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Sr. No. Topic Page No.

1 Preface iii2 Acknowledgement v3 Executive Summary ix4 About the Founder 15 The Man who built HDFC 26 About HDFC Bank 37 Business Focus 68 Products of HDFC Bank

& HDFC Mutual Fund 78.1 Equity Funds

8.2 Balanced Funds

8.3 Debt Funds

9 Systematic Investment Plan 1310 Corporate Governance 1611 Practice of Corporate Governance by HDFC

Group 1712 About Mutual Funds 1813 History of Mutual Funds in INDIA 1914 HDFC Mutual Fund 2115 How is Mutual Fund Set-up. 2216 Structure of the Indian Mutual Fund Industry 24

16.1 Advantages of Mutual funds16.2 Disadvantages of Mutual Funds

17 Types of Mutual Fund Schemes 2718 Future Scenario of Mutual Funds 3119 My Assignment 3220 Organization Structure 3521 Financial Analysis of HDFC Bank 3622 Amalgamation 37

23 Awards 4024 Experience & Recommendations 4225 Exhibits a26 Bibliography g

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About the Founder

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

Chairman of HDFC bank, 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. 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 trendsetter for housing

finance in the whole Asian continent.

A soft-spoken man of few words, Mr. Parekh nevertheless held strong and definite views

with a quiet conviction. He was also a writer in his own right. There are over 200

published articles by him, full of incisive comments on finance and economics. But there

was much more to the man than his financial genius. In his own unassuming way,

Hasmukhbhai devoted all his life to raising resources for philanthropic causes. He was

one of the Founder Members of the Centre for Advancement of Philanthropy, and its

Chairman till 1993. He took active interest in the Bombay Community Public Trust,

designed specifically to serve the needs of the citys underprivileged citizens.

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The Man who built HDFC:

Deepak Parikh is unofficially dubbed the government's informal crisis-manager. Whether

it was the UTI mess that the government wanted to sort out or a final decision on the

Telecom Regulatory Authority of India, Deepak Parikh, chairman HDFC Limited, has

served as an invaluable problem-solver with innovative, creative and credible alternate

inputs that have shaped policy.

He was born on October 18, 1944. Though HDFC was founded in 1977, it was Parikhs

vision and entrepreneurial acumen that enabled the company to create a niche in housing

finance and emerge as the market leader.

Today, the HDFCs group size is over 70,000 crore. From a single-product company that

focused on the Indian middle class to develop the mortgage market, the HDFC family

offers a buffet of every possible financial product.

HDFC was H T Parekh's creation but it was Deepak Parekh's vision and entrepreneurship

that have built the empire. As an insider puts it, Deepak Parekh runs HDFC as if he owns

it. He is manager, entrepreneur and leader rolled into one.

But HDFC employees know a different Parekh: a tough taskmaster, yet always accessible

and helpful. It is telling that none of HDFC's senior employees -- directors, general

managers and deputy general managers -- have left the organization over the past decade.

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About HDFC bank-

The Housing Development finance Corporation Ltd. was incorporated in August 1994 in

the name of HDFC Bank Ltd. with its registered office situated at Mumbai. Today it is

one of the India's new generation private sector banks. It was listed at NSE on 8 th

November 1995. And in just a span of 10 years it is recognized as one of the India's

leading private commercial banks with more than 468 branches and 1054 networked

ATMs in 212 cities. Since its inception, the Bank has focused on ensuring that its IT

infrastructure is as good as that of any world-class bank. This statement is well supported

by the fact that HDFC Bank was adjudged the 'Best IT User in Banking' at the IT Users

Awards 2003, by economictimes.com and the National Association of Software and

Service Companies (NASSCOM).

HDFC Bank has to its credit, major global recognitions like the 'Best Under a Billion,

200 Best Small Companies for 2003' by Forbes Global, 'Best Local Bank in India' in

2002-2003 by Hong Kong based Finance Asia magazine and 'Best Domestic Bank in

India Region' by Hong Kong-based, The Asset magazine.

Business Challenges

HDFC Bank has tried to interact with its customers in variety of ways i.e. branches,

ATMs, Net Banking, Phone Banking and Mobile Banking. As a result, HDFC Bank was

increasingly feeling the need to capture and analyze the customer transaction data and

related information that was pouring in through these channels. The only information the

bank was able to capture was of the overall transaction volumes. Inability to analyze

relevant customer data was causing considerable delays in decision-making.

The Bank determined that it needed to reduce reporting turnaround times by one-third

while simultaneously improve the quality and consistency of information reported to a

variety of departments including marketing, credit risk, channel management and finance.

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Building the Enterprise Data Warehouse

HDFC turned to Reveleus for a solution.

Reveleus is a global provider of business intelligence and analytical applications for thefinancial services industry. Reveleus provides pre-built, cross-functional analytics built

from an in-depth banking domain expertise. Reveleus business analytics deliver

profitable customer acquisition and retention strategies, timely and focused answers for

risk management, and the insight to manage enterprise performance.

Reveleus first established the centralized data repository into place to capture customer

transaction data.

What this meant was that the customer information needed to be captured from every

point of contact the ATM, branch or call center and pulled into a centralized

warehouse, where consistent data could then be circulated to marketing, product

management and finance departments. Additionally, data would be collected from all the

sources like assets, liabilities and off-balance sheet contracts and integrated to produce

'one-view' of the customer.

Reveleus' unique Unified Metadata was used to implement standard business definitions

that were mapped to all source data systems, to guarantee consistent reporting across the

organization.

Today, this data warehouse is the only source of customer data for the retail business and

is being used to manage customer relationships and identify cross-selling opportunities.

Moreover, it is providing decision-makers with the insight to manage resources and track

business performance metrics.

Reveleus Business Analytics

The first Reveleus Business Analytic deployed was Customer Relationship

Management (CRM) Analytics.

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The CRM solution created a consolidated view of HDFC Bank's customers across

multiple touch-points, making it possible for HDFC Bank to cross-sell and up-sell

services to existing customers.

Reaping the Rewards

HDFC Bank has seen immediate improvements in profitability, increased cross-selling

opportunities and decreased channel costs.

The Bank is also using the customer data collected to develop targeted marketing

programs, offer new services and provide high quality customer service, helping it to

improve customer retention levels.

The new Enterprise Data Warehouse and Business Analytics have also helped to keep IT

costs under control. While data volumes have doubled over the last year, the resources

needed by the MIS department to maintain the systems have not increased.

