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A SUMMER INTERNSHIP PROJECT IN STUDY ON A REPORT ON ULIP FUND PERFORMANCE IN INDIA: ”A CASE STUDY OF HDFC STANDARD LIFE INSURANCE COMPANY LIMITED” SUBMITTED IN PARTIAL FULFILLMENT OF REQUIREMENT OF BACHELOR OF BUSINESS ADMINISTRATION (B.B.A.) BBA V- SEMESTER (E) BATCH -2010-2013 1

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Page 1: ULIP FUND PERFORMANCE- HDFC SLIC.docx

A SUMMER INTERNSHIP PROJECT

IN

STUDY ON A REPORT ON ULIP FUND PERFORMANCE IN INDIA:

”A CASE STUDY OF HDFC STANDARD LIFE INSURANCE COMPANY LIMITED”

SUBMITTED IN PARTIAL FULFILLMENT OF REQUIREMENT

OF BACHELOR OF BUSINESS ADMINISTRATION (B.B.A.)

BBA V- SEMESTER (E)

BATCH -2010-2013

Submitted To:Mrs. Ahuti Bhargav Submitted By:

Name of Guide Name: Kirti Chhabra

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Enrollment no:0742450710

Designation

JAGANNATH INTERNATIONAL MANAGEMENT SCHOOL

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TABLE OF CONTENTS

Authorization------------------------------------------------ 4

Acknowledgments---------------------------------------- 5

Abstract-------------------------------------------------------- 6

1. Introduction

1.1 Industry Background------------------------------------ 7

1.2 Company Background----------------------------------- 9

1.3 Objectives-------------------------------------------------- 10

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1.4 Description of the project----------------------------- 11

1.5 Methodology----------------------------------------------- 11

2. Industrial Analysis

2.1 To understand the operation of

the ULIP funds -----------------------------12

2.2 To understand an investor can make

a balance between the risk and

return of his chosen portfolio. ----------------------17

2.3 To know the risk and average return

of each portfolio -------------------------23

2.4 To know the asset allocation -----------------------25

2.5 Evaluation of fund performance ----------------- 82

2.6 To understand the factors should be

Taken into consideration by an investor ----89

3. Conclusion----------------------------------------------------------------------99

4. References---------------------------------------------------------------------101

A report submitted in partial fulfillment of the requirements of BBA program of IP University, Delhi.

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Authorized Signature

Prof. Ahuti Bhargav

Faculty, JIMS, Kalkaji

Any activity in the tradition of India begins with Guru Vandana. I first seek the blessings of my Honorable Prof. Ahuti Bhargav, Faculty, JIMS,Kalkaji who taught me jargons of finance during the discussion to face the ground realities of finance a fraction of whose wisdom I strove to absorb.

I am grateful to Dr. O.P. Gupta Director, Icfai Business School for giving me the opportunity to do my Summer Internship Project.

When I started off with the project, the only thing I knew was the objective, rest was a s hazy as winter fog. The constant guidance and untiring support and motivation I received from my faculty guide Prof. Ahuti Bhargav, Faculty, JIMS Kalkaji who enabled me to proceed this project. To thank them would be an injustice, I owe them much more.

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ACKNOWLEDGEMENT

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I am indebted to Mr. Ashish Shishodia, Channel Development Manager, Vikas Puri Branch, my company guide, for his help in learning actual corporate environment.

I would also like to thank to various respondents, who took time out of their busy schedules and provided me with their advice, information and expertise.

Finally I would like to thank my family and friends who have been constant sources of encouragement and support.

Regards,

Reeturaj Borah

ABSTRACT

The project has a detailed study of various ULIPs offered by the major players in the insurance sector. I made a comparative analysis of ULIPs available in HDFC Standard life insurance company with that of other major players. I also carried out an in-depth study of all the major ULIP funds available in the market & analyse their performance since their inception. The mathematical techniques I have used for calculating the risk and return profile are beta values, variance, Sharpe ratio & standard deviations followed by graphically plotting the calculated values and make a comparative analysis of the data which I have gathered from various sources. The project also aims to help understand the consumer behavior towards various financial services like insurance and what are the factors should be taken in to consideration before investing in Unit Linked Insurance Plans. The report enhances the knowledge on how various financial concepts learnt in the classroom are implemented in a real life environment.

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INTRODUCTION

1.1 Industry Background

INSURANCE

Insurance is a contract providing for payment of a sum of money to the person assured or failing him to the person entitled to receive the same on the happening of certain event. Uncertainty of death is inherent in human life. It is this risk, which gives rise to the necessity for some form of protection against the financial loss arising from death. Insurance substitutes this uncertainty by certainty.

The objective of insurance is normally to provide;

a) Family protection and/orb) Provision for old agec) Protection against risks

Why insurance?

Insurance cover is essential because it provides the following benefits:

A lump sum payment to the nominees at the time of the death of the policy holder.

A regular payment to the nominees in the event of the death of the policy holder.

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Tax benefits, as premiums paid reduce the liability of tax

Relieves economic hardships in the family on the uneventful death of the sole income holder

Inculcates the habit of savings

Superior to an ordinary savings plan as it provides full protection against risk of death

Encourages and forces compulsory savings unlike other saving instruments wherein the saved money can be easily withdrawn

Provides loan to tie over a temporary difficult phase and is also acceptable as security for a commercial loan

Hedges risk against uncertainty

For a policy taken under the MWP Act( married women’s property act), a trust is created for wife and children as beneficiaries

Based on the concept of sharing of losses, the society will be benefited as catastrophic losses are spread globally.

Need for insurance

The need for life insurance comes from the need to safeguard the family. Today insurance has become even more important due to the disintegration of the prevalent joint family system, a system

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in which a number of generation co- existed in harmony, and a system in which a sense of financial security was always there as they were more earning members. Times have changed and the nuclear family has emerged. Apart from other pitfalls of a nuclear family, a high sense of insecurity is observed in it today besides, the family has shrunk. Needs are increasing with time and fulfillment of these needs is a big question mark. How will we be able to satisfy all those needs? Better lifestyle, good education, long desired house. But again- we just cannot fritter away all our earnings; we need to save a part of it for the future too- a wise decision. This is where insurance helps us. Ambitions etc are some the reasons why insurance have gained importance and where insurance plays a successful role.

1.2 HDFC STANDARD LIFE INSURANCE COMPANY LIMITED.

COMPANY INRODUCTION

HDFC STANDARD LIFE is one of India’s leading private life insurance companies, which offers a range of individual and group insurance solutions. It is a joint venture between Housing Development Finance Corporation Limited (HDFC), India’s leading housing finance institution and STANDARD LIFE, a leading provider of financial services in the United Kingdom.

HDFC STANDARD LIFE’S product portfolio comprises solutions, which meet various customer needs such as protection, pension, savings, investments and health.

HDFC Incorporated in 1977 with a share capital of Rs. 10 Cr. HDFC has since emerged as the largest residential mortgage finance institution in the country. The corporation has had a series of issued raising its capital to Rs. 119 Cr. The gross premium income for the year ending March 31, 2009 stood at Rs. 5,564.69 Cr. The company during the current year registered a positive growth of 14.53%. The sum assured in force for the current year was Rs. 57,158 Cr. as compared to Rs. 45,753 Cr. for the previous year.

HDFC operates through almost a network of 595 cities serving over 720 cities and towns across the country. The company has increased its depth in existing markets with a strong base of more than 207,000 financial consultants, having its head quarters in Mumbai. HDFC also has an international

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office in Dubai, UAE with service associates in Kuwait, Oman and Qatar. HDFC is the largest housing company in India for the last 33 years.

HDFC standard life was one of the first private companies to get license and allowed to do business in the insurance sector. HDFC is RATED ‘AAA’ by CRISIL and ICRA. Similarly STANDARD LIFE is rated ‘AAA’ by MOODY’S AND STANADARD AND POOR’S. This reflects the efficiency with HDFC and STANDARD LIFE manages their asset base of Rs. 15000 Cr. and Rs. 600000 Cr. respectively.

HDFC STANDARD LIFE was incorporated on 14th August 2000. HDFC is the majority stakeholder in insurance JV with 76% staple and STANDARD LIFE of as a staple of 24%. Mr. Amitabh Chaudhary is the MD and CEO of the venture.

Since inception, HDFC SL is continuously among the top three private players which has performed up to the mark as par the consumer satisfaction

KEY STRENGTHS OF THE COMPANY

FINANCIAL EXPERTISE RANGE OF SOLUTIONS STRONG ETHICAL VALUE MOST RESPECTED PRIVATE COMPANY CORPORATE AGENTS SOLVENCY DISTRIBUTION FINANCIAL CONSULTANTS

1.3 OBJECTIVE: : The main objective of my project is to make known to all people how the ULIPs managed by the insurance company. Besides this main objective, my project has the following objectives-

To understand an investor can make a balance between the risk and return of his/her chosen portfolio.

To understand the factors should be taken in to consideration by an investor while choosing a particular portfolio under an ULIP. To understand investors risk taking appetite. To understand assets allocations of insurance company.

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To understand the average return given by the each portfolio and how much having volatility among the securities of a particular portfolio.

1.4 DESCRIPTION OF THE STUDY:

My proposed project how ULIP funds are managed and operate in the capital market by the insurance company (HDFC Standard life insurance Company). Though most of the people are attracted towards the ULIP products because of getting more fund value than what they initially invested in the company, but sometimes they lost their believes on the insurance company when they get lesser amount. The main reason of this conflict between the insurance company and the investors is that the investors do not have sufficient knowledge about ULIP fund performance in the capital market.

An investor can get maximum appreciation in his/her investment only when he/she properly manages money in the appropriate funds. For this purpose the investors should have minimum knowledge about in which companies shares are managed under one portfolio and how these included companies perform in the capital market as a whole. Unless and until the investors do not know how their portfolios perform and managed in the capital market, they may invest their money in wrong funds which leads to depreciation of their fund value and all of these finally lead to humors among the prospective customers that the investments in the ULIPs give lesser returns. This may make a huge negative impact in the insurance industry in near future.

1.5 METHODOLOGY

For completion of this project, we use the following methodologies--

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Using average return and standard deviation techniques in each portfolio for

determining average portfolio return and fluctuation having for a particular time period

A market survey done through preparing questionnaire to understand investors risk taking appetite.

For determining the risk of a portfolio, we use Beta calculation technique. For evaluating the performance of a portfolio, we use-

Treynor Measure

Sharpe Measure.

2. Industrial Analysis

2.1 To understand the operation of the ULIP funds:

Unit linked insurance plan which is popularly known as 'ULIP' is the flavor of the season. The conventional Insurance policies have a fixed relationship between the premium and the sum assured. Whereas ULIP allows the policyholder to choose his own sum assured within certain limits, for any given premium. The policyholder may then have the right to adjust his sum assured up or down, again within certain limits according to his circumstances.

Features of a Unit Linked Insurance Plan

Unit linked insurance plan (ULIP) is life insurance solution that provides for the protection and flexibility in investment. The investment is denoted as units and is represented by the value that it has attained called as Net Asset Value (NAV). The policy value at any time varies according to the value of the underlying assets at the time.

ULIP provides multiple benefits to the consumer. The benefits include:

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" Life protection

" Investment and Savings

" Flexibility - in Sum assured, to increase the sum assured, investment, etc

" Adjustable Life Cover

" Investment Options

" Transparency

" Options to take additional cover against - Death due to accident, Disability, Critical illness etc

" Liquidity

" Tax planning

Unit linked Insurance plan provides insurance protection against the risk of death combined with a provision for long term investment in the equity market, which are structured differently. ULIPS are basically an investment type of plan, wherein the Life assured decides the quantum of contribution which he can set aside on a regular basis towards premium. He also has the flexibility to decide the risk cover, i.e. the Sum Assured for his policy.

Based on the Sum assured and the contribution for the policy, insurer deducts charges towards life insurance which are mainly—

Administration charges: A fee is charged for administration from the policy every month. Administration charges are deducted by cancelling units proportionately from each of the funds chosen.

Fund management charges: These charges are towards meeting expenses related to managing the fund. This is charged as a percentage of the fund’s value and is deducted before arriving at the net asset value of the fund.

Switch charges: The investor can switch between the funds available to suit his/her changing needs and goals. In a policy year, a fixed number of such switches are available free of cost. Subsequent to this, each switch would attract a certain charge. These charges are deducted by cancelling units proportionately from each of the funds you have chosen.

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Surrender charges: These charges are levied for premature encashment of units. They are charged as a percentage of the fund value and depend on the policy year in which the policy has been surrendered.

Mortality Charges: Depending upon the age, and the amount of cover, these charges are levied towards providing a death cover to the insured.

Premium Allocation Charge: This charge is deducted as a fixed percentage of the premium received, and is usually charged at a higher rate in the initial years of a policy. This charge varies depending upon whether the policy is a single premium or regular premium policy, the size of the premium, premium frequency and payment mode.

Partial Withdrawal Charges: Lump sum withdrawals are allowed from the fund after the lapse of three years of the policy term and subject to pre-specified conditions. However, such withdrawals attract charges mentioned in the respective policy brochures.

The policyholder's share in the fund is represented by the number of units held in his account. The value of the unit is determined by the total value of all the investments made by the fund divided by the total number of units.

At any point of time i.e., maturity or surrender, the cash value will be equivalent to the number of units held by the insured multiplied by the unit price. In case of death claim, it will be unit value, plus the sum assured if any under the policy.

To know the method of “Pricing of Units”

Method of pricing the units depends on whether the company is purchasing or selling assets (stocks). While purchasing of assets the units will be priced on Appropriation basis and while selling of assets the Expropriation basis of pricing will be applied.

1.Appropriation Price

This will be applied when the fund is expanding. In this method of pricing, the unit price is calculated as follows:

Unit Price = (Market value of fund + expenses for purchase of assets + current assets + income - charges - current liabilities) / Number of units in the fund.

2.Expropriation Price

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Expropriation Price will be applied when the fund is contracting. In this method of pricing, the unit price is calculated as follows:

Unit Price = (Market value of fund - expenses for sale of assets + current assets + income - charges - current liabilities) / Number of units in the fund. The bid/offer spread

There are two different prices for a stock. One is a Bid price and the other is Offer price. Bid price is the price at which the investor can sell the shares and the offer price is the price at which the investor can buy them. The first is always lower than the second, and the difference between them is called the spread.

