March 2016 1
Table of Contents it s The Season for Tax Investments Background Why ELSS? Why HDFC TaxSaver? The Economy & Equity Market outlook Product Features Asset Allocation Pattern Scheme Performance Disclaimer 2
It s the Season For Tax Saving Investments Its that time of the year when planning for tax saving investments takes the front seat ELSS (Equity Linked Savings Schemes) are one of the most popular Sec 80C investments wherein investors enjoy both the benefits of equity investing, as well as tax benefits. The lock in for these schemes is 3 Years, comparatively shorter as compared to other Sec 80C investment products The lock-in is also in line with the long term nature of equities as an asset class where staying invested for long durations pays off (See slide 7) Unlike other Sec 80C investment products, investments in Mutual Funds are subject to market risks. HDFC Mutual Fund/AMC is not guaranteeing returns on investments made in this scheme. Investors should be aware that the fiscal rules/ tax laws may change and there can be no guarantee that the current tax position may continue indefinitely. 3
Background Salient Features of Section 80C of the Income tax Act, 1961 Section 80C of Income Tax Act, 1961 W.e.f. April 1, 2014 (A.Y. 2015-16) provides for deduction from gross total income in respect of specified sums paid or deposited Aggregate amount of deductions under Section 80C shall not exceed Rs. 1,50,000/- Section 80C generally has no sectoral limits Eligible investments u/s 80C, inter alia, include: Life Insurance Premiums Unit Linked Insurance Plans (ULIP) Public Provident Fund (PPF) National Saving Certificate (NSC) Subscription to eligible issue of capital Equity Linked Savings Schemes (ELSS) Fixed Deposits with Scheduled / Commercial Banks with 5 years lock-in ELSS are formulated as per the Notification dated December 28, 1992 as amended on December 22, 1998 and Notification dated November 3, 2005 as amended on December 13, 2005 issued by the Department of Economic Affairs, Ministry offinance, Government of India. 4
The following example illustrates Tax Saving: Assume Gross Total Income for the year is Rs. 12,00,000 Investment in HDFC TaxSaver Rs. 1,50,000 Income on which tax will be paid Rs. 10,50,000 Tax Saved on Rs. 1,50,000/- (Highest tax bracket assumed) Rs. 46,350* * Including education Cess @ 2% and secondary and higher education cess @ 1% This implies that you can avail benefit of Rs. 46,350 in tax savings under Section 80C (assuming highest tax bracket) on investments. This is apart from the returns your investment would possibly earn in the fund Investors should be aware that the fiscal rules/ tax laws may change and there can be no guarantee that the current tax position may continue indefinitely. HDFC Mutual Fund/AMC is not guaranteeing returns on investments made in this scheme. In view of individual nature of tax consequences, each investor is advised to consult his/her own professional tax advisor. 5
So Why ELSS? Exposure to equities with a long term horizon. 3 Year lock in ensures money remains invested without taking into account volatility in equity markets. Lock in period lower than other investment options like PPF, NSC or Bank FD`s Options to Invest, Options to earn Investments can be made in lump sums or in regular investments by way of SIP`s as small as Rs 500/- Income can be earned by way of dividend or through capital appreciation based on the investors need Incomes are completely tax exempt Dividends earned on equity oriented mutual fund units are exempt from taxation Long term capital gains earned by way of capital appreciation are exempt from capital gains tax Deduction U/s 80C Maximum deduction claimable is Rs 1,50,000/- in a financial year HDFC Mutual Fund/AMC is not guaranteeing returns on investments made in this scheme. Unlike PPF, NSC & Bank FD`s investments in Mutual Funds are subject to market risks. Hence, the performances are not strictly comparable. There is no assurance or guarantee to unit holders as to the rate/quantum of dividend distribution nor that the dividends will be paid regularly. In view of individual nature of tax consequences, each investor is advised to consult his/her own professional tax advisor. 6