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Business Focus

HDFC Bank's mission is to be a World-Class Indian Bank. The Bank's aim is to build

sound customer franchises across distinct businesses so as to be the preferred provider of

banking services in the segments that the bank operates in and to achieve healthy growth

in profitability, consistent with the bank's risk appetite. The bank is committed to

maintain the highest level of ethical standards, professional integrity and regulatory

compliance. HDFC Bank's business philosophy is based on four core values: Operational

Excellence, Customer Focus, Product Leadership and People.

Promoter

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 a market

leader in mortgages. Its outstanding loan portfolio covers well over a million dwelling

units. HDFC has developed significant skill 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.

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Products of HDFC Bank-

Saving Account

Current Account

Mutual Funds

International Credit Cards

Insurance

Sweep-in Account

Super Saver Account

Demat Account

Personal Loans

Car and two-wheeler loans

Loans against Shares

Products of HDFC Mutual Fund-

Equity Funds-

HDFC Growth Fund

HDFC Long Term advantage Fund

HDFC Equity Fund

HDFC Capital Builder Fund

HDFC Tax Saver

HDFC Top 200 Fund

HDFC Premier Multi Cap Fund

Balanced Funds-

HDFC Childrens Gift Fund Savings Plan

HDFC Balanced Fund

HDFC Prudence Fund

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Debt Funds-

HDFC Income Fund

HDFC Liquid Fund

HDFC Short Term plan

HDFC High Interest Fund

HDFC Multiple Yield Fund

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Equity Funds:

HDFC Growth Fund:

The primary objective of the scheme is to generate long-term capital appreciation from a

portfolio that is predominantly invested in equity and equity related instruments. The

fund manager of this scheme is Mr. Tushar Pradhan.

HDFC Long Term Advantage Fund:

HDFC long-term advantage fund was introduced on Jan 02, 2001. This is an open-ended

equity linked saving scheme from HDFC.

Since ELSS invests primarily in equity markets, hence timing is of much importance for

any investor. At a time when equity markets are down, exposure can be made to theseschemes at lower holding cost. Thus, an investor can put money in these schemes even at

the beginning of the financial year if, in his opinion, the equity markets at that moment

present a good investment opportunity.

HDFC Equity Fund:

This is an open-ended growth scheme with the investment objective of achieving capital

appreciation. This fund was earlier known as Zurich India Equity Fund. The fund carries

a risk level that is normal for a diversified equity fund. The fund has stuck to its strategy

of focusing on a small number of sectors and stocks.

HDFC Capital Builder Fund:

This open ended fund aims to achieve capital appreciation in the long run. The fund holds

a much-diversified portfolio, with construction, pharmaceuticals, and commodity

chemicals being the top sectoral preferences.

HDFC Tax Saver Fund:

The fund has a good six-year track record and the added advantage of a relatively small

size. All investments in this fund carry a mandatory three-year lock in period. Given that

the equity markets have produced high returns over the past year or two, any investment

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in equities at this juncture may carry downside risk. Only those comfortable with such

risks may enter HDFC Tax Saver.

HDFC Top 200 Fund:

THE HDFC Top 200 Fund is a good investment option for those looking to build an

equity portfolio. The fund has performed impressively over the past year or two and has a

track record of consistent performance over the past six years. The HDFC Top 200 Fund

draws mainly from the basket of stocks in the BSE 200 index.

HDFC Premier Multi Cap Fund:

The primary objective of the scheme is to generate capital appreciation in the long

through equity investments by investing in a diversified portfolio of Mid Cap and Large

Cap Blue chip companies. This scheme carries higher growth potential due to its

exposure to Mid Cap companies.

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Balanced Funds:

HDFC Childrens Gift Fund Saving Plan:

The Savings Plan of the HDFC Children's Gift Fund is a very conservative balanced

fund, which invests over 80 per cent of the portfolio in debts. This may be a good

investment option for those looking to build an investment over a long period. This

Scheme is mainly designed for those who wish to accumulate money for their childrens

higher education or their daughters marriage in the future.

HDFC Balanced Fund:

The primary objective of the Scheme is to generate capital appreciation along with

current income from a combined portfolio of equity & equity related and debt & money

market instruments.

HDFC Prudence Fund:

HDFC Prudence is that rare fund which has never disappointed its investors. Sticking to

its 60:40 equity-debt allocations by consistent rebalancing is the secret of HDFC

Prudence's combination of high performance and low risk. This means that the fund

always sells equities when they rally and buys when they dip.

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Debt Funds:

HDFC Income Fund:

This open-ended income scheme aims to optimize returns while maintaining a balance of

safety, yield and liquidity. In a span of less than five years, HDFC Income Fund has

consistently beaten a large number of its peers.

HDFC Liquid Fund:

The main investment objective of this fund is to have high level of liquidity, through a

judicious portfolio mix comprising of money market and debt instruments. The fund

continually changes its asset allocation; exposure to money market instrument has ranged

between 10 per cent to 45 per cent with the rest in corporate bonds and bank deposits.

Such changes in asset allocation can enhance returns if the fund successfully times the

market.

HDFC Short term Plan:

The main investment objective of this plan is to generate regular income through

investment in debt securities and money market instruments. Investments made from the

net assets of the Scheme are in accordance with the investment objective of the Scheme

and the provisions of the SEBI Regulations.

HDFC High Interest Fund:

The investment objective of HDFC High Interest Fund is to generate income by investing

in a range of debt and money market instruments of various maturity dates with a view to

maximizing income while maintaining the optimum balance of yield, safety and liquidity.

HDFC High Interest Funds Investment strategy of restricting the portfolio largely to

debt, money market and related instruments is intended to reduce risk while maintaining

steady income.

HDFC Multiple Yield Fund:

Investors of HDFC Multiple Yield Fund can stay with the fund. The fund has done well

in the six months since its launch, outperforming its benchmark during the period. At the

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same time, its riskiness, measured in terms of fluctuations in returns, has been lower than

the available alternative investment options. Its main objective is to reduce the chances of

capital depreciation over the medium term.

Systematic Investment Plan-

Systematic Investment Plan is a feature specifically designed for those who are interested

in building wealth over a long-term and plan out a better future for themselves and their

family. It is a vehicle offered by mutual funds to help you save regularly and is just like a

recurring deposit with the post office or the bank where you put in a small amount every

month. The only difference being that here the money is being put in a mutual fund.

Anyone can enroll for this facility by starting an account with (minimum investment

amount) as small as Rs 500 and the frequency of investment is usually monthly or

quarterly. This disciplined approach to investing gives one the following advantages:

1) Dont have to time the market:

If one tries to time the market i.e. entering when market is down or exiting when

its on the rise does, it wont work in his or her favor. Therefore it is best to take

the systematic investment approach to stay above market forces.

