HDFC PRUDENCE FUND

(Open ended Balanced Scheme)

The Fund that has seen it all

Celebrating 20
years*of Prudent
investing

This product is suitable for investors who are seeking*:

Capital appreciation over long term

Investment predominantly in equity and equity related instruments of medium
to large sized companies
High risk
(BROWN)
* Investors should consult their financial advisers if in doubt about whether
the product is suitable for them. Fund Inception date: February 1, 1994

Note: Risk is represented as:

(BLUE) investors understand that their principal will be at low risk

(YELLOW) investors understand that their principal will be at medium risk
(BROWN) investors understand that their principal will be at high risk

October 16, 2014

The journey so far

Launched as Centurion Prudence Fund in January 1994, it was renamed as Zurich India Prudence Fund
and finally HDFC Prudence Fund in June 2003.

HDFC Prudence Fund is today the largest balanced Fund in India with a AUM of ~ INR 7000 crores as
on 30th September, 2014 and ~ 3 lac investors

In this journey of over 20 years, Rs 10,000 has become ~Rs 4.5 lacs (~45 times) at CAGR of ~20.3%

Our sincere thanks to all investors, distributors, well wishers etc. in making this possible

A special thanks to 2,500 investors who have stayed with us right through this 20 year journey

Compound interest is the eighth wonder of the world.

He who understands it, earns it ... he who doesn't ... pays it.

**

Albert Einstein

* Source: AMFI - Average AUM : Rs 7,058 crs (July Sep 2014), ** Past performance may or may not be sustained in Future, Refer Slide No. 16

The Fund that has seen it all.

Crises, bubbles, events, market cycles HDFC Prudence Fund has seen it all

A disciplined approach to investing with a long term focus has enabled HDFC Prudence Fund
to weather all of the above and generate ~20.3%* CAGR over 20 years
* Past performance may or may not be sustained in Future, Refer Slide No 16

The Fund that has seen it all

4.5 lacs

0.67 lacs
0.49 lacs

Sensex Levels

~4,000

~5,000

~10,000

~20,000

~9,000

~20,000

~27,000

Reference made to SENSEX in this slide is only for easy understanding of market movement. The Benchmark for this FUND
is CRISIL Balanced Fund Index. * Past performance may or may not be sustained in Future, Refer Slide No 16

Salient Features of HDFC Prudence Fund

Prudence being a balanced fund, invests in both equities and in debt

Asset Allocation between equities/debt is a function of valuations, growth outlook, interest

rates etc.

Equity strategy





Clear long term focus

Multi cap strategy, flexibility to invest in large / mid / small cap stocks
Preference for high quality companies
Effective diversification of portfolio to reduce risk

Debt Strategy
 Portfolio duration is actively managed based on outlook for interest rates with a 2-3 year view
 Strong preference for good credit quality

One Fund that offers the best of both asset classes

For details on Investment Strategy refer Scheme Information Document available on www.hdfcfund.com

Consistent dividends

The Fund has paid dividends in each of last 15 years

Total dividends paid in last 15 years aggregate to Rs 50.9 per unit

Double digit dividend yield in each of last 10 years

In last 15 years

1999

2000

2001

2002

2003

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

Dividend per unit (Rs) (A)

2.0

1.5

0.9

1.0

2.0

3.0

1.5

5.0

5.0

5.0

5.0

2.5

3.5

3.5

3.5

3.0

3.0

NAV (Record Date) (B)

17.7

15.2

12.7

13.9

18.7

23.7

20.2

25.3

30.5

32.5

33.5

17.4

31.2

31.3

29.5

27.5

25.7

11

10

11

13

20

16

15

15

14

11

11

12

11

12

Dividend Yield (%) ( A / B )

^ Past performance may or may not be sustained in the future. There is no assurance or guarantee to Unit holders as to rate/quantum of dividend distribution nor that the
dividends will be paid regularly
All dividends are on face value of Rs. 10 per Unit. After payment of the dividend, the per Unit NAV falls to the extent of the payout and statutory levy, if any. Please log on to
www.hdfcfund.com for Record Date-wise listing of dividends declared.

