Mumbai: The initial offer for HDFC Mutual Fund's HDFC Core & Satellite Fund, an open ended diversified equity fund and HDFC Multiple Yield Fund, a hybrid fund. opens today, August 20, 2004, and closes on September 10, 2004.

The objective of HDFC Core & Satellite Fund is to generate capital appreciation through equity investments in companies whose shares are quoting at prices below their true value. The net assets of the scheme will be invested primarily in equity and equity related instruments in a portfolio comprising of "core" group of companies and "satellite" group of companies.

The "core" portfolio, which will constitute 60 to 80 per cent of the total, will comprise of well-established and large-cap stocks of companies with long, successful track records. The investment strategy of this portion will be focused with the "core" group investing in around 10-20 companies, with exposure to each stock being 3-8 per cent of the overall portfolio. The "core" group stocks are expected to provide greater stability and dependability to the overall portfolio.

The "satellite" portfolio will constitute the remaining 20-40 per cent. These would typically be small-mid cap companies with a potential for higher returns compared to the "core" group but would also carry greater risk. The investments in these "satellite" stocks will be spread over 10-20 stocks and hence, the average exposure per company would be between 1-4 per cent of the portfolio. This strategy aims to manage higher risk inherent in such companies by spreading it over a high number of stocks and thus limit the risk of the overall portfolio.

The investors will thus be benefited in striking a right balance for their investments due to the two portions of the portfolio viz., the "core" group of well-established low risk companies and the "satellite" group of higher return potential (as also higher risk) companies, which will complement each other.

The objective of HDFC Multiple Yield Fund is to generate positive returns with very low risk of capital loss over medium time frame. The asset allocation will comprise of 85 per cent (maximum. 95 per cent) of the net assets in debt and money market instruments and the remaining 15 per cent (maximum. 25 per cent) of the net assets in equities.

On the equities front, the fund will concentrate on moderate to high dividend-yielding stocks of well-managed companies that have a sound track record and where dividends are expected to be maintained or grow. The debt portion of the portfolio of the scheme will invest primarily in bonds maturing in around one year's time. The fund will allow the maturity of the fund to run down with time.

The unique investment strategy of letting the maturity of the debt investment run down with time and targeting equity investments to capture dividends, is expected to deliver positive returns over medium time frame.

During the 'initial offer period units' will be available at Rs10 each (plus applicable entry load in case of HDFC Core & Satellite Fund) and at NAV based prices thereafter. The 'minimum application amount' (MAA) for both HDFC Core & Satellite Fund and HDFC Multiple Yield Fund is Rs5,000 per application and in multiples of Rs1000 thereof under each option.

The entry load (IPO) for HDFC Core & Satellite Fund is 2.25 per cent for purchase / switch-in of units less than Rs.5 crore and nil for purchase / switch-in of units equal to or greater than Rs.5 crore. Exit load (IPO) is nil.

The entry load (IPO) for HDFC Multiple Yield Fund is nil. Exit load (IPO): In respect of each purchase / switch-in of units upto and including Rs2 crore in value, an exit load of 1 per cent is payable if units are redeemed within one year from the date of allotment. In respect of each purchase / switch-in of units greater than Rs2 crore in value, no exit load is payable.

The funds will be managed by HDFC Asset Management Company Limited (AMC), a joint venture between HDFC Limited and Standard Life Investments Limited (UK).