2) Rupee cost averaging:

SIP helps to take advantage of the fluctuations in the stock markets by Rupee cost

averaging. With rupee costs averaging, one doesn't have to worry about where

share prices or interest rates are heading. One simply has to invest a set amount of

money on a regular basis over a long period of time. This approach over a long-

term can help turn the odds in ones favour. The idea is that one buys less when

the market is up, and more when it is down.

3) Convenience:

One does not have to take out time from ones busy schedule to make his

investments. One has to just submit cheques with the completed enrollment form

and one can relax. The mutual fund will deposit the cheques on the requested date

and credit the units to ones account and will send the confirmation for the same.

Every year Mutual Fund will give an account statement showing the amount of

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investments made at various time, total number of units held, and the average cost

of each unit and the market value of the investment.

4) Helps build wealth for the future:

Most of us have needs that involve significant amount of money, like childs

education, daughters marriage, buying a house or car. If one had to save for these

milestones overnight or couple of years in advance, it is unlikely that he or she

will be able to do so in most cases. But if one start saving in small amounts every

month/quarter through SIPs that is treated as sacred and is kept aside for some

specific purpose, one has a fairly better chance to be able to meet these significant

needs.

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Some of the recommended funds to the investor:

HDFC Growth Funds:

The main objective of this conservatively managed fund is to provide growth by

investing in value stocks. Value stocks are stocks with low P/Es or with values in the

form of investment in another company or asset. These value stocks usually do not

witness much erosion in falling market. Fund invests upto 80-100%in debt and money

market instruments depending on the market conditions. This fund is suitable for the

conservative investors looking for good long-term appreciation and out-performance

even in the falling market.

Prudential ICICI Dynamic plan:

The philosophy of this fund is dynamic movement of funds between debt and equity

based opportunities. Fund aims to provide absolute returns to the customers. This is an

aggressively managed scheme that invests in a mix of large and mid-cap stocks. It can

invest 0-100% in equity i9nstruments as well as 0-100% in debt and money market

instruments depending on the market conditions. This fund is suitable for investors

looking at movement across assets according to the fund view on debt and equity.

Tata infrastructure Fund:The fund is an aggressively managed scheme that invests in stocks in the Infrastructure

sector. Infrastructure comprises of Oil, power, Metal and construction. The demand for

this sector is likely to be around $250 bn over the next 5 years. The fund will invest upto

100% in equity instruments and can invest upto 30% in debt and money market

instruments for liquidity and preservation of capital, particularly in bearish market. The

fund has outperformed the market in the current corrective phase through judicious stock

picking and timing of the markets for investing the cash collected from the IPO.

The fund is suitable for investors who would like to take exposure to the infrastructure

sector, which is one of the best growth prospect sectors for the next 3-5 years.

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Corporate governance-

Corporate governance is the mechanism by which values, principles, management

policies and procedures of a company are made manifest in the real world. It refers to the

entire system by which a company is managed and monitored, its corporate principles

and guidelines and the system of internal and external controls and supervision to which

the companys operations are subjected. Good transparent corporate governance ensures

that the company is managed and monitored in a responsible manner geared to value

creation. Corporate governance is concerned with both the internal aspects of the

company, such as internal controls, and the external aspects such as an organizations

relationship with its shareholders and other stakeholders. Transparency and

accountability are the fundamental principles to good corporate governance.

The challenge to investor confidence in listed companies caused by recent events in the

international capital markets has brought corporate governance issues under the spotlight,

both in the international markets and in India. Serious financial manipulations in the

corporate arena have intensified the focus on how businesses are managed. Our world is

changing and forces are influencing corporations to compete globally for customers,

suppliers, alliances, employees, assets, capital and shareholders. This makes it all the

more important that companies follow the corporate governance route to building market

confidence.

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Practice of Corporate Governance by the HDFC Group

Good governance is the expression of personal beliefs and values, which configure the

organizational values, beliefs and actions of its employees. HDFC's core values of

fairness, kindness, efficiency and effectiveness determine the principles of the

organization, which in turn determine the course of action of each employee in every

sphere of activity. These core values that HDFC hands down to its subsidiary and

associate companies weave in to form the corporate culture for the HDFC group. The

HDFC group has always been committed to the principles of transparency, integrity,

accountability and social responsibility. At the HDFC group, corporate governance is a

voluntary, self-disciplining code, which means not only ensuring compliance with

regulatory requirements, but by also being responsive to customer needs. HDFC has

always maintained that a strong customer focus and a value-driven organization are the

means of attaining 'profits in perpetuity'. More specifically, the focus of the Board and

the management has always been to ensure value creation for each of its stakeholders.

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About Mutual funds-

Different investment avenues are available to investors. Mutual funds also offer good

investment opportunities to the investors. Like all investments, they also carry certain

risks. The investors should compare the risks and expected yields after adjustment of tax

on various instruments while taking investment decisions. The investors may seek advice

from experts and consultants including agents and distributors of mutual funds schemes

while making investment decisions.

A mutual fund is a trust that pools the savings from many investors and invests it on

behalf of them, in accordance with a stated set of objectives. Mutual funds raise the

money by selling shares of the fund to the public; much like any other company can sell

stock in itself to the public. Funds then take the money they receive from the sale of their

shares and use it to purchase various investment vehicles, such as stocks, bonds and

money market instruments. The income earned through these investments and the capital

appreciations realized are shared by its unit holders in proportion to the number of units

owned by them. Thus a Mutual Fund is the most suitable investment for the common man

as it offers an opportunity to invest in a diversified, professionally managed basket of

securities at a relatively low cost. For most mutual funds, shareholders are free to sell

their shares at any time, although the price of a share in a mutual fund will fluctuate

daily, depending upon the performance of the securities held by the fund.1

1 Refer Exhibit 1 to see working of mutual funds

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History of Mutual funds in India

The mutual fund industry in India started in 1963 with the formation of Unit Trust of

India, at the initiative of the Government of India and Reserve Bank. The history of

mutual funds in India can be broadly divided into four distinct phases:

First Phase 1964-87

An Act of Parliament established Unit Trust of India (UTI) in 1963. It was set up by the

Reserve Bank of India and functioned under the Regulatory and administrative control of

the Reserve Bank of India. In 1978 UTI was de-linked from the RBI and the Industrial

Development Bank of India (IDBI) took over the regulatory and administrative control in

place of RBI. The first scheme launched by UTI was Unit Scheme 1964. At the end of

1988 UTI had Rs.6,700 crores of assets under management.2

Second Phase 1987-1993 (Entry of Public Sector Funds)

1987 marked the entry of non- UTI, public sector mutual funds set up by public sector

banks and Life Insurance Corporation of India (LIC) and General Insurance Corporation

of India (GIC). SBI Mutual Fund was the first non- UTI Mutual Fund established in June

1987 followed by Canbank Mutual Fund (Dec 87), Punjab National Bank Mutual Fund

(Aug 89), Indian Bank Mutual Fund (Nov 89), Bank of India (Jun 90), Bank of Baroda

Mutual Fund, (Oct 92). LIC established its mutual fund in June 1989 while GIC had set

up its mutual fund in December 1990. At the end of 1993, the mutual fund industry had

assets under management of Rs.47,004 crores.

