Ordinary Investors Education Series No.

HOW WORK

MUTUAL
With Special Reference to:

FUNDS

Diversified Equity Funds Index Funds Systematic Investment Plans Equity Schemes vs. Direct Equityholding Regulatory and organizational Aspects

Dr. L. Director

C.

Gupta,

Assisted by: Poornima Kaushik, (Eco.) Research Associate & Monika Chopra Incharge Computer M.A.

Society for Capital Market Research & Development

jointly with

Vivek Financial Focus Limited

i

HOW MUTUAL FUNDS WORK

Content s
Sectio n I. Rationale Behind Mutual Funds: How to Combine Return-AndBest Risk Governance, Management Structure Regulations And SEBI Types of Schemes Mutual Fund Par a 1-7

II.

8-13 14-21

III.

Main types Types of equity schemes Bond schemes Balanced schemes Money market schemes

IV.

Index Funds
Reasons for index funds How index funds operate Slight tracking error Effect of index revision Index funds not popular in India

22-27

V.

Net Asset (NAV): A Very Concept

Value Important

28-34

Daily NAV per unit NAV Watch the NAV per unit Mutual fund and stock market relationship

i (i)

Sectio n VI. Chargeable Expenses Fees and

Par a 35-45

SEBI regulations Initial launching expenses Load funds and no-load funds Are no-load funds preferable?

VII.

Closed-end Schemes

and

Open-end

46-49

A puzzle Open-end schemes are better

VIII.

Systematic Investment (SIP) is SIP? What

When is SIP advantageous Example Caution needed

Plan

50-58

IX.

Direct Equity Holding Mutual Fund Equity Schemesperformance is the key Future

vs. 59-22

Direct shareholding Narrow diversification works well The practical angle

Appendix 1: List of Mutual Funds in India

(ii) ii

I. RATIONALE BEHIND MUTUAL FUNDS : HOW BEST TO COMBINE RETURN-AND-RISK

1. The essential purpose behind mutual funds is to secure two important benefits for small investors, viz.,(a) diversification (b) professional management of of risk, and investments. 2. As regards (a), mutual funds can spread their investments dozens or even hundreds of companies but this is over not possible for a small investor. Diversification reduces risk. 3. As regards (b), it may be noted that success in the investment game requires that (1) one must be prepared to spend the time required for selecting investments and one must also have the necessary skills. A majority (2) of ordinary investors cant devote the time required and/or have dont the skills. 4. Mutual funds resolve the problems mentioned above, as they employ full-time professionally qualified managers who continuously follow companies and can be expected to select the investments more skillfully than ordinary investors . 5. This is not to say that all mutual funds are good. There are wide differences in their performance. Such differences become noticeable only over a long period of 5-10 years. short periods of 1-2 years, a particular fund may, Over at one time, be among the best, and at another time among the worst! 6. Hence, you should choose from among the mutual funds those which have a record consistently good of possess characteristics (e.g.performance composition and the industry of investments) which will help to achieve good long term performance . 7. In the case of equity funds, the ups and downs in the equity have direct effect on the performance of the market equity This is an inherent source of risk over both shortfunds. term long-term in the case of equity funds. An investor and in equity funds should have some understanding of the equity markets behaviour. 1

II. GOVERNANCE, MANAGEMENT STRUCTURE AND SEBI REGULATIONS

8. The top management structure of a mutual fund should ensure that the fund is managed in the best interest of the unitholders in the mutual fund. It is to be noted in this connection that, unlike the shareholders of a company, the unitholders in a mutual fund do not have voting and rightsno hand in appointing, supervising or dismissing have the funds top management. The unitholders are simply beneficiaries . 9. Mutual funds original legal form was that of a trust, as their history in the U.K. shows. The fund was divided into units for sale to the public. Hence, the name investment trust or unit trust came to be used. There are three parties such to an arrangement: (a) trustees who exercise over-all control; (b) managers who manage the investments from day to day; and (c) beneficiaries or unitholders, i.e. investors. 10. The question which arises is: How do we ensure that the mutual fund will be managed in the best interest of the unitholders? This problem is taken care of partly by the regulatory system and partly by fairly fierce competitionmutual funds for the investors money. There among the are many as 30 mutual fund organisations in India as (see Appendix 1). Each of them has dozens of mutual fund schemes . 11. Mutual funds in India are structured on the lines indicated below in Exhibit I.