An example of different prices for different stocks of HDFC Standard Life Insurance Company Limited are shown in below-

Unit Prices as on : 8/4/2010 Fund Name Offer Price (Rs) Bid Price (Rs)

Liquid Fund II 11.4746 11.4746Stable Managed Fund II 11.3088 11.3088Secure Managed Fund II 11.5325 11.5325Defensive Managed Fund II 12.7908 12.7908Balanced Managed Fund II 14.2127 14.2127Equity Managed Fund II 14.8671 14.8671Growth Fund II 17.1348 17.1348CGF2 Fund * 10.0507 10.0507

Insurance companies offer a range of funds like Growth Fund (Equity Fund), Balanced Fund, Secured Fund, Income Fund etc. The insured can direct the company to invest his contribution in the fund of his choice.

Balanced Fund

This type of fund buys a combination of common stock, preferred stock, bonds and short-term bonds, to provide both for income and capital appreciation while avoiding excessive risk. Such diversified holdings ensure that these funds will manage downturns in the stock market without too much of a loss.

Growth fund

This fund aims to achieve capital appreciation by investing in growth stocks. They focus on companies that are experiencing significant earnings or revenue growth, rather than companies that pay out dividends. The hope is that these rapidly growing companies will continue to increase in value, thereby allowing the fund to reap the benefits of large capital gains. In general, growth funds

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are more volatile than other types of funds, rising more than other funds in bull markets and falling more in bear.

Income fund

This fund emphasizes on current income in the form of dividends or payments from bonds, rather than emphasizing growth. Income funds are considered to be conservative investments, since they avoid growth of stocks.

Comparison between Unit Linked Plans and Conventional Plans

1.Description: Unit Linked Insurance Plans offered by insurance companies allow policy holders to direct part of their premiums into different types of funds (equity, debt, money market, hybrid etc.) Here the risk of investment is borne by the policyholder.

Conventional Plans are traditional insurance plans. They usually invest in low risk return options and offer guaranteed maturity proceeds along with declared bonuses.

2.Flexibility of investment: Unit Linked Plans give the investor flexibility to invest as per his risk profile, financial commitments and convenience. The investor can choose to invest either in equity, or in debt or in hybrid fund and even change his investment strategy. But the conventional plans do not allow him to choose investment avenues. The funds are invested as per the strategy and discretion of the company.

3.Transparency: Most Unit Linked Plans allow the investor to track his portfolio. They also regularly intimate regarding the percentage of the premium that is invested along with the charges levied. The investors are also kept informed about the value and number of fund units that the investor holds. In conventional plans, the premiums are invested in a common 'with profits' fund and therefore the investor cannot track his individual portfolio. 4.Maturity benefits payout: At the time of maturity the investor redeems the units collected at the prevailing unit prices. Some plans also offer loyalty or additional units annually or at the time of maturity. At the time of maturity the conventional investor gets the sum assured plus bonuses, if applicable in the plan. 5.Partial withdrawal: Unit Linked Plans allow the investor to make withdrawals from his fund, provided the fund does not fall below the minimum fund value and subject to other conditions.

Conventional plans do not allow the investor to withdraw part of your fund. Instead, some policies offer the investor the facility to take a loan against his investment.

6. Switching options : The investor can change his investment fund decision by switching between the funds as being offered by the policy. Not available since the investment decision is taken by the insurance company.

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7.Charges structure: Unit Linked Plans specify the charges under various heads. Conventional plans do not specify the charges involved.

IS ULIP FUND AS SAME AS MUTUAL FUND

1.Description :Unit Linked Insurance Plans allow the investors to direct part of their premiums into different types of funds (equity, debt, money market, hybrid etc.)

A mutual fund pools the money from investors and uses it to invest in various securities according to a pre-specified investment objective. Key Features

2.Objective: Unit Linked Plans are long term plans offering the investor a dual benefit of insurance and investment. Mutual funds are ideal investment tool for the short to medium term.

3.Tax Benefit: All Unit Linked Plans offer tax benefits under section 80C. Some mutual funds are eligible for section 80C benefits.

4.Switching options: Unit Linked Plans allow the investors to switch investment between the funds linked to the plan. This enables the investors to change the risk- return. No switching option is available in mutual funds. 5.Additional Benefits: Some of the Unit Linked Plans give to the investors an additional benefit or loyalty benefit by issuing extra fund units. There are no additional benefits issued by mutual funds .

6.Liquidity: Unit Linked Plans have limited liquidity. One needs to stay invested for a minimum period of time as specified in the policy before redeeming the units. The investors can easily sell mutual fund units (except for ELSS and funds that have a minimum lock-in period)

7.Charges structure: Charges in a unit linked plan include mortality charges for the life insurance provided. In addition, premium allocation charge, fund management charge and administration charges are applicable. Mutual fund charges include an entry load, the annual fund management charge and an exit load, if applicable.

2.2 To understand an investor can make a balance between the risk and return of his/her chosen portfolio:

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For fulfilling this objective, I made analysis the following points so that I can understand how an investor can make a balance between the risk and return of his/her chosen portfolio.

In an insurance portfolio, there is a mixer of equity and debt securities. An investor can make minimization of risk and maximization of return of that particular portfolio by portfolio rebalancing technique. Before understanding this technique, we should understand pros and cons of equity and debt.

Understand the pros and cons of Equity and Debt

EQUITY

Pros : High returns , Low risk in Long term , High Liquidity Cons : Risky , not suitable for short term investment

DEBTPros : Stable and assured returns, Good investment for short term goalsCons : Low returns

Equity + Debt : When we combine Equity and Debt , returns are better than Debt but less than Equity , but at the same time risk is also minimized compared to Equity and Debt , and when we apply technique of Portfolio Rebalancing ,both risk and returns are well managed.

What is Portfolio Rebalancing?

Portfolio rebalancing is the technique through which an investor can make rearrange his portfolio by changing equity and debt in some ratio, it may be 40:60, 30:70 or any ratio. The ratio depends on a persons risk taking capability and return expectation. For an example let take the ratio to 60:40 , portfolio rebalancing is nothing but rebalancing investor’s portfolio in same ratio , in case the portfolio got changed after some months or years . Preferably the good time is every 6 months or 1 yr , but not 15 days or 1 month.

WHY SHOULD AN INVESTOR DO IT

Every investor should understand his/her both risk and return expectation and accordingly the investor should proceed rebalancing his/her portfolio. An investor may use the following concepts while rebalancing his/her portfolio-

Case 1: Equity: Debt goes up.Action: Decrease the Equity part and shift it to Debt so that Equity: Debt is same as earlier.

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Reason: As the Equity has gone up, the investor could loose a lot of it if something bad happens , he shift the excess part to Debt so that it is safe and grows at least.

Case 2: Equity: Debt Goes Down.Action: Decrease the Debt part and shift it to Equity, so that Equity: Debt is same as earlier.Reason: As Equity part has decreased, the investors make sure that it is increased so that he does not loose out on any opportunity.

Limitations Lets also talk about the limitations of this strategy, once equity exposure has gone up , if the investor rebalance and bring down his Equity Exposure , he will loose out on the profits if Equity provides great returns after that , or if his Equity exposure as gone down and he bring up his exposure from Equity and if Equity does bad , then the investor will loose more.

Understanding the Game of Equity and Debt

The primary objective of rebalancing of a portfolio is managing risk and profit is secondary .We know that market is unexpected and it can go in any direction, so better be safe than sorry . Many people are confused that if there equity has done very well then shall they book profits and get out with money and wait for markets to come down so that they can reinvest. Portfolio rebalancing is the same thing but a little different name and methodology , so once an investor get good profit in something which was risky he transfers some part to non-risk Debt.When we say Equity we mean shares or mutual funds which are related to Stock markets, which tend to go up and down, if it goes up , there are high chances that it will come down and when it comes down, its highly probable that it will move up again . Lets us now see with an example—

Mr. X has Rs 1,00,000 to invest and he wants to invest it for 5 yrs and the 5 yrs returns are 30% , -35% , 40% , 60% and -30% .Here we use two techniques i.e. without rebalancing and rebalancing of portfolio and we will see which technique will maximize return and minimize risk of his investment.

Lets look at his money and its growth in 3 different mode- Only Equity- Only Debt- Equity + Debt in some ratio (without Portfolio Rebalancing)

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Year Return Return/100 Equity Debt@9% Equity+Debt

(30:70)

Equity+Debt

(70:30)

1 30 0.30 130000 109000 115300 123700

2 -35 -0.35 84500 118810 108517 94793

3 40 0.40 118300 129503 126142 121661

4 60 0.60 189280 141158 155595 174843

5 -30 -0.3 132496 153862 147452 138906

We can see here that Debt performed better than Equity , because of the uncertain movement in returns , also the Equity+Debt performed better than Equity but not Debt.

UNDER PORTFOLIO REBALANCING

Let us now see the performance of Equity + Debt (with portfolio rebalance)

So now , every time our Equity and Debt ratio changes , the investor can rebalance it .

Ratio = 30:70Investment = 1,00,000Equity = 30,000Debt = 70,000

At the end of 1st year (Equity return = 30% , and debt = 9%) :Equity = 30,000 * (1.3) = 39,000Debt = 70,000 * (1.09) = 76,300Total Capital = 39,000 + 76,300 = 1,15,300

Now the investor will rebalance the portfolio

Equity = 30% of 115300 = 34590Debt = 70% of 115300 = 80710

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Now this is new Equity and Debt investment

At the end of 2nd year (Equity return = -35%, and debt = 9%) :Equity = 34590 * (1-.35) = 22484Debt = 80710 * (1.09) = 87974Total Capital = 22484 + 87974 = 110457

Now the investor will again rebalance the portfolio

Equity = 30% of 110457 = 33137Debt = 70% of 110457 = 77320

Year Return E+D

(30:70)

E+D

(70:30)

Equity Debt New

Equity

New

Debt

E+D

PR*

(30:70)

E+D

PR*

(70:30)

1 30 115300 123700 39000 76300 34590 80710 115300 123700

2 -35 108517 94793 22484 87974 33137 77320 110457 96733

3 40 126142 121661 46392 84279 39201 91470 130671 126431

4 60 155595 174843 62722 99702 48727 113697 162424 182945

5 -30 147452 138906 34109 123930 47412 110627 158039 149466

In this way the investor keeps rebalancing the portfolio and lets see its performance for 5 yrs

*PR-portfolio rebalancing.

Here, we can see that the column (E+D with PR) is our main column which shows the performance with portfolio rebalancing. Here we have example for two ratios’ 30:70 and 70:30 , we can clearly see that at the end of every year the final corpus for rebalanced portfolio is always greater than the non-balanced portfolio for both the ratio .

From the following table, it is very clear that an Investor can get maximum return with minimum risk if he/she follows Portfolio Rebalancing technique-

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For ratio 30:70

Year Rebalancing Without Rebalancing

1 115300 115300

2 110457 108517

3 130671 126142

4 162424 155595

5 158039 147452

For ratio 70:30

Year Rebalancing Without Rebalancing

1 123700 123700

2 96733 94793

3 126431 121661

4 182945 174843

5 149466 138906

Also we see that for most of the years re-balanced portfolio outperformed “Only Equity” and “Only Debt” except 1st year and 4th year . 1st yr is very easy to understand why it happened and for 4th year , the returns were positive again after 3rd year and the investor made more profit in “Only Equity” portfolio because of high concentration on Equity side , but we see that in 5th year , when there was a negative return of -35% , then the “Only Equity” fell heavily , but the rebalanced Portfolio fell very little because the investor has rebalanced it already and dropped his/her Equity Exposure to be safe.

So in this way, an investor can make a balance his portfolio by using Portfolio rebalancing technique which leads to at least minimum return on his/her investment in ULIPs.

2.3.TO KNOW THE RISK AND AVERAGE RETURN OF EACH PORTFOLIO22

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I also try to find out what is the risk and average return from the date of inception of each funds. It is assumed that before expecting a minimum rate of return by an investor on his funds, he should be expected to know what is the amount of volatility having in his/her chosen funds and what is the average rate of return of each funds.

Relationship between the risk and return

We know that there is always a relationship between the expected rate of return and risk. If an investor wants to expect more return then he obviously bears higher risk and vise-versa. So , in this regard the investor should be very carful before chosen a particular fund according to his risk taking capacity.

Now we discus the risk and return of various funds available in HDFC Standard Life Insurance Company Limited--

LIFE FUND SERIES I

Liquid fund

Stable Managed

Secured Managed

Defensive Managed

Balanced Managed

Growth Fund

Equity Fund

Risk* 0.72 0.60 1.29 7.43 18.80 40.81 41.91

Annual avg. return*

9.05 8.77 8.93 15.42 28.89 35.82 36.38

(*- ANNEXURE 1)

Interpretation: From the above table ,we can say that some funds provide more returns with more risk and vise-versa. On the basis of more risk and return, we can give the following ranking of the funds available under LIFE FUND SERIES 1----

1.Equity Fund

2.Growth Fund

3.Balanced Managed Fund

4.Defensive managed Fund

5. Secured Managed Fund

6. Liquid Managed Fund

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7.Stable Managed Fund

PENSION FUND SERIES II (*- ANNEXURE 2)

Liquid fund

Stable Managed

Secured Managed

Defensive Managed

Balanced Managed

Growth Fund

Equity Fund

Risk* 0.77 0.40 1.20 14.98 19.46 35.79 37.90

Annual avg. return*

9.43 9.07 9.01 7.05 24.77 41.32 42.56

Ranking of funds on the basis of High risk with High return----

1.Equity fund

2.Growth Fund

3.Balanced Managed Fund

4.Defensive Managed Fund

5.Secured Managed Fund

6.Liquid Fund

7.Stable Managed Fund.

Group Fund

Liquid fund

Stable Managed

Secured Managed

Defensive Managed

Balanced Managed

Growth Fund

Risk* 0.84 0.28 1.12 6.55 18.72 62.12

Annual avg. return*

9.40 8.05 8.64 14.89 23.97 59.69

(*- ANNEXURE 3)

Ranking of funds on the basis of High risk with High return----24

Page 25: ULIP FUND PERFORMANCE- HDFC SLIC.docx

1. Growth Fund

2. Balanced Managed

3. Defensive Managed

4. Secured Managed

5. Liquid fund

6. Stable Managed

2.4. To know the assets allocation of HDFC Standard Life Insurance Company Limited

Asset allocation is the strategy used in choosing between the various kinds of possible investments, in other words, the strategy used in choosing in what asset classes such as stocks and bonds one wants to invest. A large part of financial planning consists of finding an asset allocation that is appropriate for a given person in terms of their appetite for and ability to shoulder risk. This can depend on various factors.

