hdfc floating rate income fund december 2012

8/12/2019 HDFC Floating Rate Income Fund December 2012

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PresentingHDFC Floating Rate Income Fund

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(An Open-Ended Income Scheme)

(December 2012)


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Table of Contents

Definition and Fund Positioning

Product Rationale

Product Features and Asset Allocation Pattern

Investment Strategy

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Portfolio Composition

Fund Suitability

Glossary and Disclaimer


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What is a Floating Rate DebtInstrument?

Floating rate debt instruments are debt securities issued by Central and / orState Government, corporates or PSUs with interest rates that are resetperiodically

The periodicity of the interest reset could be daily, monthly, quarterly, half-yearly, annually or any other periodicity that may be mutually agreed with theissuer and the fund.

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CP/CD/ other debt securities with maturity of less than 1 year are also treatedas floating rate instruments as proceeds on maturity will be invested at the thenprevailing interest rate & effectively the coupon gets reset

Fixed rate assets converted into Floating rate assets through swaps


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Positioning of the Floating Rate Fund

TURN

Income Funds

Gilt Funds - LTP

Monthly Income Plans

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RISK

R

Liquid Funds

Floating Rate - STP

Short Term Plans

Floating Rate - LTP


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Product Rationale

Conventional fixed interest rate investments are open to interest rate risk andhence volatility of price movements depending on interest rate fluctuations

Floating rate instruments are re priced at periodic intervals based on certainaccepted benchmarks

B virtue of this re ricin the rice movements are minimised due to interest

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rate fluctuations

Substantially minimises the interest rate risk for investors


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How Floaters Work

Coupon rates linked to accepted interest rate benchmarks

Benchmarks are repriced periodically

Credit spreads are generally fixed

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Fixed rate instruments swapped into floating rate minimises the interest rate risk

Emphasis on current yields with focus on minimising volatility


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Product Features

Type of Scheme An Open-ended Income Scheme

The scheme offers investors two plans:

Short Term Plan

Long Term Plan

Inception Date Long Term Plan & Short Term Plan (Retail Option)*: January 16, 2003

Short Term Plan (Wholesale Option): October 23, 2007

Investment Objective To generate regular income through investment in a portfolio comprising substantially of floating rate debt /money market instruments, fixed rate debt / money market instruments swapped for floating rate returns andfixed rate debt securities and money market instruements

Load Structure Entry Load (Short Term Plan & Long Term Plan):

Not Applicable.Upfront commission shall be paid directly by the investor to the ARN Holder (AMFIregistered Distributor) based on the investors assessment of various factors including the service

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ren ere y e o er.

Exit LoadShort Term Plan: Nil

Long Term Plan:

In respect of each purchase / switch-in of units, an Exit load of 2% is payable if units are redeemed /switched-out within 12 months from the date of allotment

No exit load is payable if units are redeemed / switched-out after 12 months from the date ofallotment

No Entry / Exit Load shall be levied on bonus units and units allotted on dividend reinvestment

Fund Manager $ Shobhit Mehrotra (Since February 16, 2004)

Benchmark CRISIL Liquid Fund Index

$ Mr. Rakesh Vyas (Dedicated Fund Manager for Overseas Investments since May 10, 2012)* Fresh subscriptions are not accepted under HDFC Floating Rate Income Fund- Short Term Plan- Retail Option w.e.f.

October 1, 2012.


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Product Features.(contd)

Short Term Plan (Wholesale Option) Long Term Plan

Options Growth Option

Dividend Option offers daily dividend option (with reinvestmentfacility only) and Weekly* and Monthly** Dividend Option (withPayout and Reinvestment facility)

*Every Monday (or immediately succeeding business day if that dayis not a business day)

** Last Monday of the Month (or immediately succeeding businessday if that day is not a business day)

Growth Option

Dividend Option (weekly*) offers reinvestmentfacility only

*Every Monday (or immediately succeedingbusiness day if that day is not a business day)

MinimumApplication

Under each Option:

Purchase: `10 lakh and any amount thereafter

Under each Option :