Exhibit 1 Mutual Structure Fund

Board of Trustees

Asset Management Company SEB I Regulations Unitholders (Beneficiaries)

12. Each mutual fund has a Board of , an Asse Management or Trustees (the manager) t AMC Company In India, we also have a promoter or and unitholders sponso . r who takes the initiative of starting a mutual fund but has no active role after the fund has been launched. The sponsor only as a shareholder of the AMC. As per remains SEBI regulations, the effective control of the AMC is not with the sponsor but with the Board of Trustees. A majority of the trustees have to be chosen from amongst independent the rest are the nominees of the sponsor. persons and The Board of Trustees functions as the governing body of the mutual fund. 13. SEBI regulations provide the framework within which mutual funds have to operate. Maximum limits have been prescribed for management fees and other chargeableas detailed a little later. SEBI also regulates expenses, many aspects of their operations and other policies.

III. TYPES OF MUTUAL FUND SCHEMES

Main types

14. Before proceeding further, let us take note of the varioustypes of mutual fund schemes. The main types are: (1) Equity Schemes (2) Bond Schemes Balanced (3) Schemes (4) Money Market or Liquid Schemes The actual relative importance of the various mutual fund schemes, as measured by the value of assets held, is shown in Exhibits 2 and 3. Types of equity schemes 15. Equity schemes are the most important among mutual fund schemes. The original purpose of mutual funds was to enable small investors to invest in equities. Within equity schemes, most of the mutual funds offer several options, growth plan, dividend plan and dividend such as reinvestment plan. 16. Equity schemes enjoy tax : the return from a advantage such schemes, whether dividend or long-term capital gain, is totally exempt from income tax in the hands of the recipients. Most equity schemes invest the bulk of the fund in equities. 17. Equity schemes can be further classified as: (a Broadly : The fund manager is ) diversified entirely free to choose the composition of the equity portfolio. For ensuring a certain minimum degree of diversification, SEBI regulations require that not than 5% of the fund should be invested in more any company. one
4

Mutual Fund According

(January 31, 2007)

Schemes

in

India

No.

Scheme Type

1 Growth (i.e. equity) Schemes 1,21,751 36 3 Income (i.e. Bond) Schemes 89,665 25 5 Balanced Schemes 9,383 3 Source :

2,118 1

January 2007.

Schemewise Management

Assets

Under

(January 31, 2007)

36%

32%

25%

20

10

3% 3%

Exhibit 4

Mutual Types

Fund

Scheme

Equity Schemes

Bond Schemes Company

Balanced Schemes Company

Liquid Schemes Company

Broadly diversified

Index funds

Industry specific Mid-cap

Corporate bond schemes

Government bond schemes

(b) Industry : Some mutual funds specialize specific particular industryin segments. They specify the industry or industries in which the fund is to be invested although the exact boundary line for an industry is not always easy to draw. The idea is to concentrate on some promising industries expectedsuperior returns. It should be borne in to give mind fortunes of particular industries are liable that the to much sharper and sudden changes than the broad economy. (c ) Mid-cap : As the name implies, these funds funds are meant to be invested in companies of medium- is no general definition of medium size. There size. such fund adopts its own definition, usually Each in terms of a companys market capitalisation. They emerged in recent years in the hope have that relatively young, innovative and smallsized companies are likely to grow faster than the large and mature companies. (d) Index Funds: Here, the portfolio composition is not decided by the fund manager but is given by a articular index, as announced at the time p of launching the scheme. The merits and demerits of index funds will be discussed in the next section at length. Bond schemes 18. Bond , also known as income schemes, invest schemes in government and corporate bonds of medium and long duration. The bulk of their income arises from interest and some part from trading of bonds. 19. Bonds are exposed to interest rate : if interest rates rise, the market value of therisk existing portfolio of bonds will fall. Bonds of longer maturity will decline more than bonds of shorter maturity. Two other risks in the case of bonds arise respectively default by the issuers and from s market illiquidit . Hence, bond schemes are not always as safe y they may asappear to be.
7

20.

