Franklin India Opportunities Fund


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Franklin India Opportunities Fund

  1. 1. CONTINUOUS OFFER OFFER DOCUMENT Franklin India Opportunities Fund An Open – end Growth Scheme Sale of units on an ongoing basis at a Net Asset Value (NAV) related price Asset Management Company : Templeton Asset Management (India) Pvt. Ltd Mutual Fund : Templeton Mutual Fund Trustee Company : Templeton Trust Services Pvt. Ltd. The particulars of Templeton Floating Rate Income Fund have been prepared in accordance with the Securities and Exchange Board of India (Mutual Funds) Regulations 1993 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 March 10, 2004. 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.
  3. 3. 01. DEFINITIONS In this Offer Document the following definitions have been used: AMC / Asset Templeton Asset Management (India) Pvt. Ltd., the asset Management management company, set up under the Companies Act, 1956 and Company/ authorized by SEBI to act as Asset Management Company to the Investment schemes of Templeton Mutual Fund. Manager Applicable NAV “Applicable NAV for Subscriptions” is the Net Asset Value per unit of for Subscriptions the business day on which the application for subscription is accepted. Applicable NAV “Applicable NAV for Redemptions” is the Net Asset Value per unit of for Redemptions 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. (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. Custodian A custodian appointed for holding the securities and other assets of the scheme which for the time being is Citibank N.A., Mumbai branch. 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 Templeton Trust Services Pvt. Ltd. and Templeton Agreement or IMA Asset Management (India) Pvt. Ltd. 3
  4. 4. ISC Investor Service Centre of the Asset Management Company. 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 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 Templeton Floating Rate Income Fund. Offer Document The document issued by Templeton Mutual Fund offering units of Franklin India Opportunities Fund. Public Offering ‘POP’ or the Sale Price is the price at which the units are proposed to Price (POP) / Sale be sold on an ongoing basis and may include permissible load amount Price 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, Templeton Asset Management (India) Pvt. Ltd. Scheme Franklin India Opportunities Fund (FIOF) 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, USA. Trust Deed The Trust Deed dated January 4, 1996 of Templeton Mutual Fund. Trustee Templeton Trust 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 Templeton Mutual Fund. Unit The interest of an investor which consists of one undivided share in the Net Assets of Templeton Floating Rate Income Fund 4
  5. 5. Net Assets of Templeton Floating Rate Income Fund. Unitholder A person holding Units in Templeton Floating Rate Income Fund. II HIGHLIGHTS & RISK FACTORS HIGHLIGHTS • Open end growth scheme. • Option of Growth Plan and Dividend Plan. • Dividend Plan offers Payout and Reinvestment Options. • Favourable long term capital gains tax with indexation benefit. • Sponsors are Templeton International Inc, a subsidiary of Franklin Resources Inc., based in San Mateo, California, USA. • Tax benefits under Section 48 & Section 112 of the Income Tax Act, 1961. RISK FACTORS AND SPECIAL CONSIDERATIONS RISK FACTORS • Mutual funds and securities investments are subject to market risks and there is no assurance or guarantee that the objective of the mutual fund 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/debt 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 India Opportunities 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. • 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 debt markets. • Engaging in securities lending is subject to risks related to fluctuations in collateral value/settlement/liquidity/counter party. 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. SPECIAL CONSIDERATIONS • The scheme may invest upto 5% of its net assets in unlisted equity and equity related instruments, which could affect the liquidity of the scheme. • Engaging in securities lending is subject to risks related to fluctuations in collateral value and settlement/liquidity and counter party risks. • 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 market. 5
  6. 6. • Derivatives are high risk, high return instruments. As they are highly leveraged, even a small price movement in the underlying security could have a large impact on their value and may also result in a loss. Also, the market for derivative instruments is nascent in India. III INTRODUCTION Franklin India Opportunities Fund (FIOF) is an open-end growth scheme designed to generate capital appreciation by capitalizing on the long-term growth opportunities in the Indian economy. Investors have the option of investing in the Growth Plan and Dividend Plan. 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 tax. DIVIDEND PLAN Under this plan, it is proposed to distribute the returns to the investors in the form of dividends out of distributable profits. Investors have the option of reinvesting the dividend or receiving cash payouts. As the scheme is an open-end equity scheme, dividends are totally tax-free in the hands of the investor. IV CONSTITUTION / MANAGEMENT OF THE MUTUAL FUND 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 Templeton Trust Services Private 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 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 the 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 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 6
