MONTHLY INCOME PLAN

Group Members

01

•Kritesh Bavisi

09

•Shashank Dube

16

•Vishaka Jain

18

•Shivani Joshi

28

•Vrushti Parmar

31

•Jamini Patel

What is a Monthly Income Plan (MIP)

• Primarily, MIP of mutual fund is a debt-oriented scheme that generally invests up to 75-80% of its corpus in debt instruments and the remaining in equity instruments.

• MIP aims to provide reasonable returns on a monthly basis through investment in debt as well as a small portion in equities.

• They invest in debt instruments (commercial paper, certificate of deposits, government securities and treasury bills).

Benefits of Monthly Income Plans

• Benefit of both worlds -Stability of Debt and returns of Equity: Normally debt instruments may provide the safety and stability of regular income from coupon payments whereas equities provide the chance to earn an extra income through dividends and capital appreciation over a period of time.

• Diversification: Since each asset classes have their own cycles, which at times may run in opposite directions, it pays to invest across different assets so to balance the portfolio. Majority of debt investments are into high credit quality papers.

• Stable return: If we see the track record, MIPs have given stable return, though one have to watch out extreme bearish and bullish phase where return may misguide you.

Who should opt for Monthly Income Plan

• MIP are good for conservative investors and retired people looking for better return than traditional Fixed Deposits.

• Who don’t want to take high risk.

 Some myths around Monthly Income Plans

• Does MIP offer Monthly Return/Income: The answer is that they are meant to give investor a regular income but there is no such guarantee

• Guaranteed Return: The aim of MIP is to protect the capital and give consistent return but at any point in time, there is no guarantee in this product

• Regular Dividends: Though fund manager try to give regular dividend but it is again not certain. MIPs have often missed many dividends

• No principal Loss: Though chances of MIPs giving negative return are very low but it cannot be eliminated

HDFC ASSET MANAGEMENT COMPANY LIMITED

• HDFC Asset Management Company Limited (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 July 3, 2000. In terms of the Investment Management Agreement, the Trustee has appointed the HDFC Asset Management Company Limited to manage the Mutual Fund. The paid up capital of the AMC is Rs. 25.161 crores. HDFC was incorporated in 1977 as the first specialized mortgage company in India.

No. of schemes

No. of schemes including options

Equity Schemes

Debt Schemes

Short term debt Schemes

Equity & Debt

Money Market

Gilt Fund

106 403 59 297 22 12 0 8

Asset under management(Rs in crores)

Mutual Fund Name

No. of Schemes

As on Corpus As on Corpus Net inc/dec in corpus

HDFC Mutual Fund

403 Dec 31, 2012

101,392.54

Sep 30, 2012

97,773.66 3618.878

Fund type Open –ended

Fund class MIP aggressive

Investment plan Growth

Launch date Dec 08, 2003

Bench mark CRISIL MIP Blended Fund

Asset size(rs.cr) 5382.54 (sep-30-2012)

Minimum investment Rs.5000

Fund manager Shobhit Mehrotra / Prashant Jain / Miten Lathia

Scheme details

Fund managersFUND MANAGER'S PROFILE

NAME -PRASHANT JAIN

DESIGNATION-Fund Manager

 

EDUCATION-Master in Business Administration Indian Institute of Management, Bangalore.B.Tech (Mechanical Engg.) Indian Institute of Technology, Kanpur.

 

EXPERIENCE-1992-1993 - SBI Mutual Funds as Fund Incharge.1993 - Zurich India Mutual Fund as Fund Manager.

PORTFOLIOS MANAGED

1.HDFC Equity Fund

2.HDFC Infrastructure Fund

3.HDFC Monthly Income Plan - Long Term Plan

4.HDFC Prudence Fund

5.HDFC Top 200

NAME-SHOBHIT MEHROTRA

DESIGNATION-Fund Manager

PORTFOLIOS MANAGED 1.HDFC Fixed Maturity Plan - Apr 2010 2.HDFC Fixed Maturity Plan - Aug 20123.HDFC Fixed Maturity Plan - Dec 20124.HDFC Fixed Maturity Plan - Dec 2012 5.HDFC Fixed Maturity Plan - Sep 20126.HDFC Floating Rate Income Fund - Long Term Fund7.HDFC Floating Rate Income Fund - Short Term Fund8.HDFC High Interest Fund9.HDFC High Interest Fund - Short Term Plan10.HDFC Income Fund11.HDFC Liquid Fund

FUND MANAGER'S PROFILE

NAME-MITEN LATHIA

 

DESIGNATION-Fund Manager

EDUCATIONC-FA (AIMR); CA (ICAI); B. Com.(Mumbai University).

EXPERIENCE-Collectively over 9 years of experience in Equity Research December 26, 2006 to date HDFC Asset Management Company Limited June 1, 2004 to December 12, 2006 BRICS Securities Limited Position Held: Vice President - Research January 1, 2004 to May 31, 2004 Enam Securities Pvt. Ltd. Position Held: Analyst January 1, 2001 to December 26, 2003 SSKI Securities Pvt. Ltd.