Third Phase 1993-2003 (Entry of Private Sect or Funds)

With the entry of private sector funds in 1993, a new era started in the Indian mutual fund

industry, giving the Indian investors a wider choice of fund families. Also, 1993 was the

year in which the first Mutual Fund Regulations came into being, under which all mutual

funds, except UTI were to be registered and governed. The erstwhile Kothari Pioneer

2 source- www.indiainfoline.com

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(now merged with Franklin Templeton) was the first private sector mutual fund registered

in July 1993. The 1993 SEBI (Mutual Fund) Regulations were substituted by a more

comprehensive and revised Mutual Fund Regulations in 1996. The industry now

functions under the SEBI (Mutual Fund) Regulations 1996.

The number of mutual fund houses went on increasing, with many foreign mutual funds

setting up funds in India. At the end of January 2003, there were 33 mutual funds with

total assets of Rs. 1,21,805 crores. The Unit Trust of India with Rs.44,541 crores of assets

under management was way ahead of other mutual funds.

Fourth Phase since February 2003

In February 2003, following the repeal of the Unit Trust of India Act 1963 UTI was

bifurcated into two separate entities. One is the Specified Undertaking of the Unit Trust

of India with assets under management of Rs.29,835 crores as at the end of January 2003,

representing broadly, the assets of US 64 scheme, assured return and certain other

schemes. The Specified Undertaking of Unit Trust of India, functioning under an

administrator and under the rules framed by Government of India and does not come

under the purview of the Mutual Fund Regulations. The second is the UTI Mutual Fund

Ltd, sponsored by SBI, PNB, BOB and LIC. It is registered with SEBI and functionsunder the Mutual Fund Regulations. With the bifurcation of the erstwhile UTI which had

in March 2000 more than Rs.76,000 crores of assets under management and with the

setting up of a UTI Mutual Fund, conforming to the SEBI Mutual Fund Regulations, and

with recent mergers taking place among different private sector funds, the mutual fund

industry has entered its current phase of consolidation and growth. As at the end of

September 2004, there were 29 funds, which manage assets of Rs.153108 crores under

421 schemes. 3

3 Refer exhibit 2 to see growth of assets over the years

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HDFC Mutual Fund

Management:

HDFC Asset Management Company Ltd (AMC) was incorporated under the Companies

Act, 1956, on December 10, 1999, and was approved to act as an Asset Management

Company for the Mutual Fund by SEBI on June 30, 2000.

The registered office of the AMC is situated at Ramon House, 3rd Floor, H.T. Parekh

Marg, 169, Backbay Reclamation, Church gate, Mumbai - 400 020.

In terms of the Investment Management Agreement, the Trustee has appointed the AMC

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.

Vision:

To be a dominant player in the Indian mutual fund space recognized for its high levels ofethical 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 specialized housing finance institution in

India. HDFC provides financial assistance to individuals, corporates and developers forthe 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 5,00,000 borrowers, 13,00,000 depositors, 1,00,000

shareholders and 52,000 deposit agents.

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Standard Life Investments Limited

The Standard Life Assurance Company was established in 1825 and has considerable

experience in global financial markets. The Standard Life Assurance Company was

present in the Indian life insurance market from 1847 to 1938 when agencies were set up

in Kolkata and Mumbai. The Standard Life Assurance Company was therefore keen to

re-enter the Indian market and in 1995, signed an agreement with HDFC to launch an

insurance joint venture. HDFC and Standard Life Investments Limited are neither

responsible nor liable for any loss resulting from the operation of the Scheme(s) beyond

their contribution of an amount of Rs. 1 lakh each made by them towards the corpus of

the Mutual Fund.

How is Mutual Fund Set-up:

A mutual fund is set up in the form of a trust, which has sponsor, trustees, Asset

Management Company (AMC) and custodian. A trust is established by a sponsor or more

than one sponsor who is like promoter of a company. The trustees of the mutual fund

hold its property for the benefit of the unit holders. Asset Management Company (AMC)

approved by SEBI manages the funds by making investments in various types of

securities. Custodian, who is registered with SEBI, holds the securities of variousschemes of the fund in its custody. The trustees are vested with the general power of

superintendence and direction over AMC. They monitor the performance and compliance

of SEBI Regulations by the mutual fund.

SEBI Regulations require that at least two thirds of the directors of trustee company or

board of trustees must be independent i.e. they should not be associated with the

sponsors. Also, 50% of the directors of AMC must be independent. All mutual funds are

required to be registered with SEBI before they launch any scheme.

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What is Net Asset Value (NAV) of a scheme:

The performance of a particular scheme of a mutual fund is denoted by Net Asset Value

(NAV). Mutual Funds invest the money collected from the investors in securities

markets. In simple words, Net Asset Value is the market value of securities held by the

scheme. Since market value of securities changes everyday, NAV of a scheme also varies

on a day-to-day basis. The NAV per unit is the market value of securities of a scheme

divided by the total number of units of the scheme on any particular date.

What is A Load or No-Load Fund:

A Load Fund is one that charges a percentage of NAV for entry or exit. That is, each time

one buys or sells units in the fund, a charge will be payable. This charge is used by the

mutual fund for marketing and distribution expenses. Suppose the NAV per unit is Rs.10.

If the entry as well as exit load charged is 1%, then the investors who buy would be

required to pay Rs.10.10 and those who offer their units for repurchase to the mutual fund

will get only Rs.9.90 per unit. The investors should take the loads into consideration

while making investment as these affect their yields/returns. However, the investors

should also consider the performance track record and service standards of the mutual

fund, which are more important. Efficient funds may give higher returns in spite of loads.A no-load fund is one that does not charge for entry or exit. It means the investors can

enter the fund/scheme at NAV and no additional charges are payable on purchase or sale

of units.