India Economic Outlook : on the recovery path

GDP growth, CAD, Fiscal deficit (FD), IIP, CPI, WPI are showing encouraging trend

A strong, pro economy, pro business government bodes well for economy and for businesses

Recent sharp fall in crude oil prices, should lead to sharply lower CAD, FD and inflation

Source : Citi Research, Internal estimates, Colored rows refer to yearly data; other represent quarterly data

Equity Markets : A positive outlook

EBITDA margins at cyclical lows

24.0

Low P/Es despite markets

S&P BSE Sensex EBITDA margin (%)

45

Roll PE (LHS)

40
22.0

**

run up
30,000

Average (LHS)

SENSEX (RHS)

25,000

**

35
30

20.0

20,000

25

18.0

15,000

20
15

10,000

10

16.0

5,000

5
14.0FY
93

0
95

Source : BAML

97

99

01

03

05

07

09

11

13

0
91

93

95

97

99

01

03

05

07

09

11

13

Source : CLSA

Reasonable P/Es at cyclically low margins leads to positive outlook for equities

Reference made to S&P BSE SENSEX in this presentation is only for easy understanding of market movement and must not be construed as future performance of
S&P BSE SENSEX. The Benchmark for this fund is Crisil Balanced Fund Index. Refer Disclaimer / Risk Factors on Slide 20

Interest rates : Headed lower

Falling fiscal deficit, low CAD, falling inflation and likely further fall in inflation should lead to
lower rates

Inflation drivers are moderating

Past

Future

High commodity prices

Lower/Stable Commodity prices

INR depreciation

Stable INR

Strong Consumer demand

Slowdown in Consumer demand

High w age inflation

Moderation in w age growth

High increase in MSP's

Low grow th in MSP's

Sharply rising Diesel prices

Stable prices

HDFC Prudence Fund - Positive Outlook

Economic outlook for India is improving

Equity valuations are attractive

SENSEX @ 26,630 is trading at 15.6x FY15E; earnings upgrades are being witnessed

(Source : CLSA)

Cyclically low margins aid profit growth outlook

Interest rates are near peak and are likely to come down in medium term

In view of above, outlook for both equities and bonds is positive

HDFC Prudence Fund, offers a simple solution to benefit from both equities and bonds

Simplicity is the ultimate sophistication

Sensex value as on 30th Sep, 2014

Leonardo da Vinci

10

Asset Allocation is the key to wealth creation An illustration

You earn on what you invest
Initial investment of Rs 100
Equity %

Debt %

Value at Year
10

100

404

15.0

80

20

367

13.9

60

40

328

12.6

40

60

291

11.3

20

80

253

9.7

100

216

8.0

CAGR (%)

Debt, Equity allocation makes a

bigger difference to wealth over
long periods, than timing.

For illustration purposes only. For calculation purpose CAGR returns for equities has been taken as 15% CAGR and for debt as 8% CAGR.

In India, household allocation to equity funds is minimal, there is a strong case to increase it.

11

11

The benefits of long term investing

Study based on return distribution of HDFC Prudence Fund over 20 years
Following table represents monthly rolling returns over last 20 years of HDFC Prudence Fund distributed over different
holding periods and return brackets, e.g., returns have been more than 15% p.a. in ~57% of 1 year holding
periods, more than 15% p.a. in ~63% of 3 year holding periods, more than 15% p.a. in ~81% 5 year holding periods
and more than 15% p.a. in ~100% of 10, 15 and 20 years holding periods
CAGR (%)
more than 20
more than 15
more than 10
more than 0
more than -10
more than -20
less than -20

1 Year
49
57
65
76
89
96
4

3 Years
46
63
75
96
100
100
0

5 Years
55
81
96
100
100
100
0

10 Years
83
100
100
100
100
100
0

15 Years
94
100
100
100
100
100
0

20 Years
56
100
100
100
100
100
0

It can be clearly seen, that as the holding period increases, return profile improves

This is consistent with the belief that equities are a long term asset class and that risk reduces as holding
period increases

Time spent in markets is more important than timing the markets

Performance data computed till September, 2014

^ Past performance may or may not be sustained in the future.

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12

Fund Selection - Lane Changing does not work !

RANK
1
2
3
4
5
6
7
8
9
10

2004
H
D
F
E
B
C
A
I
G
J

2005
H
D
G
F
I
E
B
A
C
J

2006
G
A
B
I
C
H
F
D
E
J

2007
H
B
A
I
F
D
J
C
E
G

2008
E
G
J
F
B
C
A
D
I
H

2009
D
H
F
A
J
E
C
I
G
B

2010
D
E
F
C
G
J
A
H
B
I

2011
E
C
J
B
G
A
F
D
H
I

2012
H
A
D
F
J
G
B
E
I
C

2013
G
A
J
C
F
D
B
E
I
H

The above data illustrates the calendar year performance of 10 largest diversified Equity /
Balanced funds as on Dec 31, 2013 for last 10 years

It is evident that flavor of the season investing does not work. There is merit in sticking
with funds that have a disciplined approach to investments and have performed
across cycles
If investing is entertaining, if you're having fun, you're probably not making any money.
George Soros

Data compiled by HDFC Mutual Fund

^ Past performance may or may not be sustained in the future.