Purchase: `5,000 and any amount thereafter

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ona urc ase: an any amoun erea er ona urc ase: , an any amoun

thereafter


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Asset Allocation Pattern

Types of Instruments Normal Allocation

(% of Net Assets)

Normal Deviation Risk Profile

Fixed Rate Debt Securities(including securitised debt,Money Market Instruments &Floating Rate Debt Instrumentsswapped for fixed rate returns)

0- 25 0 - 50 Low to Medium

Under normal circumstances, the asset allocation of the schemes portfolio will be as follows:

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Floating Rate Debt Securities(including securitised debt,Money Market Instruments &Fixed Rate Debt Instrumentsswapped for floating rate

returns)

75 100 50 100 Low to Medium

Under normal circumstances at least 75% of the total portfolio will be invested in floating rate debt securities / money marketinstruments. This may be by way of direct investment in floating rate assets or fixed rate assets swapped for floating rate returnsby using derivatives as described later in this section. Similarly under normal circumstances at least 25% of the total portfolio

will be invested in fixed rate debt securities / money market instruments.The investment in securitised debt will not normally exceed 60% of the net assets of the respective plans under the scheme. The respectiveplans under the scheme may seek investment opportunity in Foreign Debt Securities (max. 60% of net assets of respective plans) subject toSEBI (Mutual Funds) Regulations, 1996. The scheme may use derivatives mainly for the purpose of hedging and portfolio balancing (max.75% of net assets of respective plans including cash) based on the opportunities available subject to SEBI (Mutual Funds) Regulations,1996.


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Tax Benefits / Consequences

HDFC Floating Rate Income Fund (the Scheme) is classified as an Income Scheme and hence is notimpacted by the DDT applicable for Liquid Schemes / Money Market Mutual Funds

Income distributed by the Scheme (both Plans) will be exempt from Income-tax in the hands of investors

On income distribution if any made by the Scheme, additional income tax is payable under section 115 R ofthe Income - tax Act, 1961, at the following rates

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Category of Investors Dividend Distribution Tax (%)

Individuals / HUF 13.519% $

Others 32.445% $

$ Including applicable surcharge, education cess and secondary and higher education cessInvestors should be aware that the fiscal rules / tax laws may be changed and there can be no guarantee that the

current tax position may continue indefinitelyIn view of the individual nature of tax consequences, each investor is advised to consult his / her professional tax advisor


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Fund Manager Profile $

Name and Designation Mr. Shobhit Mehrotra - Senior Fund Manager Fixed Income and Head of Credit.

(Since February 16,2004)

Educational Qualifications B. Text

M.S. MBA (Clemson University, Sc, USA)

Experience Collectively over 19 years of work experience in Fixed Income Markets, credit rating etc.

Assignments Held Feb 16, 2004 till Date

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sse anagemen ompany m e

Feb 1997 to Feb 2004Templeton Asset Management (India) Pvt. Ltd.

Last Position Held AVP and Portfolio Manager (Fixed Income)

July 1992 to January 1997

ICRA Ltd.

Last Position Held Business / Investment Analyst, Member Executive RatingCommittee

$ Mr. Rakesh Vyas (Dedicated Fund Manager for Overseas Investments since May 10, 2012)


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Investment Strate

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The Fund aims to:

Enable investors to generate regular income in various interest rate scenarios

Enable investors to minimise interest rate risk in a rising rate environment

Generate regular income through investments in floating rate debt instruments

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Current Investment Strategy(Short Term Plan)

Portfolio will normally be skewed towards maturities higher than liquid schemes

Focus on accrual income as the primary source of returns

To primarily invest in CP/CDs / Other debt securities with maturity < 1 year, as

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Current Investment Strategy(Long Term Plan)

Portfolio will normally be skewed towards longer term maturities

Invest in CP/ CDs/ Other debt securities


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Portfolio Composition

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,


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Portfolio Composition(As on November 30, 2012)

Short Term Plan

Portfolio Classification by Asset Class (%)

Commercial Papers (CP) /Certificate of Deposit (CD)