Asset allocation is based on the idea that in different years a different asset is the best-performing one. It is difficult to predict which asset will perform best in a given year. Thus, although it is psychologically appealing to try to predict the "best" asset, proponents of asset allocation consider it risky. A fundamental justification for asset allocation is the notion that different asset classes offer returns that are not perfectly correlated, hence diversification reduces the overall risk in terms of the variability of returns for a given level of expected return. Therefore having a mixture of asset classes is more likely to meet the investor's wishes in terms of amount of risk and possible returns.

In HDFC Standard Life Insurance Company Limited, there are various types of portfolio available for their customers. How these portfolios are managed are shown in below------

LIFE FUND SERIES I

Balanced Managed Investment fund-

Fund Objective :To generate long term capital appreciation along with current income from a combined portfolio of equity and debt market instruments. The equity exposure will be between 30%-60%

25

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DEBENTURES/BONDS % to Fund

8.55% Power Finance Corp Ltd NCD Mat 07/09/2011

8.10% Shree Cement Ltd. Mat 23/11/2012

6.90% Power Finance Corp Ltd NCD Mat 11/05/2012

5.55% Export and Import Bank of India NCD Mat 27/11/2012

6% Export and Import Bank of India NCD Mat 07/01/2013

9.33% Power Grid Corp of India Ltd Mat- 15-Dec-2015

7.75% Rural Elec Corp Ltd NCD Mat 17/11/2012

IRFC PTC SERIES - A12 MAT 15-10-2015.

10.60% IRFC NCD Mat 11.09.2018

0% IDFC LTD DDB Mat 04/11/2011

0% HDFC LTD DDB MAT 24/08/2011.

8.80% Power Grid Corp of India Ltd Mat- 29-Sep-2015

10.00% IDFC NCD Mat 16 Dec 2013.

Others

3.33%

2.16%

2.12%

1.79%

1.67%

1.56%

1.52%

1.48%

1.48%

1.28%

1.15%

1.08%

1.01%

17.10%

Equity % to fund

26

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Infosys Technologies Ltd

Reliance Industries Ltd

ICICI Bank Ltd

Oil & Natural Gas Corporation Ltd

Larsen & Toubro Limited

BHARTI AIRTEL LTD

Crompton Greaves Ltd

State Bank of India

Bharat Heavy Electricals Ltd

ITC Ltd

Union Bank Of India

Tata Steel Ltd

Bank of Baroda

Punjab National Bank

National Thermal Power Corporation Ltd

Others

3.03%

2.78%

1.92%

1.79%

1.77%

1.67%

1.60%

1.51%

1.43%

1.32%

1.25%

1.23%

1.22%

1.18%

1.12%

17.38%

Total 42.20%

Government securities % to Fund

27

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7.56% GOI MAT 03/11/2014

7.32% GOI 2014 Mat 20/10/2014

7% Oil Bonds Mat 09.Sep.2012

7.44% Oil Bonds Mat. 23/03/2012

Others

3.32%

3.22%

1.56%

1.10%

2.20%

Total 11.40%

Deposits, Money Market Securities and other Assets. 7.68%

Graphically presentation of Asset Allocation

Equity; 42.2

Debentures/Bonds; 38.73

Dep,MMI & others;

7.68

Governmnet securities; 11.4

Allocation By “Sector wise”

28

Page 29: ULIP FUND PERFORMANCE- HDFC SLIC.docx

Finance

Oil & Gas

Capital Goods

Fast Moving Consumer Goods

Healthcare

Information Technology

Transport Equipments

Telecom

Metal,Metal Products & Mining

Power

Agriculture

Media & Publishing

Consumer Durables

Chmical & Petrochemical

0 5 10 15 20 25

Defensive Managed Investment

Objective :To enhance long term returns for a portfolio predominantly invested in fixed income securities by taking a moderate to medium exposure to equity and equity related securities. The equity exposure will be between 15%-30%.

Debentures/Bonds % to fund

29

Page 30: ULIP FUND PERFORMANCE- HDFC SLIC.docx

5.55% Export and Import Bank of India NCD Mat 27/11/20126.40% National Housing Bank NCD Mat - 27/01/2013.7.45% LIC Housing Finance Ltd. MAT - 21-JULY-20127.76% LIC Housing Finance Ltd. MAT - 06-Nov-201211.45% Reliance Industries Ltd NCD 25/11/20139.15% Larsen & Tourbo Ltd. NCD Mat 05-Jan-201910.60% IRFC NCD Mat 11.09.2018IRFC PTC SERIES - A12 MAT 15-10-2015.0% IDFC LTD DDB Mat 04/11/20119.50% NABARD MAT 15/10/20128.46% IRFC NCD Mat 15.01.2014.10.95% Rural Elec Corp Ltd NCD Mat 14/08/20117.75% Rural Elec Corp Ltd NCD Mat 17/11/201210.00% IDFC NCD Mat 16 Dec 2013.0% HDFC LTD DDB MAT 24/08/2011.

3.72%3.05%2.52%1.99%1.97%1.97%1.85%1.81%1.77%1.65%1.59%1.51%1.44%1.41%1.28%

Debentures/Bonds % to fund

11.50% Rural Elec Corp Ltd NCD Mat 26/11/201310.90% Rural Elec Corp Ltd NCD Mat 14/08/20139.55% Power Finance Corp Ltd NCD Mat 09/06/20116.55% National Housing Bank NCD Mat - 20/11/2012.9.90% HDFC LTD NCD MAT 19/12/201311.35% Rural Elec Corp Ltd NCD Mat 24/10/2013Others

1.27%1.24%1.18%1.15%1.15%1.01%

18.34%

Total 54.84%

Equity % to fund

Reliance Industries LtdInfosys Technologies LtdOthers

1.18%1.11%18.63%

Total 20.92%

30

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Government securities % to fund

7.56% GOI MAT 03/11/20146.35% GOI 02/01/20208.20% GOI 15/02/2022Others

3.67%1.38%1.16%2.63%

Total 8.84%

Deposits, Money Mkt Securities and other Assets. 15.40%

Graphically presentation of” asset allocation”:

Equity; 20.92

Govt. securities; 8.84

Dep,MMI; 15.4

Debentures; 54.84

31

Page 32: ULIP FUND PERFORMANCE- HDFC SLIC.docx

Allocation by sector:

Finance

capital goods

oil & gas

FMCG

Healthcare

IT

Transport equipment

power

telecom

Metal,metal product & mining

Consumer durable

Agriculture

Media & Publishing

Chemical & Petrochemical

0 5 10 15 20 25

EQUITY MANAGED INVESTMENT:

Fund Objective :To achieve long term capital appreciation by investing pre-dominantly in equity and equity related securities and balancing it by shifting assets to the fixed income securities depending on the fund manager's views. The minimum allocation to equity will be 60%.

Debentures/Bonds % to fund

5.55% Export and Import Bank of India NCD Mat 27/11/20120% HDFC LTD DDB MAT 24/08/2011.6.85% LIC Housing Finance Ltd. MAT - 28-Sep-20116.90% Power Finance Corp Ltd NCD Mat 11/05/20128.25% ICICI Securities Primary Dealership Ltd NCD Mat - 21/02/2012Others

2.35%2.31%1.78%1.07%1.04%4.59%

Total

32

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13.14%

EQUITY % to fund

Infosys Technologies LtdReliance Industries LtdICICI Bank LtdState Bank of IndiaLarsen & Toubro LimitedCrompton Greaves LtdBHARTI AIRTEL LTDITC LtdUnion Bank Of IndiaPunjab National BankBank of BarodaBharat Heavy Electricals LtdRURAL ELECTRIFICATION CORPORATION LTDUnited Phosphorous LimitedZee Entertainment Enterprises LtdOil & Natural Gas Corporation LtdSiemens LtdTata Steel LtdNational Thermal Power Corporation LtdGlaxo Smithkline ConsNestle India LimitedColgate Palmolive (India) Ltd

6.13%4.87%4.36%3.33%3.20%2.85%2.77%2.37%2.31%2.22%2.19%2.13%2.10%2.09%2.02%2.01%1.99%1.85%1.83%1.80%1.78%1.76%

Equity % to fund

Blue Star LimitedSun Pharmaceuticals Industries LtdMahindra & Mahindra LtdAsian Paints (India) LtdOIL INDIA LIMITEDDivis Laboratories ltdExide Industries LtdPower Finance Corporation LtdAMTEK AUTO LTDIndraprastha Gas LtdIPCA Laboratories LtdDishman Pharmaceuticals & chemicals LimitedOthers

1.75%1.69%1.64%1.50%1.46%1.44%1.43%1.24%1.13%1.12%1.04%1.02%3.82%

33

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Total78.25%

Govt. securities % to fund

7% Oil Bonds Mat 09.Sep.2012Others

2.12%1.17%

Total 3.29%

Deposits, Money Mkt Securities and other Assets. 5.32%

Graphically presentation of “Asset allocation”:

34

Page 35: ULIP FUND PERFORMANCE- HDFC SLIC.docx

Equity; 78.25

Govt securi-ties; 3.29

Dep,MMI & others; 5.32

Debentures/Bonds; 13.14

ALLOCATION OF ASSET WISE

35

Page 36: ULIP FUND PERFORMANCE- HDFC SLIC.docx

Finan

ce

capita

l goods

oil & ga

sFM

CG

Health

care IT

Transp

ort eq

uipment

power

teleco

m

Metal,m

etal p

roduct

& mining

Consumer

durable

Agricu

lture

Media

& Publishing

Chemica

l & Petr

ochem

ical

Constructi

on

23.52

13.4512.09 11.24

6.64 7.845.92

2.99 3.53 3.32 2.24 2.68 2.58 1.910.06

Allocation by Sector

GROWTH FUND INVESTMENT:

Fund Objective: To generates long term capital appreciation from a diversified portfolio of equity and equity related securities.

Equity % to fund

Infosys Technologies LtdReliance Industries LtdICICI Bank LtdCrompton Greaves LtdBharat Heavy Electricals LtdOil & Natural Gas Corporation LtdState Bank of IndiaLarsen & Toubro LimitedSiemens LtdBHARTI AIRTEL LTDSun Pharmaceuticals Industries LtdUnion Bank Of IndiaNestle India LimitedITC Ltd

6.94%5.57%5.56%5.34%4.18%4.09%4.04%3.72%3.11%3.08%2.89%2.83%2.74%2.65%

Equity % to

36

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fund

Asian Paints (India) LtdBank of BarodaTata Steel LtdColgate Palmolive (India) LtdExide Industries LtdUnited Phosphorous LimitedZee Entertainment Enterprises LtdRURAL ELECTRIFICATION CORPORATION LTDPunjab National BankBlue Star LimitedOIL INDIA LIMITEDNational Thermal Power Corporation LtdGlaxo Smithkline ConsDivis Laboratories ltdMahindra & Mahindra LtdPower Finance Corporation LtdDishman Pharmaceuticals & chemicals LimitedSterlite Industries Limited.Others

2.63%2.62%2.59%2.57%2.49%2.34%2.33%2.15%2.09%1.96%1.90%1.86%1.79%1.79%1.72%1.49%1.02%1.01%3.69%

Total96.76%

Deposits, Money Mkt Securities and other Assets. 3.24%

Graphically presentation of “Asset class”:

Equity; 96.76

Dep,MMI & Others; 3.24

37

Page 38: ULIP FUND PERFORMANCE- HDFC SLIC.docx

Finan

ce

capita

l goods

oil & ga

sFM

CG

Health

care IT

Transp

ort eq

uipment

power

teleco

m

Metal,m

etal p

roduct

& mining

Consumer

durable

Agricu

lture

Media

& Publishing

Chemica

l & Petr

ochem

ical

Cemen

t

Constructi

on

22.25

16.89

11.95 10.94

6.64 7.174.9

2.52 3.18 3.722.02 2.42 2.41 2.72

0.19 0.06

Allocation by Sector

LIQUID FUND INVESTMENT:

Fund Objective :To deliver returns linked to Money Market levels with minimal interest rate risk and minimal credit risk so as to provide a high level of safety of capital.

Deposits, Money Market Securities and other Assets. 100.00%

Dep,MMI & Others100%

Asset Class

38

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SECURED MANAGED INVESTMENT:

Fund Objective :To provide reasonable returns through investments in high credit quality debt instruments while maintaining an optimal level of interest rate risk.

Debentures/Bonds % to Fund

0% IDFC LTD DDB Mat 15/04/20119.50% Export and Import Bank of India NCD Mat 12/12/20139.25% Export and Import Bank of India NCD Mat 18/12/20138.46% IRFC NCD Mat 15.01.2014.9.50% National Bank for Agriculture & Rural Development MAT 15/10/20129.90% Power Finance Corp Ltd NCD Mat 30/03/20170% Sundaram Finance NCD Mat 15-Sep-20110% IDFC LTD DDB Mat 04/11/201111.45% Reliance Industries Ltd NCD 25/11/20136.55% National Housing Bank NCD Mat - 20/11/2012.9.45% Citi Financial Consumer Finance India Ltd MD 03 Dec 2010.7.45% LIC Housing Finance Ltd. MAT - 21-JULY-20128.40% Sundaram Finance NCD Mat 06/07/20116.75% National Housing Bank NCD Mat - 21/12/20128.45% Rural Elec Corp Ltd NCD Mat 19/02/20159.08% HDFC LTD NCD Mat 18-Jan-20138.90% Steel Authority of India Ltd (SAIL) NCD Mat 01/05/2019.10.00% IDFC NCD Mat 16 Dec 2013.8.90% Power Finance Corp NCD mat 16/02/20148.90% STATE BANK OF INDIA NCD MD 19-DEC-2023.10.00% NABARD Mat 14.05.20129.85% Rural Ele Corp NCD 28-Sep-2017Others

7.00%5.74%5.33%5.25%3.70%2.76%2.64%2.62%2.16%1.88%1.88%1.78%1.75%1.65%1.63%1.57%1.57%1.50%1.50%1.17%1.11%1.05%

10.67%

Total67.89%

Government securities % to fund

7.44% Oil Bonds Mat. 23/03/20127.32% GOI 2014 Mat 20/10/20147.61% Oil Bonds Mat 07/03/20156.35% GOI 02/01/2020Others

4.25%3.37%1.81%1.27%3.56%

Total 14.26%

39

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Deposits, Money Market Securities and other Assets. 17.85%

Graphically presentation of “Asset Class”.