Why HDFC TaxSaver? A comparison of Rs 10,000 invested every financial year on the specified date 50,00,000 45,00,000 40,00,000 Staying invested in equities pays off 35,00,000 35,49,643 30,00,000 25,00,000 20,00,000 Short term drops have been compensated with relative outperformance in the long term 15,00,000 10,00,000 5,00,000 0 10,000 8,38,304 7,30,179 5,32,927 PPF@ Nifty 500 Index# Nifty 50 Index## HDFC TaxSaver Fund*$$ *Past performance may or may not be sustained in the future. # Benchmark Index of HDFC TaxSaver. ## Additional Benchmark Index for HDFC TaxSaver.$$ 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). @ Year end balances have been arrived at by adding interest at the rates notified by the competent authorities from time to time. NAV as on 29 th February 2016. HDFC Mutual Fund/AMC is not guaranteeing returns on investments made in this scheme. Unlike PPF, investments in Mutual Funds are subject to market risks. Hence, the performances are not strictly comparable. 7
Public Provident Fund v/s HDFC TaxSaver This is how an amount of Rs 10,000 invested on Mar 31, 1996 would have performed on Feb 29, 2016 Year Ended PPF NSC HDFC TaxSaver * Nifty 500 Index Nifty 50 Index (Rs) @ (Rs) @ (Rs) $$ (Rs) # (Rs) ## Mar-96 10,000 10,000 10,000 10,000 10,000 Mar-97 11,200 11,240 9,040 9,018 9,827 Mar-98 12,544 12,630 12,400 10,220 11,336 Mar-99 14,049 14,190 23,190 10,830 10,941 Mar-00 15,706 15,940 62,430 18,895 15,513 Mar-01 17,409 17,910 39,650 10,772 11,653 Mar-02 19,052 20,150 50,100 11,076 11,464 Mar-03 20,746 22,004 47,020 10,017 9,928 Mar-04 22,406 24,029 1,01,210 20,817 17,983 Mar-05 24,198 26,239 1,70,420 25,321 20,660 Mar-06 26,134 28,653 3,31,020 41,569 34,533 Mar-07 28,225 31,291 3,37,730 44,925 38,786 Mar-08 30,483 34,170 3,83,483 54,645 48,051 Mar-09 32,921 36,859 2,44,849 32,777 30,660 Mar-10 35,555 39,976 5,18,840 61,606 53,274 Mar-11 38,399 43,239 5,87,527 66,080 59,208 Mar-12 41,539 46,769 5,62,526 60,300 53,746 Mar-13 45,195 50,586 5,68,413 63,393 57,673 Mar-14 49,127 54,714 6,98,236 74,627 68,042 Mar-15 53,401 59,178 10,04,396 99,669 86,177 Feb-16 57,660 63,952 7,80,366 83,269 70,913 * Past performance may or may not be sustained in future. The above simulation is for illustration purpose only. @ Year end balance has been arrived at by adding interest at the rates notified by the Competent authorities from time to time. # Benchmark Index of HDFC TaxSaver. ## Additional Benchmark Index for HDFC TaxSaver. $$ 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). Unlike PPF, investments in Mutual Funds are subject to market risks. Hence, the performances are not strictly comparable. 8
Investment Rationale & Fund Suitability Investment Rationale Well diversified equity fund Fund ideally positioned to take advantage of impending growth phase in the Indian economy Has given investors a superior post tax return as compared to traditional tax saving instruments^ Fund Suitability Considering to invest for tax planning and avail benefit of tax deduction u/s 80C of the Income Tax Act, 1961 Looking for an alternative to traditional tax saving instruments Willing to invest in a diversified equity fund with minimum lock-in period of three years ^Past performance may or may not be sustained in the future. Refer slide 17 for complete scheme performance HDFC Mutual Fund/AMC is not guaranteeing returns on investments made in this scheme. The current investment strategy is subject to change depending on the market conditions 9
Current Portfolio Strategy In order to provide long term capital appreciation, the scheme will invest mainly in growth companies The companies selected under this portfolio would generally consist of medium to large sized companies which: Are likely to achieve above average growth than the industry Enjoy distinct competitive advantages; and Have superior financial strengths The aim will be to create a portfolio, which represents a cross-section of strong growth companies in the prevailing market In order to reduce the risk, the portfolio will target reasonable diversification HDFC Mutual Fund/AMC is not guaranteeing returns on investments made in this scheme. The current investment strategy is subject to change depending on the market conditions 10