Balanced schemes Balanced invest in both equity and bonds. For this schemes limits are specified in the form of percentage to purpose, be invested in equity and bonds respectively. The idea is to provide a mix of equity and bonds in a single scheme to suit somewhat conservative investor. However, the such schemes are not popular in India, an important reason being they dont enjoy the tax advantage which that equity schemes have. Money market schemes Money market or liquid are a relatively schemes recent phenomenon in India. They invest in money market instruments which are of very short-term maturity and, therefore, do not generally involve much interest-raterisk. schemes compete with bank deposits as a method Such of holding liquid balances.

21.

IV. INDEX FUNDS

Reasons for index funds 22. Index funds simply mirror a chosen market index. They first emerged in the U.S. because it was found that many equitymanagers did worse than the market average fund as measured by the index. That is, they earned a lower return the return which could be earned on a than portfolio corresponding to the market index. So, why not hold a portfolio which simply mirrors the market An index? index fund can reduce the fund management costs on two counts: can dispense with the highly paid fund (1) it managers selection of investments is required and (2) it because no can reduce the transaction costs also because there is no need for portfolio churning, i.e. changing the portfolio mix by constantly reviewing the portfolio, selling some shares and buying others in their place. How index funds operate 23. For the reasons given above, the cost of running an index fund is substantially lower compared to the discretionary equity diversified funds. index funds charge Hence, management fees and expenses lowerthe extent of to almost one-half, compared to discretionary diversified funds. 24. Of course, some purchases and sales of stocks will be necessitated even in the case of index funds. This is because some existing investors may leave the fund and some new investors join the fund from time to time. The purchases and of stocks have to be made in such a manner that sales the portfolio composition continues to match the index chosen. Slight tracking error 25. This means that if the fund has to reduce its portfolio size by, say, 1%, each distinct holding should be reduced by 1%. exact calculation may mean fractions of some shares The but shares cannot be sold or bought in fractions. The fund manager can only try to match the funds portfolio to the index as nearly as possible. Slight mismatch, known as tracking error, will generally remain but this is unlikely to affect the funds performance materially.
9

Effect of index revision 26. Agencies which compile the share index usually revise the index at some intervals by replacing some of the existing companies by others. The agency has to give an advance the public about such changes. The index fund notice to will to readjust its portfolio composition so that have it corresponds to the revised index. Some changes in the composition of the index are necessitated by mergers and liquidations of companies also. Index funds not popular in India 27. In India, index funds are not very popular for two main reasons. , not many investors in India have much First what kind of future return to expect from idea about the particular Secon , an emerging economy, like index. d provides many rewarding India, opportunities of investing in companies not included in the These may be young index.fast growing companies. Even in the case of and index companies, some companies may be more promising than but index funds have to rigidly adhere to others the percentage representation of the various index companies in the funds In the present Indian portfolio. in fund management has been found to situation, flexibility be advantageous .

10

V. NET ASSET VALUE (NAV) : A VERY IMPORTANT CONCEPT

28. Once a mutual fund scheme has been floated, the buying and selling prices of its units from day to day are related to the of the units according to the regulations of SEBI. It NAV is important for investors to understand the NAV concept. Daily NAV 29. A mutual fund is required to compute the NAV once a day based on the closing market prices by valuing all assets and liabilities at current . their values NAV per unit 30. The steps involved in computing the NAV per are unit as follows : (a) Compute the aggregate assets of the as a at fund current whole values. (b) Compute the aggregate liabilities at current values.Compute aggregat NAV i.e. (a) minus (c) the (b). (d) Compute eper NAV by dividing the the NAV by the total number of units outstanding. That unit aggregate is: Aggregate NAV NAV of per unit = --------------------------------No. of units outstanding Watch the NAV per unit 31. Just as investors in shares watch the share prices in order to know how their investment is faring, a mutual fund investor track of the progress of the fund by looking at can keep the movement of the NAV per unit.