Debentures/Bonds; 67.89

Govt securities; 14.26

Dep,MMI,Othe

rs; 17.85

SOVEREIGN FUND LIFE

Fund Objective :To generate high returns through investments in Central and State Government securities such that credit risk is alleviated and the returns are commensurate to the interest rate risks.

Govt. securities % to fund

7.02% GOI MAT 17/08/20167.27% GOI 03/09/20139.39% GOI Mat 02/07/20117.61% Oil Bonds Mat 07/03/20157.59% GOI 2016

28.86%28.47%17.82%12.25%

8.50%

Total95.90%

40

Page 41: ULIP FUND PERFORMANCE- HDFC SLIC.docx

Deposits, Money Market Securities and other Assets. 4.10%

STABLE MANAGED LIFE:

Fund Objective :To generate optimal returns for investors through short term investments in high credit quality securities so as to keep interest rate risks low and provide safety of capital over the medium term horizon.

Debentures/Bonds % to fund

8.00% Infrastructure Dev Fin Corp NCD Mat 13 Apr 20116.75% LIC Housing Finance Ltd. MAT - 13-May-20116.90% LIC Housing Finance Ltd. Mat. 23-Apr-20116.84 % HDFC LTD NCD MAT 22/04/20119.80% GE Money Fin Ser Mat 25 Apr 117.75% TECH MAHINDRA LIMITED NCD MAT 24/03/20110% IDFC LTD DDB Mat 15/04/20119.55% Power Finance Corp Ltd NCD Mat 09/06/2011Others

18.42%8.33%5.48%5.40%5.21%1.82%1.60%1.51%2.29%

Total50.06%

Deposits, Money Market Securities and other Assets. 49.94%

Graphically presentation of” Asset Class”:

Debentures/Bonds; 50.06

Dep,MMI & Others; 49.94

41

Page 42: ULIP FUND PERFORMANCE- HDFC SLIC.docx

LIFE FUND SERIES II

Balanced Managed Investment:

Fund Objective :To generate long term capital appreciation along with current income from a combined portfolio of equity and debt market instruments. The equity exposure will be between 30%-60%.

Debentures/Bonds % to fund

10.95% Rural Elec Corp Ltd NCD Mat 14/08/201111.50% Rural Elec Corp Ltd NCD Mat 26/11/201311.35% Rural Elec Corp Ltd NCD Mat 24/10/20135.55% Export and Import Bank of India NCD Mat 27/11/201211.45% Reliance Industries Ltd NCD 25/11/2013Others

9.58%2.84%2.21%1.45%1.42%

10.68%

Total28.18%

Equity % to fund

Punjab National BankInfosys Technologies LtdReliance Industries LtdCrompton Greaves LtdICICI Bank LtdState Bank of IndiaIPCA Laboratories LtdUnion Bank Of IndiaBHARTI AIRTEL LTDNestle India LimitedOil & Natural Gas Corporation LtdLarsen & Toubro LimitedTata Steel LtdRURAL ELECTRIFICATION CORPORATION LTDPower Finance Corporation LtdBank of BarodaSun Pharmaceuticals Industries LtdOthers

3.17%2.57%2.07%1.88%1.76%1.76%1.74%1.44%1.33%1.18%1.16%1.12%1.09%1.05%1.03%1.03%1.01%

14.94%

Total 41.32%

42

Page 43: ULIP FUND PERFORMANCE- HDFC SLIC.docx

Govt. Securities % to fund

6.35% GOI 02/01/20206.07% GOI MAT 15/05/20147.44% Oil Bonds Mat. 23/03/20127.61% Oil Bonds Mat 07/03/2015Others

6.11%1.80%1.39%1.17%3.14%

Total 13.62%

Deposits, Money Market Securities and other Assets. 16.89%

Graphically presentation of “Asset allocation”:

Equity; 41.32

Government Securities; 13.62

Dep,MMI & Others; 16.89

Debentures/Bonds; 28.18

43

Page 44: ULIP FUND PERFORMANCE- HDFC SLIC.docx

Graphically presentation of “Allocation by sector”:

Finan

ce

capita

l goods

oil & ga

s

FMCG

Health

care IT

Tran

sport

equip

men

t

power

telec

om

Met

al,m

etal

product

& min

ing

Consum

er d

urable

Agricu

lture

Med

ia & P

ublishin

g

Chemica

l & P

etro

chem

ical

0

5

10

15

20

25

3027.77

11.9 12.389.42 10.24

6.22 5.072.28 3.21 4.3

1.49 1.77 2.11 1.67

Defensive Managed Investment:

Fund Objective :To enhance long term returns for a portfolio predominantly invested in fixed income securities by taking a moderate to medium exposure to equity and equity related securities. The equity exposure will be between 15%-30%.

Debentures/Bonds % to fund

6% Export and Import Bank of India NCD Mat 07/01/201310.75%10.00% IDFC NCD Mat 16 Dec 2013.6.90% Power Finance Corp Ltd NCD Mat 11/05/20128.40% Sundaram Finance NCD Mat 06/07/20110% IDFC LTD DDB Mat 04/11/20117.76% LIC Housing Finance Ltd. MAT - 06-Nov-20127.75% Rural Elec Corp Ltd NCD Mat 17/11/20129.50% Export and Import Bank of India NCD Mat 12/12/201311.15% PFC NCD mat 15/09/20117.45% Tata Capital Ltd NCD Mat 21/01/20115.55% Export and Import Bank of India NCD Mat 27/11/2012Others

6.62%4.95%4.81%2.86%2.20%2.19%1.81%1.42%1.13%1.08%2.56%

Total 42.37%

Equity % to fund

Others

17.41%

44

Page 45: ULIP FUND PERFORMANCE- HDFC SLIC.docx

Govt. Securities % to fund

7.59% GOI 20166.35% GOI 02/01/20206.07% GOI MAT 15/05/2014Others

8.75%7.23%2.33%1.09%

Total 19.41%

Deposits, Money Market Securities and other Assets. 20.80%

Graphically presentation of “Asset Allocation”

Equity; 17.41

Government Securities; 19.41

Dep,MMI & Others; 20.8

Debentures/Bonds; 42.37

Graphically presentation of Allocation by sector:

45

Page 46: ULIP FUND PERFORMANCE- HDFC SLIC.docx

0

5

10

15

20

25

0 0 0 0 0 0 0 0 0 0 0 0 0 0

21.35

16.94

15.08

10.64

7.03

4.86 4.633.7 3.67 3.49

2.59 2.411.62 1.78

Equity Managed Investment:

Fund Objective :To achieve long term capital appreciation by investing pre-dominantly in equity and equity related securities and balancing it by shifting assets to the fixed income securities depending on the fund manager's views. The minimum allocation to equity will be 60%.

Debentures/Bonds % to fund

6.85% LIC Housing Finance Ltd. MAT - 28-Sep-20115.55% Export and Import Bank of India NCD Mat 27/11/2012Others

3.02%2.27%4.18%

Total9.47%

Equity

Reliance Industries Ltd 4.87%Punjab National Bank 4.30%Infosys Technologies Ltd 3.85%Oil & Natural Gas Corporation Ltd 3.69%ICICI Bank Ltd 3.57%Crompton Greaves Ltd 3.40%Larsen & Toubro Limited 3.06%State Bank of India 2.77%OIL INDIA LIMITED 2.42%

46

Page 47: ULIP FUND PERFORMANCE- HDFC SLIC.docx

BHARTI AIRTEL LTD 2.36%Union Bank Of India 2.14%Nestle India Limited 1.94%Siemens Ltd 1.83%Asian Paints (India) Ltd 1.83%Divis Laboratories ltd 1.82%Bank of Baroda 1.78%Mahindra & Mahindra Ltd 1.77%Colgate Palmolive (India) Ltd 1.76%Power Finance Corporation Ltd 1.71%Zee Entertainment Enterprises Ltd 1.68%RURAL ELECTRIFICATION CORPORATION LTD 1.65%Tata Steel Ltd 1.59%ITC Ltd 1.54%United Phosphorous Limited 1.52%Sun Pharmaceuticals Industries Ltd 1.32%Blue Star Limited 1.28%National Thermal Power Corporation Ltd 1.24%Exide Industries Ltd 1.11%

Equity % to fund

Glaxo Smithkline ConsPower Grid Corporation of India LtdBharat Heavy Electricals LtdDishman Pharmaceuticals & chemicals LimitedOthersTotal

1.09%1.08%1.03%1.02%6.05%

74.10%

Govt securities % to fund

7.32% GOI 2014 Mat 20/10/2014OthersTotal

1.14%0.75%1.89%

Deposits, Money Market Securities and other Assets. 14.54%

Graphically presentation of Asset class:

47

Page 48: ULIP FUND PERFORMANCE- HDFC SLIC.docx

Equity; 74.1

Government Securities;

1.89Dep,MMI & Others; 14.54

Debentures/Bonds; 9.47

Allocation by Sector:

Finan

ce

capita

l goods

oil & ga

s

FMCG

Health

care IT

Tran

sport

equip

men

t

power

telec

om

Met

al,m

etal

product

& min

ing

Consum

er d

urable

Agricu

lture

Med

ia & P

ublishin

g

Chemica

l & P

etro

chem

ical

0

5

10

15

20

25

3025.16

12.84

17.31

9.126.69

5.2 5.113.14 3.19 3.27

1.72 2.05 2.27 2.46

48

Page 49: ULIP FUND PERFORMANCE- HDFC SLIC.docx

GROWTH FUND INVESTMENT:

Fund Objective :To generate long term capital appreciation from a diversified portfolio of equity and equity related securities.

Equity % to fund

Infosys Technologies LtdReliance Industries LtdICICI Bank LtdCrompton Greaves LtdOil & Natural Gas Corporation LtdLarsen & Toubro LimitedBank of BarodaPower Finance Corporation LtdState Bank of IndiaBHARTI AIRTEL LTDUnion Bank Of IndiaNestle India LimitedAsian Paints (India) LtdColgate Palmolive (India) LtdPunjab National BankBharat Heavy Electricals LtdSun Pharmaceuticals Industries LtdMahindra & Mahindra LtdZee Entertainment Enterprises LtdRURAL ELECTRIFICATION CORPORATION LTDOIL INDIA LIMITED

6.90%5.62%5.15%4.99%4.35%3.30%3.18%3.10%3.00%2.81%2.77%2.64%2.57%2.55%2.54%2.50%2.45%2.20%2.20%2.19%2.19%

Equity % to fund

Tata Steel LtdSiemens LtdNational Thermal Power Corporation LtdDivis Laboratories ltdGlaxo Smithkline ConsExide Industries LtdBlue Star LimitedUnited Phosphorous LimitedITC LtdShree Cement LimitedDabur India LtdSterlite Industries Limited.Others

2.13%2.03%1.79%1.68%1.66%1.62%1.55%1.52%1.46%1.17%1.03%1.01%

5.11%

49

Page 50: ULIP FUND PERFORMANCE- HDFC SLIC.docx

Total 92.94%

Deposits, Money Market Securities and other Assets. 7.06%

Allocation by sector:

Finan

ce

capita

l goods

oil & ga

sFM

CG IT

Health

care

Transp

ort Eq

uipment

Metal,M

etal P

roduct

& Mining

Telec

om

Chemica

l & Petr

ochem

ical

Power

Media

& Publishing

Consumer

Durables

Agricu

lture

Cemen

t

Constructi

on0

5

10

15

20

2524.07

14.05 13.59

10.53

7.426.16 5.43

3.39 3.08 2.77 2.63 2.36 1.67 1.64 1.260.03

Liquid Fund Investment:

Fund Objective :To deliver returns linked to Money Market levels with minimal interest rate risk and minimal credit risk so as to provide a high level of safety of capital

Deposits, Money Market Securities and other Assets. 100.00%

Secured Managed Investment:

50

Page 51: ULIP FUND PERFORMANCE- HDFC SLIC.docx

Fund Objective :To provide reasonable returns through investments in high credit quality debt instruments while maintaining an optimal level of interest rate risk.

Debentures/Bonds % to fund

10.00% NABARD Mat 14.05.20126% Export and Import Bank of India NCD Mat 07/01/20138.40% Sundaram Finance NCD Mat 06/07/20115.55% Export and Import Bank of India NCD Mat 27/11/20126.90% Power Finance Corp Ltd NCD Mat 11/05/20128.46% IRFC NCD Mat 15.01.2014 .0% Sundaram Finance NCD Mat 15-Sep-20119.50% National Bank for Agriculture & Rural Development MAT 15/10/20127.45% LIC Housing Finance Ltd. MAT - 21-JULY-20120% HDFC LTD DDB MAT 24/08/2011.9.90% HDFC LTD NCD MAT 19/12/201310.60% IRFC NCD Mat 11.09.20186.40% National Housing Bank NCD Mat - 27/01/2013.9.50% Export and Import Bank of India NCD Mat 12/12/20139.25% Export and Import Bank of India NCD Mat 18/12/20138.75% IDFC NCD Mat 20 JULY 2010OthersTotal

15.50%9.14%7.00%5.13%4.78%4.53%3.67%2.55%1.90%1.89%1.85%1.79%1.73%1.54%1.24%1.07%6.73%

72.02%

Govt. Securities % to fund

7.02% GOI MAT 17/08/20166.35% GOI 02/01/20207.61% Oil Bonds Mat 07/03/20156.07% GOI MAT 15/05/2014OthersTotal

5.51%3.94%2.81%2.25%1.20%

15.71%

Stable Managed Life:51

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Fund Objective :To generate optimal returns for investors through short term investments in high credit quality securities so as to keep interest rate risks low and provide safety of capital over the medium term horizon.

Debentures/Bonds % to fund

8.00% Infrastructure Dev Fin Corp NCD Mat 13 Apr 20116.84 % HDFC LTD NCD MAT 22/04/20110% IDFC LTD DDB Mat 15/04/20116.75% LIC Housing Finance Ltd. MAT - 13-May-20118.00% Housing Dev Finance Corp Ltd NCD MAT 08/04/2011.10.70% GE Capital Ser NCD 06.06.1110.27% Sundaram Fin Co NCD MD 03-SEP-20109.80% GE Money Fin Ser Mat 25 Apr 116.90% LIC Housing Finance Ltd. Mat. 23-Apr-2011Total

14.73%12.07%11.36%8.76%5.23%3.93%3.28%2.82%2.32%

64.50%

Deposits, Money Market Securities and other Assets. 35.50%

PENSION SERIES I:

Balanced Managed Investment:

Fund Objective: To generate long term capital appreciation along with current income from a combined portfolio of equity and debt market instruments. The equity exposure will be between 30%-60%.

