Summary

Type	Open ended equity (diversified)	Benchmark	S&P CNX 500
Min. Investment	Rs 5,000	Face Value	Rs 10
Entry Load	2.25%	Exit Load	Nil
Issue Opens	June 2, 2005	Issue Closes	July 1, 2005

Investment Objective

To generate capital appreciation from a diversified portfolio of equity and equity related instruments.

Is this fund for you?

Kotak Contra Fund (KCF) works on the premise that equity markets keep throwing up investment opportunities for the discerning investor from time to time. This comes by way of temporary bouts of under-valuation, which makes fundamentally strong stocks an attractive investment proposition for the investor. When markets turnaround, these stocks tend to get valued in line with their fundamentals and investors clock a return based on the uptick. The fund has indicated that investors with an investment horizon of at least one year, should look at investing in the fund. In our view, that is too short a time frame for a value-style investment strategy to show results. Investing in equities must be made with a minimum 3-year investment horizon and a predominantly value-based investment strategy might take even longer than that to fructify. In our view, investors in this fund should be looking at an investment a lot longer than what the fund has specified. Given that Kotak Mutual Fund's equity funds have done little to redeem themselves over longer time frames (3-5 years), we believe that the contrarian/value investor's investment objective will be met better over the long-term by considering some of KCF's established peers like Templeton India Growth Fund and HDFC [Get Quote] Capital Builder.

Portfolio Strategy

The fund proposes to pursue a bottom-up investment approach. This means that it will select stocks that coincide with its investment parameters, and only then consider the sectoral/industrial, economic and political factors affecting those companies. In terms of an investment style, the fund proposes to pursue a contrarian style of investing. A cornerstone of this investment approach is that the mutual fund is constantly on the lookout for companies that are valued, even temporarily, below their actual valuations (based on book value). Given the contrarian nature of the fund, it foresees investing in typical 'value' stocks and 'growth' stocks depending on the under-valuation. Investments Indicative Allocation Equity and equity-related securities 65-100% Debt and money market instruments 0-35%

Fund Manager Profile

Nilesh Shah, 36, is a CFA and holds a PGDRM from the Institute of Rural Management, Anand (IRMA). During his association with the Kotak Group, he has handled assignments in the corporate finance and capital markets divisions before moving into equities. Prior to joining the AMC (asset management company), Mr. Shah was Executive Director, Equity Strategy, at Kotak Securities Ltd. Mr. Shah is President of the AMC, and guides its equity strategy, among other responsibilities.

Outlook

For quite some time now, a concern with Kotak Mutual Fund has been a string of CIO (chief investment officer) shuffle over the past 3-4 years that seems to have deprived the fund of a stable fund management strategy. That is probably one reason why no single equity fund from Kotak Mutual Fund has ranked highly in its peer group over a 3-5 year investment time frame. Going forward, if there is lack of continuity at the CIO level, then this is bound to disturb the fund's investment strategy. Kotak Contra Fund offers investors an opportunity to clock higher risk-adjusted returns by investing in stocks that are at a discount to their book values. Should the fund have a larger number of typical value stocks, its volatility could be on the lower side, vis-�-vis funds that have a lot of growth stocks, as value stocks generally witness lower turbulence over the long-term.

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