11

32.

33.

34. an

Mutual fund and stock market relationship Remember that the NAV per unit of an equity fund is linked to the value of the funds portfolio, which, in turn, is related to the ups and downs of the stock The market. fickleness of the equity market as a whole affects the mutual fund investors through its effect on the NAV per unit. Such fickleness sometimes borders on madness it has no link with fundamental factors. It is because best brought out by movements of the markets P/E 1 ratio. Exhibit 5 presents the movements over a fairly long period from January 1999 to March 2007. If the stock market crashes, the value of an equity fund will also As Peter Lynch has said, there is crash. thing no such as a crash-proof 2 Even the portfolio. best fund manager cannot protect the investor in such an eventuality. Short-term and cyclical fluctuations are aharacteristics of stock markets all over the c world. Investors should view mutual fund equity schemes as avenue for long-term investment rather than for short-term speculation.

See our Investors Education Series No. 1 on How the P/E Ratio Can Really Help You, pp. 6-8. 2 Peter Lynch, Learn to Earn: A Beginn ers Guide to Basics of Investing and Business New York, 1995), p. 119.

specially (Fireside,

12

Exhibit 5 P/E Ratio - Sensex & Nifty Comparison

35

30

Sensex
25

20

15

S&P CNX Nif ty

10

S&P CNX Nifty Series2 Sensex Series1

Months

13

VI. CHARGEABLE FEES AND EXPENSES

SEBI Regulations

35. The AMC (Asset Management Company) charges an investment advisory fee to the mutual fund. In addition, the to day running expenses are also chargeable to day the mutual fund. 36. If the AMC is lavish, careless or unscrupulous in spending, net return to investors will be adversely affected. the Hence, regulations have laid down in detail what and SEBI how can be charged to the mutual fund in the form much of advisory fees and expenses. 37. The SEBI regulations have laid down sub-limits for (a) investment advisory fee, and (b) other recurring expenses and also an over-all limit for the two combined. Expenses not expressly allowable have to be borne by which are the AMC. (For example, expenses of account maintenance is AMCs responsibility. There could be others, like the rental for office space) 38. The over-all limit on fees plus recurring advisory expenses, which the AMC can charge to the fund, is prescribed as a ercentage of average weekly net assets, indicated p below: Average Weekly Net Assets Over-all limit on fees & expenses (1) First Rs 100 crore 2.50% (2) Next Rs 300 crore 2.25% (3) Next Rs 300 crore 2.00% Additional (4) assets 1.75% Note The percentages mentioned are applied to : the average weekly net assets. 39. In the case bond the percentage is required to of schemes, be lower by at least 0.25% than the above-mentioned figures.
14

40. Within the over-all limit mentioned above, there is a sub- limit for advisory fees as follows: Average Weekly Net Assets Sub-limit on advisory fee (1) Rs 100 crore 1.25% (2) Excess over Rs 100 crore 1.00% 41. The difference between the combined over-all limit (mentioned in Para 38 above) and the sub-limit for advisory fee represents the sub-limit for allowable recurring These expenses comprise brokerage expenses. and transaction cost, registrars services, custodian fees, audit fees, trustees fees and expenses, investor communication expenses, insurance premium and statutory advertisement costs . Initial launching expenses 42. The initial launching expenses of a scheme are also regulated by SEBI as a separate category. SEBI regulations expenses upto a maximum limit of 6% of allow these the initial resources raised. Till recently, the regulations required initial expenses exceeded 6%, the excess will that if the have borne by the AMC. A recent change disallows to be initial expenses beyond 6% even if the AMC is prepared to bear excess. Ostensibly, this change has been made to the stop unhealthy competition among mutual funds. Load funds and no-load funds 43. No-load funds are those funds which do not charge an initial entry-fee from investors. On the other hand, load funds an entry fee. In the case of schemes launched on charge no basis, the AMC is permitted to recover the load launching by increasing the investment management expenses advisory fee slightly, i.e. by upto 1% of the average weekly net assets.investors may get attracted into a scheme because Some it charges no entry fee but this advantage is, more or less, cancelled out by higher advisory fee and exit fee.
15