Debentures/Bonds % to fund

8.55% Power Finance Corp Ltd NCD Mat 07/09/20116% Export and Import Bank of India NCD Mat 07/01/2013

4.71%2.61%

52

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8.80% Power Grid Corp of India Ltd Mat- 29-Sep-201510.95% Rural Elec Corp Ltd NCD Mat 14/08/20110% IDFC LTD DDB Mat 04/11/201110.00% IDFC NCD Mat 16 Dec 2013.0% HDFC LTD DDB MAT 24/08/2011.9.15% Larsen & Tourbo Ltd. NCD Mat 05-Jan-20196.55% National Housing Bank NCD Mat - 20/11/20129.90% Housing Dev Finance Corp Ltd NCD MAT 29/12/2018

8.10% Shree Cement Ltd. Mat 23/11/20121.19%9.32% Housing Dev Finance Corp Ltd NCD MAT 17/12/2012Others

2.12%1.84%1.81%1.69%1.43%1.33%1.30%1.20%

1.19%1.17%

15.78%

Equity % to fund

Infosys Technologies LtdReliance Industries LtdICICI Bank LtdBharat Heavy Electricals LtdBHARTI AIRTEL LTDLarsen & Toubro LimitedState Bank of IndiaCrompton Greaves LtdTata Steel LtdOil & Natural Gas Corporation LtdITC LtdBank of BarodaUnion Bank Of IndiaSiemens LtdPunjab National BankOthersTotal

2.99%2.66%1.85%1.83%1.79%1.65%1.63%1.58%1.57%1.57%1.38%1.12%1.12%1.10%1.02%

16.97%41.82%

53

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Govt. securities % to fund

7.56% GOI MAT 03/11/20147.32% GOI 2014 Mat 20/10/20147.02% GOI MAT 17/08/2016OthersTotal

4.76%3.40%1.25%3.18%

12.60%

Deposits, Money Market Securities and other Assets. 7.39%

Graphically presentation of Asset class

Equity; 41.82

Government Securities; 12.6Dep,MMI &

Others; 7.39

Debentures/Bonds; 38.19

54

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Graphically presentation of Allocation by sector:

Finan

ce

capita

l goods

oil & ga

sFM

CG

Health

care IT

Transp

ort eq

uipment

power

teleco

m

Metal,m

etal p

roduct

& mining

Consumer

durable

Agricu

lture

Media

& Publishing

Chemica

l & Petr

ochem

ical

0

5

10

15

20

2520.59

15.3513.75

10.84

7.24 7.165.47

3.39 4.28 4.76

1.92 1.36 2.03 1.7

Defensive Managed Investment:

Fund Objective :To enhance long term returns for a portfolio predominantly invested in fixed income securities by taking a moderate to medium exposure to equity and equity related securities. The equity exposure will be between 15%-30%.

Debentures/Bonds % to fund

8.50% Export and Import Bank of India Mat 12/09/20119.50% NABARD MAT 15/10/20127.45% LIC Housing Finance Ltd. MAT - 21-JULY-20128.75% IDFC NCD Mat 20 JULY 20107.76% LIC Housing Finance Ltd. MAT - 06-Nov-20129.80% LIC Housing Finance Ltd. Mat. 22-Oct-2017IRFC PTC SERIES - A7 MAT 15-04-2013.6.55% National Housing Bank NCD Mat - 20/11/2012.9.00% Tata Sons Ltd MD 27-JUL-20108.90% Power Finance Corp NCD mat 16/02/20149.50% Export and Import Bank of India NCD Mat 12/12/20139.15% Larsen & Tourbo Ltd. NCD Mat 05-Jan-2019

5.01%4.58%3.84%3.26%2.64%2.55%2.42%2.41%2.14%2.09%1.92%1.88%

55

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7.45% Tata Capital Ltd NCD Mat 21/01/20118.55% Power Finance Corp Ltd NCD Mat 07/09/20119.90% Sundaram Finance NCD Mat 06/08/20109.25% Export and Import Bank of India NCD Mat 18/12/201310.48 % GRASIM NCD MD 16 DECEMBER 2013OthersTotal

1.76%1.46%1.33%1.20%1.04%

10.89%52.40%

Equity % to fund

Infosys Technologies LtdICICI Bank LtdReliance Industries LtdOthersTotal

1.12%1.09%1.01%

15.15%18.37%

Govt. securities % to fund

6.35% GOI 02/01/20207.44% Oil Bonds Mat. 23/03/20127.56% GOI MAT 03/11/2014

6.72%3.48%2.79%

11.03% GOI 18/07/2012OthersTotal

2.18%0.59%

15.76%

Deposits, Money Market Securities and other Assets. 13.47%

56

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Graphically presentation of Asset class:

Equity; 18.37

Government Securities; 15.76

Dep,MMI & Others;

13.47

Debentures/Bonds; 52.4

Graphically presentation of Allocation by sector:

Finan

ce

capita

l goods

oil & ga

s

FMCG

Health

care IT

Tran

sport

equipmen

t

power

telec

om

Meta

l,meta

l pro

duct & m

ining

Consumer

durable

Agricu

lture

Med

ia & Publis

hing

Chemica

l & Petr

ochem

ical

Constructi

on0

5

10

15

20

2523.92

14.6 13.66

7.79 8.096.08

4.39 3.88 3.164.37

2.25 3.24

0.34 0.16 0.07

Equity managed Investment:

Fund Objective :To achieve long term capital appreciation by investing pre-dominantly in equity and equity related securities and balancing it by shifting assets to the fixed income securities depending on the fund manager's views. The minimum allocation to equity will be 60%.

Debentures/Bonds % to fund57

Page 58: ULIP FUND PERFORMANCE- HDFC SLIC.docx

5.55% Export and Import Bank of India NCD Mat 27/11/20126.85% LIC Housing Finance Ltd. MAT - 28-Sep-20110% HDFC LTD DDB MAT 24/08/2011.8.25% ICICI Securities Primary Dealership Limited NCD Mat - 21/02/2012OthersTotal

3.36%3.31%1.49%1.48%2.48%

12.11%

Equity % to fund

Reliance Industries LtdInfosys Technologies LtdICICI Bank LtdCrompton Greaves LtdLarsen & Toubro LimitedSun Pharmaceuticals Industries LtdState Bank of IndiaBharat Heavy Electricals LtdOil & Natural Gas Corporation LtdBHARTI AIRTEL LTDTata Steel LtdUnion Bank Of IndiaITC LtdRURAL ELECTRIFICATION CORPORATION LTDUnited Phosphorous LimitedBank of BarodaZee Entertainment Enterprises LtdSiemens LtdAsian Paints (India) LtdBlue Star LimitedNestle India LimitedGlaxo Smithkline ConsNational Thermal Power Corporation Ltd

4.99%4.86%4.07%3.68%3.21%2.87%2.81%2.78%2.76%2.62%2.59%2.40%2.30%2.18%2.15%2.12%2.04%2.02%1.97%1.97%1.96%1.94%1.78%

Colgate Palmolive (India) LtdPunjab National BankDivis Laboratories ltdMahindra & Mahindra LtdOIL INDIA LIMITEDExide Industries LtdAMTEK AUTO LTDIndraprastha Gas LtdDishman Pharmaceuticals & chemicals LimitedIPCA Laboratories LtdPower Finance Corporation LtdOthers

1.76%1.63%1.51%1.50%1.43%1.40%1.22%1.13%1.11%1.07%1.02%3.93%

58

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Total 80.80%

Govt. securities % to fund

7% Oil Bonds Mat 09.Sep.2012OthersTotal

2.82%0.34%3.16%

Deposits, Money Market Securities and other Assets. 3.93%

Graphically presentation of Asset Class:

Equity; 80.8

Govern-ment Se-curities;

3.16

Dep,MMI & Others;

3.93

Debentures/Bonds; 12.11

Graphically presentation of Asset Allocation:

59

Page 60: ULIP FUND PERFORMANCE- HDFC SLIC.docx

Finan

ce

capita

l goods

oil & ga

s

FMCG

Health

care IT

Tran

sport

equip

men

t

power

telec

om

Met

al,m

etal

product

& min

ing

Consum

er d

urable

Agricu

lture

Med

ia & P

ublishin

g

Chemica

l & P

etro

chem

ical0

5

10

15

20

2521.07

14.9512.76

11.01

8.136.02 5.67

2.86 3.25 4.152.44 2.66 2.53 2.44

Growth fund:

Fund Objective :To generate long term capital appreciation from a diversified portfolio of equity and equity related securities.

Equity % to fund

Infosys Technologies LtdCrompton Greaves LtdReliance Industries LtdICICI Bank LtdState Bank of IndiaBharat Heavy Electricals LtdOil & Natural Gas Corporation LtdLarsen & Toubro LimitedUnited Phosphorous LimitedBHARTI AIRTEL LTDSiemens LtdSun Pharmaceuticals Industries LtdNestle IndiaITC LtdExide Industries LtdTata Steel LtdUnion Bank Of IndiaBank of Baroda

7.11%6.10%5.48%5.39%4.65%4.04%3.98%3.46%3.14%3.09%3.06%3.03%2.78%2.76%2.72%2.70%2.66%

2.64%

Asian Paints (India) LtdColgate Palmolive (India) LtdZee Entertainment Enterprises Ltd

2.64%2.60%2.40%

60

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Blue Star LimitedGlaxo Smithkline ConsRURAL ELECTRIFICATION CORPORATION LTDPunjab National BankNational Thermal Power Corporation LtdOIL INDIA LIMITEDDivis Laboratories ltdMahindra & Mahindra LtdPower Finance Corporation LtdDishman Pharmaceuticals & chemicals LimitedOthersTotal

2.12%2.01%2.00%1.96%1.84%1.72%1.70%1.67%1.28%1.15%4.09%

97.96%

Deposits, Money Market Securities and other Assets. 2.04%

Graphically presentation of Allocation by sector:

Finan

ce

capita

l goods

oil & ga

sFM

CG

Health

care IT

Transp

ort eq

uipment

power

teleco

m

Metal,m

etal p

roduct

& mining

Consumer

durable

Agricu

lture

Media

& Publishing

Chemica

l & Petr

ochem

ical

Cemen

t

Constructi

on0

5

10

15

20

2521.77

17

11.4 11.05

6.49 7.264.99

2.42 3.16 3.722.17 3.2 2.45 2.69

0.16 0.06

61

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Liquid Fund:

Fund Objective: To deliver returns linked to Money Market levels with minimal interest rate risk and minimal credit risk so as to provide a high level of safety of capital.

Deposits, Money Market Securities and other Assets. 100.00

Secured Managed Fund:

Fund Objective: To provide reasonable returns through investments in high credit quality debt instruments while maintaining an optimal level of interest rate risk.

Debentures/Bonds % to fund

11.45% Reliance Industries Ltd NCD 25/11/20130% Sundaram Finance NCD Mat 15-Sep-20116.40% National Housing Bank NCD Mat - 27/01/2013.9.90% HDFC LTD NCD MAT 19/12/20138.90% Steel Authority of India Ltd (SAIL) NCD Mat 01/05/2019.10.48 % GRASIM NCD MD 16 DECEMBER 20139.50% National Bank for Agriculture & Rural Development MAT 15/10/20127.45% LIC Housing Finance Ltd. MAT - 21-JULY-20129.55% Citi Maruti Finance 05/10/20106% Export and Import Bank of India NCD Mat 07/01/20136.90% National Housing Bank NCD Mat - 30/10/201210.60% IRFC NCD Mat 11.09.20188.90% Power Finance Corp NCD mat 16/02/20149.08% HDFC LTD NCD Mat 18-Jan-20138.00% Infrastructure Dev Fin Corp NCD Mat 13 Apr 20119.25% Export and Import Bank of India NCD Mat 18/12/20130% IDFC LTD DDB Mat 04/11/201110.00% IDFC NCD Mat 16 Dec 2013.8.40% Sundaram Finance NCD Mat 06/07/20116.90% Power Finance Corp Ltd NCD Mat 11/05/20128.20% IRFC NCD MAT 27.04.2017.8.46% IRFC NCD Mat 15.01.2014.9.90% Housing Dev Finance Corp Ltd NCD MAT 29/12/2018.

3.53%3.48%2.82%2.79%2.67%2.64%2.61%2.53%2.45%2.43%2.07%1.96%1.92%1.87%1.79%1.77%1.73%1.71%1.55%1.53%1.47%1.46%1.31%

62

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7.20% Rural Elec Corp Ltd NCD Mat 17/03/201110.90% Rural Elec Corp Ltd NCD Mat 14/08/20138.80% Power Finance Corp Ltd NCD Mat 15/01/202510.00% NABARD Mat 14.05.2012OthersTotal

1.26%1.17%1.11%1.10%

13.45%68.18%

Govt, securities % to fund

7.61% Oil Bonds Mat 07/03/20157.56% GOI MAT 03/11/20147.32% GOI 2014 Mat 20/10/2014OthersTotal

9.34%5.33%4.99%4.03%

23.69%

Deposits, Money Market Securities and other Assets. 8.13%

Stable Managed Pension Fund:

Fund Objective :To generate optimal returns for investors through short term investments in high credit quality securities so as to keep interest rate risks low and provide safety of capital over the medium term horizon.

Debentures/Bonds % to fund

6.75% LIC Housing Finance Ltd. MAT - 13-May-20116.90% LIC Housing Finance Ltd. Mat. 23-Apr-20118.00% Housing Dev Finance Corp Ltd NCD MAT 08/04/2011 .6.84 % HDFC LTD NCD MAT 22/04/2019.80% GE Money Fin Ser Mat 25 Apr 110% IDFC LTD DDB Mat 15/03/2011OthersTotal

33.28%11.18%4.84%

14.09%2.71%1.53%0.81%

58.44%

Deposits, Money Market Securities and other Assets. 41.56%

63

Page 64: ULIP FUND PERFORMANCE- HDFC SLIC.docx

PENSION SERIES II:

Balance Managed Investment:

Fund Objective :To generate long term capital appreciation along with current income from a combined portfolio of equity and debt market instruments. The equity exposure will be between 30%-60%.