79.31

Credit Exposure 10.33

Long Term Plan

Portfolio Classification by Asset Class (%)

Commercial Papers (CP) /Certificate of Deposit (CD)

99.72

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Cash, Cash Equivalents and NetCurrent Assets

10.36

Average Portfolio Maturity* 78 days

Modified Duration*: 71 days

Yield to Maturity*: 8.59%

Net Assets (`(`(`(`In crores) 1,263.26**

Cash, Cash Equivalents and NetCurrent Assets 0.28

Average Portfolio Maturity * 115 days

Modified Duration*: 106 days

Yield to Maturity*: 8.50%

Net Assets (`(`(`(`In crores) 1,346.75**

** Average AUM for the quarter ended September 30, 2012

* Computed on the invested amount


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Portfolio Composition(As on November 30, 2012)

Short Term Plan

Portfolio Classification by Rating Class (%)

AAA / AAA(SO)/ A1+/ A1+ (SO) &Equivalent

100.65

Long Term Plan

Portfolio Classification by Rating Class (%)

AAA / AAA(SO) / A1+ / A1+(SO) &Equivalent

99.72

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AA+ & Below 1.44

Cash, Cash Equivalents and Net

Current Assets (2.09)

Cash, Cash Equivalents and NetCurrent Assets

0.28


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Fund Suitabilit

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Why HDFC Floating Rate IncomeFund?

Protection against rising interest rates and steepening of the yield curve

Extremely low interest rate risk; lower NAV volatility

Ideal investment vehicle to generate regular income in various interest ratescenarios

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Superior risk return trade off; ideally suited during periods of uncertainty

Maintains high credit quality

Lower incidence of DDT as compared to Liquid Funds / Money Market MutualFunds @

@ Resident Individual/HUF should be aware that the fiscal rules / tax laws may be changed and there can be no guarantee

that the current tax position may continue indefinitely. In view of the individual nature of tax consequences, each investor is

advised to consult his/ her professional tax advisor


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HDFC Floating Rate Income Fund issuitable for investors:

Requiring regular income in various interest rate scenarios

Wanting to minimise interest rate risk

Desiring to diversify their portfolio

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Glossary

Mark to Market Valuation of an asset (e.g. marketable securities, derivatives and other financial contracts) using a traded price ora derived price from the corresponding yield curve

Duration Measure of the price sensitivity of a bond to a change in yield

Credit Risk Risk of default

Interest Rate Risk Risk that the price of a bond held in a portfolio will decline if market interest rates rise

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Yield Curve Graphical depiction of the relationship between yield and maturity

Interest Rate Swaps Contract between two parties to exchange, on particular dates in the future, one series of cashflows (fixedinterest) for another series of cash flows (floating interest) in the same currency and on the same principle for anagreed period of time

Forward Rate Agreements An agreement between two counter parties to pay or to receive the difference between an agreed fixed rate andthe interest rate prevailing on a stipulated future date, based on a notional amount, for an agreed period


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DISCLAIMER:This presentation has been prepared by HDFC Asset Management Company Limited (HDFC AMC) on the basis of internal data,publicly available information and other sources believed to be reliable. The information contained in this document is for general purposes only. Thedocument is given in summary form and does not purport to be complete. The document does not have regard to specific investment objectives,financial situation and the particular needs of any specific person who may receive this document. The information/ data herein alone are notsufficient and should not be used for the development or implementation of an investment strategy. The same should not be construed asinvestment advice to any party. Neither HDFC AMC and HDFC Mutual Fund (the Fund) nor any person connected with them, accepts any liability

arising from the use of this document. The recipient(s) before acting on any information herein should make his/her/their own investigation and seekappropriate professional advice and shall alone be fully responsible / liable for any decision taken on the basis of information contained herein.

MUTUAL FUND INVESTMENTS ARE SUBJECT TO MARKET RISKS, READ ALL SCHEME RELATEDDOCUMENTS CAREFULLY.

Disclaimer & Risk Factors

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THANK YOU

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hdfc floating rate income fund december 2012

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