Generally there is Entry Load for Equity Funds but no Exit Load and Exit Load for Debt

Funds but no Entry Load. In general entry load charged by equity funds is 2.25% and exit

load charged by debt funds is 1%.

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Structure of Indian mutual fund industry:

The structure of the mutual funds consists of Sponsors, trustees and AMCs.4

Sponsors: A Sponsor is the person who alone or in cooperation 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 Funds) 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.

Trustee: Trustee is usually a company or board of trustees. The main responsibility of

the trustee is to safeguard the interest of the unit holders and ensure that AMC functions

in the interest of the investors.

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 (SEBI) 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 crore at all times.5

4 Refer exhibit 3 for organization of Mutual Funds5 Refer exhibit 4 for structure of Asset Management Company

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Advantages of investing in Mutual Funds:

Professional Management: Mutual funds are managed by a team of

professionals, which usually includes one mutual fund manager and several

analysts. Generally, professionals have more experience, knowledge, and

information than the average investor when it comes to deciding which

securities to buy and sell. They also have the ability to focus on just a single

area of expertise.

Diversification: Diversification can reduce overall investment risk by

spreading the risk across many different assets. With a mutual fund one can

diversify his or her holdings both across companies and across asset classes

when some assets are falling in price, others are likely to be rising, so

diversification results in less risk than if one purchased just one or twoinvestments.

Return Potential

Low Transaction Cost: Mutual funds are able to keep the transaction costs i.e.

the cost associated with buying and selling of securities at a minimum because

they benefit from reduced brokerage commissions for buying and selling large

amount of investments at a single time.

Liquidity: Liquidity refers to the ease with which one can convert his or her

assets into cash. In the case of mutual funds it is as easy to sell a share of mutual

funds, as it is to sell a share of a stock.

Transparency: In mutual fund transactions there is complete transparency in

buying and selling of units by the mutual fund company. For every transaction

done by the company on behalf of the investor, company issues a account

statement in which details of the number of units bought and sold are mentioned

at respective NAVs.

Choice of schemes: Mutual funds come in wide varieties. Some mutual fundsinvest exclusively in a particular sector (e.g. energy funds), while others might

target growth opportunities in general. There are thousands of funds, and each has

its own objectives and focus. The key for the investor is to find the mutual fund

that most closely matches their particular investment objectives.

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Tax benefits: The money invested by the investor in mutual funds is exempt from

tax. He can invest upto Rs 100,000 in a mutual fund and can avail tax deduction

from the gross total income.

Disadvantages of investing in a Mutual fund:

Apart from benefits associated with the mutual funds one should also be aware of the

disadvantages associated with them.

No insurance: Mutual funds though regulated by the government, are not insured

against losses. The Federal Deposit Insurance Corporation (FDIC) only insures

against certain losses at banks, savings and loans but not mutual funds. This

means that despite the risk-reducing diversification benefits provided by

mutual funds, losses can occur, and it is possible that one could even lose his

or her entire investment.

Fees and Expenses: Most Mutual funds charge management and operating fees

that pay for management expenses. Generally there is a entry load of 2.25 percent

in equity oriented mutual funds and exit load of 1 percent with debt oriented

mutual funds.

Trading limitations: Although mutual funds are highly liquid in general, most

mutual funds (called open-ended funds) cannot be bought or sold in the middle of

the trading day. You can only buy and sell them at the end of the day, after

they've calculated the current value of their holdings.

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Types of Mutual Fund Schemes:

Investment Objective:

Mutual Fund Schemes can be classified according to their stated investment objective,

such as Growth Fund, Balanced Fund and Income Fund.6

1) Equity oriented Schemes:

These schemes are also called as Growth Schemes these schemes seek to invest majority

of their funds in equities and a small portion in money market instruments. Such schemes

have the potential to deliver superior returns over the long term. However, because they

invest in equities, these schemes are exposed to fluctuations in value especially in the

short term.

The aim of growth funds is to provide capital appreciation over the medium to long-

term. These schemes provide different options to the investors like dividend option,

capital appreciation, etc. and the investors may choose an option depending on their

preferences. The investors must indicate the option in the application form. The mutual

funds also allow the investors to change the options at a later date. Growth schemes are

good for investors having a long-term outlook seeking appreciation over a period of time.

Equity schemes are hence not suitable for investors seeking regular income or needing to

use their investments in the short-term. The NAV prices of equity fund fluctuates with

market value of the underlying stock which are influenced by external factors such as

social, political as well as economic. HDFC Growth Fund, HDFC Tax Plan 2000 and

HDFC Index Fund are examples of equity schemes.7

6 Refer exhibit 5 to see types of Mutual Fund schemes7 Refer exhibit 6

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General purpose: The investment objectives of general-purpose equity schemes do not

restrict them to invest in specific industries or sectors. They thus have a diversified

portfolio of companies across a large spectrum of industries. While they are exposed to

equity price risks, diversified general-purpose equity funds seek to reduce the sector or

stock specific risks through diversification. They mainly have market risk exposure.

HDFC Growth Fund is a general-purpose equity scheme.

a) Sector specific: These schemes restrict their investing to one or more pre-defined

sectors, e.g. technology sector. Since they depend upon the performance of select

sectors only, these schemes are inherently more risky than general-purpose

schemes. They are suited for informed investors who wish to take a view and risk

on the concerned sector.

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2) Debt Based Schemes:

These schemes are commonly called as income Schemes, these schemes invest in debt

securities such as corporate bonds, debentures and government securities. The prices of

these schemes tend to be more stable compared with equity schemes and most of the

returns to the investors are generated through dividends or steady capital appreciation.

These schemes are ideal for conservative investors or those not in a position to take

higher equity risks, such as retired individuals. However, as compared to the money

market schemes they do have a higher price fluctuation risk and compared to a Gilt fund

they have a higher credit risk.8

Income Schemes: These Schemes invest in money markets, Bonds and debentures of

corporates with medium and long-term maturities. These schemes primarily target current

income instead of capital appreciation. They therefore distribute substantial part of their

distributable surplus to the investors by way of dividend.

a) Liquid Income Schemes: These Schemes are similar to the income schemes but

with the shorter maturity period than income schemes. An example of this scheme

is HDFC Liquid Fund.

b) Money Market Schemes: These Schemes invest in short term instruments suchas commercial paper, treasury bills etc. These schemes have become popular with

institutional investors and high net worth individuals having short term surplus

fund.

c) Gilt Funds: These schemes primarily invest in government debt. Hence, the

investor does not have to worry about credit risk since government debt is

generally credit risk free. HDFC gilt fund is an example of such a scheme.