Debentures/Bonds % to fund

6.75% National Housing Bank NCD Mat - 21/12/20120% HDFC LTD DDB MD 10/01/20119.75% LIC Housing Finance Ltd. Mat. 24-Mar-201810.27% Sundaram Fin Co NCD MD 03-SEP-20108.90% Steel Authority of India Ltd (SAIL) NCD Mat 01/05/20199.15% Larsen & Tourbo Ltd. NCD Mat 05-Jan-20196.55% National Housing Bank NCD Mat - 20/11/2012.6.85% LIC Housing Finance Ltd. MAT - 28-Sep-2011HDFC BANK 9.92% MD 08/09/2036OthersTotal

3.93%2.64%2.55%2.53%2.03%1.87%1.54%1.39%1.25%

10.64%30.36%

Equity % to fund

Reliance Industries LtdInfosys Technologies LtdICICI Bank LtdDivis Laboratories ltdLarsen & Toubro LimitedCrompton Greaves LtdIPCA Laboratories LtdMahindra & Mahindra LtdOil & Natural Gas Corporation LtdBHARTI AIRTEL LTDUnion Bank Of IndiaState Bank of IndiaTata Steel LtdPower Finance Corporation LtdDabur India LtdBank of BarodaNational Thermal Power Corporation Ltd

2.75%2.48%2.13%2.03%1.83%1.67%1.65%1.64%1.46%1.36%1.34%1.31%1.16%1.14%1.10%1.10%1.08%

64

Page 65: ULIP FUND PERFORMANCE- HDFC SLIC.docx

Colgate Palmolive (India) Ltd 1.07%

Asian Paints (India) LtdSun Pharmaceuticals Industries LtdOthersTotal

1.07%1.04%

12.12%42.52%

Govt. securities % to fund

7.44% Oil Bonds Mat. 23/03/20126.07% GOI MAT 15/05/20146.35% GOI 02/01/2020OthersTotal

2.14%1.78%1.27%3.16%8.35%

Deposits, Money Market Securities and other Assets. 18.77%

Graphically presentation of Asset Class:

Equity; 42.52

Government Securities; 8.35000000000001

Dep,MMI & Others; 18.77

Debentures/Bonds; 30.36

65

Page 66: ULIP FUND PERFORMANCE- HDFC SLIC.docx

Graphically presentation of Allocation by Sector:

Finan

ce

capita

l goods

oil & ga

s

FMCG

Health

care IT

Tran

sport

equip

men

t

power

telec

om

Met

al,m

etal p

roduct

& minin

g

Consum

er dura

ble

Agricu

lture

Med

ia & P

ublishing

Chemica

l & P

etroch

emica

l0

5

10

15

20

2521.54

11.6513.45

9.6912.25

5.84 6.654.31

3.24.72

1.66 1.610.940000000000001

2.51

Defensive Managed Investment:

Fund Objective :To enhance long term returns for a portfolio predominantly invested in fixed income securities by taking a moderate to medium exposure to equity and equity related securities. The equity exposure will be between 15%-30%.

Debentures/Bonds % to fund

8.40% Sundaram Finance NCD Mat 06/07/201110.60% IRFC NCD Mat 11.09.20188.20 % IRFC NCD MAT 27/04/201211.45% Reliance Industries Ltd NCD 25/11/20130% HDFC LTD DDB MD 10/01/20119.50% NABARD MAT 15/10/20129.00% Tata Sons Ltd MD 27-JUL-20109.50% Export and Import Bank of India NCD Mat 12/12/20138.00% Housing Dev Finance Corp Ltd NCD MAT 08/04/20119.90% Housing Dev Finance Corp Ltd NCD MAT 23/12/20188.50% Export and Import Bank of India Mat 12/09/20117.76% LIC Housing Finance Ltd. MAT - 06-Nov-20126.90% National Housing Bank NCD Mat - 30/10/2012OthersTotal

7.55%4.73%3.92%3.39%2.81%2.00%1.98%1.96%1.61%1.61%1.57%1.52%1.14%3.27%

39.08%

66

Page 67: ULIP FUND PERFORMANCE- HDFC SLIC.docx

Equity % to fund

Reliance Industries LtdInfosys Technologies LtdOthersTotal

1.19%1.18%

14.84%17.22%

Govt. securities % to fund

6.35% GOI 02/01/20207.44% Oil Bonds Mat. 23/03/20127.32% GOI 2014 Mat 20/10/20146.07% GOI MAT 15/05/2014OthersTotal

8.46%7.79%6.56%3.29%2.33%

28.42%

Deposits, Money Mkt Securities and other Assets. 15.28%

Graphically presentation of Asset Class:

67

Page 68: ULIP FUND PERFORMANCE- HDFC SLIC.docx

Equity; 17.22

Government Securities; 28.42

Dep,MMI & Others; 15.28

Debentures/Bonds; 39.08

Graphically presentation of Allocation by Sector:

Finan

ce

capita

l goods

oil & ga

sFM

CG

Health

care IT

Transp

ort eq

uipment

power

teleco

m

Metal,m

etal p

roduct

& mining

Consumer

durable

Agricu

lture

Media

& Publishing

Chemica

l & Petr

ochem

ical

0

5

10

15

20

2524.84

13.3215.58

7.42 7.81 6.854.39 3.86 4.37 4.09

1.192.29 2.63

1.37

Equity Managed Investment:

68

Page 69: ULIP FUND PERFORMANCE- HDFC SLIC.docx

Fund Objective :To achieve long term capital appreciation by investing pre-dominantly in equity and equity related securities and balancing it by shifting assets to the fixed income securities depending on the fund manager's views. The minimum allocation to equity will be 60%.

Debentures/Bonds % to fund

6.85% LIC Housing Finance Ltd. MAT - 28-Sep-20119.70% Housing Dev Finance Corp Ltd NCD MAT 19/07/2017.OthersTotal

6.79%1.38%1.07%9.24%

Equity % to fund

Infosys Technologies LtdICICI Bank LtdOil & Natural Gas Corporation LtdReliance Industries LtdCrompton Greaves LtdPunjab National BankLarsen & Toubro LimitedState Bank of IndiaBank of BarodaOIL INDIA LIMITEDBHARTI AIRTEL LTDUnion Bank Of IndiaRURAL ELECTRIFICATION CORPORATION LTDNestle India LimitedSun Pharmaceuticals Industries LtdSiemens LtdTata Steel LtdAsian Paints (India) LtdColgate Palmolive (India) LtdPower Finance Corporation LtdNational Thermal Power Corporation LtdZee Entertainment Enterprises LtdMahindra & Mahindra LtdBharat Heavy Electricals Ltd

4.61%3.93%3.78%3.57%3.46%3.32%3.27%2.91%2.67%2.58%2.38%2.15%2.05%1.94%1.85%1.84%1.83%1.75%1.72%1.62%1.62%1.59%1.57%1.52%

69

Page 70: ULIP FUND PERFORMANCE- HDFC SLIC.docx

IPCA Laboratories LtdExide Industries LtdUnited Phosphorous LimitedDivis Laboratories ltdBlue Star LimitedPower Grid Corporation of India LtdGas Authority of India Ltd(GAIL)Indraprastha Gas LtdOthersTotal

1.49%1.37%1.35%1.33%1.32%1.28%1.24%1.03%5.28%

75.20%

Govt securities % to fund

Others 1.53%

Deposits, Money Market Securities and other Assets. 14.03%

Graphically presentation of Asset class:

Equity; 75.2

Government Securities;

1.53Dep,MMI & Others; 14.03

Debentures/Bonds; 9.24

Graphically presentation of Allocation by sector:

70

Page 71: ULIP FUND PERFORMANCE- HDFC SLIC.docx

Finan

ce

capita

l goods

oil & ga

sFM

CG

Health

care IT

Transp

ort eq

uipment

power

teleco

m

Metal,m

etal p

roduct

& mining

Consumer

durable

Agricu

lture

Media

& Publishing

Chemica

l & Petr

ochem

ical

0

5

10

15

20

25

3025.44

13.7116.21

7.38 7.38 6.13 5.53.85 3.17 3.3

1.76 1.79 2.12 2.32

Growth Fund:

Fund Objective: To generate long term capital appreciation from a diversified portfolio of equity and equity related securities.

Equity % to fund

Infosys Technologies LtdReliance Industries LtdOil & Natural Gas Corporation LtdCrompton Greaves LtdICICI Bank LtdPunjab National BankPower Finance Corporation LtdBharat Heavy Electricals LtdLarsen & Toubro LimitedOIL INDIA LIMITEDBank of BarodaState Bank of IndiaColgate Palmolive (India) LtdNestle India LimitedBHARTI AIRTEL LTDSun Pharmaceuticals Industries LtdAsian Paints (India) LtdUnion Bank Of IndiaZee Entertainment Enterprises Ltd

7.08%4.67%4.64%4.54%4.17%4.04%4.00%3.96%3.75%3.32%3.17%3.06%2.78%2.75%2.75%2.63%2.59%2.55%2.22%

71

Page 72: ULIP FUND PERFORMANCE- HDFC SLIC.docx

Siemens LtdITC LtdTata Steel LtdRURAL ELECTRIFICATION CORPORATION LTDMahindra & Mahindra LtdNational Thermal Power Corporation LtdExide Industries LtdDivis Laboratories ltdBlue Star LimitedUnited Phosphorous LimitedDabur India LtdGlaxo Smithkline ConsOthersTotal

2.21%2.18%1.96%1.88%1.74%1.71%1.60%1.58%1.39%1.24%1.18%1.14%5.68%

94.16%

Deposits, Money Market Securities and other Assets. 5.84%

Graphically presentation of Allocation by Sector:

Finan

ce

capita

l goods

oil &

gas

FMCG

Health

care IT

Tran

sport

equip

men

t

power

tele

com

Met

al,m

etal

pro

duct &

min

ing

Consum

er d

urable

Agricu

lture

Med

ia &

Publis

hing

Chemica

l & P

etro

chem

ical

0

5

10

15

20

2524.95

15.6113.51

11.09

6.077.52

4.422.68 2.92 3.08

1.47 1.32 2.36 2.75

Liquid Fund Investment:

Fund Objective :To deliver returns linked to Money Market levels with minimal interest rate risk and minimal credit risk so as to provide a high level of safety of capital.

Deposits, Money Market Securities and other Assets. 100.00%

Secured Managed Investment:72

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Fund Objective :To provide reasonable returns through investments in high credit quality debt instruments while maintaining an optimal level of interest rate risk

Debentures/Bonds % to fund

10.00% NABARD Mat 14.05.20128.00% Infrastructure Dev Fin Corp NCD Mat 13 Apr 20118.40% Sundaram Finance NCD Mat 06/07/20116.90% Power Finance Corp Ltd NCD Mat 11/05/20128.49% Power Finance Corp Ltd NCD Mat 09/10/20116.75% National Housing Bank NCD Mat - 21/12/20128.46% IRFC NCD Mat 15.01.2014.0% Sundaram Finance NCD Mat 15-Sep-20118.90% Power Finance Corp NCD mat 16/02/20149.55% Citi Maruti Finance 05/10/201010.10% STATE BANK OF INDIA NCD MD 12-SEP-20229.90% HDFC LTD NCD MAT 19/12/20136.55% National Housing Bank NCD Mat - 20/11/2012.

13.14%7.90%7.18%6.08%5.85%5.83%3.84%3.63%2.94%2.08%1.90%1.73%1.40%

.

9.50% National Bank for Agriculture & Rural Development MAT 15/10/20127.45% Tata Capital Ltd NCD Mat 21/01/201110.60% IRFC NCD Mat 11.09.20189.15% Larsen & Tourbo Ltd. NCD Mat 05-Jan-20198.80% Power Finance Corp Ltd NCD Mat 15/01/20259.25% Export and Import Bank of India NCD Mat 18/12/201310.90% Rural Elec Corp Ltd NCD Mat 14/08/20130% IDFC LTD DDB Mat 04/11/2011OthersTotal

1.25%1.22%1.21%1.20%1.16%1.09%1.07%1.03%1.60%

74.30%

Govt securities % to fund

6.35% GOI 02/01/20207.44% Oil Bonds Mat. 23/03/20127.02% GOI MAT 17/08/20166.07% GOI MAT 15/05/2014OthersTotal

5.53%1.85%1.63%1.27%2.61%

12.89%

Deposits, Money Market Securities and other Assets. 12.81%

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Stable Managed Pension:

Fund Objective: To generate optimal returns for investors through short term investments in high credit quality securities so as to keep interest rate risks low and provide safety of capital over the medium term horizon.

Debentures/Bonds % to fund

5.55% Export and Import Bank of India NCD Mat 27/11/20120% HDFC LTD DDB MAT 24/08/2011.6.75% LIC Housing Finance Ltd. MAT - 13-May-20110% IDFC LTD DDB Mat 15/03/20110% HDFC LTD DDB MD 10/01/20117.45% Tata Capital Ltd NCD Mat 21/01/20118.50% Export and Import Bank of India Mat 12/09/20118.00% Housing Dev Finance Corp Ltd NCD MAT 08/04/2011.8.00% Infrastructure Dev Fin Corp NCD Mat 13 Apr 20116.90% LIC Housing Finance Ltd. Mat. 23-Apr-2011 2.12%

19.37%18.69%8.43%7.87%7.59%5.91%4.24%3.91%3.48%

OthersTotal

0.85%82.46%

Deposits, Money Market Securities and other Assets. 17.54%

Wealth builder fund series:

Blue Chip Wealth Builder Fund:

Fund Objective :The fund aims to provide medium to long term capital appreciation by investing in a portfolio of predominantly large cap companies which can perform through economic and market cycles. The fund will invest at least 80% of the AUM in companies which have a market capitalization greater than the company with the least weight in BSE100 index. The fund may also invest upto 20% in money market instruments/cash.

Equity % to fund

Mahindra & Mahindra LtdUnion Bank Of IndiaPunjab National BankSterlite Industries Limited.Siemens LtdOIL INDIA LIMITED

12.71%8.75%7.39%6.01%5.12%4.88%

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Crompton Greaves LtdNestle India LimitedBank of BarodaPower Grid Corporation of India LtdAsian Paints (India) LtdReliance Industries LtdRURAL ELECTRIFICATION CORPORATION LTDBharat Heavy Electricals LtdPower Finance Corporation LtdOil & Natural Gas Corporation LtdITC LtdMaruti Suzuki India LtdLarsen & Toubro LimitedTata Steel LtdBHARTI AIRTEL LTDTotal

4.59%4.52%4.51%4.40%2.31%1.90%1.85%1.81%1.78%1.75%1.69%1.65%1.61%1.58%1.52%

82.35

Deposits, Money Market Securities and other Assets. 17.65%

Graphically presentation of Allocation by sector:

Finan

ce

capita

l goods

oil &

gas

FMCG IT

power

tele

com

Met

al,m

etal

pro

duct &

min

ing

Chemica

l & P

etro

chem

ical

0

5

10

15

20

25

3029.49

15.95

10.357.55

0

5.34

1.85

9.22

2.8

Income Wealth Builder Fund:

Fund Objective :The fund aims to provide superior returns through investments in high credit quality debt instruments while maintaining an optimal level of interest rate risk. The fund may also invest upto 20% in money market instruments/cash.

