HDFC INFRASTRUCTURE FUND(Open Ended Equity Scheme)(Open Ended Equity Scheme)

Best positioned for the improving environment

"It is better to look ahead and prepare than to look back and regret.."

– Jackie Joyner Kersee

111st August, 2014

This product is suitable for investors who are seeking*:� Capital appreciation over long term� Investment predominantly in equity and equity related instruments of medium

to large sized companies • High risk (BROWN)

* Investors should consult their financial advisers if in doubt about whether the product is suitable for them.

Note: Risk is represented as:

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

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

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

– Jackie Joyner Kersee

What has changed ?

• New Government has a decisive mandate for Development with Good Governance.

• Mandate seen as one for development not for appeasement

• Strong and capable leadership

2

• Decision making has improved. Optimism in the air.

• Government is widely seen as Pro-Economy, Pro Local Business & Pro-Employment

2

Key focus areas of new government

• Power : Increase generation, coal supplies and reduce T&D losses

• Transportation : Improve Road, Railway and in-land water transportation networks

• Manufacturing : Review of Land Acq. Act, SEZ policy, labor reforms, defense industry

• Quality of life : Increase spend on health, sanitation & education, urban reforms

• Urban Infra : 70bn allocated for smart cities, housing for all by the year 2022

• Subsidies : Subsidies for only the deserving, leading to lower fiscal deficit

3

• Subsidies : Subsidies for only the deserving, leading to lower fiscal deficit

• Decision making : Focus on time bound clearance for projects

• Taxation : Implementation of GST and tax reforms

Minimum government and maximum governance 3

Source: Speech by President of India, Shri Pranab Mukherjee to Parliament dated 9th June, 2014, July 2014 Budget Speech and other Publicly available documents

Power

• Target 24x7 power by 2022

Steady increase in generation and falling deficit

1,200

1,300

1,400

5

10

Demand [LHS] Actual generation [LHS] Energy deficit [RHS]BU %

• Focus on reviving stranded assets

• Improving PLF’s of existing plants byincreasing domestic coal production

• Investments in T&D to reduce losses

• What the Minister is saying:

Awarding for new power plants to pick up

11

14

(GW)

800

900

1,000

1,100

1,200

2012 2013 2014 2015E 2016E 2017E

-15

-10

-5

0

4

• What the Minister is saying:“If a plant has come up, it is now a nationalasset,…. so my job is to quickly get all of themoperational”

Source: Kotak , CEA

2

5

8

2012 2013 2014 2015E 2016E 2017E

“We want 24x7 power for every citizen of India ..“

Mr. Piyush Goyal, Hon. Min. for Power, Coal and New & Renewable Energy4

(Source: Times of India, 26th June, 2014)

Source: Publicly available information

Transportation

• Targeting to add 30 km road per day fromcurrent 3 km per day

Strong growth in execution & new awards

6,000

7,000 (km)

Roads Award Executioncurrent 3 km per day

• Improving the rural & intra-regionconnectivity and border infrastructure

• Resolving issues in BoT projects

• Railways – Modernization and expansion

• Diamond Quadrilateral project of high

0

1,000

2,000

3,000

4,000

5,000

2012 2013 2014 2015E 2016E 2017E

Roads Award Execution

Major thrust on modernisation of Railways

900

1,200(Rs bn)

5

• Diamond Quadrilateral project of highspeed trains and freight corridor

• Expansion of railways in Hilly States andNorth East region

Source: Kotak

300

600

900

2012 2013 2014 2015E 2016E 2017E

“After two years aim is to set a target of building roads at a rate of 30 kms per day”

Mr. Nitin Gadkari, Hon. Min. for Transportation5

(Source: Outlook 24th June, 2014)

Source: Publicly available information

Defense

• Modernisation is a major thrust area

• Clear pending projects and simplifyprocurement process.

• Encourage Indian companies in designand production of defense equipment

600

900

1,200

1,500

FY12 FY13 FY14 FY15E FY16E FY17E38%

39%

40%

41%

42%

43%

44%Revenue Exp Capital Exp Capital Exp / Total Exp (%)

Source: Edelweiss

Rising Capital spending(Rs bn)

6

• Hike in FDI limit to 49% to encourageoverseas defense companies

“The new government will work towards expediting the procurement process”

Mr. Arun Jaitley, Hon. Min. for Defense

6

(Source: Indian Express 24th June, 2014)

Source: Publicly available information

Key decisions so far

• Diesel, Sugar & Railway passenger fares increased, MSP increase moderated to 0-4% • Diesel, Sugar & Railway passenger fares increased, MSP increase moderated to 0-4%

• Cabinet clears FDI limit from 26% to 49% in insurance and defence

• Labour Reforms – A small beginning in Rajasthan; amendments to labour laws likely

• Review of Land Acquisition Act underway

• Inverted Duty Structure being corrected

7

• Online single-window system for providing Govt.-to-Business (G2B) services

• Increase validity for licences

Minimum government and maximum governance

7

Source: Publicly available information

Infrastructure – Reforms so far

Funding reforms:

• Flexible Structuring of Long Term Project Loans to Infrastructure and Core Industries

