CONTINUOUS OFFER

                                    OFFER DOCUMENT



                          Franklin FMCG Fund
     ...
CONTENTS



S. No.                   CHAPTER                        PAGE NO.



01.      HIGHLIGHTS & RISK FACTORS        ...
01. HIGHLIGHTS

•   Franklin FMCG Fund, an open-end scheme sponsored by the Franklin Templeton Group, one
    of the world...
•   The scheme may invest in unlisted equities. This may expose the scheme to liquidity
    risks.
•   Engaging in securit...
The Fund/Trustee/AMC shall not be responsible for any acts done by the intermediaries
       representing or purportedly r...
(v)     a day on which normal business could not be transacted due
                            to storms, floods, bandhs, ...
SEBI                  Securities and Exchange Board of India established under
                      Securities and Exchan...
04. DUE DILIGENCE CERTIFICATE


                                  Franklin FMCG Fund


It is confirmed that:

i.     The u...
05. SUMMARY OF THE SCHEME

Name of the Scheme          Franklin FMCG Fund (FFF)
Nature of the Scheme        An Open-end gr...
*In case of exchanges:
If Entry Load paid for Scheme I is greater than the   No entry load will be charged by Scheme II
en...
Load in case of Fund-of-Funds scheme: As the FOF scheme can charge a load, if the
underlying schemes too charge a load, th...
The total expenses of the scheme including the investment management and advisory fee
(together with additional management...
Name of the Scheme                FTDPEF           TIGF - Growth Plan            FTLF
Information as at the end   Mar 2004...
Name of the Scheme                       FTDPEF              TIGF - Growth Plan                    FTLF
                  ...
1000.0142 (DDP - I Plan)
                                                                                       1024.2429 ...
Name of the Scheme                         TITMA – Institutional Plan (IP)                   FTLF
                        ...
Limited as the Trustee. The Trust Deed and the Supplementary Trust Deed have been registered
under the Indian Registration...
2. Number of Shareholder Accounts
   More than 15 million worldwide.

3. Number of Schemes Managed Globally
   About 240 O...
FRANKLIN TEMPLETON IN INDIA: A LONG TERM COMMITMENT

As part of Franklin Templeton’s major thrust on investing in emerging...
The members of the Board of Directors of the Trustee (“the Board of the Trustee”) are: -

• Gregory E. McGowan*
Templeton ...
• Bharat Doshi, Company Executive
  8, St. Helen's Court, Dr. Gopalrao Deshmukh Marg, Mumbai 400 026

Mr. Bharat Doshi is ...
Details of other Directorships are as under:
Name                                                    Details
Franklin Reso...
h) The Trustee shall ensure that the AMC has not given any undue or unfair advantage to any
   associates or dealt with an...
advocates, bankers, brokers, accountants, professional advisors and consultants as it may deem
appropriate.

Trustee shall...
Pursuant to the Deed of Trust constituting the Mutual Fund, the Mutual Fund is authorised to pay
to the Trustee, which in ...
DUTIES AND OBLIGATIONS OF THE INVESTMENT MANAGER

Under the IMA, the Investment Manager has, inter alia, the following dut...
Modifications, if any, in the rights and/or obligations and duties of the Investment Manager are
on account of amendments ...
he graduated as a Foreign Student Scholar and received a Bachelor's Degree in Accounting and
Finance from the University o...
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Franklin FMCG Fund

