During 1997-98, HDFC invested a hefty amount of Rs 125 crore in Unit Trust of India's Insitutional Investors' Special Fund Scheme - 1997. IISFUS '97 was the first instiutional fund from UTI for year 1997-98 and came at a time when interest rates were beginning to move southwards. UTI, with its assured return of 15 per cent for five years,was caught on the wrong foot while insitutional investors made a beeline for the lucrative coupon. The issue mobilised a little over Rs 800 crore with HDFC accounting for more than 15 per cent of the total initial corpus.

Though substantial, this is one of the very few investments in income funds by the housing development behemoth. HDFC has a scattered investment in a large number of equity funds. These include Mastershare, Masterplus, Mastergain, Equity Opportunities Fund, Centurion Prudence, DSPML Equity, JF personal Taxsaver '1996, Morgan Stanley Gorwth Fund, Taurus Starshare and Templeton India Growth Fund.

HDFC acquired 31 lakh units in Mastershare during the year, taking the number of units to 1.78 crore. As a result, the investment (at cost) has gone up from Rs 15.69 crore to Rs 20 crore. It may be recalled that Mastershare had paid a dividend of 16 per cent last year and investment was probably made before the payout to earn a decent dividend yield. Similarly, HDFC acquired an additional 19.24lakh units in Masterplus with its investment going up from Rs 50 lakh to Rs 3.84 crore. The fund from UTI has a healthy portfolio and is coming up for redemption in January, 1999. The fund's units normally trade at a steep discount to the net asset value which makes it a wise investment. HDFC has maintained its exposure to the open-end fund, Mastergain '1992.

During the year, the housing development institution moved out of Centurion Growth, where it sold 5 lakh units in the market HDFC has surely booked a loss here since the market price of Growth during 1997-98 didnot go beyond Rs 6 while the units were acquired at Rs 10 - a loss of Rs 20 lakh, assuming that units were sold at Rs 6. HDFC also booked losses when it redeemed 5 lakh units in Taurus newshare, bought in 1995. When Newshare was rolled over, its NAV was slightly above Rs 4 with the market price around Rs 3.

HDFC has also redeemed units in GIC Rise II and GIC Suraksha '96, where it had investment of Rs 11.47 crore and Rs 4.82 crore,respectively. GIC Suraksha had offered an assured return of 14.5 per cent for 1996-97 with HDFC holding 50 lakh units. The institution, after earning dividend of Rs 1.45 per unit (Rs 72.5 lakh), redeemed in 1997-98.

HDFC has also moved out of Alliance '95, the balanced fund from Alliance '95, with an aggressive equity exposure. The fund was the top performer during 1997-98 in its category and was the first fund to invest heavily in the IT sector. With its NAV appreciating to over Rs 16 last year, HDFC redeemed its 50 lakh units during 1997-98. Strangely, the institution does not hold any investment in the grand old scheme of the industry - US '64. HDFC had an investment of Rs 209.57 crore in the scheme in 1995 which was redeemed in full in 1996.