  7. 7. constitutive documents of the Fund. Templeton Asset Management (India) Pvt. Ltd. (TAMIL)/Nominees and Templeton Trust Services Pvt. Ltd. (TTSL)/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.45.41 on January 14, 2004) 9/30/2003 9/30/2002 9/30/2001 (Rs. in millions) (Rs. in millions) (Rs. in millions) Total income 119,174.00 114,365.09 106,931.47 Profit After Tax 22,832.15 19,648.91 22,010.23 Net Worth 195,721.64 193,759.93 180,636.44 Equity Capital 1,116.78 1,174.10 1,184.29 Earnings per Share 89.91 75.38 87.19 Book Value per Share 796.04 749.27 692.50 Dividend per Share 13.62 12.71 11.81 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 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$351.20 billion as at 27th February 2004 (Rs.15,89,531/- crores approximately) 2. Number of Shareholder Accounts More than 10 million worldwide. 3. Number of Schemes Managed Globally About 240 Open End Mutual Funds, Separately Managed Accounts and Other Investment Vehicles. 7
  8. 8. 4. Global Offices There are offices all over the world in over 28 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 The Franklin Templeton Group is one the world’s largest investment management groups. Created from the merger of Franklin Resources, Inc., Mutual Fund Series and Templeton Worldwide, Inc., this group offers a wide range of investment products and services to worldwide clients. The group’s equity funds are largely driven by the following two philosophies. First, the group manages a large number of global funds following the firm’s well known ‘bottom-up value investing’ approach. One of the most prominent tenets of this approach is: “Never follow the crowd. Superior performance is possible only if you invest differently from the crowd.” This is reflected in Templeton’s time tested strategy of buying bargains wherever they exist. Second, the group manages a number of funds following a growth-oriented style of equity investing. This includes funds like Franklin Growth Fund, Franklin Blue Chip Fund, and Franklin Dynatech Fund (focused on technology stocks). These funds take a more top-down approach and may be focused on a country, industry or sector. Funds following this approach essentially seek investment opportunities in those companies that are geared towards growth or are experiencing a turn-around in their operations. 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 more than 33 places in India including Ahmedabad, Bangalore, Calcutta, Chennai, Hyderabad, Kochi, Lucknow, Mangalore, Mumbai, New Delhi and Pune with the current total staff numbers at 123. THE TRUSTEE Templeton Trust Services Private Limited (the “Trustee”), through its Board of Directors, shall discharge its obligations to the 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 Templeton Trust Services Private Limited held seven meetings during the year 2002-2003. 8
  9. 9. 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 Scheme • Sectoral Fund-Equity Fund-Balance 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 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 9
  10. 10. 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 Franklin Templeton Italia SIM SpA S.A. Templeton Global Holdings Ltd. Franklin Templeton France S.A. Franklin Templeton Investments Australia Franklin Templeton Asset Management S.A. Ltd. Franklin Templeton Holding Limited Happy Dragon Holdings Ltd. Templeton Trust Services Private Ltd. Templeton Research Poland SP. z.o.o. TRFI Investments Limited • Anand J. Vashi, Chartered Accountant Kalpataru Heritage, 5th Floor, 127 M G Road, Mumbai 400 023. 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 A.J. Patel Investment & Trading Co. Pvt. Ltd. Director Lucid Technologies Pvt Ltd. Director Millars India Ltd. Director Millars Mach Co. Pvt. Ltd. Director Pedershaab Millars India Pvt Ltd. Director • Percy Jal Pardiwalla, Advocate 10
  11. 11. 16, Vishnu Mahal, 'D' Road, Churchgate, Mumbai 400 020. • 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 Information Technology Services Limited Director Mahindra Consulting Limited Director Mahindra Holdings & Finance Limited Director Ford India Limited Director Mahindra British Telecom Limited Director Godrej Consumer Product Limited Director NSE.IT Limited Director Mahindra Consulting Inc. Director • Stephen Dover*, International Chief Investment Officer, Franklin Templeton Advisors, 336, Royal Oaks, Vacaville, CA 95687, 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 11
  12. 12. 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. 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: 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. 12