  1. 1. CONTINUOUS OFFER OFFER DOCUMENT Franklin FMCG Fund An Open – end Growth Scheme Sale of units on an ongoing basis at a Net Asset Value (NAV) related price Asset Management Company : Franklin Templeton Asset Management (India) Pvt. Ltd Mutual Fund : Franklin Templeton Mutual Fund Trustee Company : Franklin Templeton Trustee Services Pvt. Ltd. The particulars of Franklin FMCG Fund have been prepared in accordance with the Securities and Exchange Board of India (Mutual Funds) Regulations, 1996 as amended till date, and filed with SEBI, the units being offered for public subscription have not been approved or disapproved by the Securities and Exchange Board of India nor has the Securities and Exchange Board of India certified the accuracy or adequacy of the Offer Document. The Offer Document sets forth concisely the information about the scheme that a prospective investor ought to know before investing. Please retain this Offer Document for future reference. The date of this revised Offer Document is August 24, 2005 This Offer Document shall remain effective until a 'material change' (other than a change in fundamental attributes and within the purview of the Offer Document) occurs and thereafter changes shall be filed with SEBI and circulated to the unitholders along with the quarterly/half yearly report. In this Offer Document all references to “U.S.$” or “$” are to United States of America Dollars and “Rs.” are to Indian Rupees. The Offer Document should be retained for future reference. Before investing, investors should also ascertain about any further changes in this Offer Document after the date of Offer Document From the Mutual Fund/ Investor Service Centres/Website/Distributors or Brokers. 1
  2. 2. CONTENTS S. No. CHAPTER PAGE NO. 01. HIGHLIGHTS & RISK FACTORS 03 02. INTRODUCTION 05 03. DEFINITIONS 05 04. DUE DILIGENCE CERTIFICATE 08 05. SUMMARY OF THE SCHEME 09 06. SUMMARY OF EXPENSES AND FINANCIAL INFORMATION 09 07. CONDENSED FINANCIAL INFORMATION 12 08. CONSTITUTION / MANAGEMENT OF THE MUTUAL FUND 16 09. INVESTMENT OBJECTIVES AND POLICIES 34 10. HOW TO INVEST 44 11. VALUATION OF ASSETS AND NET ASSET VALUE 53 12. HOW TO REDEEM UNITS OF THE SCHEME 66 13. ASSOCIATE TRANSACTIONS 72 14. UNITHOLDER INFORMATION 72 15. TAX BENEFITS 79 16. INVESTOR SERVICES 83 17. GENERAL INFORMATION 85 18. PENDING LITIGATION OR PROCEEDINGS 92 2
  3. 3. 01. HIGHLIGHTS • Franklin FMCG Fund, an open-end scheme sponsored by the Franklin Templeton Group, one of the world’s largest investment management companies, which has over 50 years of experience in international investment management and manages US$ 438.7 billion in assets (approximately Rs.19,05,713 crores) as on July 31, 2005. • An open-end sector fund investing primarily in the Fast Moving Consumer Goods (FMCG) industry. • India's FMCG sector is poised for robust growth on account of increased spending, penetration of rural markets, shift in demographic pattern favouring consumption of consumer goods etc. In addition, investment in brands and cost reduction is expected to continue the process of wealth creation in this sector. • Choice of Dividend Plan and Growth Plan. • The dividend option also offers reinvestment facility. • Minimum investment amount - Rs. 5,000/-. • Long term capital gains benefits. • Dividend tax free in the hands of investors (the scheme will not pay any distribution tax, if 50% or more of the investible funds of the scheme are invested in equity shares). • No tax deduction at source on redemption irrespective of the amount redeemed for resident investors. RISK FACTORS • Mutual funds and securities investments are subject to market risks and there is no assurance or guarantee that the objective of the Scheme will be achieved. • As with any investment in securities, the Net Asset Value (NAV) of the units issued under the scheme can go up or down depending on the factors and forces affecting the capital markets. • Past performance of the sponsors/the asset management company/mutual fund does not indicate the future performance of the scheme of the mutual fund. • Franklin FMCG Fund is the name of the scheme and does not in any manner indicate either the quality of the scheme or its future prospects and returns. • Franklin FMCG Fund will invest primarily in the Fast Moving Consumer Goods (FMCG) industry thereby restricting the diversification of the scheme. Therefore, the performance of the scheme would be dependent upon the performance and market price movements of companies in the Fast Moving Consumer Goods (FMCG) industry. Hence, movements in the Net Asset Value (NAV) of Franklin FMCG Fund will be more volatile compared to the NAV of a scheme with a more diversified portfolio. • The Sponsor is not responsible or liable for any loss resulting from the operation of the Scheme beyond the initial contribution of Rs.1 lakh made by it towards setting up the Fund. • The investors in the Scheme are not being offered any guaranteed/assured returns. SCHEME SPECIFIC RISK FACTORS AND SPECIAL CONSIDERATION • To the extent the assets of the scheme are invested in overseas financial assets, there may be risks associated with currency movements, restrictions on repatriation and transaction procedures in overseas markets. • Derivatives are high risk, high return instruments as they may be highly leveraged. A small price movement in the underlying security could have a large impact on their value and may also result in a loss. 3
  4. 4. • The scheme may invest in unlisted equities. This may expose the scheme to liquidity risks. • Engaging in securities lending is subject to risks related to fluctuations in collateral value/settlement/liquidity/counter party. • The performance of the scheme may be affected by changes in Government policies, general levels of interest rates and risk associated with trading volumes, liquidity and settlement systems in equity and Money market markets. • As per SEBI circular No. SEBI/IMD/Cir-10/22701/03 dated December 12, 2003 read with Circular No. SEBI/IMD/Cir-1/42529/05 dated June 14, 2005, each portfolio under a scheme should have a minimum of 20 investors and no single investor should account for more than 25% of the corpus of such portfolio. Determining the breach of the 25 % limit by an Investor – The average net assets of the scheme would be calculated daily and any breach of the 25% holding limit by an investor would be determined. At the end of the quarter, the average of daily holding by each such investor is computed to determine whether that investor has breached the 25 % limit over the quarter. If there is a breach of limit by any investor over the quarter, a rebalancing period of one month would be allowed and thereafter the investor who is in breach of the rule shall be given 15 days notice to redeem his exposure over the 25 % limit. Failure on the part of the said investor to redeem his exposure over the 25 % limit within the aforesaid 15 days would lead to automatic redemption by the Mutual Fund on the applicable Net Asset Value on the 15th day of the notice period. In each calendar quarter, on an average basis, each portfolio under an open end scheme shall meet with the above condition of minimum 20 investors, failing which the provisions of Regulation 39(2)(c) of SEBI (Mutual Funds) Regulations, 1996 would become applicable automatically without any reference from SEBI and accordingly, the portfolio shall be wound up by following the guidelines laid down by SEBI. • Prospective investors should review/study this Offer carefully and in its entirety and shall not construe the contents hereof or regard the summaries contained herein as advice relating to legal, taxation, or financial/ investment matters and are advised to consult their own professional advisor(s) as to the legal or any other requirements or restrictions relating to the subscription, gifting, acquisition, holding, disposal (sale, transfer, switch or redemption or conversion into money) of Units and to the treatment of income (if any), capitalisation, capital gains, any distribution, and other tax consequences relevant to their subscription, acquisition, holding, capitalisation, disposal (sale, transfer, switch or redemption or conversion into money) of Units within their jurisdiction / of nationality, residence, domicile etc. or under the laws of any jurisdiction to which they or any managed Funds to be used to purchase/gift Units are subject, and (also) to determine possible legal, tax, financial or other consequences of subscribing / gifting to, purchasing or holding Units before making an application for Units. • Neither this Offer Document nor the units have been registered in any jurisdiction. The distribution of this Offer Document in certain jurisdictions may be restricted or subject to registration requirements and, accordingly, persons who come into possession of this Offer Document in certain jurisdictions are required to inform themselves about, and to observe, any such restrictions. No person receiving a copy of this offer document or any accompanying application form in such jurisdiction may treat this Offer Document or such application form as constituting an invitation to them to subscribe for Units, nor should they in any event use any such application form, unless in the relevant jurisdiction such an invitation could lawfully be made to them and such application form could lawfully be used without compliance with any registration or other legal requirements. The Investor is requested to check the credentials of the individual/firm he/she is entrusting his/her application form and payment to, for any transaction with the Fund. 4
