HDFC Medium Term Debt Fund

An open ended medium term debt scheme investing in instruments such that the Macaulay Duration# of the portfolio is between 3 years and 4 years. A relatively high interest rate risk and relatively high credit risk.

Investments made from the total assets of the Scheme would be in accordance with the features of the Scheme and the provisions of the SEBI (MF) Regulations. Since Macaulay Duration of the portfolio will be managed in the range of 3 – 4 years, the Scheme will be subject to interest rate risk on an ongoing basis. The fund manager, in the interest of investors, may reduce the portfolio duration of the scheme up to one year i.e. between 1 year and 4 years, in case of a view on interest rate movements in light of anticipated adverse situation.

The Scheme shall endeavour to develop a well-diversified portfolio of debt (including securitised debt) and other instruments.

Macaulay Duration (Duration) measures the price volatility of fixed income securities. It is often used in the comparison of interest rate risk between securities with different coupons and different maturities. It is defined as the weighted average time to cash flows of a bond where the weights are nothing but the present value of the cash flows themselves. It is expressed in years. The duration of a fixed income security is always shorter than its term to maturity, except in the case of zero coupon securities where they are the same.