  13. 13. 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. 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. 13
  14. 14. 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. 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 in writing to the asset management company of the deficiencies and checking by the 14
  15. 15. 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 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. Pursuant to the Deed of Trust constituting the Mutual Fund, the Mutual Fund is authorized 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. 15
  16. 16. The Trustee has appointed Templeton Asset Management (India) Private Ltd. as the Investment Manager and the Investment Manager has appointed Citibank, N.A. Mumbai as the Custodians. 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 Templeton Asset Management (India) Private Ltd. is a private limited company incorporated under the Companies Act, 1956 on October 6, 1995, having its Registered Office at 1st Floor, Sakhar Bhavan, 230 Backbay Reclamation, Nariman Point, Mumbai 400 021. Templeton Asset Management (India) Private Ltd. has been appointed as the Asset Management Company of the Mutual Fund by the Trustee vide Investment Management Agreement (IMA) dated January 5, 1996, executed between Templeton Trust Services Pvt. Ltd and 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. As per SEBI Regulations currently in force, the Investment Manager is entitled to charge a Management Fee of 0.25 % within the overall fees of 0.75% of the daily / weekly average NAV, for the services rendered by it to the Scheme 16
  17. 17. DUTIES AND OBLIGATIONS OF THE INVESTMENT MANAGER Under the IMA, the Investment Manager has, inter alia, the following duties and obligations: a) 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. b) 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. c) 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. d) 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. e) 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. f) 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. g) To report all investments to the Trustee and the Custodian of the Mutual Fund. h) 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. i) 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. j) 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. k) 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. l) To disclose the basis of calculating the re-purchase price and NAV of the various 17
  18. 18. schemes in the Scheme particulars and to disclose the same to investors at such intervals as may be specified by the Trustee and SEBI. m) 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. 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. BOARD OF DIRECTORS The Board of Directors of the Investment Manager is: - Gregory E Johnson* (Chairman of Board of Director of Templeton Asset Management (India) Pvt. Ltd. Franklin Resources Inc. 920 Park Place, 4th Floor, San Mateo, CA 94403, U.S.A. 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) * 62 Swiss View, # 09-02 La Suisse 1, Singapore. 18
  19. 19. 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 Templeton organisation in 1995 and was responsible for developing Templeton's activities in India. Prior to joining the 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 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 organization 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'. 19
  20. 20. • 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. and has worked in the Operations Department of a major U.S. headquartered multinational bank. 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 various committees of the Bombay Chamber of Commerce & Industries as well as 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. • P. Vaidyanathan 7 AB, 3rd Block. 7th Floor, Kences Enclave, No. 1 Ramakrishna Street, T. Nagar, Chennai 600017. Mr. Vaidyanathan, B. Com., FCA, AICWA, ACS, started his career as a practising Chartered Accountant in his family Chartered Accountancy firm. After a few years of practice, he chose to enter into the line of investment consultancy. He took up marketing and distribution of financial products and promoted the concept to various investors and companies. Today, this has grown into a venture now known as “Integrated Enterprises (India) Ltd.” which is acting as a Total Financial Service Provider for investors who constitute the bottom end of the income pyramid. • Narvoz Seervai, 8, Shiv Shanti Bhavan, M. Karve Marg, Mumbai 400 020. Mr. Navroz H. Seervai is a leading Advocate in Mumbai. He is actively involved in public interest litigation in the field of Environmental Law and Civil Liberties and Human Rights. He started practice in the Bombay High Court in the Chambers of R. J. Joshi and A. M. Setalvad, specialised in Constitutional and Administrative Law, Company and Corporate Law, and Environmental Law. He completed his B.A. (Hons) from Elphinstone College in 1977 and earned his Law degree from the Government Law College, Mumbai in 1981. While studying law, Navroz won many awards - the Kinloch Forbes Gold Medal for Jurisprudence & the Telang Memorial Gold Medal. Navroz also dedicates a lot of his time and energy to various social activities. He is a member of the Peoples’ Union for Civil Liberties & the Bombay Environmental Action Group since 1981. 20