  5. 5. The Fund/Trustee/AMC shall not be responsible for any acts done by the intermediaries representing or purportedly representing such investor. • No person has been authorised to give any information or to make any representations not confirmed in this Offer Document in connection with this Offer or the issue of Units, and any information or representations not contained herein must not be relied upon as having been authorised by the Mutual Fund, the Investment Manager. Neither the delivery of this Offer Document nor any sale made hereunder shall, under any circumstances, create any implication that the information contained herein is correct as of any time subsequent to the close of the Initial Offering Period. 02. INTRODUCTION Franklin FMCG Fund is an open-end growth scheme, which invests primarily in the Fast Moving Consumer Goods (FMCG) industry and seeks to provide long- term capital appreciation. Investors have a choice of Growth Plan and Dividend Plan. Dividend Plan Under this plan, investors can choose to receive tax-free dividends. Investors also have the option to reinvest their dividend for additional units. There is no assurance on the frequency of dividends as they depend on the availability of distributable profits. Growth Plan Under this plan, the growth in NAV will reflect the appreciation of the value of investment. Investors have the benefits of indexation of cost and favourable long term capital gains. 03. DEFINITIONS In this Offer Document the following definitions have been used: AMC/Asset Franklin Templeton Asset Management (India) Pvt. Ltd., the Management asset management company, set up under the Companies Act, 1956 Company/ and authorized by SEBI to act as Asset Management Company to Investment the schemes of Franklin Templeton Mutual Fund. Manager Applicable NAV “Applicable NAV for Subscriptions” is the Net Asset Value per for Subscriptions unit of the business day on which the application for subscription is accepted. Applicable NAV “Applicable NAV for Redemptions” is the Net Asset Value per for Redemptions unit of the business day on which the application for redemption is accepted. Business Day A day other than: (i) Saturday and Sunday, (ii) a day on which the banks in Mumbai and/or RBI are closed for business / clearing, (iii) a day which is a public and/or bank holiday at a collection centre where the application is received, (iv) a day on which sale and repurchase of units is suspended by the AMC, 5
  6. 6. (v) a day on which normal business could not be transacted due to storms, floods, bandhs, strikes or such other events as the AMC may specify from time to time. (vi) A day on which register of unitholders is closed. (vii) A day on which the underlying scheme(s) is closed for Subscription/Redemption or determination of the NAV of the fund. The AMC reserves the right to declare any day as a Business Day or otherwise at any or all collection centres. Custodians A custodian appointed for holding the securities and other assets of the scheme, which for the time being is Deutsche Bank, Kodak House, 422, Dr. D. N. Road, Fort, Mumbai 400 001. Entry Load / Sales Load on ongoing purchases. Load Exit Load / Load on redemption other than CDSC. Redemption Load Investment Investment Management Agreement (IMA) dated January 5, 1996 Management executed between Franklin Templeton Trustee Services Pvt. Ltd. Agreement or and Franklin Templeton Asset Management (India) Pvt. Ltd. IMA ISC Investor Service Centre of the Asset Management Company Collection Centre The location that is declared as an official point of acceptance for all transactions but where no Investor or Distributor services are offered. These locations would only accept and acknowledge transactions as per SEBI guidelines. Money Market Commercial papers, commercial bills, treasury bills, Government Instruments securities having an unexpired maturity upto one year, call or notice money, certificate of deposit, usance bills, (repos / reverse repos), and any other like instruments as specified by the Reserve Bank of India from time to time including mibor linked securities, fixed deposits, call products having unexpired maturity upto one year. Mutual Fund Franklin Templeton Mutual Fund, a trust set up under the provisions of Indian Trusts Act 1882, and registered with SEBI vides Registration No. MF/026/96/8. NAV Net Asset Value of the Units of Franklin FMCG Fund. Offer Document The document issued by Franklin Templeton Mutual Fund offering units of Franklin FMCG Fund. Public Offering ‘POP’ or the Sale Price is the price at which the units are proposed Price (POP) / Sale to be sold on an ongoing basis and may include permissible load Price amount as and when an entry load is introduced. (see Section “Public Offering Price”). RBI Reserve Bank of India established under the Reserve Bank of India Act, 1934. Registrars Registrar for the time being of the Mutual Fund, which is in-house, Franklin Templeton Asset Management (India) Pvt. Ltd. Repo / Reverse Sale/Purchase of Government Securities as may be allowed by RBI Repo from time to time with simultaneous agreement to repurchase/resell them at a later date. Scheme Franklin FMCG Fund (FFF) 6
  7. 7. SEBI Securities and Exchange Board of India established under Securities and Exchange Board of India Act, 1992. SEBI Regulations SEBI (Mutual Funds) Regulations, 1996, as amended from time to time, for the operation and management of Mutual Funds. Sponsor Templeton International, Inc., a subsidiary of Franklin Resources, Inc., based in San Mateo, California, U.S.A. Trust Deed The Trust Deed dated January 4, 1996 of Franklin Templeton Mutual Fund, as amended by the Supplemental Deed of Trust dated May 30, 1996. Trustee Franklin Templeton Trustee Services Pvt. Ltd., a company set up under the Companies Act 1956, and approved by SEBI to act as the Trustee to the schemes of Franklin Templeton Mutual Fund. Unit The interest of an investor, which consists of one undivided share in the Net Assets of Franklin FMCG Fund. Unitholder A person holding Units in Franklin FMCG Fund. FRANKLIN FMCG FUND Franklin FMCG Fund is an open-end growth scheme with an objective to provide long-term capital appreciation by investing primarily in shares of companies operating in the Fast Moving Consumer Goods (FMCG) industry. 7
  8. 8. 04. DUE DILIGENCE CERTIFICATE Franklin FMCG Fund It is confirmed that: i. The updated and revised Offer Document forwarded to SEBI is in accordance with the Securities and Exchange Board of India (Mutual Funds) Regulations, 1996 and the guidelines and directives issued by SEBI from time to time. ii. The disclosures made in the Offer Document are true, fair and adequate to enable the investors to make a well informed decision regarding investment in the proposed scheme iii. The intermediaries named in the Offer Document are registered with SEBI and till date such registrations is valid. Pranita Gramopadhye Compliance Officer Date: August 24, 2005 Place: Mumbai 8
  9. 9. 05. SUMMARY OF THE SCHEME Name of the Scheme Franklin FMCG Fund (FFF) Nature of the Scheme An Open-end growth scheme. Investment Objective The investment objective of Franklin FMCG Fund is to provide long- term capital appreciation by investing in shares of companies operating in the Fast Moving Consumer Goods (FMCG) industry. Pricing for on going On going subscription will be at Public Officering Price* (POP) subscription Redemption Price Redemptions will be done at the Applicable NAV for redemptions*. Liquidity The redemption cheque will be despatched to the unitholders within the statutory time limit of 10 business days prescribed by SEBI. However, on a best effort basis the Fund will endeavour to despatch the redemption cheque within 4 working days after a valid redemption request is received at the Registrar’s office. Transparency • NAV will be normally determined for all business days and released to the press. • NAV will be calculated upto 2 decimal places. • The Fund would publish the half-yearly and annual results as per the SEBI Regulations. • Full Portfolio disclosure every half-year as per the SEBI regulations. Tax Benefits There are certain tax benefits available to the investors under the Scheme. (Please refer to Section on Taxation). * AMC reserve the right to introduce/increase/decrease the entry/exit load on a prospective basis. 06. SUMMARY OF EXPENSES AND FINANCIAL INFORMATION EXPENSES OF THE SCHEME The information that is provided under this section seeks to assist the investor in understanding the following: - a) The expense structure of the current Scheme and types of different fees and their percentage the investor is likely to incur on purchasing and selling the units of the Scheme. a) The financial information (condensed) relating to the previous schemes launched by the Fund. Unitholder Transaction Expenses or Sales Load: As a % of NAV Present charge Maximum charge I Maximum sales Load imposed on purchase 2.25% 3% (for normal purchases#) II Sales Load, if any, on issue of units in lieu of dividends NIL NIL III Redemption / Repurchase load NIL 3% IV Switchover/Exchange Fee* NIL NIL # normal purchases are purchases at the minimum subscription amount specified for each respective scheme, other than purchases through SIP, STP(in), DTP(in) or Exchange/ Switch(in) 9
  10. 10. *In case of exchanges: If Entry Load paid for Scheme I is greater than the No entry load will be charged by Scheme II entry load for Scheme II If Entry Load paid for Scheme I is lower than the The differential load will be charged by Scheme II entry load for Scheme II If Entry Load paid for Scheme I is same as the An exchange fee of 0.25% will be charged by entry load for Scheme II Scheme II For all Systematic Investment Plan (SIP), Systematic Transfer Plan (STP) and Dividend Transfer Plan (DTP) purchase transactions, following entry and exit load shall be applicable: Description Entry Load Exit Load* If the entry load for normal 1% Equal to the entry load applicable purchases# exceeds 1% to normal purchases#, as reduced by 1% If the entry load for normal 50% of the entry load applicable Equal to 50% of the entry load purchases# is equal to or less for normal purchases# applicable for normal purchases# than 1% * if redeemed within 2 years (730 calendar days) of the allotment date applying ‘First in First Out’ basis, or in case the SIP/STP is prematurely terminated before completion of the minimum term for any reason, as the AMC may deem fit.. It is clarified that the load applicable in case of a SIP, STP and DTP shall be the load prevailing on the date of the first instalment. The investors may please note the exchanges/switches in the tax savings schemes will be subject to the applicable lock-in-periods. The Trustee/AMC reserves the right to increase/decrease/introduce a Load/Fee at any time in future on a prospective basis and will be applied for transactions after the introduction of the load. Load will be charged at rates applicable at the time of the transaction (purchase, redemption, exchange, dividend reinvestment etc.) details of which will be provided in our offices/Web site/addendum to the offer document. The addendum detailing the changes may be attached to offer documents and abridged offer documents. The addendum may be circulated to all the distributors/brokers so that the same can be attached to all offer documents and abridged offer documents already in stock. However, such increase/decrease/introduction would be subject to the limits prescribed under the Regulations. The AMC/Trustee reserves the right to introduce a load and change the load structure of the scheme if it so deems fit in the interest of and for the smooth and efficient functioning of the scheme. A load structure, introduced by the Trustee/AMC may comprise of an entry load, exit load, spread or level load or any other load represents a low flat charge to buy the fund with an equal charge upon redemption, whenever it occurs. The AMC/Trustee reserve the right to levy the exit load with a view to protect the interests of existing unitholders and the same will be levied having regard to such relevant factors such as market conditions/volatility, expenses of liquidating the securities, impact cost due to liquidating the securities etc. All loads including CDSC shall be maintained in a separate account and may be utilised towards meeting the selling and distribution expenses. Any surplus in this account may be credited to the scheme, whenever felt appropriate by the AMC. As per SEBI circular MFD/CIR.No 04/11488 /2003 dated June 12, 2003; Mutual Funds are permitted to launch Fund of Funds (FOF) schemes. The A FOF scheme will invest in other mutual fund schemes, which will be treated as underlying schemes. 10