Are no-load funds ? preferable 44. In the case a load-fund which has an entry fee of, say, 6%, for every Rs. 100 paid by the investor, the amount actually on his/her behalf will be Rs. 94 only. On the invested other in the case of a no-load fund, the full amount hand, of 100 paid by the investor is available to be invested Rs. on his/her behalf but the fund is allowed to charge an additional 1% advisory fees in lieu of not charging an entry fee. 45. There is thus a trade-off. The difference between the two alternatives does not seem to be significant from the long- angle. Usually, in the case of no-load funds, term the investor has to pay upto 1% additional advisory fee and also exit charge if he/she exits from the fund within a an short In the case of load funds which levy an entry period. fee, is generally no exit there charge.

16

VII. CLOSED-END SCHEMES

AND

OPEN-END

46. Mutual fund schemes are of two broad types, viz., (a) closed-end and (b) open-end. closed-end has a A fund number of units outstanding, just like shares fixeda of company. are listed on stock exchanges and traded in Such units the market at the prevailing market prices in the same way as shares of a company. The liquidity of such units depends on actively they are being traded. With just a how few exceptions, most closed-end funds are not actively traded but have a fixed tenure. At the end of such tenure, the fund is liquidated and the money returned to the unit holders. 47. An open-end fund has arrangement both to mutual issue further units and also to repurchase existing units from the holders. The sale and repurchase prices are both linked to NAV. The SEBI has laid down rules for regulating the the maximum permissible spread between issue and repurchaseof prices open-end . schemes A puzzle 48. In the case of closed-end , i t has been observed schemes that their market price is often significantly lower than the NAVat a discount to NAV, in market parlance). This (i.e., has always been a puzzle because it looks illogical. In such aase, the unitholders will be better off if the fund c is liquidated and the money returned to the unitholders. If unitholders had voting power, they could get the scheme liquidated . Open-end schemes are better 49. From the investors viewpoint, open-end funds are preferable because they provide immediate liquidity to the investor in case of need. They also keep the funds management on its toes. If an open-end fund is poorly managed, the investors can walk out any time. This is not so the case of closed-end schemes which, in a sense, lockin in existing investors. In the case of actively traded the closedend funds, an existing investor can sell his holding in the market but usually at a price which is significantly below the NAV.
17

VIII. SYSTEMATIC INVESTMENT PLAN (SIP)

What is SIP? 50. A systematic investment plan (SIP) commits the investor to invest a specified amount every month (or every quarter) in units of a funds equity scheme. The number of the units bought each month for the investor under the plan will depend on the ruling price: fewer units are bought when the is high, and more units are bought when price is price low. is a built-in advantage of SIPs. It averages This out investors buying price over the entire period of holding. resolves a dilemma often facing investors due The SIP to and downs in the market price. The investor finds ups it difficult to decide when to invest in the equity scheme. 51. The monthly or quarterly amount to be invested can be as small as Rs. 500 or Rs. 1000. Mutual funds specify the schemes for which SIP is allowed by them. Some funds a lower entry load under SIP than for onecharge time investment, but others dont make any such distinction. An load under SIP is charged if the investor leaves exit the scheme before a specific period of time. When is SIP advantageous 52. It cannot be claimed that the SIP is always more advantageous than a lump sum investment. It all depends on course of equity prices which form the basis the for computing the price of units. 53. If over the total period of holding, the prices have been generally declining, the SIP would cause a loss: the redemption amount (based on NAV at the end) paid to the investor for the accumulated units in his/her account would than the total cost. In the opposite case of be less rising prices, the SIP would be advantageous.