8 Refer to exhibit 7

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3) Hybrid Schemes:

These schemes are better known as balanced schemes. These schemes seek to invest in

both the equities and debt. By investing in both the equities and debt, balanced fund seek

to attain the objective of both the income and moderate capital appreciation and is ideal

for investors with a conservative and a long term investment approach. HDFC balanced

fund and HDFC childrens gift fund are the examples of such a scheme.

Constitution:

These schemes can be classified as close-ended or open-ended depending on whether

they give the investor the option to redeem at any time or whether the investor has to wait

till the maturity of the scheme.

a) Open-ended scheme: The units offered by these schemes are available for sale

and repurchase on any business day at NAV based prices. Hence, the unit capital

of the schemes keeps changing each day. Such schemes thus offer very high

liquidity to investors and are becoming increasingly popular in India.

b) Close-ended scheme: The unit capital of a close-ended product is fixed as it

makes a one-time sale of fixed number of units. These schemes are launched with

an initial public offer (IPO) with a stated maturity period after which the units are

fully redeemed at NAV linked prices. In the interim period, investors can buy or

sell units on the stock exchange where they are listed. Unlike open-ended

schemes, the unit capital in closed-ended schemes usually remains unchanged.

After an initial closed period, the scheme may offer direct repurchase facility to

the investors.

c) Interval Schemes: These schemes combine the features of open-ended and

closed-ended schemes. They may be traded on the stock exchange or may be open

for sale or redemption during pre-determined intervals at NAV based prices.

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Future scenario of Mutual Funds:

The Indian economy has been traversing the path of economic reforms successfully for

more than a decade. Particularly during the last six years, it has been experiencing a high

rate of GDP growth and is currently the second fastest growing economy in the world.

India's market capitalization has grown sharply and has shot past $400 billion, 50% of

GDP and the prospects of scaling greater heights are positive. Financial market

executives of India have acquired the skills to handle the complexities of a globalized

market.

Employment opportunities in the financial sector are expected to expand exponentially,

as happened earlier in London, New York and Hong Kong. A sound securities market

infrastructure and a large banking sector will play a more significant role in enhancing

the contribution of the financial services sector to GDP in years to come.

The latest survey of ASSOCHAM shows that financial sector has created 24% of the total

jobs in Indian Cities. IT-enabled & IT sector is number one job generator with 45% of

total jobs in the city. One may add jobs created by IT enabled services to financial sector

as generally IT-enabled services sector provides services mainly to financial sector. One

can say that financial sector is almost accounting for more than 50% jobs in Indian cities.

I feel we should go forward with the financial sector to show big growth. Credit growth

would help banks post-good core operating results. There is a fast growing demand for

Mutual Funds, Insurance, equities & Commodities. Many new people have started

investing in Mutual funds, equity market; Insurance, Commodities & many more are

interested in investing. This positive environment for investment among all the people in

India definitely signals a better future for financial services sector.

One can consider investing in financial services sector companies through mutual funds,

which are overweight on this sector. UTI Banking & Reliance Banking Fund are the

major devoted funds for this sector. Among others UTI Services, Franklin India Flexi

Cap, Franklin India Opportunity Fund are major investors in financial services sector.

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More info on project:

My role in this summer project was of a financial advisor to the investors. My actual

work was to make calls to the customers, on the basis of database provided to me by the

bank and take an appointment from them after explaining about various investment

options available with our bank.

The database provided to me consisted of both, high net worth customers as well as

ordinary customers. I segregated this database into three parts on the basis of their

income and their past investment records. The first part consisted of customers who have

already invested in various mutual funds or other schemes with the bank and had huge

income. Second, part consisted of customers who had no previous investment records and

were just the account holders with the bank with suitable income, whereas the last

category of people consisted of those who were not the banks customer.

This was basically done, to prepare a strategy to induce different category of people to

invest with the bank. Dealing with all these category of people was not an easy task.

Under the first category, since the customers were already investing, it was the tough job

to make them invest again, but at the same time this category also consisted of the people

who were regular investors. Dealing with this category of people was an easy task as they

were already investing and were aware of the market and various investment

opportunities available. They just needed some specialized person who could guide their

investments in the right direction. After talking to these customers regarding the new

investment opportunities, I use to guide them to my investment manager who in turn gave

them right investment advises.

While dealing with second category of customers who were just the account holders,

there were some problems that I faced. Since, they were not aware of the investment

opportunities available to them, my task got even tougher as I had to explain them about

various investment options specially mutual funds and SAP (saving assurance plan). This

category of people had conservative approach towards investments as they were first time

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investors and did not want to take chances with their money. They were more inclined to

invest in SAP and debt funds where their money was safe. But at the same time there

were also some customers who were willing to take chances with their money by

investing it in equity market where money is subject to market risk as share prices keep

fluctuating.

Third category consisted of the people who were not banks customer. I had to adopt a

different approach while talking to them in order to make them invest with our bank.

These people generally had high-income base and had good potential to invest. While

dealing with these people I was just asked by my investment manager under whom I was

working to just try and take an appointment with them by explaining about various

investment options and rest was taken care by them.

Those who were the first time customers I had to tell them about the benefits associated

with the mutual funds and other schemes.

My observation was that generally first time customers showed more faith in fixed

deposits, as there their money was safe. But they were not aware of the fact that with the

passing of time their value of money decreases and with the high rate of inflation they

were actually making losses by keeping their money in fixed deposits as fixed deposits

give around 5-6 percent return but since inflation being higher than fixed deposits return

they were making losses.

Those people who were aware of this fact were making good money by investing in

various equity or debt funds.

Our advice to customers about investing was dependent on their risk taking appetite and

how much returns they wanted to generate. There were customers who did not want to

take risk by investing their money in equity funds, as their risk is quite high. To them, we

suggested investing in Debt funds were even though the returns are less but risk is

minimized. But to those people who were comfortable with taking risk and were

interested in reaping good returns were advised by us to invest in equity funds for a

period of two and a half to three years. We suggested our clients to stay invested in equity

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market for a period of two and a half to three years because in India the equity funds have

a life cycle of two and a half to three years and are expected to perform at its best during

this period of time.

During my internship the IPO from Fidelity, worlds largest mutual fund company was

launched. Fidelity is the worlds largest mutual fund company. It has got an asset base of

1.2 trillion dollars. It has been in existence in India as FIIs for the past 11 years and now

has come up with its IPO. This IPO opened on 21st March and closed on 19th April 2005.

During this period fidelity did the business of Rs 2500 crores.