  11. 11. Load in case of Fund-of-Funds scheme: As the FOF scheme can charge a load, if the underlying schemes too charge a load, there would be a double incidence of load for the investors at the FOF level and at the underlying scheme level. Hence, no load (entry/exit) will be charged by the underlying open-end schemes of Franklin Templeton Mutual Fund on the investments made by any Fund of Funds scheme of a Mutual Fund. Trail Fees: In the FOF scheme, the underlying schemes get the subscription through the vehicle of FOF. Hence, the distributor who mobilizes the investment in Franklin Templeton Fund of Fund schemes is entitled to trail fees, which the underlying scheme would have normally paid to a distributor. Accordingly, the trail fees will be paid out of the underlying scheme. Total Expenses: • Investment Management and Advisory fees not exceeding 1.25% on the first 100 crores of the Daily/Weekly Average Net Assets and 1% of the amount in excess of Rs.100 crores. • The maximum annual recurring expenses that can be charged to the scheme shall be within the limits stated in Regulations 52(6) and subject to a percentage limit of Daily/Weekly Average Net Assets as in the table below: First Rs.100 crore Next Rs.300 crore Next Rs.300 crore Over Rs.700 crore 2.50% 2.25% 2.00% 1.75% Any excess over these specified ceilings will be borne by the Asset Management Company. The Trustee/AMC reserves the right to charge higher operating expenses in relation to overseas investment as and when SEBI permits. The AMC has estimated the following recurring expenses for the first Rs.100 crores of Average Daily / Weekly Net Assets: Nature of fees and expenses % of Average Weekly Net Assets Investment Management Fees 1.25 Custodial Fees 0.50 Shareholder Servicing Fee/Investor Communication Expenses 0.50 Trustee Remuneration, Audit Fees etc 0.25 Total Annual Recurring Expenses 2.25* Trusteeship fee shall be distributed equitably across all schemes of Franklin Templeton Mutual Fund. Out-of-pocket expenses incurred for attending meetings of the Trustee shall be paid separately and shall be charged to the fund. *The above heads and percentages are estimates and may vary in practice in line with actuals and amendment to SEBI regulations but will be subject to the overall ceiling of 2.50 %. The AMC will bear any expenses in excess of the ceiling. The tables given above relating to Unitholder Transaction Expenses, Initial Issue Expenses and Annual Scheme Recurring Expenses have been given to the investor to assist him/her in understanding the various costs and expenses that an investor of the scheme will bear directly or indirectly. Investment management fees are payable in arrears. The direct expenses incurred by each scheme of Franklin Templeton Mutual Fund shall be chargeable to that scheme. The common expenses incurred on various schemes will be charged on the basis of number of unitholders, the size of corpus of the scheme and in conformity with generally accepted accounting principles. 11
  12. 12. The total expenses of the scheme including the investment management and advisory fee (together with additional management fee wherever applicable) shall not exceed the limit stated in Regulation 52(6). The AMC reserves the right to revise these charges as specified under the paragraph pertaining to fundamental attributes of the scheme. Past schemes (launched during the past one fiscal year): The details of initial issue expenses of Franklin India Flexi Cap Fund (FIFCF) and Franklin Templeton Fixed Tenure Fund – Series I – 60 Month Plan (FTFTF-I) (schemes launched during the last one fiscal year) are given below: (Rs. in Lakhs) Nature of expenses FIFCF FTFTF-I (No Load Scheme) Brokerage fees & Commission 5,410.89 183.68 Marketing & Advertising 331.37 27.31 Printing & Distribution 81.92 17.30 Banker’s fees 6.70 -- Other expenses 0.25 - Total Expenses 5,831.13 228.29 None of the expenses in any of the schemes above have exceeded 6% of initial resources mobilised. The initial issue expenses in case of FTFTF-I are currently borne by the AMC. In case of FIFCF, the amount in excess of the entry load has been borne by the AMC. 07. CONDENSED FINANCIAL INFORMATION a) HISTORICAL PER UNIT STATISTICS Name of the Scheme FINTF FIFCF Date of launch 20.12.2002 02.03.2005 Information as at the end of Mar 2003 Mar 2004 March 2005^ March 2005^ NAV at the beginning of the year 10.00 a 9.9790 9.3611 10.00 a Net Income per unit (Rs.) (0.01) -1.08 0.36 (0.35) Dividends (Rs.) / Bonus NIL Nil Nil Nil Transfer to Reserves NIL NIL Nil Nil NAV at the end of the year (Rs.) 9.9790 9.3611 9.5602 9.64 Annualised compounded return%@ (0.21%)* -5.03% -1.95% -3.60%* Benchmark Index Lehman Intermediate Govt (US) Index S&P CNX 500 Benchmark Annualised compounded 0.35%# * -3.96%# -2.13%# -2.87%* return%@ Net Assets (End of period) (Rs. in crores) 5.84 1.68 1.18 1949.72 Ratio of Recurring Expenses to Net Assets 0.90% 0.85% 0.85% 1.97% Name of the Scheme FTDPEF TIGF - Growth Plan FTLF Date of Inception 31.10.2003 05.09.2003 29.11.2003 12
  13. 13. Name of the Scheme FTDPEF TIGF - Growth Plan FTLF Information as at the end Mar 2004 Mar 2005^ Mar 2004 Mar 2005^ Mar 2004 Mar 2005^ of NAV at the beginning of 10.00 a 11.8435 20.59 29.20 10.00a 10.9294 (20s the year (GP) Plan) 11.8435 10.7121 (30s (DP) Plan) 10.5444 (40s Plan) 10.4021 (50s Plus Plan) 10.00 a (50s Plus Floating Rate Plan) Net Income per unit (Rs.) 1.37 3.91 12.15 6.25 0.75 3.26 (20s Plan) (20s Plan) 0.40 2.28 (30s Plan) (30s Plan) 0.30 1.28 (40s Plan) (40s Plan) 0.29 0.21 (50s Plus (50s Plus Plan) Plan) N. A. 0.71 (50s Plus (50s Plus Floating Floating Rate Plan) Rate Plan) Dividends (Rs.) / Bonus Nil Nil N.A. N.A Nil 0.2564 (I), 0.2398 (O) – 50s Plus Plan 0.2211 (I) – 50s Plus Floating Rate Plan 0.2067 (O) – 50s Plus Floating Rate Plan Transfer to Reserves Nil Nil Nil Nil Nil Nil NAV at the end of the 11.8435 13.9462 29.20 35.61 10.9294 13.1409 (20s year (Rs.) (GP) (GP) (20s Plan) Plan) 11.8435 13.9462 10.7121 12.1450 (30s (DP) (DP) (30s Plan) Plan) 10.5444 11.5734 (40s (40s Plan) Plan) 10.4021 10.8030 (50s (50s Plus Plus Plan- Plan) GP) 10.5131 (50s Plus Plan- DP) 10.8471 (50s Plus Floating Rate Plan- GP) 10.5971 (50s Plus Floating Rate Plan- DP) Annualised compounded 18.44%* 26.47% 41.82 %* 41.76% 9.29%* 22.77% (20s return%@ (20s Plan) Plan) 13
  14. 14. Name of the Scheme FTDPEF TIGF - Growth Plan FTLF 7.12%* 15.71% (30s (30s Plan) Plan) 5.44%* 11.60% (40s (40s Plan) Plan) 4.02%* 5.97% (50s (50s Plus Plus Plan) Plan) 8.47% (50s Plus Floating Rate Plan) Benchmark Index N.A BSE BSE Sensex / MSCI India N.A Benchmark Sensex/ Value *** Crisil Balanced Fund Index Benchmark Annualised N.A 21.86%/ 26.96%*/ 28.70%/ N.A 16.69% (20s compounded return%@ 14.42% 33.30%* 25.79% Plan) 12.25% (30s Plan) 8.81% (40s Plan) 5.50% (50s Plus Plan) 8.35% (50s Plus Floating Rate Plan) Net Assets (End of 252.01 93.82 72.92 89.70 204.43 406.66 period) (Rs. in crores) Ratio of Recurring Nil Nil 2.33 2.29 0.75% 0.75% (20s Expenses to Net Assets (20s Plan) Plan) 0.75% 0.75% (30s (30s Plan) Plan) 0.50% 0.50% (40s (40s Plan) Plan) 0.25% 0.25% (50s (50s Plus Plus Plan) Plan) 0.25% (50s Plus Floating Rate Plan) Name of the Scheme TGSF - PF Plan TITMA – Institutional Plan (I- Plan) & Liquid Plan (LP) Date of launch 7.5.2004 22.6.2004 (I Plan) 17.9.2004 (L Plan) Information as at the end of Mar 2005^ March 2005^ NAV at the beginning of the year 10.00 a 1000.0000 a (I Plan, LP) Net Income per unit (Rs.) (0.25) 83.05 Dividends (Rs.) / Bonus Nil LP: Rs.18.86 O (WP) Rs.20.17 I (WP) Rs.19.80 O (DDP) Rs.21.18 I (DDP) I Plan: Rs.28.36 O (WP) Rs.30.33 I (WP) Rs.28.75 O (DDP) Rs.27.45 I (DDP) Transfer to Reserves NIL Nil NAV at the end of the year (Rs.) 9.8335 1037.4229 (GP - I Plan) 1001.2360 (WP - I Plan) 14
  15. 15. 1000.0142 (DDP - I Plan) 1024.2429 (GP - LP) 1001.1692 (WP - LP) 1000.0142 (DDP - LP) Annualised compounded return%@ -1.66% * 4.84% & (I Plan) 4.54% & (LP) Benchmark Index I-Sec Composite Index Crisil Liquid Fund Index Benchmark Annualised compounded -1.02% * 4.20% & (I Plan) return%@ 4.35% & (LP)* Net Assets (End of period) (Rs. in crores) 96.40 972.86 (I Plan) 198.73 (LP) Ratio of Recurring Expenses to Net Assets 1.25% 0.65% (I Plan) 1.00% (LP) NAV & Returns as of July 29, 2005 with the Benchmarks: Name of the Scheme TIGF - Growth FINTF FTDPEF Plan NAV as on July 29, 2005 40.79 9.5930 15.7486 (GP/DP) Annualised Returns from the date of 43.34 -1.58 29.72% inception @ Benchmark Returns @ 34.18% / 33.84% -1.55%# 28.83% (BSE Sensex ), 17.12% (Crisil Balanced fund Index) Benchmark Indices used BSE Sensex / MSCI Lehman BSE Sensex and India Value Intermediate Govt. Crisil Balanced fund (US) Index Index Net Assets as on July 29, 2005 (Rs. in 89.65 1.03 67.64 Crores) Name of the Scheme TGSF - PF Plan FIFCF FTFTF-I NAV as on July 29, 2005 10.0035 11.51 10.5908 Annualised Returns from the date of 0.03% 15.10%* 5.91%* inception @ Benchmark Returns @ 0.78% 11.07%* 4.82%* Benchmark Indices used I Sec Composite S&P CNX 500 25% S&P CNX 500 Index + 65% Crisil Composite Bond Fund Index + 10% Crisil Liquid Fund Index Net Assets as on July 29, 2005 (Rs. in 78.43 1938.47 88.81 Crores) Name of the Scheme TITMA – Institutional Plan (IP) FTLF & Liquid Plan (LP) NAV as on July 29, 2005 (July 31, 2005 1055.7254 (GP-IP) 14.9123 - 20s Plan in case of TITMA) 1000.5536 (WP-IP) 13.3266 - 30s Plan 1000.0378 (DDP-IP) 12.3684 - 40s Plan 1040.5764 (GP-LP) 11.2775 (GP)/10.8934 (DP) - 50s 1000.5259 (WP-LP) Plus Plan 1000.0378 (DDP-LP) 11.3176 (GP)/10.9549 (DP) - 50s Plus Floating Rate Plan Annualised Returns from the date of 5.02% (IP)& 27.21% - 20s Plan inception @ 4.67% (LP)& 18.88% - 30s Plan 13.66% - 40s Plan 7.51% - 50s Plus Plan 12.45%- 50s Plus Floating Rate Plan Benchmark Returns @ 4.36% (IP)& 22.43% - 20s Plan 15