Debentures/Bonds % to fund

75

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6.90% National Housing Bank NCD Mat - 01/09/2012.8.94% LIC Housing Finance Ltd. Mat. 16-Jan-20116.55% National Housing Bank NCD Mat - 20/11/2012.8.00% Infrastructure Dev Fin Corp NCD Mat 13 Apr 20119.80% GE Money Fin Ser Mat 25 Apr 110% IDFC LTD DDB Mat 15/03/20115.55% Export and Import Bank of India NCD Mat 27/11/20120% IDFC LTD DDB Mat 15/04/20110% HDFC LTD DDB MAT 24/08/2011.0% HDFC LTD DDB MD 10/01/2011OthersTotal

12.03%11.23%10.20%8.43%8.36%7.27%6.27%5.76%4.03%2.95%2.49%

79.03%

Govt securities % to fund

7.02% GOI MAT 17/08/2016OthersTotal

3.93%0.82%4.75%

Deposits, Money Market Securities and other Assets. 16.22%

Opportunities Wealth Builder Fund:

Fund Objective: The fund aims to generate long term capital appreciation by investing pre-dominantly in mid cap stocks which are likely to be the blue chips of tomorrow. The fund will invest in stocks which have a market capitalization equal to or lower than the market capitalization of the highest weighted stock in the NSE CNX Midcap Index. The fund may also invest upto 20% in money market instruments/cash.

Equity % to fund

Exide Industries LtdAllahabad Bank.Indraprastha Gas LtdKarnataka Bank LimitedIPCA Laboratories LtdCastrol India Ltd

12.91%11.03%9.63%7.39%4.99%4.17%

76

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Thermax LtdGlaxo Smithkline ConsP & G Hygine & Health Care LtdMindTree LimitedDishman Pharmaceuticals & chemicals LimitedLupin Limited.Oriental Bank of CommerceApollo Tyres LtdColgate Palmolive (India) LtdAlstom Projects India Ltd.Ashok Leyland LtdAndhra BankOthersTotal

3.59%3.13%3.06%3.00%2.73%2.68%2.65%2.63%2.57%1.76%1.69%1.59%2.23%

83.42%

Deposits, Money Market Securities and other Assets. 16.58%

Graphically presentation of Allocation by sector:

Finan

ce

oil & ga

s

Health

care IT

Tran

sport

equip

men

t

power

Agricu

lture

0

5

10

15

20

25

30 27.16

17.18

12.47

3.6

20.64

1.03 1

Vantage Wealth Builder Fund:

Fund Objective :This is a fund of funds which will invest in the Income Wealth Builder Fund, Bluechip Wealth Builder Fund and Opportunities Wealth Builder Fund. The allocation to each fund will depend on the fund manager's market view and will be within the limits

77

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Debentures/Bonds % to fund

HDFC SL Income Wealth Builder Fund 39.65%

Equity % to fund

HDFC SL Opportunities Wealth Builder FundHDFC SL Blue Chip Wealth Builder FundTotal

33.97%26.38%60.35%

Wealth maximizer fund series :

Bond Opportunities Fund:

Fund Objective :To provide reasonable returns through investments in high credit quality debt instruments while maintaining an optimal level of interest rate risk.

Debentures/Bonds % to fund

IRFC PTC SERIES - A7 MAT 15-04-2013.7.76% LIC Housing Finance Ltd. MAT - 06-Nov-20126.55% National Housing Bank NCD Mat - 20/11/2012.11.45% Reliance Industries Ltd NCD 25/11/20138.00% Infrastructure Dev Fin Corp NCD Mat 13 Apr 20115.55% Export and Import Bank of India NCD Mat 27/11/201210.27% Sundaram Fin Co NCD MD 03-SEP-20100% HDFC LTD DDB MD 10/01/2011OthersTotal

4.45%3.96%3.81%2.39%2.36%1.77%1.34%1.19%9.40%

30.68%

78

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Govt securities % to fund

7.02% GOI MAT 17/08/20166.07% GOI MAT 15/05/20147.61% Oil Bonds Mat 07/03/20156.35% GOI 02/01/20207.59% GOI 20167.32% GOI 2014 Mat 20/10/20147.27% GOI 03/09/20137.56% GOI MAT 03/11/20147.44% Oil Bonds Mat. 23/03/2012OthersTotal

18.71%9.80%7.41%3.20%3.18%2.71%2.66%2.20%2.18%0.81%

52.87%

Deposits, Money Market Securities and other Assets. 16.45%

Graphically presentation of Asset Allocation:

Equity; 52.87

Dep,MMI & Others;

16.45

Debentures/Bonds; 30.68

79

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Large Cap Niche Life Fund:

Fund Objective :To generate long term capital appreciation from a diversified portfolio of pre-dominantly in large cap equity and equity related securities.

Equity % to fund

Reliance Industries LtdInfosys Technologies LtdICICI Bank LtdPunjab National BankState Bank of IndiaBharat Heavy Electricals LtdMaruti Suzuki India LtdTata Steel LtdCrompton Greaves LtdLarsen & Toubro LimitedITC LtdOil & Natural Gas Corporation LtdNestle India LimitedBHARTI AIRTEL LTDUnion Bank Of India

6.36%6.03%5.00%4.70%4.45%4.44%3.99%3.48%3.28%3.25%3.24%3.09%3.07%3.00%2.97%

Siemens LtdCipla LimitedSterlite Industries Limited.Power Grid Corporation of India LtdBank of BarodaRURAL ELECTRIFICATION CORPORATION LTDMahindra & Mahindra LtdPower Finance Corporation LtdZee Entertainment Enterprises LtdOIL INDIA LIMITEDNational Thermal Power Corporation LtdHero Honda Motors LtdSun Pharmaceuticals Industries LtdGas Authority of India Ltd(GAIL)Asian Paints (India) LtdAXIS Bank LimitedTotal

2.96%2.92%2.92%2.71%2.60%2.47%2.42%2.40%2.39%2.35%2.29%2.01%1.92%1.89%1.69%1.26%

97.54%

Deposits, Money Market Securities and other Assets. 2.46%

80

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Graphically presentation of Allocation by Sector:

Finan

ce

capita

l goods

oil & ga

s

FMCG

Health

care IT

Tran

sport

equip

men

t

power

telec

om

Met

al,m

etal

product

& min

ing

Autom

obiles-2

,3 W

eeler

s

Med

ia & P

ublishin

g

Chemica

l & P

etro

chem

ical

0

5

10

15

20

25

30 26.49

14.28 14.04

6.474.97 6.19 6.57

5.133.07

6.56

2.06 2.45 1.73

Mid Cap Niche Life fund:

Fund Objective :To generate long term capital appreciation from a diversified portfolio of pre-dominantly in mid cap equity and equity related securities.

Equity % to fund

Allahabad Bank.IPCA Laboratories LtdGujarat Gas Company LimitedShree Cement LimitedMindTree LimitedThermax LtdUnited Phosphorous LimitedCastrol India LtdExide Industries LtdBajaj Holdings & Investment LimitedIndraprastha Gas LtdAndhra BankLupin Limited.Colgate Palmolive (India) LtdCummins India Ltd..Oriental Bank of CommerceCorporation Bank Ltd

5.38%5.00%4.12%4.07%4.04%3.87%3.85%3.76%3.66%3.31%3.15%3.14%2.97%2.97%2.95%2.83%2.76%

81

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Mahindra & Mahindra Financial Services LimitedFEDERAL BANKApollo Tyres LtdP & G Hygine & Health Care LtdBlue Star LimitedAshok Leyland LtdPUNJ LLOYD LIMITEDDishman Pharmaceuticals & chemicals LimitedTitan Industries LimitedPower Trading Corporation of India LtdGlaxo Smithkline ConsTata Tea LtdAMTEK AUTO LTDAlstom Projects India Ltd.Tata Chemicals LtdChennai Petroleum Corporation LtdKarnataka Bank LimitedMARICO LIMITEDOthersTotal

2.69%2.67%2.45%2.37%2.22%2.10%1.96%1.73%1.63%1.60%1.54%1.53%1.50%1.48%1.29%1.22%1.16%1.02%2.51%

96.52%

Deposits, Money Market Securities and other Assets. 3.48%

Graphically presentation of Allocation by Sector:

Finan

ce

capita

l goods

oil & ga

s

FMCG

Health

care IT

Tran

sport

equip

men

t

power

Logis

tics

Consum

er d

urable

Agricu

lture

Cemen

t

Chemica

l & P

etro

chem

ical

0

5

10

15

20

2524.81

6.7

12.710.8 10.05

4.19

13.12

1.660.41

3.99 3.99 4.22

1.34

Wealth Maximizer Managers Fund:

82

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Fund Objective :This is a fund of funds which will invest in Money Plus Niche Life Fund, Bond Opportunities Niche Life Fund, Large Cap Niche Life Fund and Mid Cap Niche Life Fund. The allocation to each fund will depend on the fund manager's market view and will be within the limits.

Debentures/Bonds % to fund

Bond Opportunities Niche Life Fund.Money Plus Niche Life Fund

35.27%4.78%

Total40.05%

Equity % to fund

Mid Cap Niche Life FundLarge Cap Niche Life FundTotal

33.18%26.78%59.95%

Deposits, Money Market Securities and other Assets. 0.00%

2.5 EVALUATION OF FUND PERFORMANCE :

It is very difficult to evaluate the performance of the funds available in an insurance sector because the performance of the funds are influenced by many factors. I try to evaluate the performance of the funds by using Trynore and Sharp method within by limited knowledge.

I. What Treynor measurement says----

The Treynor measure of portfolio performance relates the excess return on a portfolio to the portfolio beta because according to Jack Treynor, systematic risk or beta is the appropriate measure of risk, as suggested by the capital asset pricing model. It reflects the excess return earned per unit of risk.

Treynor’s measure= ( Avg. rate of return on portfolio p – Average rate of return on a risk-free invt.)

/ Beta of portfolio p

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II. What Sharpe measurement says----

The sharpe measure is similar to the Treynor measure except that it employs standard deviation, not beta, as measurement of risk. Thus,

Sharpe measure= ( Avg. rate of return on portfolio p – Average rate of return on a risk-free invt.)

/ Standard deviation of return of portfolio p

Hence, Sharpe measure reflects the excess return earned on a portfolio per unit of its total risk (standard deviation)

Evaluation of fund performance available under LIFE FUND SERIES I:

Life fund series I

Period Expected

Return

Return on market

Risk-free return

Beta value

Mean Standard

deviation

Balanced

fund

14.68 12.89 7.23 1.32 23.89 18.80

Defensive

fund

10.42 6.91 7.81 -2.9 15.42 7.43

Equity

fund

14.13 14.39 6.33 0.97 36.38 41.91

Secured fund

06.00 04.56 8.00 0.58 8.93 1.29

Stable 09.11 07.93 7.57 4.28 8.77 0.60

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fund

Mean of risk-free return-7.39

Analysis of data:

Under Treynor measure:

Funds’ names Analysis

I. Balanced fund It reflects excess 16.5 return earned per 1.32 unit of risk (23.89-7.39=16.5)

II. Defensive fund It reflects excess 8.03 return earned per -2.9 unit of risk (15.42-7.39=8.03)

III. Equity fund It reflects excess 28.99 return earned per 0.97 unit of risk

(36.38-7.39=28.99)

IV. Secured fund It reflects excess 1.54 return earned per 0.54 unit of risk (8.93-

85

Fund names Treynor measure Sharpe measure

Balanced fund (23.89-7.39)/1.32=12.5 (23.89-7.39)/18.80=0.89

Defensive fund (15.42-7.39)/-2.9=-2.76 (15.42-7.39)/7.43=0.4

Equity fund (36.38-7.39)/0.97=29.87 (36.38-7.39)/41.91=4

Secured fund (8.93-7.39)/0.58=2.65 (8.93-7.39)/1.29=0.72

Stable fund (8.77-7.39)/4.28=0.32 (8.77-7.39)0.60=2

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7.39=1.54)

V. Stable fund It reflects excess 1.38 return earned per 0.32 unit of risk (8.77-7.39)/4.28

Under Sharpe measure:

Funds’ names Analysis

I. Balanced fund It reflects excess 16.5 return earned per 18.80 unit of total risk ( Standard deviation) (23.89-7.39=16.5)

II. Defensive fund It reflects excess 8.03 return earned per 7.43 unit of total risk (15.42-7.39=8.03)

III. Equity fund It reflects excess 28.99 return earned per 41.91 unit of total risk

(36.38-7.39=28.99)

IV. Secured fund It reflects excess 1.54 return earned per 1.29 unit of total risk (8.93-7.39=1.54)

V. Stable fund It reflects excess 1.38 return earned per 0.60 unit of total risk (8.77-7.39)/4.28

Evaluation of fund performance available under PENSION FUND SERIES I:

Funds’ names

Return Market return

Risk-free return

Beta value Avg. return Standard deviation

Balance

fund

13.97 12.89 7.39 1.20 24.77 19.46

Defensive

Managed fund

8.71 6.91 7.10 (8.47) 14.98 7.05

Liquid fund 7.45 5.83 8.81 0.45 9.43 0.77

Secured 5.74 4.56 7.66 0.62 9.01 1.2086

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fund

Stable fund 9.20 7.93 8.08 (7.47) 9.07 0.40

Mean of risk-free return-7.81

Fund names Treynor measure Sharpe measure

Balanced fund (24.77-7.81)/1.20=14.13 (24.77-7.81)/19.46=0.87

Defensive fund (14.98-7.81)/(8.47)=(0.85) (14.98-7.81)/7.05=1.02

Liquid fund (9.43-7.81)/0.45=3.6 (9.43-7.81)/0.77=2.10

Secured fund (9.01-7.81)/0.62=1.94 (9.01-7.81)/1.20=1

Stable fund (9.07-7.81)/(7.47)=(0.17) (9.07-7.81)/0.40=3.15

Analysis of data available under PENSION FUND SERIES I:

Under Treynor measure:

