Applications for purchase /subscription received through distributor / agent as under:


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Invest

or

Type Transaction Charges

First

Time

Transaction charge of

150/- for

Mutua

l Fund

subscription of

10,000/- and above

Invest

or

will be deducted from

the subscription

amount and paid to the

distributor/agent

of the first time

investor. The balance of

the subscription amount

shall be invested.

Invest

or

Transaction charge of

100/- per

otherthan

subscription of 10,000/- and above will

First

Time

be deducted from the

subscription amount

Mutua

l Fund

and paid to the

distributor/agent of the

Invest

or

investor. The balance of

the subscription

amount shall be

invested.

However, transaction charges in case of investments through SIP shall be

deducted only if the total commitment (i.e. amount per SIP installment x No. ofinstallments) amounts to ` 10,000/- or more. The transaction charges shall be

deducted in 3-4 installments.

Identification of investors as first time or existing will be based on

Permanent Account Number (PAN) / PAN Exempt KYC Reference Number

(PEKRN) at the First / Sole Applicant / Guardian level. Hence, Unit holders are

urged to ensure that their PAN / PEKRN / KYC is updated with the Fund. Unit

holders may approach any of the Official Points of Acceptances of the Fund i.e.

Investor Service Centres (ISCs) of the Fund / offices of our Registrar andTransfer Agent, M/s. Computer Age Management Services Pvt. Ltd. in this

regard.


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THANK

YOU

mutual funds final aassignment

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