  16. 16. Name of the Scheme TITMA – Institutional Plan (IP) FTLF & Liquid Plan (LP) 4.49% (LP)& 16.30% - 30s Plan 11.48% - 40s Plan 7.50% - 50s Plus Plan 12.70% - 50s Plus Floating Rate Plan Benchmark Indices used Crisil Liquid Fund Index Benchmark*** Net Assets as on July 29, 2005 (July 31, 1240.75 (IP) 22.45 - 20s Plan 2005 in case of TITMA) (Rs. in Crores) 201.93 (LP) 16.21 - 30s Plan 27.51 - 40s Plan 22.15 - 50s Plan 292.99 - 50s Plus Floating Rate Plan As of March 31, 2005 the fund had no borrowing. Note: @ Returns for periods less than one year have been given in absolute terms without annualising the same. Returns for periods greater than one year are on compounded annualised basis but in case of TITMA less than one year period is annualised. a - Inception/Allotment date NAV, * - Absolute Returns, & - Annualised Return, GP - Growth Plan, DP - Dividend Plan, WP - Weekly Dividend Plan, MP - Monthly Dividend Plan, DDP - Daily Dividend Plan, I Plan - Institutional Plan, LP – Liquid, I – Individuals & HUF, O – Other than Individuals & HUF; FISIP was launched on 31.10.2003. However, all the plans under the scheme have matured and redeemed. The schemes FIFCF and FTFTF-I have been launched during March 2, 2005 and May 18, 2005 and hence NAVs are not declared. Returns for schemes/plans with dividend distribution are computed assuming re-investing of all payouts at ex-dividend NAV. The above information is presented scheme wise for all schemes launched by the mutual fund during the last three fiscal years (excluding redeemed schemes). *** Benchmark: The 20s Plan - 65% BSE Sensex + 15% S&P CNX 500 + 20% Crisil Composite Bond Fund Index; The 30s Plan - 45% BSE Sensex + 10% S&P CNX 500 + 45% Crisil Composite Bond Fund Index; The 40s Plan - 25% BSE Sensex + 10% S&P CNX 500 + 65% Crisil Composite Bond Fund Index; The 50s Plus Plan - 20% BSE Sensex + 80% Crisil Composite Bond Fund Index; The 50s Plus Floating Rate Plan - 20% BSE Sensex + 80% Crisil Liquid Fund Index. # - adjusted in rupee terms; ^ - Unaudited figures. THE ABOVE INFORMATION IS PRESENTED SCHEME WISE FOR ALL SCHEMES LAUNCHED BY THE MUTUAL FUND DURING THE LAST THREE FISCAL YEARS (EXCLUDING REDEEMED SCHEMES) The scheme abbreviations used in this offer document are as follows: Templeton India Growth Fund - (TIGF), Franklin India Index Fund - (FIIF), Franklin India Index Tax Fund- (FITF), FT India Balanced Fund- (FTIBF), Templeton Monthly Income Plan- (TMIP), FT India Monthly Income Plan - (FTIMIP), Franklin FMCG Fund - (FFF), Franklin India Bluechip Fund - (FIBCF), Franklin India Prima Fund- (FIPF), Franklin India Taxshield 96-(FIT96), Templeton Floating Rate Income Fund- LT, Templeton Floating Rate Income Fund-ST-(TFIF), Templeton India Income Fund-(TIIF), Templeton India Children’s Asset Plan-(TICAP), Templeton India Income Builder Account-(TIIBA), Franklin India Maxima Fund-(FIMF), Franklin India Growth Fund -(FIGF), Franklin India Opportunities Fund-(FIOF), Franklin Pharma Fund-(FPF), Franklin Infotech Fund- (FIF), Franklin India Prima Plus-(FIPP), Templeton India Pension Plan-(TIPP), Franklin India Taxshield 97-(FIT97), Franklin India Taxshield-(FIT), Franklin India Taxshield 99 -(FIT99), Franklin India Taxshield 98-(FIT98), Franklin India Taxshield 95-(FIT95), Templeton India Government Securities Fund-(TGSF), Franklin India International Fund (FINTF) Templeton India Liquid Plus-(TILP), Templeton India Liquid Fund-(TILF), Templeton India Treasury Management Account-(TITMA), Templeton India Money Market Account-(TIMMA), Templeton India Short-Term Income Plan-(TISTIP), Franklin India Strategic Investment Plan-(FISIP), FT India Dynamic PE Ratio Fund of Funds (FTDPEF), FT India Life Stage Fund of Funds (FTLF), Franklin India Flexi Cap Fund (FIFCF), Franklin Templeton Fixed Tenure Fund (FTFTF). 08. CONSTITUTION / MANAGEMENT OF THE MUTUAL FUND Franklin Templeton Mutual Fund (the “Mutual Fund”) has been constituted as a trust on January 4, 1996 in accordance with the provisions of the Indian Trusts Act, 1882 (2 of 1882) with Templeton International Inc., as the Sponsor and Franklin Templeton Trustee Services Private 16
  17. 17. Limited as the Trustee. The Trust Deed and the Supplementary Trust Deed have been registered under the Indian Registration Act, 1908. The Mutual Fund was registered with SEBI on February 19, 1996 under Registration Code MF-026-96-8. THE SPONSOR Franklin Templeton Mutual Fund is sponsored by Templeton International, Inc. Templeton International Inc., is a wholly owned subsidiary of Templeton worldwide Inc., which in turn is a wholly owned subsidiary of Franklin Resources Inc. The sponsor was responsible for setting up and establishing Franklin Templeton Mutual Fund. The Sponsor is the Settler of the Mutual Fund Trust. The Sponsor has entrusted a sum of Rs.1 lakh to the Trustee as the initial contribution towards the corpus of the Mutual Fund. The Trustee has appointed Franklin Templeton Asset Management (India) Private Ltd. as the Investment Manager. The Sponsor is represented by Directors on the Board of the Trustee and the Investment Manager in accordance with the Regulations. The Sponsor shall be responsible for discharging its functions and responsibilities towards the Fund in accordance with Regulations and the various constitutive documents of the Fund. Franklin Templeton Asset Management (India) Pvt. Ltd. (FTAMIL)/Nominees and Franklin Templeton Trustee Services Pvt. Ltd. (FTTSL)/Nominees had acquired 100% shares in Pioneer ITI AMC Ltd. and Pioneer ITI Mutual Fund Pvt. Ltd. respectively, in July 2002 after obtaining the approval from SEBI. Subsequently the license of Pioneer ITI Mutual Fund was surrendered to SEBI for cancellation. SEBI vide its letter dated February 17, 2003 cancelled the same. FINANCIAL PERFORMANCE OF THE SPONSOR (All figures are in Rupees million except per share data) (US$ = Rs.43.58 on December 31, 2004) 30-Sep-04 30-Sep-03 30-Sep-02 (Rs. in million) (Rs. in million) (Rs. in million) Total income 149,836.76 114,706.92 109,947.98 Profit After Tax 30,797.99 21,912.02 18,857.07 Net Worth 222,554.34 187,834.16 185,951.50 Equity Capital 1,088.11 1,071.76 1,126.80 Earnings per Share 123.77 86.29 72.34 Book Value per Share 891.21 763.96 719.07 Dividend per Share 14.82 13.07 12.20 THE FRANKLIN TEMPLETON GROUP Franklin Resources, Inc. is a diversified financial services company based in San Mateo, California, USA. Through its operating subsidiaries it provides a wide range of investment products and services to worldwide clients. Templeton International Inc., the sponsor of the Franklin Templeton Mutual Fund, is a wholly owned subsidiary of Templeton Worldwide Inc., which in turn is a wholly owned subsidiary of Franklin Resources Inc. The Franklin Templeton Group is one of the world’s largest investment management companies. Following are some of the key data relating to Franklin Templeton’s Global Operations. 1. Assets Under Management US$ 438.7 billion as at July 31, 2005 (Rs. 19,05,713 crores approximately) 17
  18. 18. 2. Number of Shareholder Accounts More than 15 million worldwide. 3. Number of Schemes Managed Globally About 240 Open End Mutual Funds, Separately Managed Accounts and Other Investment Vehicles. 4. Global Offices There are offices all over the world in over 30 countries including The United States of America, Bahamas, Canada, Argentina, France, Germany, Italy, Luxembourg, Poland, Russia, United Kingdom, Hong Kong, Singapore, Korea, India, China, Australia & South Africa. THE FRANKLIN TEMPLETON EDGE Franklin Templeton Investments offers more than 200 investment products under the Franklin, Templeton, Mutual Series, Bissett and Fiduciary Trust names globally, providing investors with the flexibility to choose from a great variety of goals-from value to growth and sector-specific to international-to meet their individual investment objectives. Franklin offers investors both, ‘growth’ and ‘value’ style equity products, as well as several focused sector portfolios. Franklin's growth team looks for companies with distinct and sustainable competitive advantages in rapidly growing markets, while value-driven analysts search for bargains and a catalyst that might unlock the companies' hidden worth for shareholders. This group also offers a line of fixed-income funds whose focus is on income, without speculating on interest rates or buying exotic derivatives. Due to Franklin's size and presence in the bond market, portfolio managers receive competitive offerings, which can reduce costs and help boost yields and returns. In fact, among tax-free fund managers, Franklin is the largest in the nation. The municipal bond team's success can be attributed to a conservative, straightforward investment philosophy that emphasizes high, current tax-free income, while seeking preservation of capital. Franklin also offers a variety of money funds. Templeton has more than 45 years of experience in global mutual fund management. Templeton managers are bargain hunters, employing a bottom-up, value-oriented approach to stock selection. They focus on identifying stocks of companies throughout the world that they believe are selling at the greatest discount to their five-year potential. They buy at the point of maximum pessimism and sell at the point of maximum optimism. The Mutual Series group of global and domestic equity value funds focus on three types of investment opportunities: stocks trading at a deep discount to asset value; companies in the midst of change such as mergers, reorganizations, restructuring, division sales or purchases, or management changes; and securities that are distressed or in bankruptcy. While many money managers avoid these situations, Mutual Series' managers believe careful research can uncover exceptional opportunities. Fiduciary Trust employs an active, disciplined approach to investment management based on thorough research and evaluation of world financial markets. Fiduciary Trust believes a global perspective is essential to determine domestic and international investment strategy. Its objective is to achieve long-term growth of income and capital appreciation while managing risk. Bissett offers a family of Canada-focused equity and fixed-income funds, as well as some global funds. 18