Funds’ names Analysis

I. Balanced fund It reflects excess 16.96 return earned per 1.20 unit of risk

II. Defensive fund It reflects excess 7.17 return earned per -8.47 unit of risk

III. Liquid fund It reflects excess 1.62 return earned per 0.45 unit of risk

IV. Secured fund It reflects excess 1.20 return earned per 0.62 unit of risk

V. Stable fund It reflects excess 1.26 return earned per -7.47 unit of risk.

Under Sharpe measure:

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Funds’ names Analysis

I. Balanced fund It reflects excess 16.96 return earned per 19.46 unit of total risk ( Standard deviation)

II. Defensive fund It reflects excess 7.17 return earned per 7.05 unit of total risk

III. Liquid fund It reflects excess 1.62 return earned per 0.77 unit of total risk

IV. Secured fund It reflects excess 1.20 return earned per 1.20 unit of total risk

V. Stable fund It reflects excess 1.26 return earned per 0.40 unit of total risk

Evaluation of fund performance available under OLD GROUP FUND SERIES :

Period Expected

Return

Return on market

Risk-free return

Beta value

Mean Standard

deviation

Balanced

fund

19.02 18.05 7.57 1.09 21.96 20.59

Defensive

fund

12.35 8.29 8.01 1 17.98 8.80

Secured fund

6.01 4.80 6.95 0.44 8.03 1.33

Mean of risk-free return-7.51

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Fund names Treynor measure Sharp measure

Balanced fund (21.96-7.51)/1.09=13.25 (21.96-7.51)/20.59=0.70

Defensive fund (17.98-7.51)/1=10.47 (17.98-7.51)/8.80=1.19

Secured fund (8.03-7.51)/0.44=1.18 (8.03-7.51)/1.33=0.39

Analysis of data available under PENSION FUND SERIES I:

Under Treynor measure:

Funds’ names Analysis

I. Balanced fund It reflects excess 14.45 return earned per 1.09 unit of risk

II. Defensive fund It reflects excess 10.47 return earned per 1 unit of risk

IV. Secured fund It reflects excess 0.52 return earned per 0.44 unit of risk

Under Sharpe measure:

Funds’ names Analysis

I. Balanced fund It reflects excess 14.45 return earned per 20.59 unit of total risk ( Standard deviation)

II. Defensive fund It reflects excess 10.47 return earned per 8.80 unit of total risk

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IV. Secured fund It reflects excess 0.52 return earned per 1.33 unit of total risk

II.6 To understand the factors should be taken in to consideration by an investor while choosing either ULIP or traditional insurance instruments.

An investor can earn a good return in his/her investment only if he/she able to classify himself/herself under which category i.e. whether he/she belongs to high risk or low risk group. If he is able to classify himself as under high risk group, then he should go to ULIP because the return of the ULIP is subject to the market risk, otherwise he should go for traditional plans. There are many factors influenced while an investor divide himself in to either high risk or low risk such as annual income, no of dependent members, age etc.For this purpose, I use discriminate analysis technique among 58 sample size through which an investor may identify himself whether he belongs to high risk or low risk and accordingly he may go for ULIP if he belongs to high risk group or he may go traditional plans if he belongs to low risk group.

Here I use discriminant analysis and advise HDFC Standard Life Insurance Company on how to set up its system to screen potential good high risk customer and low risk customer. In particular, I build a discriminant function and find out:

1. The percentage of customer that it is able to classify correctly.\2. Statistical significance of the discriminant function.3. Which variable (age, income, no. of family member) are relatively better in discriminating between ‘low risk’ and ‘high risk’ applicants.4. How to classify a new applicant into of two groups- ‘ low risk’ or ‘high risk’ by building a decision rule and a cut off score.

The code for low risk customer is 1 and the code for high risk customer is 2 in the following table.

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risk income age nofmem1 25000 32 62 20000 47 52 18780 23 71 35000 43 82 30000 46 41 15000 41 42 16000 45 71 17000 33 52 12000 47 82 14000 27 71 28000 24 52 24000 51 61 22000 40 52 26000 50 42 24000 52 32 22000 34 62 32264 52 71 25000 35 52 32000 60 52 25000 50 61 25000 14 51 22000 38 71 18000 30 61 22000 42 52 35743 58 61 28000 33 32 25000 58 52 23766 52 61 10000 43 41 12000 23 31 17000 30 42 17600 50 62 3000 25 22 5000 48 42 5000 28 22 3000 28 52 5000 30 52 3500 22 52 10000 26 82 5000 26 41 27000 23 71 10000 27 31 14000 26 52 20000 25 51 15000 29 32 30000 50 31 15000 32 91 20000 28 41 10000 22 51 20000 22 61 15000 25 31 25000 22 4

92

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We found the following outcome from the SPSS

Discriminant

[DataSet1] 

Analysis Case Processing Summary

Unweighted Cases N Percent

Valid 54 100.0

Excluded Missing or out-of-range group codes

0 .0

At least one missing discriminating variable

0 .0

Both missing or out-of-range group codes and at least one missing discriminating variable

0 .0

Total 0 .0

Total 54 100.0

Group Statistics

risk

Valid N (listwise)

Unweighted Weighted

1 income 27 27.000

age 27 27.000

nofmem 27 27.000

2 income 27 27.000

age 27 27.000

nofmem 27 27.000

Total income 54 54.000

age 54 54.000

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nofmem 54 54.000

Analysis 1

Summary of Canonical Discriminant Functions

Eigenvalues

Function Eigenvalue

% of Variance

Cumulative %

Canonical Correlation

1 .561a 100.0 100.0 .600

a. First 1 canonical discriminant functions were used in the analysis.

Wilks' Lambda

Test of Function(s)

Wilks' Lambda Chi-square df Sig.

1 .641 22.496 3 .000

Standardized Canonical

Discriminant Function

Coefficients

Function

1

income -.841

age 1.184

nofmem .175

94

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Structure Matrix

Function

1

age .726

income -.143

nofmem .108

Pooled within-groups correlations between discriminating variables and standardized canonical discriminant functions Variables ordered by absolute size of correlation within function.

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Canonical Discriminant Function

Coefficients

Function

1

income .000

age .112

nofmem .108

(Constant) -2.696

Unstandardized coefficients

Functions at Group Centroids

risk

Function

1

1 -.735

2 .735

Unstandardized canonical discriminant functions evaluated at group means

Classification Processing Summary

Processed 54

Excluded Missing or out-of-range group codes

0

At least one missing discriminating variable

0

Used in Output 54

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Classification Processing Summary

Processed 54

Excluded Missing or out-of-range group codes

0

At least one missing discriminating variable

0

Prior Probabilities for Groups

risk Prior

Cases Used in Analysis

Unweighted Weighted

1 .500 27 27.000

2 .500 27 27.000

Total 1.000 54 54.000

Classification Results

risk

Predicted Group Membership

Total1 2

Original Count 1 21 6 27

2 6 21 27

% 1 77.8 22.2 100.0

2 22.2 77.8 100.0

77.8% of original grouped cases correctly classified.

ANALYSIS OF DATA:

We made analysis of the data found in the SPSS through some questions which will help us to come to the conclusion of our objective for why we use the discriminant analysis.

Que.1: How good is this model? How many of the 54 data points does it classify correctly?

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To answer this question, we look at the computer output labeled Table classification result. This is a part of the discrimination analysis output from any computer package as spss, statistics, sas and so on. For example if a priori probabilities chosen for the classification into the two groups are equal, as we have assumed while generating this output, then we will very likely see similar number in our output.This classification result table also called the classification matrix( also known as the confusion matrix), and it indicate that the discriminant function we have obtained is able to classify 77.8% of the 54 object correctly. More specifically, it also says that out of 27 cases predicted to be in group1, 21 are observed to be in group1 and 6 in group 2.Similarly, 27 cases predict in group 2, we understand that 21 are observed to be in group in 2 and 6 in group 1.Thus, on the whole, only 12(6+6) cases out of 54 were misclassified by discriminant model, thus giving us a classification accuracy level of – (54-12)/54 or 77.8%.

Que.2. How much discriminant function is statistically significance ?

This question is answered by looking at Wilks’ Lambda and the probability value for f-test given in Wilks’ Lambda table.

Wilks' Lambda

Test of Function(s)

Wilks' Lambda Chi-square df Sig.

1 0.641 22.496 3 .000

The value of wilks’ lambda is 0.641.This the value is between 0 and 1, and a low value indicate better discriminant power of model. Thus, 0.641 is an indicator of the model being relatively good. The value of the f- test indicates that the discriminant between the two group is highly significant. Which indicate that f- test would be significant at confidence level of up to(1-000)*100=100%

Que.3. Which independent variables are relatively better in discriminating between “low risk” and “high risk” ?

To answer this question, we look at the standardized coefficient in output. This output show that age is the best predictor, with the coefficient of 1.184, followed by no. of family member, with a coefficient of 0.175, income is the last, with a coefficient of:-0.841.

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Standardized Canonical

Discriminant Function Coefficients

Function

1

income -0.841

age 1.184

nofmem 0.175

Ans.4. How do we classify an investor into ‘high’ and ‘low’ risk category, and make a decision whether the investor is suitable for either Traditional instruments or ULIP.

=This is the most important question to be answered. Please remember why we started out with the discriminant analysis in this problem. Through the discriminant analysis so that we can understand the risk taking capacity of the investors.

The way to do this is to use the output in table unstandardised coefficients in the discriminant function and table means of canonical variable ( function at group centroids)

Functions at Group Centroids

risk

Function

1

1 -0.735

2 0.735

Unstandardized canonical discriminant functions evaluated at group means

The function of group centroids, gives us the new means for the transformed group centroids. Thus, the new mean for group 1(low risk)is -0.735 and the mean for group 2(high risk) is +0.735.This means that the midpoint of these two is 0. This is clear when we plot the two means on a straight line, and locate their midpoint, as shown below-

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0

+0.735 -0.735 Mean of Group 1( high risk) Mean of Group 2( Low risk)

This also gives us a decision rule for classifying any new case. If the discriminant score of an applicant falls to the right of the midpoint, we classify him as ‘high risk’, and if the discriminant score of an applicant falls to the left of the midpoint, we classify him as ‘low risk’. In this case, the midpoint is 0. Therefore, any positive(greater than 0) value of discriminant score will lead to classification as’high risk’ any negative( less than 0) value of

the discriminant score will lead to classification as ‘ low risk’. But how do we compare the discriminant of an investor ? We use the investor’s age, income and no. of family member and plug these into the unstandardised discriminant function. This gives us his discriminant score.

Canonical Discriminant Function

Coefficients

Function

1

income .000

age 0.112

nofmem 0.108

(Constant) -2.696

Unstandardized coefficients

Y= -2.696+ income(0.000) + age(0.112) + nofmem (0.108)

Where Y will give us the discriminant score of any person whose age, income, and no.of family member were known.

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In this way we can ascertain of any person whether he is suitable for ULIP or traditional life insurance policies which will minimize the conflict between the risk and return.

CONCLUSION

Insurance sector plays a very important role in Indian economy, how it plays a vital role in Indian economy are as follows---

Insurance is the only sector which garners long term savings

Insurers are increasingly introducing innovative products to meet the specific needs of the prospective policyholders. An evolving insurance sector is of vital importance for economic growth. While encouraging savings habit it also provides a safety net to both enterprises andIndividuals.

Insurance Companies receive, without much default, a steady cash stream of premium or contributions to pension plans. Various actuary studies and models enable them to predict, relatively accurately, their expected cash outflows.

Liabilities of Insurance companies being long-term or contingent in nature, liquidity is excellent and their investments are also long-term in nature. Since they offer more than the return on savings in the shape of life-cover to the investors, the rate of return guaranteed in their insurance policies is relatively low. Consequently, the need to seek high rates of returns on their investments is also low. The risk-return trade off is heavily tilted in favour of risk.

As a combined result of all this, investments of insurance companies have been largely in bonds floated by GOI, PSUs, state governments, local bodies, corporate bodies and mortgages of long term nature.

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Generates Long term funds for infrastructure and strong positive correlation between development of capital markets and insurance/pension sector

For GDP to grow at 8 to 10%, qualitative improvement in infrastructure is essential. Estimates of funds required for development of infrastructure vary widely. An investment of 6,19,600 crore is anticipated in the next 5 years. Tenure of funding required for infrastructure normally ranges from 10 to 20 years. The insurance industry also provides crucial financial intermediary services, transferring funds from the insured to capital investment, critical for continued economic expansion and growth, simultaneously generating long-term funds for infrastructure development.

In fact infrastructure investments are ideal for asset-liability matching for life insurance companies given their long term liability profile. According to preliminary estimates published by the Reserve Bank of India, contribution of insurance funds to financial savings was 14.2 per cent in 2005-06, viz., 2.4 per cent of the GDP at current market prices. Development of the insurance sector is thus necessary to support continued economic transformation. Social security and pension reforms too benefit from a mature insurance industry.

The insurance sector in India, which was opened up to private participation in the year 1999, has completed over seven years in a liberalized environment. With an average annual growth of 37 per cent in the first year premium in the life segment and 15.72 per cent growth in the nonlife segment, together with the largest number of life insurance policies in force, the potential of the Indian insurance industry is still large.

Life insurance penetration in India was less than 1 per cent till 1990-91. During the 1990s, it was between 1 and 2 per cent and from 2001 it was over 2 per cent. In 2005 it had increased to 2.53 per cent.

Spread of financial services in rural areas and amongst socially less privileged

IRDA Regulations provide certain minimum business to be done- in rural areas- in the socially weaker sections

Life Insurance offices are spread over nearly 1400 centres. Presence of representative in every tehsil – deeper penetration in rural areas.

Insurance agents numbering over 6.24 lakhs in rural areas. Policies sold in rural areas (2004-05) - No. of policies - 55 lakhs, Sum assured 46,000 crores. Social security - No. of lives covered 2003-04 17.4 lakhs 2004-05 42.1 lakhs

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Employment generation

Life insurance industry provides increased employment opportunities. Employees in insurance sector as on 31st March, 2005 is around 2 lakhs. Many agents depend on insurance for their livelihood. No. of agents on 31st March 2004 – 15.59 lakhs. Brokers, corporate agents, training establishments provide extra employment opportunities. Many of these openings are in rural sectors.

Current value of average investment by a individual in ULIP amounts Rs. 51220.

Major portion of investor are found to be risk lover and about 64% of the investors are ready to take up the risk.

Investor expects all round development of the fund including safeguard of principal amount, steady growth, and monthly return.

References:

Investment Analysis and Portfolio Management---Prasanna Chandra

www.bseindia.com

www.bajajcapital.com

www.nseindia.com

www.indianfoline.com

www.hdfcinsurance.com

www.wekipedia.org

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