  21. 21. * These Directors are associated with the sponsor or its associates. Compliance Officer: Pranita Gramopadhye Compliance Officer 1st Floor, Sakhar Bhavan 230 Backbay Reclamation Nariman Point, Mumbai 400 021, India. 21
  22. 22. INFORMATION ON KEY PERSONNEL Age Name Qualifications Functions & Experience (years) Rajiv Vij 36 B. Tech. (IIT- Managing Director, Asia (based at Mumbai) Total Experience Delhi), PGDM Responsible for growing the firm’s retail businesses in 14 years (IIM-Calcutta) India, Singapore, Hong Kong and South Korea. Franklin Templeton Asia offices currently have assets of over US$ 6.5 billion. • Regional Head, India & Middle East (2001-2002) • Country Head and Chief Executive Officer of the India office (1999-2001) • Vice President for Sales and Marketing (1995-1999), a member of the key start-up team. • He joined Franklin Templeton from Hindustan Lever Limited where he worked across the sales and marketing functions for 6 years • He is a Member of the SEBI Mutual Fund Advisory Committee and on Board of Association of Mutual Funds in India (AMFI). Ravi Mehrotra 42 B.Com, President - Templeton Asset Management (India) Pvt. Total Experience PGDBM Ltd. (based at Mumbai) 18 years (XLRI, Responsible for Sales, Marketing, Investment Jamshedpur) management, Portfolio risk management, Human Resources and Corporate Accounting functions of the business. • Senior Vice President and Chief Investment officer- Pioneer ITI AMC Ltd. (1993-2002). He managed Taxshield 95, Taxshield 98, Taxshield 99 and Taxshield (open end) • Executive Vice President, Prime Securities (1991- 1993) • AVP, Bank of America- Investment Banking and Treasury Group (1985-1991). Sanjay Sapre 34 M.B.A (USA) Head TA Operations & Customer Service - India Total Experience (based at Mumbai) 10 years Responsible for the company’s Transfer Agency Operations and Customer Service functions in India (2003 to date). Franklin Templeton International Services (India) Pvt. Ltd. (2002 – 2003) Manager, Global Enterprise Consulting (Asia) (2002-2003), Templeton Asset Management (India) Pvt. Ltd (2001 – 2002) eBusiness Manager (Asia). Prior Assignments: • Various Management positions at Thomas Cook (India) Limited (1997 – 2001) including responsibilities in the areas of Technology, Marketing support, Special 22
  23. 23. projects and Vendor Management Operations Manager with Pinnacle Data Systems, Inc. in the USA (1993 – 1995) handling the purchase and operations functions of the company. • Purchasing Manager / Director with Henkel Chemicals (India) Limited (1990 – 1992). Age Name Qualifications Functions & Experience (years) Vivek Pai 32 B. Com, ACA Vice President - FA Operations and Compliance Total Experience (based in Mumbai) 9 years Having joined Templeton in 2000, his role largely involves general management of several functions within the operations department such as Fund Accounting, Custody and Cash Management. He also oversees Legal Affairs. • Prior to this he was the Compliance Officer and was responsible to Trustees for Compliance and Internal Audit of the Mutual Fund. (2000-2003). • He was acting as a Consultant for setting up back office operations for a new company. • Birla Sun Life Asset management Company Limited from (1996-2000) as Head of Fund Accounting. • Apollo Finvest (India) Ltd as Asst. Manager, Corporate Finance handling Lease & HP financing (1994-1996). Pranita 31 B. Com, ACA Compliance Officer (based at Mumbai) Gramopadhye Templeton Trust Services Private Ltd. Total Experience: • Having joined Templeton in July 2000, she is 7 years responsible to Trustees for Compliance and Internal Audit of the Mutual Fund. She is also responsible for compliance of Portfolio Management Services. • Templeton Asset Management (India) Pvt. Ltd. (2001- 2003), Manager Compliance and was handling compliance of mutual fund regulations and other applicable laws. • Prior to this she was managing back office cash operations and custody services (2000-2001). • Reliance Industries Ltd. (1997-2000)-Manager, Management Information, Business Analysis and Cost Control. • P.C Hansotia & Associates (affiliated to Deloitte Haskins & Sells) (1996 -1997)-Manager, Auditing of corporate clients. Franklin Equity Team R. Sukumar 39 B.E (Univ. of Senior Vice President and Chief Investment Officer Total Experience Roorkee); (Franklin Equity) (based at Chennai) 15 years PGDM (IIM Manages FIT, FIGF, FIF, FPF, FIPP, TIPP – Equity Bangalore) • Vice President and Fund Manager - Pioneer ITI AMC Ltd. (1994-2002) • Asst. Vice President - Indbank Merchant Banking Services Ltd. (1990-1994) advising Indian 23