  19. 19. FRANKLIN TEMPLETON IN INDIA: A LONG TERM COMMITMENT As part of Franklin Templeton’s major thrust on investing in emerging markets around the world, Franklin Templeton has been investing in India for the past several years. These investments are based on original research and first hand understanding of the forces those influence the economic environment. Franklin Templeton has established offices at 33 places in India with staff strength of 275. THE TRUSTEE Franklin Templeton Trustee Services Private Limited (the “Trustee”), through its Board of Directors, shall discharge its obligations to the Franklin Templeton Mutual Fund as the Trustee of the Mutual Fund. The Trustee ensures that the transactions entered into by the AMC are in accordance with the SEBI Regulations and reviews the activities carried on by the AMC on a quarterly basis. The Board of Directors of Franklin Templeton Trustee Services Private Limited held eight meetings during the year 2004-05. In accordance with Regulation 18(15) of SEBI Regulations, the Trustees shall obtain the consent of the unitholders - a) whenever required to do so by SEBI in the interest of the unitholders; or b) whenever required to so on the requisition made by three-fourths of the unitholders of any Scheme; or c) When the majority of the trustees decide to wind up or prematurely redeem the units. In accordance with Regulation 18(15A) of SEBI Regulations, the trustees shall ensure that no change in the fundamental attributes of any scheme or the trust or fees and expenses payable or any other change which would modify the scheme and affects the interest of unitholders, shall be carried out unless,- i a written communication about the proposed change is sent to each unitholder and an advertisement is given in one English daily newspaper having nation wide circulation as well as a newspaper published in the language of the region where the head office of the mutual fund is situated; and ii the unitholders are given an option to exit at the prevailing Net Asset Value without any exit load. Explanation: In terms of SEBI Regulations and circular dated February 4, 1998, “Fundamental Attributes” means and includes the following: i. Type of a Scheme • An Open end/ Closed end Scheme • Sector Fund/ Equity Fund/ Balanced Fund/ Income Fund/ Index Fund/ Fund of Funds/ any other type of Fund. ii. Investment Objective • Main Objective - Growth-Income-Both • Investment pattern - The tentative Equity-Debt-Money Market portfolio break-up with minimum and maximum asset allocation, while retaining the option to alter the asset allocation for a Institutional period on defensive considerations. iii. Terms of Issue • Liquidity provisions such as listing, repurchase, redemption • Aggregate fees and expenses charged to the Scheme • Any safety net or guarantee provided 19
  20. 20. The members of the Board of Directors of the Trustee (“the Board of the Trustee”) are: - • Gregory E. McGowan* Templeton Worldwide, Inc., 500 East Broward Boulevard, Suite 2100, Fort Lauderdale, FL 33394, U.S.A. Gregory E. McGowan is Executive Vice President, Director and General Counsel for International Development of Templeton Worldwide, Inc. Mr. McGowan serves on various Templeton Boards of Directors and also serves as Executive Vice President and General Counsel of Templeton International Inc., the Organisation responsible for the expansion and operation of Templeton business outside of North America. Prior to joining the Templeton organisation in 1986, Mr. McGowan was a senior attorney for the United States Securities and Exchange Commission. He holds a B.A. Degree in Economics/International Affairs from the University of Pennsylvania, an M.A. Degree from the University of Paris and a Juris Doctor from Georgetown University Law Centre. Details of other Directorships are as under: Name Name Franklin Templeton Investments (Asia) Ltd. Franklin Templeton Management Luxembourg SA Templeton Worldwide, Inc. Templeton Asian Direct Investments Ltd. Templeton International, Inc. Templeton Franklin Global Distributors Ltd. Templeton Global Advisors Limited Templeton Research & Management Venezuela, C.A. Franklin Templeton Asset Management S.A. Franklin Templeton Services Ltd. Franklin Templeton International Services S.A. Franklin Templeton Italia SIM SpA Templeton Global Holdings Ltd. Franklin Templeton France S.A. Franklin Templeton Investments Australia Ltd. Franklin Templeton Asset Management S.A. Franklin Templeton Holding Limited Happy Dragon Holdings Ltd. Franklin Templeton Trustee Services Private Ltd. Templeton Research Poland SP. z.o.o. TRFI Investments Limited • Anand J. Vashi, Chartered Accountant 5th Floor, Kalpataru Heritage, 127 M. G. Road, Fort, Mumbai 400023 Anand Vashi is practicing Chartered Accountant and is Senior Partner of a firm of Chartered Accountants and is a fellow member of the Institute of Chartered Accountants of India. He is also on the board of various companies and is a trustee of several charitable trusts. Details of other Directorships are as under: Name Details Lucid Technologies Pvt. Ltd. Director Millars India Ltd. Director Millars Machinery Co. Pvt. Ltd. Director Pedershaab Millars India Pvt. Ltd. Director Uttarak Enterprises Pvt. Ltd. Director • Percy Jal Pardiwalla, Advocate 16, Vishnu Mahal, 'D' Road, Churchgate, Mumbai 400 020 20
  21. 21. • Bharat Doshi, Company Executive 8, St. Helen's Court, Dr. Gopalrao Deshmukh Marg, Mumbai 400 026 Mr. Bharat Doshi is presently the Executive Director, Finance & Corporate Affairs and President, Trade & Financial Services Sector of Mahindra & Mahindra Ltd. Mr. Doshi holds a Bachelor's Degree in Commerce and Master's Degree in Law from Mumbai University, and is a Fellow Member of the Institute of Chartered Accountants of India and the Institute of Company Secretaries of India. He has also attended the Program for Management Development (PMD) at the Harvard Business School. Mr. Doshi joined Mahindra & Mahindra in 1973 and has held various managerial positions over the past 27 years and was elevated to the Company's Board in 1992. Mr. Doshi serves on the Boards of several subsidiaries and associate companies in the Mahindra Group, including Ford India Ltd. and Mahindra British Telecom Ltd. and is a member of the Board of Governors of The Mahindra United World College of India and the Indian Institute of Management, Kozhikode. Details of other Directorships are as under: Name Details Mahindra Intertrade Limited Director Mahindra & Mahindra Financial services Limited Director Mahindra Steel Service Centre Limited Director Mahindra & Mahindra Limited Director Mahindra Holdings & Finance Limited Director Mahindra (China) Tractor Co. Ltd. Director Mahindra British Telecom Limited Director Godrej Consumer Product Limited Director NSE.IT Limited Director Bristlecone Limited Director • Stephen Dover*, International Chief Investment Officer, Franklin Templeton Advisors 431 Hurlingham Avenue, San Mateo, CA 94402, USA Stephen H. Dover, CFA, is responsible for overseeing the investment functions of the locally managed and distributed products outside of the United States and Canada. Currently he is overseeing the investment areas of Franklin Templeton’s local asset management companies in: South Korea, Japan, China, Taiwan, France, Italy, Hong Kong, Singapore, India, and Brazil. Mr. Dover is a member of the Boards of Directors of Franklin Templeton’s Italian asset management company, Indian Asset Management Company, South African joint venture, and the Brazilian joint venture. Prior to serving in his current role, Mr. Dover was a founder and Chief Investment Officer of Bradesco Templeton Asset Management (BTAM), in San Paulo, Brazil. BTAM, a joint venture formed to serve the institutional market in Brazil, was sold to Bradesco in May 2001. While there Mr. Dover specialized in the management of Corporate Governance Funds. Prior to joining Franklin Templeton in 1997, Mr. Dover was a portfolio manager and principle at Newell Associates in Palo Alto, CA. Newell Associates is a subadvisor for the Vanguard Equity Income Fund well as other institutional assets. Previously, Mr. Dover worked for Towers Perrin Consulting in New York, London and San Francisco. Prior to graduate school, Mr. Dover was vice president of Financial Planning at Lefcourt Financial Group, a Palo Alto, CA, based money management and venture capital firm. Mr. Dover earned a B.A. in business administration from Lewis and Clark College in Portland, OR and a M.B.A in Finance from The Wharton School of the University of Pennsylvania. He is a Chartered Financial Analyst (CFA) as well as a Certified Financial Planner (CFP). Stephen has worked or studied in: China, Costa Rica, England, Brazil and the United States. 21
  22. 22. Details of other Directorships are as under: Name Details Franklin Resources, San Mateo Managing Director * These Directors represent sponsors of the Trustee Company and are associates of the sponsor. RESPONSIBILITIES AND DUTIES OF THE TRUSTEE (Substantial Provisions of the Trust Deed and the Regulations) Pursuant to the Deed of Trust constituting the Mutual Fund and SEBI (MF) Regulations, the Trustee, inter alia, has the following responsibilities and duties: a) The Trustee shall ensure before the launch of any scheme that the asset management company has: i) systems in place for its back office, dealing room and accounting, ii) appointed all key personnel including fund manager(s) for the scheme(s) and market, to the Trustee, within fifteen days of their appointment, submitted their bio-data, which shall contain the educational qualifications, past experience in the securities iii) appointed auditors to audit the accounts, iv) appointed a compliance officer who shall be responsible for monitoring the compliance of the Act, rules and regulations, notifications, guidelines, instructions etc. issued by SEBI or the Central Government and for redressal of investor’s grievances, v) appointed registrars and laid down parameters for their supervision, vi) prepared a compliance manual and designed internal control mechanisms including internal audit systems, vii) specified norms for empanelment of brokers and marketing agents. b) The Trustee shall obtain consent of the unit holders of the Scheme(s): i) When the Trustee is required to do so by SEBI in the interests of the unitholders; or ii) Upon the request of three-fourths of the unit holders of any scheme(s) under the Mutual Fund; or iii) If a majority of the directors of the Trustee company decide to wind up the scheme(s) or prematurely redeem the units c) In carrying out his / her responsibilities as a member of the Board of Trustee each Trustee shall maintain an arms' length relationship with other companies, or institutions or financial intermediaries or any body corporate with which he may be associated in any transaction also involving the Mutual Fund. d) No Trustee shall participate in the meetings of the Board of Trustee when any decisions for investments in which he / she may be interested are taken. e) All the Trustee shall furnish to the Board of Trustee, particulars of interest which he/she may have in any other company, or institution or financial intermediary or any corporate by virtue of his/her position as director, partner or with which he-she may be associated in any other capacity. f) The Trustee shall have the right to obtain from the AMC such information as is considered necessary by the Trustee. g) The Trustee shall ensure that the AMC has been diligent in empanelling brokers, in monitoring securities transactions with brokers and avoiding undue concentration of business with any broker. 22