18

Example 54. Consider the following simplified example: Monthly investment is Rs. 1000 for the next 12 months. The amount is invested each month immediately in units of an equity at the ruling price of scheme units. Assumption-1 (Declining The price per unit Rs Prices): first 8 and Rs 10 per unit for last 4 . is 16 for months is a simplification. The price for each month months. (This would ordinarily be different.) Under this assumption, against Rs. per month paid by the investor, the number of units 1000 purchased will be 500 in the first 8 months and 400 in the 4 months. Thus the total number of units purchased last over 12 months will be 900 at a cost of Rs. 12000. The redemption of the accumulated units is done always at the closing NAV. As per our assumptions, the accumulated units are 900 and will fetch only Rs. 9000 at the closing Rs. 10 per unit. The investor suffers a loss of NAV of Rs. on the total amount invested (Rs. 12000 9000). 3000 Assumption-2 (Rising The ruling prices of Prices): reversed, Rs. 10 for units 8 and Rs. 16 for are first being months. The number of units bought for the months last 4 investor 800 in the first 8 months and 250 in the last will be 4 onths. The total number of units accumulated over the m 12 months will be 1050 for Rs. 12000. These 1050 units will fetch Rs. 16800 at the closing price of Rs. 16 per unit. Theretotal gain of Rs. 4800 for the investor (Rs. 16800 is a 2000). 1 55. The example given above brings out that the crucial factor is how the ruling price behaves over the period of SIP. In the world, no one can predict the pattern of prices real which will prevail in the future over the next 12 months or a longer of some years. The most advantageous situation period for investor is when his/her over-all buying cost is the the least the realisable price on completion of the investment and plan is the highest.

19

56. An investor, who joins the SIP at a wrong time (i.e. when the equity prices are all-time high), will be in an unfortunate situation unless the prices rise further in the future. Thus, we that the averaging of price over the period of SIP see does always insulate the small investors against the not markets volatility . 57. In the case of SIP, the possibility of loss can be avoided by not starting at the wrong time (i.e. when equity prices are too high). We should bear in mind the fact that the Indian stock is far more volatile than the developed markets, market like and U.K. If we look at the movements of BSE U.S. Sensex, a significant fall or rise of 20-25% within a few months is fairly common. The SIP provides a very imperfect solution problem posed by markets high to the volatility. Caution needed 58. The investor should not take it for granted that SIP is always advantageous. The price level at the starting point is particularly as illustrated above. The price important, of the period chosen is also level at the end The rigidity critical. of most SIP schemes can be both inconvenient and disadvantageous to the investors. The investor should avoid a situation of forced redemption of accumulated units at unduly low price by building some flexibility in the choice of redemption date.

20

IX.

DIRECT EQUITYHOLDING VS. MUTUAL FUND EQUITY SCHEMES

Future performance is the 59. A key mutual funds future performance over the long-term is directly linked to the kind of companies in its portfolio: Are the companies and industries in which good growth these is expected over the long-term? The mutual funds are required to disclose their portfolio in periodical reports. This is to enable investors to form a broad judgment about the funds portfolio. There is generally a fair degree of performance in the case of large, diversified and continuity established mutual fund schemes. Direct shareholding 60. An advantage of direct shareholding vis--vis mutual fund equity schemes is that direct investors do not have to bear burden of annual management fees and the expenses by mutual funds. Such burden usually amounts charged to around 2.5% per annum of the mutual fund portfolio value, in addition to the entry and exit loads. For this reason, a nowledgeable long-term equity investor can hope to earn k a igher annual return through direct equity holding h than through mutual fund equity schemes. 61. A second advantage of direct shareholding is that, over the years, the investor becomes more knowledgeable about companies, industries and the share market. On the basis of knowledge, the investor may buy more shares of such the companies already in his/her portfolio as and when good the price dips. The shares of the laggard companies share may be disposed of. This kind of investment strategy reduces the market risk by reducing the average acquisition cost of his/her shareholdings. It also improves the over-all quality of portfolio. A portfolio of just 5-10 carefully the selected from different industries, held for long periods companies of over 5 years or even 10 years, can be quite rewarding.
21