13

Summary : Keep it simple

Economic outlook in India is slowly but steadily improving

Equity valuations are attractive and interest rates are likely to come down in medium term

Outlook for both equity and bonds is thus positive

HDFC Prudence Fund, a balanced fund with a track record of 20 years across several cycles,
across good and bad times, is well positioned to benefit from improving economic environment,
and from positive outlook of equities and bonds

A wise companion is half the journey Russian Proverb

14

Performance
(As on September 30, 2014)

Refer Disclaimer / Risk Factors on

Slide: 22

Slide 15

15

SCHEME PERFORMANCE SUMMARY

Past performance may or may not be sustained in the future.

$All dividends declared prior to the splitting of the Scheme into Dividend & Growth Options are assumed to be reinvested in the units of the Scheme at the then prevailing NAV
(ex-dividend NAV). #The Scheme is co-managed by Prashant Jain and Srinivas Rao Ravuri. +The Scheme is co-managed by Prashant Jain (Equities) and Shobhit Mehrotra
(Debt). @Scheme performance may not strictly be comparable with that of its Additional Benchmark in view of balanced nature of the scheme where a portion of scheme's
investments are made in debt instruments. ^Scheme performance may not strictly be comparable with that of its Additional Benchmark in view of hybrid nature of the scheme
where a portion of scheme's investments are made in equity instruments. 1. Benchmark 2. Additional Benchmark
16

Product Features
Type of Scheme
Inception
allotment)

Date

An Open-ended Balanced Scheme

(Date

of

February 1, 1994

Investment Objective

To provide periodic returns and capital appreciation over a long period of time from a judicious mix of equity
and debt investments with an aim to prevent / minimise any capital erosion

Fund Manager $

Prashant Jain (Since June 19, 2003)*

Investment Plan

HDFC Prudence Fund, HDFC Prudence Fund - Direct Plan#

Investment Option

Under Each Plan: Growth & Dividend. The Dividend Option offers Dividend Payout and Reinvestment facility.

Minimum Application Amount

(Under Each Plan/Option)

Purchase: ` 5,000 and any amount thereafter

Additional Purchase: ` 1,000 and any amount thereafter

Load Structure

Entry Load:
Not Applicable. Upfront commission shall be paid directly by the investor to the ARN Holder (AMFI
registered Distributor) based on the investors assessment of various factors including the service
rendered by the ARN Holder.
Exit Load:
In respect of each purchase / switch in of units, an exit load of 1.00% is payable if units are
redeemed / switched out within 18 months from the date of allotment.
No exit load is payable if units are redeemed / switched out after 18 months from the date of
allotment.
For further details on load structure, please refer to the Scheme Information Document / Key Information
Memorandum
of the Scheme.

Benchmark

CRISIL Balanced Fund Index

* Date of migration from Zurich India Mutual Fund.

$ Dedicated Fund Manager for Overseas Investments: Mr. Rakesh Vyas since May 10, 2012.
# Direct Plan is for investors who purchase/subscribe Units in a Scheme directly with the Fund and is not available for investors who route their investments
through a Distributor. Direct Plan shall have a lower expense ratio excluding distribution expenses, commission, etc and no commission for distribution of Units
17
17
will be paid / charged under the Direct Plan.

Asset Allocation Pattern

Under normal circumstances, the asset allocation (% of the net assets) of the Schemes
portfolio will be as follows:

Type of the
Instruments

Minimum
Allocation
(% of Net Assets)

Maximum
Allocation
(% of Net Assets)

Risk Profile of the

Instrument

Equity & Equity

linked instruments

40

75

High

Debt
Securities
and money market
instruments*

25

60

Low to Medium

*Investment in Securitised debt, if undertaken, would not exceed 10% of the net assets of the Scheme.
The scheme may seek investment opportunity in the ADR / GDR / Foreign Equity and Debt Securities (max. 40% of net assets) subject to SEBI (Mutual Funds)
Regulations, 1996. The scheme may use derivatives mainly for the purpose of hedging and portfolio balancing (max 25% of net assets) based on the
opportunities available subject to SEBI (Mutual Funds) Regulations, 1996.

18

18

Glossary
CAD

Current Account Deficit

FD

Fiscal Deficit

GDP

Gross Domestic Product

MSP

Minimum Selling Price

EBITDA

Earning before interest, taxes, depreciation & amortization

19

Thank You

20

20

DISCLAIMER
The views expressed herein are based on the basis of internal data, publicly available information and other
sources believed to be reliable. Any calculations made are approximations, meant as guidelines only, which
you must confirm before relying on them. The information contained in this document is for general purposes
only and is not an offer to sell or a solicitation to buy/sell any mutual fund units/securities. The document 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 not sufficient and should not be used for the development or
implementation of an investment strategy. The same should not be construed as investment advice to any
party. The statements contained herein are based on our current views and involve known and unknown risks
and uncertainties that could cause actual results, performance or events to differ materially from those
expressed or implied in such statements. Neither HDFC Asset Management Company (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 seek appropriate 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
RELATED DOCUMENTS CAREFULLY.

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