  23. 23. h) The Trustee shall ensure that the AMC has not given any undue or unfair advantage to any associates or dealt with any of the associates of the AMC in any manner detrimental to the interest of unitholders. i) The Trustee shall ensure that the transactions entered into by the AMC are in accordance with the SEBI Regulations and the Scheme. j) The Trustee shall ensure that the AMC has been managing the Scheme independently of other activities and have taken adequate steps to ensure that the interest of the Scheme are not being compromised with those of any other Scheme or of other activities of the AMC. k) The Trustee shall ensure that all the activities of the AMC are in accordance with the provisions of SEBI Regulations. l) Where the Trustee have reason to believe that the conduct of business of the Mutual Fund is not in accordance with SEBI Regulations, they shall forthwith take remedial steps as are considered necessary by them and shall inform the SEBI of the violation and the action taken by them. m) Each Trustee shall file the details of his/her transactions in securities on a quarterly basis with the trust. n) The Trustee shall be accountable for, and be the custodian of, the funds and property of the Scheme and shall hold the same in trust for the benefit of the unitholders in accordance with SEBI Regulations and the provisions of the trust deed. o) The Trustee shall take steps to ensure that the transactions of the Mutual Fund are in accordance with the trust deed. p) The Trustee shall be responsible for the calculation of any income due to be paid to the Mutual Fund and also of any income received in the Mutual Fund for the holders of the units of the Scheme in accordance with the SEBI Regulations and the trust deed. q) The Trustee shall call for the transactions in securities of the key personnel of the AMC in his own name or on behalf of the AMC and shall report to SEBI as and when required. r) The Trustee shall review, on a quarterly basis, all transactions carried out between the Mutual Fund, AMC and its associates. s) The Trustee shall review the net worth of the AMC on a quarterly basis and in case of any shortfall, ensure that the AMC make up for the shortfall as per clause (f) of sub-regulation (1) of regulation 21 of the SEBI Regulations. t) The Trustee shall periodically review all service contracts such as custody arrangements, transfer agency and satisfy itself that such contracts are executed in the interest of the unitholders. u) The Trustee shall ensure that there is no conflict of interest between the manner of deployment of its net worth by the AMC and the interests of the unitholders. v) The Trustee shall periodically review the investor complaints received and the redressal of the same by the AMC. w) The Trust Deed can be amended only with the prior approval of SEBI and Unitholders, where it affects the interests of the unitholders. Modifications, if any, in the rights and / or obligations and duties of the Trustee are on account of amendments to the Regulations and the Regulations supersede/override the provisions of the Trust Deed, wherever the two are in conflict. The Trustee may also consolidate/merge the scheme/plan as per SEBI Circular SEBI/MFD/CIR.No.05/12031/03 dated June 23, 2003 and directions issues by SEBI from time to time. The Trustee, in discharge of its duties, and in exercise of all discretionary powers, may engage, appoint, employ, retain, or authorise the AMC to engage, appoint, employ or retain any solicitors, 23
  24. 24. advocates, bankers, brokers, accountants, professional advisors and consultants as it may deem appropriate. Trustee shall exercise due diligence as under: A. General Due Diligence: i) The Trustee shall be discerning in the appointment of the directors on the Board of the asset management company. ii) Trustee shall review the desirability of continuance of the asset management company if substantial irregularities are observed in any of the schemes and shall not allow the asset management company to float new scheme. iii) The trustee shall ensure that the trust property is properly protected, held and administered by proper persons and by proper number of such persons. iv) The trustee shall ensure that all service providers are holding appropriate registrations from the Board of concerned regulatory authority. v) The Trustee shall arrange for test checks of service contracts. vi) Trustee shall immediately report to Board of any special developments in the Mutual Fund. B. Specific Due Diligence: i) Obtain internal audit reports at regular intervals from independent auditors appointed by the Trustee. ii) Obtain compliance certificates at regular intervals from the asset management company. iii) Hold meeting of Trustee more frequently. iv) Consider the reports of the independent auditor and compliance reports of Asset Management Company at the meetings of Trustee for appropriate action. v) Maintain records of the decisions of the Trustee at their meetings and of the minutes of the meetings. vi) Prescribe and adhere to a code of ethics by the Trustee, Asset Management Company and its personnel. vii) Communicate in writing to the asset management company of the deficiencies and checking on the rectification of deficiencies. The Trustee shall not be held liable for acts done in good faith if they have exercised adequate due diligence honestly. The independent directors of the Trustee or asset management company shall pay specific attention to the following, as may be applicable, namely: i) the Investment Management Agreement and the compensation paid under the agreement. ii) service contracts with affiliates – whether the asset management company has charged higher fees than outside contractors for the same services. iii) selection of the asset management company’s independent directors. iv) securities transactions involving affiliates to the extent such transactions are permitted. v) selecting and nominating individuals to fill independent directors vacancies. vi) code of ethics must be designed to prevent fraudulent, deceptive or manipulative practices by insiders in connection with personal securities transactions. vii) the reasonableness of fees paid to sponsors, asset management company and any others for services provided. viii) principal underwriting contracts and their renewals. ix) any service contract with the associates of the asset management company. 24
  25. 25. Pursuant to the Deed of Trust constituting the Mutual Fund, the Mutual Fund is authorised to pay to the Trustee, which in turn pays to its individual directors, a fee for their services in such capacity. The Trustee shall charge the Fund a Trusteeship Fee of 0.01% (or at such other percentage as may be agreed upon) of the daily average asset value of the Fund. Mr. McGowan and Mr. Stephen Dover, however, will not receive any fees to act as Directors of the Trustee. The Trustee has appointed Franklin Templeton Asset Management (India) Private Ltd. as the Investment Manager and Deutsche Bank, Mumbai as the Custodian. RIGHTS OF UNITHOLDERS 1) Unitholders under the Scheme have a proportionate right in the beneficial ownership of the assets of and to the dividend declared, if any, by the scheme under the Fund. 2) The Unitholders shall have right to ask the Trustee about any information, which may have an adverse bearing on their investments, and the Trustee shall be bound to disclose such information to the Unitholders. 3) In case the Mutual Fund declares a dividend under the Scheme, the Unitholders are entitled to receive dividend warrants within 30 days of the date of declaration of the dividend and in case of redemptions, unitholders are entitled to receive redemption proceeds within 10 working days subject to certain limitations as described under “Right to Limit Redemptions”. 4) The appointment of an AMC for the Fund may, with the prior approval of SEBI, be terminated by 75% of the Unitholders or by a majority of the Board of Directors of the Trustee. 5) Unitholders have the right to inspect all the documents listed under the heading “Documents Available for Inspection”. PROCEDURE FOR UNITHOLDER APPROVALS The Trustee will call for a meeting of the Unitholders of the Scheme or adopt postal ballot or any other appropriate method whenever it is required to do so in the interest of the Unitholders, or as required by the SEBI Regulations for the time being in force or if the Trustee determines to modify the Scheme or prematurely redeem the Units or wind up the Scheme. INVESTMENT MANAGER Franklin Templeton Asset Management (India) Private Ltd. is a private limited company incorporated under the Companies Act, 1956 on October 6, 1995, having its Corporate Office at 4th Floor, Wockhardt Towers, Bandra Kurla Complex, Bandra (East), Mumbai 400 051. Franklin Templeton Asset Management (India) Private Ltd., has been appointed the Asset Management Company of the Mutual Fund by the Trustee vide Investment Management Agreement (IMA) dated January 5, 1996, executed between Franklin Templeton Trustee Services Pvt. Ltd and Franklin Templeton Asset Management (India) Pvt. Ltd. Out of the Investment Manager’s total equity paid-up capital of Rs.59.33 cr., 75% is held by Franklin Templeton Holding Ltd., Mauritius with the balance of about 25% being held by Hathway Investments Pvt. Ltd. Hathway Investments is an Indian investment company, a member of the Rajan Raheja group of companies. The Investment Manager was approved by SEBI to act as the AMC for the Mutual Fund vide their letter no. IIMARP/406/96 dated February 19, 1996. 25