• Allowed banks to raise long term funds through issue of Infra bonds

• Exemption of CRR, SLR and Priority sector lending on these Infra bonds

Policy reforms:

• In principle forest clearance for transmission and certain road projects

8

• In principle forest clearance for transmission and certain road projects

• Launched a web portal for online submission and monitoring of environment & forest clearance

• MNREGA has now been linked to asset/Infra creation without cutting back on allocation

8

Source: Publicly available information

Falling subsidies – Room for productive spending

• Falling fuel subsidies (diesel hikescontinue), diesel subsidy is expected tocome down almost to NIL

Government's fuel subsidy compensation as share of GDP

1.0(%)

come down almost to NIL

• Overall fuel subsidy is expected to comedown from ~Rs 79,300crs to ~Rs21,000crs in FY16

• Urea pricing is under review

Source: Kotak

Govt. spending on Water & Sanitation to increase

325

350

375 (Rs bn)

0.0

0.5

2012 2013 2014 2015E 2016E 2017E

9

• Government can focus on spending moreon productive assets.

Source: CLSA

250

275

300

325

FY12 FY13E FY14E FY15E FY16E FY17E

9

Source: Publicly available information, Internal Research

Valuations - Room for P/E expansion

40

45 30,000Roll P\E (LHS) average (LHS)

Despite markets

moving up, P/E’s are still

low

0

5

10

15

20

25

30

35

40

0

5,000

10,000

15,000

20,000

25,000BSE (RHS)

1010

P/E’s are still low despite good market returns; thus there is room for P/E’s to increase over time

Source: CLSA, Data updated till 30st June, 2014

The CAGR of 6.2% for BSE Sensex is lower than CAGR of 14.6% nominal GDP growth in the last six years.

10Reference made to S&P BSE SENSEX in this presentation is only for easy understanding of market movement and must not be construed as future performance of S&P BSE SENSEX. The Benchmark for this FUND is CNX 500. Refer Disclaimer / Risk Factors on Slide 20

0

91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14

0

FY

Markets – Changing Colour

• HDFC Infrastructure Fund is more focussed on Engg, Infrastructure and banks etc;

• HDFC Infrastructure Fund is less focussed on Pharma, FMCG and IT

Jan-08 Jul-14

SECTOR FY 09A P/E FY 15E P/E

Automobiles 28.1 14.2

Banking 24.0 17.0

Consumers 26.1 28.9

Energy 20.5 12.0

Industrials 41.0 25.9

11Source: Bloomberg, Kotak, Based on Current (July 31, 2014) SENSEX Constituents, Prices as on Jan 08, 2008 & July 31, 2014 For FY09A P/E, Tata Motors and Dr Reddys have been excluded as these were making loss

11

Industrials 41.0 25.9

Metals & Mining 19.3 13.0

Pharmaceuticals 19.5 24.4

Technology 17.8 17.6

Telecom 21.9 27.5

Utilities 27.4 13.3

BSE-30 22.7 17.0

Reference made to S&P BSE SENSEX in this presentation is only for easy understanding of market movement and must not be construed as future performance of S&P BSE SENSEX. The Benchmark for this FUND is CNX 500. Refer Disclaimer / Risk Factors on Slide 20

EBITDA margins at cyclical lows – Room for optimism

23

25Sensex EBITDA margin ex IT, Pharma, Consumer%

Source : BAML

13

15

17

19

21

93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14FY

12

Margins are witnessing a recovery and are expected to improve as :

• Commodity prices are stabilizing - Commodity prices went up in FY12/13 and were stable in FY14

• Stabilizing wage cost - Employee wages increased significantly between 2004-10 and are stabilizing now

• Improving Operating leverage – Little capacity is being added, capacity utilization is improving

• Leverage / interest rates have peaked

12Reference made to S&P BSE SENSEX in this presentation is only for easy understanding of market movement and must not be construed as future performance of S&P BSE SENSEX. The Benchmark for this FUND is CNX 500. Refer Disclaimer / Risk Factors on Slide 20

• HDFC Infrastructure Fund invests mainly in Infrastructure/Infrastructure relatedcompanies

Infra & Infra related Stocks – Best positioned for the improving environment

companies

• Infrastructure sector broadly comprises 3 segments

– Asset Financiers : Banks and Infrastructure financing companies

– Asset Creators : Engineering and construction companies

1313

– Asset Owners/ Developers : Companies that own infrastructure projects

13

Portfolio composition* (As on June 30, 2014)

(% of AUM)Auto Others

(% of AUM)

• Asset Financiers – 32

• Asset creators – 28

• Asset owners – 24

• Auto – 10

• Others – 6

• Pharma – Nil

• FMCG – Nil

Asset Owners/

Developers

24%

Asset Financiers

32%

Auto

10%

Others

6%

Asset Creators

28%

1414 14Based on internal computation and classification. For detailed monthly portfolio please visit our website www.hdfcfund.com

HDFC Infrastructure Fund – Favorable Risk Reward Proposition

RISK

� Portfolio is concentrated in a few sectors, hence carries higher risk

� In view of the higher risk, exposure to this Fund should be controlled*

� Not suitable for Risk averse investors

Risk Reward Proposition

� With attractive valuations and prospects of economic recovery, we feel risk

1515

� With attractive valuations and prospects of economic recovery, we feel riskreward is favorable for the scheme*

* In view of the individual circumstances and risk profile, each investor is advised to consult his / her professional advisor before making a decision to invest. , Refer Disclaimer / Risk Factors on Slide 20 15

• Stable, strong government; acceleration in policy making

Summary

• Focus on Infra, Manufacturing, simpler taxation, etc.