Narrow diversification works well 62. It has been statistically proved that more than one-half of the market risk is eliminated by portfolios of 5 differentand more than two-thirds of risk is eliminated shares; by portfolios of 10 3 Market risk is the risk of shares. from the whole loss arising market falling. Diversifying beyond 10 companies can reduce the remaining market risk. However, since the remaining risk is small, its elimination a minor benefit. Even this is cancelled brings only out because too much diversification makes it difficult to supervise the portfolio. The practical angle 63. From the practical angle, a more comfortable as well as more profitable strategy would be to have a combination of direct equity holdings and mutual fund equity schemes. In this way, a well-to-do investor can avoid having too many companies in his/her own portfolio.

See L.C. Gupta, Rates of Retu rn on Equities: The Indian Experience (Oxford University Press, 1981), pp. 33-34. Market risk has to be distinguished from the risk of rando m error or insurable risk. See Ibid., pp. 31-32.

22

Appendix 1 List of Mutual Funds In India Sr. No. Name of the Asset Management Company Assets Under
Management Bank A. Sponsored (i) JOINT VENTURES PREDOMINANTLY INDIAN 1 SBI Funds Management Pvt. Ltd. 17,552 TOTAL A 17,552 (i) (ii) OTHER S 1 BOB Asset Management Co. 118 Ltd. 2 Canbank Investment Management Services Ltd. 2,308 3 UTI Asset Management Co. Pvt. Ltd. 37,535 TOTAL A 39,961 (ii) TOTAL A (i + 57,513 ii) B. INSTITUTIONSFund Asset Management Co. Ltd. 12,237 1 LIC Mutual TOTAL 12,237 B C. PRIVATE SECTOR (i) INDIA N 1 Benchmark Asset Management Co. Pvt. Ltd. 6,076 2 DBS Cholamandalam Asset Management Co. Ltd. 2,263 3 Escorts Asset Management Ltd. 129 4 J.M. Financial Asset Management Pvt. Ltd. 3,816 5 Kotak Mahindra Asset Management Co. Ltd. 12,674 6 Quantum Asset Management Co. Ltd. 59 7 Reliance Capital Asset Management Ltd. 39,020 8 Sahara Asset Management Co. Pvt. Ltd. 181 9 Tata Asset Management Ltd. 13,222 10 Taurus Asset Management Co. Ltd. 261 TOTAL C 77,701 (i) (ii) JOINT VENTURES - PREDOMINANTLY INDIAN 1 Birla Sun Asset Management Co. Ltd. 21,190 2 DSP Merrill Lynch Fund Mangers Ltd. 13,440 3 HDFC Asset Management Co. Ltd. 31,424 4 Prudential ICICI Asset Management Co. Ltd. 34,746 5 Sundaram BNP Paribas Asset Management Co. Ltd. 7,104 TOTAL C 107,904 (ii) (iii) JOINT VENTURES PREDOMINANTLY FOREIGN 1 ABN AMRO Asset Management (India) Ltd. 5,145 2 Deutsche Asset Management (India) Pvt. Ltd. 6,330 3 Fidelity Fund Management Pvt. Ltd. 5,873 4 Franklin Templeton Asset Management (India) Pvt. Ltd. 23,908 5 HSBC Asset Management (India) Pvt. Ltd. 12,140 6 ING Investment Management (India) Pvt. Ltd. 4,067 7 Lotus India Asset Management Co. Pvt. Ltd. 647 8 Morgan Stanley Investment Management Pvt. Ltd. 3,118 9 Principal PNB Asset Management Co. Pvt. Ltd. 10,333 10 Standard Chartered Asset Management Co. Pvt. Ltd. 12,746 TOTAL C 84,307 (iii) TOTAL C 269,912 (i+ii+iii) TOTAL 339,662 (A+B+C) Source:Newsletter of Association of Mutual Funds in India (AMFI), January 2007 23