Economy : Ready, set, go A stable, proactive, long term focussed Government, stress on reviving capital expenditure, financial inclusion, gold monetization, resolving stalled projects, roads and railway spending increased, etc. Falling inflation low commodity prices, improving supplies & Real rates above 2% indicate lower yields going forward Recent IIP readings are encouraging Forex reserves represent a healthy 9 month import cover FY 14 FY 15E FY 16E FY17E CPI (Average %) 9.5 5.9 4.9 5.3 WPI (Average %) 6.0 2.1-2.0 2.7 Real GDP Growth $ (%) 6.9 7.3 7.5 7.7 Fiscal Deficit (% GDP) 4.4 4.1 4.1 3.7 CAD (% GDP) 1.7 1.3 0.8 1.5 Steadily improving growth; Capex expected to revive in FY17 Forex Assets (Incl. Gold) In US$ 303.7 341.4 377.4 417.5 By 2020, India is likely to be 5 th largest economy in the world and fastest growing as well Source: CSO, RBI, Ministry Of Finance, Citi Estimates as on 31 st January 2016 $ At Current market prices 11
Mar-96 Mar-97 Mar-98 Mar-99 Mar-00 Mar-01 Mar-02 Mar-03 Mar-04 Mar-05 Mar-06 Mar-07 Mar-08 Mar-09 Mar-10 Mar-11 Mar-12 Mar-13 Mar-14 Mar-15 Mar-16 Equity Markets A Positive Outlook Low oil prices driving down CAD, steadily falling fiscal deficit and low inflation have set the stage for lower interest rates. Market Valuations Remain Below Long Term Averages Steps taken in the key areas of roads, railways, mining, power and housing should start yielding results now and lead to faster economic growth. 30 25 20 Roll PE (LHS) average (LHS) BSE (RHS) 35,000 30,000 25,000 20,000 Economy and equity markets appear to be in transition from consumption to capex. Improving margin outlook of corporates, likely lower interest rates, soft commodity prices and reasonable valuations lead to a positive outlook for equity markets over the medium to long term. 15 10 5 15,000 10,000 5,000 0 In our opinion therefore, post the sharp correction there is merit in increasing allocation to equities (for those with a medium to long term view) and to stay invested. Reasonable P/E s at cyclically low margins lead to positive outlook for equities Source: CSO, CLSA HDFC Mutual Fund/AMC is not guaranteeing returns on investments made in this scheme. The reference to the S&P BSE Sensex is purely for understanding purposes and should not be compared to the scheme. The benchmark for the scheme is Nifty 500 Index. 12
Consistent dividends The Scheme has paid dividends in each of last 18 years Total dividends paid in last 18 years aggregate to Rs. 115.2 per unit In last 18 years 1999 1999 2000 2001 2002 2003 2004 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Total/ Average Dividend per unit (Rs.) (A) 3.6 5.0 21.0 1.6 2.0 2.0 2.0 2.0 5.0 7.5 7.5 8.0 5.0 6.0 6.0 6.0 6.0 6.0 7.0 6.0 115.2 NAV (Record Date) (B) 25.7 35.4 41.6 15.7 17.9 19.9 28.4 26.7 40.6 67.1 60.4 66.1 31.2 61.9 62.7 56.7 53.6 52.7 73.7 53.6 Dividend Yield (%) ( A / B ) 14 14 51 10 11 10 7 7 12 11 12 12 16 10 10 11 11 11 10 11 15 ^Past performance may or may not be sustained in the future. 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 applicable.). There is no assurance or guarantee to unit holders as to the rate/quantum of dividend distribution nor that the dividends will be paid regularly. 13
Portfolio Facts (As on February 29, 2016) Top 10 equity and equity related holdings (%) 47.13 Top 15 equity and equity related holdings (%) 59.25 Top Sector Weighting Banks 25.98% Top 5 Sector Holdings (Total %) 58.85% Portfolio Turnover Ratio (%) 36.55% Total Equity & Equity Related Holdings(%) 95.75 Cash, Cash Equivalents and Net Current Assets (%) 4.25 Average AUM (Rs. In crore) ** 4,153.82 * As a % of net assets ** Average AUM for the month ended February 29 th, 2016. For complete portfolio details refer www.hdfcfund.com. Portfolio Beta 1.138 Standard Deviation (%) 5.356 14
Product Features Type of Scheme Inception Date (Date of allotment) Investment Objective Fund Manager $ Investment Plans Investment Option Minimum Application Amount (Under Each Plan/Option) Load Structure Lock-in period Tax Benefit Benchmark Open-ended Equity Linked Savings Scheme with a lock-in period of 3 years March 31, 1996 To achieve long term growth of capital Vinay Kulkarni Direct Plan, Regular Plan Under Each Plan: Growth & Dividend. The Dividend Option offers Dividend Payout and Reinvestment facility Purchase & Additional Purchase: Rs. 500 and in multiples of Rs. 500 thereafter 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: Nil No entry / exit load shall be levied on bonus units and units allotted on dividend reinvestment. 3 Years from the date of allotment of the respective units U/s 80C of the Income-tax Act, 1961, an individual / HUF is entitled to a deduction up to Rs. 1.5 Lakh (along with other prescribed investments) for amounts invested in HDFC TaxSaver while computing the total income Nifty 500 Index $ Dedicated Fund Manager for Overseas Investments: Mr. Rakesh Vyas For further details on load structure, please refer to the Scheme Information Document. 15