  26. 26. DUTIES AND OBLIGATIONS OF THE INVESTMENT MANAGER Under the IMA, the Investment Manager has, inter alia, the following duties and obligations: ) To manage the acquisition, holding and disposal of the assets of the Mutual Fund and the various schemes framed thereunder in accordance with the investment objectives, policies and restrictions set out in each Scheme’s offer document and with the SEBI Regulations. ) To act as the Investment Manager of the Mutual Fund with respect to the investment and reinvestment of the cash, securities and other properties comprising the assets of each Scheme organized under the Mutual Fund with full discretionary authority in accordance with the investment policies set forth in the Deed of Trust and by the SEBI Regulations from time to time. ) To provide the Trustee or any party designated by the Trustee with:- • evaluation of current economic conditions; • evaluation of particular prospects in the securities markets; • investment research and advice for the assets of the Mutual Fund consistent with the provisions of the Deed of Trust and the investment policies and guidelines adopted and declared by the Trustee; and • any other activities as may be directed by the Trustee. ) To assume day to day investment management of the Mutual Fund and, in that capacity, make investment decisions and manage the Mutual Fund in accordance with the Scheme Objectives, the Deed of Trust and provisions of the SEBI Regulations. ) To ensure that the delivery of scrips purchased is taken and that delivery is given in the case of scrips sold and that the Mutual Fund in no case engages in short selling or carry-forward transactions or badla finance. ) To ensure that no Offer Document of a Scheme, Key Information Memorandum, abridged half yearly results and annual results is issued or published without the prior approval of the Trustee. ) To report all investments to the Trustee and the Custodian of the Mutual Fund. ) To hold all assets of the Mutual Fund separate from its own assets, free and clear of all liens, claims and encumbrances of any party, except as provided in the IMA and segregate the assets under its management, Scheme-wise. ) To submit such quarterly reports to the Trustee regarding the Investment Manager’s activities as specified in the IMA as the Trustee or SEBI may prescribe from time to time. ) To maintain books and registers about the operation of various schemes of the Mutual Fund under its management to ensure compliance with the SEBI Regulations, and demonstrate that such compliance by it has been achieved. ) To report market prices of the securities in which the Mutual Fund’s assets are invested to the Trustee and Custodian(s) of the Mutual Fund, as required for the purpose of determining the NAV of the Mutual Fund. ) To disclose the basis of calculating the re-purchase price and NAV of the various schemes in the Scheme particulars and to disclose the same to investors at such intervals as may be specified by the Trustee and SEBI. ) To obtain from the Custodian(s) of the Mutual Fund, from time to time, such financial reports, proxy statements and other information relating to the business and affairs of the Mutual Fund as the Investment Manager may reasonably require in order to discharge its duties and obligations as specified in the IMA, or to comply with the SEBI Regulations, or any applicable law, rules and regulations. 26
  27. 27. Modifications, if any, in the rights and/or obligations and duties of the Investment Manager are on account of amendments to the Regulations and the Regulations supercede/override the provisions of the IMA, wherever the two are in conflict. The AMC had obtained a certificate from SEBI dated November 8, 2000 to act as a Portfolio Manager under Securities and Exchange Board of India (Portfolio Managers) Rules and Regulations, 1993, vide registration No.INP000000464 and commenced the activity. Further, a renewal of the registration certificate was granted upto November 15, 2006 vide SEBI letter No.IMD/SD/22901/2003 dated December 4, 2003. The AMC has also obtained a No-Objection letter from SEBI under Regulation 24(2) of Securities and Exchange Board of India (Mutual Funds) Regulations, 1996 for commencing the Portfolio Managers activity. The Asset Management Company certifies that the key personnel of the asset management company, the systems, back office, bank and securities accounts are segregated activity wise and there exists a system to prohibit access to inside information of various activities. Further, SEBI vide it’s letter IMD/SG/8567/2004 dated August 23, 2004 has accorded it’s no objection for providing non-binding investment advisory services to Franklin Templeton Asset Management Ltd. for Hagstromer & Qviberg Fond I Fond AB (H&Q) BOARD OF DIRECTORS The Board of Directors of the Investment Manager is: - • Gregory E Johnson* (Chairman of the Board of Director of Franklin Templeton Asset Management (India) Pvt. Ltd.) Franklin Resources, Inc. Building 920, 4th Floor, San Mateo, CA 94403, USA Mr. Gregory Johnson is a president of Franklin Templeton USA, a member of the office of the President of Franklin Resources, Inc., chairman of Franklin Templeton Distributors, Inc., President of Templeton/Franklin Investment Services, Inc., and Vice President of Franklin Advisers, Inc. Mr. Johnson is responsible for the retail, institutional, private client, and strategic alliance businesses as well as domestic shareholder services and human resources. Mr. Johnson joined Franklin in 1986, after working as a senior accountant for Coopers & Lybrad. Mr. Johnson received his Bachelor of Science degree in accounting and business administration in 1983 from Washington and Lee University and his Certified Public Accountant certificate in 1985. He is the past vice-chairman of the Mutual Fund Forum, is past chairman of the Western district of the Securities Industry Association and is a past president of the San Francisco Bond Club. He is also a board member of Command Audio Corporation. • Vijay C. Advani (Alternate Director to Mr. Gregory E. Johnson)* 484 Walsh Road, Atherton, CA 9402, USA Mr. Vijay C. Advani is the Alternate Director for Mr. Gregory E. Johnson. Mr. Advani is currently Executive Managing Director, International Retail Development, Franklin Templeton Investments. He joined the Franklin Templeton organisation in 1995 and was responsible for developing Franklin Templeton's activities in India. Prior to joining the Franklin Templeton organisation, Mr. Advani was employed by the International Finance Corporation (IFC), the private sector arm of the World Bank Group, where his primary responsibility was in providing advisory and technical assistance to government authorities on the development of securities and financial markets, structuring, establishing and financing specialised financial institutions; and mobilising equity, quasi-equity and debt financing. During his ten-year career with the IFC, Mr. Advani worked on several emerging economies in the former Soviet Union, Asia, Middle East and Africa. Mr. Advani received an MBA from the University of Massachusetts, Amherst, where 27
  28. 28. he graduated as a Foreign Student Scholar and received a Bachelor's Degree in Accounting and Finance from the University of Mumbai, India. • Dr. J. Mark Mobius * Block 11, Waterside Apartments, No. 06-02, Panjorg Rhu Road, Singapore Mark Mobius joined the Templeton organisation in 1987 as president of Templeton Emerging Markets Fund Inc. in Hong Kong. He currently directs the analysts based in Templeton’s eleven emerging markets offices and manages the emerging markets portfolios. Dr. Mobius has spent over thirty years working in Asia and other parts of the emerging markets world. As a result of his experience, in 1999 Dr. Mobius was appointed joint chairman of the World Bank and Organization for Economic Cooperation and Development (OECD) Global Corporate Governance Forum’s Investor Responsibility Taskforce.In 2001, Dr. Mobius was awarded “Emerging Markets Equity Manager of the Year 2001” by International Money Marketing in the United Kingdom. In 1999, Dr. Mobius was named one of the “Ten Top Money Managers of the 20th Century” in a survey by the Carson Group, a leading global capital markets intelligence- consulting firm. In the 1998 Reuters Survey, Dr. Mobius was named the number one global emerging market fund manager. CNBC named him “1994 First in Business Money Manager of the Year.” Morningstar in the United States awarded Dr. Mobius the “Closed-End Fund Manager of the Year” for 1993. In 1992, Dr. Mobius was named “Investment Trust Manager of the Year” by The Sunday Telegraph in the United Kingdom. Prior to joining Templeton, he was President of International Investment Trust Company Ltd. in Taipei, Taiwan, the country's first and largest investment management firm. Prior to that, he served at Vickers-da-Costa, an international securities firm, which later merged with Citibank. Before joining Vickers, for ten years, Dr. Mobius operated his own regional economics and research-consulting firm in Hong Kong. Dr. Mobius holds Bachelors and Masters Degrees from Boston University, and received his Ph.D. in Economics and Political Science in 1964 from the Massachusetts Institute of Technology. Dr. Mark Mobius is the author of ‘The Investor's Guide to Emerging Markets'. • Rajan Raheja * "Rahejas", 87/1, Gangadhar Baskar Marg, Juhu, Mumbai 400 049 Mr. Raheja is a renowned businessman, who has been involved in the construction business for the past 25 years. The Raheja group is diversified into other business areas that include cement, petrochemicals, hotels, automotive batteries, ceramic tiles and cable TV network. • Deepak Satwalekar 9, Nutan Alka Co-op. Hsg. Society Ltd. Relief Road, Santacruz (West), Mumbai 400 054 Mr. Satwalekar obtained a Bachelors Degree in Technology with a Major in Mechanical Engineering from the Indian Institute Technology, Mumbai. He has completed a Masters Degree in Business Administration from the American University, Washington D.C. Mr. Satwalekar is currently, the Managing Director and CEO of HDFC Standard Life Insurance Co. Ltd. Until recently, he was the Managing Director of Housing Development Finance Corporation Ltd. He has been a consultant to the World Bank, the United States Agency for International Development (USAID) and the United Nations Centre for Human Settlements (HABITAT). Mr. Satwalekar is actively involved in the Confederation of Indian Industries. Recipient of the “Distinguished Alumnus Award” from IIT, Mumbai. He is also a Director on the boards of several companies. 28

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