One of the reason behind fidelity doing such a great business despite coming up with its

IPO for the first time in India is that fidelitys one of the scheme called India Focus Fund

is already in operation in India and is generating a return of about 43 percent p.a. This

great success of fidelitys India Focus Fund has added to the success of fidelitys IPO.

Fidelity has got the team of 480 analysts all over the world, which is one of the largest in

the world. In India alone they have about 11 analysts. The main work of these analysts is

to assist the fund manager in his work. Fidelitys fund manager in India is Mr. Arun

Mehra. He has got the rich experience of about 10 years of investing in capital market.

Fidelity is different from other mutual funds in the sense that a normal mutual fund

invests in about 25-30 stocks but fidelity is looking forward to invest in about 70 stocks.

Fidelity is also looking forward to invest in across the sectors and across the companies.

It seeks to invest in not more than 4% in any particular stock and not more than 25% in

any particular sector. This is being done to diversify the risk.

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Organization Structure:

HDFC Bank is a professionally managed organization with the board of directors

consisting of eminent persons who represent various fields including finance, taxation,construction and urban policy & development. The board primarily focuses on strategy

formulation, policy and control, designed to deliver increasing value to shareholders.

The bank follows a tall as well as flat hierarchical structure with there being one

chairman and various country heads controlling wholesale banking, corporate banking,

retail banking and operations respectively. It has one treasurer and one head for IT and

custody, DS, F&A.9

9 Refer to exhibit 8 to see the organization structure

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Financial Analysis of HDFC Bank:

HDFC Bank has sustained its robust financial performance despite losses on its

investment portfolio. Strong growth in the company's assets continues to be the maindriver. For 2Quarter, FY05, while the top line has risen by 15% YoY, the bottom line has

increased at a faster rate (30% YoY). The bank continues to keep its interest costs low

and this has significantly helped the growth in net interest income. Other income has

improved indicating that the bank has managed to improve its fee-based income and has

more than compensated for the losses from its investment portfolio.10

One of the major triggers to the banks healthy bottom line has been the consistent top

line growth. The retail loan book has grown by 58% YoY during the fourth quarter

bringing the annual growth to 40%. On the other hand, the growth in wholesale assets

remains a consistent 16% for both the periods. Other fact which is also noticeable is that

the standalone contribution of the retail assets to the bottom line has grown by 134%

YoY during FY05. This signals efficiency on the part of the bank not only in terms of

generating sales but also ensuring profitability of the same. The banks net interest

margins (3.9%) have also recovered considerably over the last couple of years.11

The overall operating and financial performance for the financial year 2004-05 remained

healthy. Total net revenues at Rs 2429.3 crores, increased by 33.6% over Rs 1817.9

crores in 2003-04. The revenue growth was a result of an increase of 32.9% in net interest

income and of 35.7% in other income. The net interest income growth was driven by an

increase in the average balance sheet size by 28.9% and a marginally higher net interest

margin at 3.9%.

10 Refer to exhibit 9 for banks financial performance11 Refer to exhibit 10 for segment-wise revenue of HDFC bank

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Amalgamations:

In a milestone transaction in the Indian banking industry, TimesBank Limited (another

new private sector bank promoted by Bennett, Coleman & Co. /Times Group) was

merged with HDFC Bank Ltd., effective February 26, 2000. As per the scheme of

amalgamation approved by the shareholders of both banks and the Reserve Bank of India,

shareholders of TimesBank received 1 share of HDFC Bank for every 5.75 shares of

TimesBank. The amalgamation added significant value to HDFC Bank in terms of

increased branch network, expanded geographic reach, enhanced customer base, skilled

manpower and the opportunity to cross-sell and leverage alternative delivery channels.

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Important things according to me that an investor should keep in mind:

'Investment' is a sacred term for individuals. For many, investing means a kind of

'compulsory' savings from one's earnings and getting lump sum money later.

However there is a lot more to investing than just that. Investment is an important part of

financial planning. It requires considerable thought and groundwork.

Here are some suggestions, which would be of much help for an investor.

Do the homework well

Before investing the money, an investor should ensure that he has done his homework

well. It is 'normal' for sales people to be aggressive. Most sales executives are mainly

interested in 'commission earned' or 'business garnered', which reflects in their monthly

targets. That is why one only gets to hear the 'best case scenario' from agents/sales

executives. A lot of sales agents/consultants try to exploit the individual's weakness and

lack of knowledge while making sales.

Therefore, one should understand his own profile in terms of income, risk appetite and

future plans and only then, make investments in tune with the same. Individuals need toknow what benefits different products offer and how they fit into their financial portfolios

before investing in them.

Keep your eyes and ears open

An investor should keep his eyes and ears open at all times for any investment

opportunity that comes his way. The opportunity could be by way of changing market

scenario or new product launches. Individuals shouldn't lose out on any opportunity justbecause they didn't know it existed. Of course, this involves a bit of updating himself

with latest product trends, market conditions and changing economic scenario. This way,

he will not be completely at the mercy of the consultant/agent to provide him with

investment-related information and solutions.

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Maintain a logbook

An Investor should always maintain a logbook of his investments. Individuals can and do

have a variety of investments ranging from life insurance to mutual funds. A logbook

should contain details about the same. Over an extended period of time, it becomes

difficult for one to remember or track investment details like maturity date, maturity

value and rate of interest. This logbook will take care of that problem. Of course, it goes

without saying that for the logbook to be really effective and useful, it should be updated

periodically to reflect investments and redemptions.

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Awards:

HDFC Bank began operations in 1995 with a simple mission to be a world class Indian

bank. It is extremely pleasing to know that their efforts towards providing customer

convenience have been recognized both nationally and internationally.

In 2004, HDFC Bank was selected by BusinessWorld as "one of India's Most Respected

Companies" as part of The Business World Most Respected Company Awards 2004.

In 2004, Forbes Global again named HDFC Bank in its listing of Best under a Billion,

100 Best Smaller Size Enterprises in Asia/Pacific and Europe, in its November 1, 2004

issue.

In 2004, HDFC Bank was named "Best Overall Local/Domestic Bank India" in the

Corporate Cash Management Poll conducted by the Hong Kong-based Asiamoney

magazine.

In 2004, HDFC Bank won the award for "Operational Excellence in Retail Financial

Services" - India as part of the Asian Banker Awards 2003

In 2003, Forbes Global named HDFC Bank in its ranking of "Best under a Billion, 200

Best Small Companies for 2003".

Hong Kong-based Finance Asia magazine rated HDFC Bank "Best Domestic

Commercial Bank - India" in 1999, 2000 and 2001 respectively and "Best Local Bank -

India" in 2002 and 2003.