Asset Allocation Pattern Under normal circumstances, the asset allocation of the scheme s portfolio will be as follows: Types of Instruments Equities & Equity related instruments Debt and money market instruments* Normal Allocation (% of Net Assets) Minimum 80 Maximum 20 Risk Profile Medium to High Low to medium *Investment in Securitized debt, if undertaken, would not exceed 20% of the net assets of the Scheme. The scheme may seek investment opportunity in the ADR / GDR / Foreign 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. For further details refer SID. 16
Scheme Performance Summary Scheme Inception Dates NAV as on 31 Dec 2015 31 Dec 2014 to 31 Dec 2015 Discrete Returns in % 31 Dec 2013 to 31 Dec 2014 31 Dec 2012 to 31 Dec 2013 Since Inception CAGR (in %) Value of investment of Rs. 10,000 Since Inception (Rs.) HDFC TaxSaver $$ 31-Mar-1996 375.880-6.24 56.36 5.09 25.90 9,48,188 Nifty 500 Index 1-0.72 37.82 3.61 12.13 96,050 Nifty Index 2-4.06 31.39 6.76 NA NA Vinay Kulkarni manages 6 open ended schemes including HDFC Taxsaver and 11 close ended schemes. Performance of Top 3 schemes managed by Vinay Kulkarni HDFC Core & Sattelite Fund 17-Sep-2004 61.821 4.99 51.45-2.26 17.50 61,821 S&P BSE 200 Index 1-1.48 35.47 4.38 14.60 46,601 S&P BSE SENSEX 2-5.03 29.89 8.98 14.68 46,964 HDFC Large Cap Fund # 18-Feb-1994 94.993-4.84 27.46 4.54 10.84 94,993 Nifty 50 Index 1-4.06 31.39 6.76 8.89 64,491 S&P BSE SENSEX 2-5.03 29.89 8.98 9.06 66,711 HDFC Premier Multicap Fund # 6-Apr-2005 42.948-1.21 52.07-0.11 14.53 42,948 Nifty 500 Index 1-0.72 37.82 3.61 13.01 37,215 Nifty Index 2-4.06 31.39 6.76 13.34 38,401 Performance of Bottom 3 schemes managed by Vinay Kulkarni HDFC CPO - II - 36M February 2014 # 29-Jan-2014 11.556 4.00 - - 8.26 11,556 CRISIL MIP Blended Index 1 6.79 - - 12.04 12,302 CRISIL 1 Year T - Bill Index 2 8.22 - - 8.50 11,602 HDFC CPO - III - 1100D October 2014 # 28-Oct-2014 11.037 4.51 - - 5.16 10,609 CRISIL MIP Blended Index 1 6.79 - - 8.61 11,019 CRISIL 1 Year T - Bill Index 2 8.22 - - 8.33 10,986 HDFC CPO - II - 36M January 2014 # 6-Mar-2014 11.757 4.10 - - 8.80 11,757 CRISIL MIP Blended Index 1 6.79 - - 12.02 12,436 CRISIL 1 Year T - Bill Index 2 8.22 - - 8.43 11,638 Past performance may or may not be sustained in the future. Returns greater than 1 year period are compounded annualised (CAGR). The above returns are of growth option. #The Scheme is co - managed by Vinay Kulkarni (Equities) and Anil Bamboli (Debt). Load is not taken into consideration for computation of performance. 1. Benchmark 2. Additional Benchmark. On account of difference in the type of the Scheme, asset allocation, investment strategy, inception dates, the performance of these schemes is strictly not comparable. Top 3 and bottom 3 schemes managed by the Fund Manager have been derived on the basis of since inception returns. 17
Disclaimer This presentation dated 10 th March 2016 has been prepared by HDFC Asset Management Company Limited (HDFC AMC) based on 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. 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 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. Past performance may or may not be sustained in future. Neither HDFC AMC and HDFC Mutual 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. Disclaimer of NSE/ BSE: It is to be distinctly understood that the permission given by NSE/ BSE should not in any way be deemed or construed that the Scheme Information Document (SID) has been cleared or approved by NSE/ BSE nor does it certify the correctness or completeness of any of the contents of the SID. The investors are advised to refer to the SID for the full text of the Disclaimer clause of NSE/ BSE. MUTUAL FUND INVESTMENTS ARE SUBJECT TO MARKET RISKS, READ ALL SCHEME RELATED DOCUMENTS CAREFULLY. 18
Thank You 19