• Corporate margins likely to improve; currently at a 18 year low

• P/E multiples are below long term averages & Interest rates are likely to come down

1616

HDFC Infrastructure Fund is best positioned for the improving environment

Type of Scheme An Open Ended Equity Scheme

Investment Objective To seek long term capital appreciation by investing predominantly in equity and equity related securities of

Product Features – HDFC Infrastructure Fund

Investment Objective To seek long term capital appreciation by investing predominantly in equity and equity related securities of companies engaged in or expected to benefit from the growth and development of infrastructure

Plans/Options The plans viz. HDFC Infrastructure Fund and HDFC Infrastructure Fund – Direct Plan offers investors following options:

• Growth Option

• Dividend Option – with payout and re-investment facility

Application Amount

(Under Each Plan/Option)

Minimum Rs. 5,000/- and any amount thereafter.

Additional Purchase : Rs 1000/- and any amount thereafter

Entry / Exit Load Entry Load: Not Applicable.

• Upfront commission shall be paid directly by the investor to the ARN Holder (AMFIregistered Distributor) based on the investors' assessment of various factors including the servicerendered by the ARN Holder.

17

Exit Load:

• In respect of each purchase / switch - in of units, an exit load of 1.00% is payable if units are redeemed / switched - out within 1 year from the date of allotment.

• No exit load is payable if units are redeemed / switched - out after 1 year from the date of allotment.

Benchmark Index CNX 500

Additional Benchmark Index CNX NIFTY

For further details, refer SID and KIM available on www.hdfcfund.com and at ISC’s of HDFC Mutual Fund

Refer Disclaimer / Risk Factors on Slide 2017

Under normal circumstances, the asset allocation of the scheme’s portfolio will be as follows:

Type of Instruments Minimum Allocation

(% of Net Assets)

Maximum Allocation

(% of Net Assets)

Risk Profile of the Instrument

Asset Allocation Pattern

(% of Net Assets) (% of Net Assets) Instrument

Equity and Equity Related Instruments of infrastructure / infrastructure related companies

65 100 Medium to High

Equity and Equity Related Instruments of companies other than mentioned above

0 35 Medium to High

Debt Securities and Money Market Instruments* and 0 35 Low to Medium

18

Market Instruments* and Fixed Income Derivatives

0 35 Low to Medium

*Investment in securitized debt shall not normally exceed 30% of the net assets of the scheme.

Exposure to Derivatives

Glossary

MSP – Minimum Support Price

PLF’s – Plant Load Factor

T&D – Transmission & DistributionT&D – Transmission & Distribution

BU – Billion units

GW – Giga Watts

BoT – Built operate and Transfer

DFC’s – Dedicated Freight Corridor

CRR – Cash reserve Ratio

SLR – Statutory liquidity ratio

MNREGA – Mahatma Gandhi National Rural Employment Guarantee Act

CAGR – Compound Annual growth rate

GDP – Gross domestic product

SENSEX – S&P BSE SENSEX

19

SENSEX – S&P BSE SENSEX

SID – Scheme Information Document

KIM – Key Information Memorandum

ISC’s – Investor Service Centres

19 19

DISCLAIMER / RISK FACTORS

The views expressed herein are based on the basis of internal data, publicly available information and othersources believed to be reliable. Any calculations made are approximations, meant as guidelines only, whichyou must confirm before relying on them. The information contained in this document is for general purposesonly and is not an offer to sell or a solicitation to buy/sell any mutual fund units/securities. The document isgiven in summary form and does not purport to be complete. The document does not have regard to specificgiven in summary form and does not purport to be complete. The document does not have regard to specificinvestment objectives, financial situation and the particular needs of any specific person who may receive thisdocument. The information/ data herein alone are not sufficient and should not be used for the development orimplementation of an investment strategy. The same should not be construed as investment advice to anyparty. The statements contained herein are based on our current views and involve known and unknown risksand uncertainties that could cause actual results, performance or events to differ materially from thoseexpressed or implied in such statements. Neither HDFC Asset Management Company (HDFC AMC) andHDFC Mutual Fund (the Fund) nor any person connected with them, accepts any liability arising from the useof this document. The recipient(s) before acting on any information herein should make his/her/their owninvestigation and seek appropriate professional advice and shall alone be fully responsible / liable for anydecision taken on the basis of information contained herein.

20

decision taken on the basis of information contained herein.

MUTUAL FUND INVESTMENTS ARE SUBJECT TO MARKET RISKS, READ ALL SCHEMERELATED DOCUMENTS CAREFULLY.

2020

Thank You

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