Position Held: AVP Research October 1, 1999 to December 31, 2000 Anand Rathi Securities Pvt. Ltd. Position Held: Manager Research

 

PORTFOLIOS MANAGED

1. HDFC Capital Builder Fund

Investment Objective

• The primary objective of Scheme is to generate regular returns through investment primarily in Debt and Money Market Instruments. The secondary objective of the Scheme is to generate long-term capital appreciation by investing a portion of the Scheme`s assets in equity and equity related instruments.

Investment strategy

Debt Investments :

Debt securities (in the form of non-convertible debentures, bonds, secured premium notes, zero interest bonds, etc.) include, but are not limited to : 

Debt obligations of the Government of India, State and local Governments, Government Agencies and statutory bodies (which may or may not carry a state / central government guarantee),Securities that have been guaranteed by Government of India and State Governments,Securities issued by Corporate Entities (Public / Private sector undertakings),Securities issued by Public / Private sector banks and development financial institutions.

Money Market Instruments Equity investment

The investment approach would be based on the concept of economic earning power and cash return on investments. Five basic principles would serve as the foundation for this investment approach. They are as follows :•Focus on long term growth.•View investments as conferring a proportionate ownership of the business.•Maintain a margin of safety (i.e. the price of purchase represents a discount to the intrinsic value of that business).Maintain a balanced outlook on the market by regularly monitoring economic trends and investor sentiment.

Performance snapshot as on Jan 08,2013

PeriodAbsolute Returns

(%)AnnualizedReturns (%)

Performance Rank #

(within fund classes)

1 week 0.3 ** 16

1 month 2.1 ** 1

3 months 3.5 ** 20

6 months 7.8 ** 21

1 year 15.4 15.4 14

2 years 17.3 8.3 17

3 years 27.6 8.5 4

5 years 53.5 8.9 4

• Eg:. If an investor had invested `1,000 in the fund in December 2003 (at inception), the initial capital would have grown to `2,284 vis-à-vis `1,623 in the benchmark index.

• Consistent dividend payouts Over a five-year period, the fund has distributed dividends in 51 out of 60 months, indicating its consistency in terms of regular dividend payouts

Eligibility Criteria

Who Can Invest :-

NRI Individuals Company Trust Partnership Firm FIIs OCBs Others HUFs Minors Societies Association of Persons

DIVIDEND HISTORY OF HDFC MONTHLY INCOME PLAN - LONG TERM PLAN - MONTHLY

DIVIDEND

Record Date Rate of Dividend (Bonus/Rights)

Dec 27, 2012 0.6000 % N.A

Nov 27, 2012 0.6000 % N.A

Oct 25, 2012 0.6000 % N.A

Sep 26, 2012 0.6000 % N.A

Aug 28, 2012 0.6000 % N.A

Holdings as on 30th Nov2012

Debt Rating Value (Rs cr) Asset %

0.27 Power Finance Corporation Ltd.

CRISIL - AAA 166.52 3.33

9.37 Sundaram Finance Ltd ICRA - AA+ 135.26 2.70

9.15 Government Securities Sovereign 116.74 2.33

11.40 Tata Power Co. Ltd CRISIL - AA 104.06 2.08

9.55 Hindalco Industries Ltd CRISIL - AA+ 100.99 2.02

Oriental Bank of Commerce 100.00 2.00

State Bank of India 92.24 1.84

ICICI Bank Ltd 79.74 1.59

9.46 Power Finance Corporation Ltd

CRISIL - AAA 75.75 1.51

9.60 Housing Development Finance Corporation Ltd.$

CRISIL - AAA 75.32 1.51

Sector allocation

  Sector   % 1-Yearhigh

1-Year  low

Banking/Finance 7.68 7.90 4.30

Oil & Gas 2.78 3.55 2.74

Manufacturing 2.66 2.66 1.85

Engineering 1.97 2.06 0.84

Media 1.62 1.67 1.03

Automotive 1.40 1.62 0.86

Asset Allocation (%) (Nov 30, 12)

Class %

Equity  24.86

Others / Unlisted 0.00

Debt 68.77

Mutual Funds N.A

Money Market 2.60

Cash / Call 3.77

RETURN

1 Month

3 Months

6 Months

1 Year 3 Years 5 YearsSince

Inception

2.37 3.61 7.90 15.44 8.53 8.96 11.44

RiskMean 0.25

Standard Deviation 1.00

Sharpe 0.15

Beta 1.28

Performance of the fund comparing with category average

Ranking of fund by CRISIL

Conclusion

• We like this fund for its boldness to take advantage of the 25 per cent allocation to equities which it maintains on most occasions.

• Performance driver: The fund manager’s conviction with equity has paid off resulting in this fund becoming one of the biggest in the category.

• Further, equity allocation is well-diversified across sectors and stocks, with a buy and hold strategy adding to the returns. Having a diverse equity portfolio and aggressive debt portfolio with long maturity investments have also worked for this fund.

• Risk: The sheer size of this fund poses risks.• Why invest? This fund may not pay outstanding returns, but the

above-average consistency of returns along with low risks makes it a compelling choice.