HDFC Bank has been named Best Domestic Bank in India Region in The Asset Triple a

Country Awards 2003.

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Leading business newspaper The Financial Express named HDFC Bank the "Best New

Private Sector Bank 2003" in the FE-Ernst & Young Best Banks Survey 2003.

Leading Personal Finance Magazine in India Outlook Money named HDFC Bank the

"Best Bank in the Private Sector" for the year 2003.

NASSCOM and economictimes.com have named HDFC Bank the 'Best IT User in

Banking' at the IT Users Awards 2003.

The Economic Times has conferred on HDFC Bank, The Economic Times Awards for

Corporate Excellence as the Emerging Company of the Year 2000-01.Leading Indian

business magazines Business India named the HDFC Bank as "India's Best Bank" in

2000.

In the year 2000, leading financial magazine Forbes Global named the Bank in its list of

"The 300 Best Small Companies" in the world and as one of the "20 for 2001" best small

companies in the world.

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Experience & Recommendations:

It is a known fact that Before a compass needle is magnetized, it points anywhere. But

once it is magnetized, it only points in one direction-North. Similar was the case with

me, because before joining HDFC Bank and studying about mutual funds, I had no clue

as to how mutual funds act. I had knowledge about mutual funds in bits and pieces. But

after joining HDFC Bank, this knowledge in bits and pieces helped me in introducing

myself to the entire ocean of mutual funds.

During the initial period of training days it was quite difficult for me to keep knowledge

about all the categories of mutual funds and understand them, but with the time I,

acclimatized myself into the situation from where I could not only understand but also

give advises to the investors on investment opportunities available in mutual funds.

During the tenure of my summer internship I learnt that A winner in todays world is a

person with a deep sense of passion, vision and personal mission with no or little fear of

failure. He understands that success is based on the foundation of failures and that the

only way one can never fail is to seek no challenges since challenges and failures go

hand in hand12.

My experience at HDFC bank was wonderful; I not only gathered useful information

while working at the place but also came to know about their corporate culture which

gave me confidence to talk and meet the high profile clients like CEOs and senior level

managers in the multinational companies.

My journey towards successful completion of the internship was not so easy, as I had to

face several difficulties. One of those difficulties that I faced was while trying to explain

about investment opportunities available in mutual funds to the clients, who worked in

multinationals at high-level posts, as they had no time to listen to us. Therefore, I had to

12 Source-HDFC fact sheet.

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follow them for a long time in order to take an appointment and induce them to invest in

mutual funds.

Whole working atmosphere of the HDFC bank is of highest standards. Employees

understand their duty towards the customers very well. My branch manager of the bank

was a perfect example for all the other people. He was always ready to help out the

customers, no matter how small the problem may be or who the customer was.

My only recommendation to the bank is that it should be more organized while keeping

the forms and fact sheets of the mutual fund companies. The customers had to wait for

sometime for the forms and fact sheets due to the reason that they were not kept at proper

places. Hence, bank should make such arrangements like to have separate shelves for

keeping of forms and fact sheets so that customers do not have to wait for long time, this

will also help in reducing the crowd from the bank and make the work processes much

faster.

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Exhibit 1:The flow chart below describes broadly the working of Mutual Funds:

Mutual Fund operation flow chart

Exhibit: 2

The Graph indicates the Growth of Assets over the years

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Exhibit 3:

Unit Holders

S onsors

Trustees

The mutual fund

Custodian

SEBI

AMC

Transfer a ent

Organization of Mutual fund

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Exhibit 4:

------------------------------------------------------------------------------------------------------------

Exhibit 5:

Investment Objective ConstitutionTypes of

Schemes

EquityBased

DebtBased

CloseEnded

Hybrid OpenEnded

Interval

SPONSORTRUSTEE

MKT. /SALES

SEBI

AMCOPERATIONS

MKT. /SALES

FUND MANAGER

DISTRIBUTORSCHEMES

INVESTOR

MUTUAL FUND

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Exhibit 6:

Exhibit 7:

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Exhibit 8:

Board of Directors

Chairman

Jagdish Capoor

Aditya Puri

Managing Director

Harish Engineer

Country Head

Wholesale Banking

Samir Bhatia

Country Head

Corporate Banking

A. Rajan

Country Head

Operations

Neeraj Swaroop

Country Head

Retail Banking

C N Ram

Head

I T

Bharat Shah

Head,

Custody, DS, F&A.

Abhay Aima

Head Equity&

Private Banking

Sudhir Joshi

Treasurer

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Exhibit 9:

HDFC banks past performance

( Rs m) 2Q

FY04

2Q

FY05

change 1H

FY04

1H

FY05

change

Income from operations 6447 7447 15.5% 12217 14473 18.5%

Other income 863 1227 42.3% 2185 2308 5.6%Interest Income 3024 3191 5.5% 6018 6229 3.5%

Net Interest Income 3422 4256 24.4% 6199 8244 33.0%

Other Expenses 1991 2473 24.2% 3811 4781 25.5%

Operating Profit 1431 1783 24.6% 2388 3463 45.0%

Operating Profit Margin (%) 22.2% 23.9% 19.5% 23.9%Provisions & Contingencies 638 758 18.9% 1339 1448 8.1%

Profit before tax 1656 2253 36.0% 3234 4323 33.7%

Tax 485 730 50.6% 989 1400 41.5%

Profit after Tax (loss) 1171 1523 30.0% 2244 2923 30.2%Net Profit Margin (%) 18.2% 20.4% 18.4% 20.2%

No. of Shares (m) 283.5 286.2 283.5 286.2

Diluted Earnings Per Share (Rs) 16.5 21.3 15.8 20.4

PE ratio (x) 19.7

Exhibit 10:

Segmental Revenues

FY 04 % of total FY 05 % of total Change

Retail BankingRevenue 25319 53.5% 35363 60.1% 39.7%

Profit 2222 38.0% 5206 53.2% 134.3%

Profit Margin 8.8% 14.7%

Whole Sale Banking

Revenue 17615 37.2% 20563 35.0% 16.7%Profit 3483 59.5% 5394 55.1% 54.9%


Treasury

Revenue 4406 9.3% 2869 4.9% -34.9%

Profit 148 2.5% (810) -8.3% -647.3%Profit Margin 3.4% -28.2%

Total

Revenue 47340 58795 24.2%

Profit 5853 9790 67.3%


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Bibliography:

www.Hdfcbank.com

www.hdfcfund.com

www.indices.icraindia.com

http://www.amfiindia.com

www.finance.indiamart.com

www.investorguide.com

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