  24. 24. Opportunities Fund • Decision Support Systems Group, Tata Steel (1986 – 1988) K.N. Siva 41 BE (REC Senior Vice President and Portfolio Manager – Equity Subramanian Jaipur); PGDM – Based at Chennai Total Experience (IIM Calcutta) Manages FTIAAF - Equity, FIBCF, FFF, FIPF, FIVF, 15 years FIOF • Vice President and Fund Manager – Pioneer ITI AMC Ltd. (1993 – 2002) • Industrial Finance Officer, Industrial Development Bank of India (1988 – 1993) Age Name Qualifications Functions & Experience (years) Deepesh Pandey 31 B. Tech. (IIT- Asst. Vice President & Portfolio Manager (Equity) – Total Experience Delhi), PGDM Based at Mumbai 8 years (IIM-Calcutta) Responsible for Balanced Funds, Nifty, Sensex & PE Ratio Funds, equity portion of Monthly Income Plan. Schemes managed: FIIF, FTIIF, FTIPERF, TMIP-H, G equity portion, FTIMIP- Equity portion, FTIBF – Equity portion, FIBF – Equity portion, FITF, TICAP – Equity, FIT97, FIT99, FIT95, FIT98, FIT96 • He managed the Franklin India Growth Fund and equity components of Franklin India Balanced Fund and Templeton Monthly Income Plan. He also oversees the Franklin India Index Fund and Franklin India Index Tax Fund (2000-2002) • His previous assignment for around 4.5 years was with the Offshore Funds Group of SBI Funds Management Ltd. where he worked as an Investment analyst on 2 of their offshore funds, one of which was set up in collaboration with Morgan Stanley Asset Management, USA. S. Chellappa 44 MBA, (Madras Assistant Vice President and Senior Research Analyst Total Experience Univ.), (based at Chennai)- Provides Research support on 22 years Diploma in Software, Cement, Metals, Banking Sectors Computer • Asst. Vice President– Pioneer ITI AMC Ltd. (1994- Applications 2002) (NITIE) • Industrial Finance Corporation of India Ltd. (1986- 1994) • Kothari Industrial Corporation Ltd (1981 – 1986) Anil Prabhudas 42 CA Assistant Vice President and Senior Research Analyst Total Experience (based at Chennai) 17 years • Asst. Vice President – Investments – Pioneer ITI AMC Ltd. (Since 1993) • Petrosil Oil Co. Ltd. • L. U. Krishnan & Co. Provides Research support on Oil & Gas, Petrochemicals, Engineering, Power and Hotel sectors. 24
  25. 25. B Sashikanth 36 B. Com., C.A. AVP & Senior Research Analyst (based at Chennai) Total Experience Responsible for Research coverage of Pharma, Auto, 12 years Media and Power sectors • 1991-1993, SBI Mutual Fund – Investment Analyst. • 1993-1996, ITC Peregrine / Peregrine Capital India – Research Analyst for Basic Industries (Designation : General Manager) • 1997-1999, Socgen Crosby Securities, Research of Basic Industries including Cement, Metals, Capital goods (Designation Vice President) • 2000-2003, ABN Amro Asia Equities, Research of Basic Industries including, Oil & Gas, Capital Goods, Power Utilities, Metals (Designation: Assistant Director) Age Name Qualifications Functions & Experience (years) Templeton Equity Team Chetan Sehgal 34 B.E. (Mech), Director – Research India and is part of the team Total Experience PGDBA (IIM- managing TIGF, based at Mumbai 12 years Bangalore), • He joined Templeton in 1995 as Investment CFA Analyst with the emerging markets group and is currently a Portfolio Manager. • As a Portfolio Manager and Analyst, Chetan analyses stocks across a wide gamut of sectors, industries and geographies within the emerging markets group which invests in about 40 countries under the direct supervision of Dr. Mark Mobius. • Before joining Templeton, he had a 3-year stint at CRISIL, India’s largest rating agency currently affiliated with Standard & Poor. He has experience in rating corporate securities across various industries and was also involved in structuring debt instruments including securitisation assignments. Rakesh Parekh 39 MBA-Finance Investment Analyst with the Emerging Markets Total Experience from Group, under Dr. Mark Mobius. Based at Mumbai 17 years University of He identifies and evaluates investment opportunities Stirling (UK), for the global funds as well as TIGF, and looks after 25
  26. 26. Associate of Israel and India markets. He joined Templeton in Nov Chartered 1999. Insurance • Worked with B & K Securities India as a Senior Institute (UK), Analyst from (1998-1999) focusing mainly on the Business pharmaceutical and auto sectors. Administration • Caspian Securities as a Senior Analyst (1996- with Honours 1998) again covering the pharmaceutical and auto from sectors. University of • Oppenhiemer India as an Investment Analyst Dundee (UK). from (1993-1996) • Rakesh Parekh has been involved in various roles primarily as an insurance underwriter with General Accident Plc and Commercial Union Plc in the UK (1986-1992). Age Name Qualifications Functions & Experience (years) Fixed Income/Debt Team Nilesh Shah 34 ACA, Grad. Director and Chief Investment Officer – (Fixed Total Experience CWA, Income) – Based at Mumbai 13 years completed Responsible for investment strategy and asset GFM-25 allocation for all fixed income funds. He manages program at JP TIIF, FINTF, TFIF-ST, TILF, TITMA, TIMMA, Morgan, New TISTIP, FISIP, & TILP. York, USA • Handling Templeton Debt Funds and Franklin Equity Funds in India (1999-2002). • Portfolio Manager – Fixed Income (1997-1999). • Prior to joining Franklin Templeton, Mr. Nilesh worked as Head of structured products group at ICICI Securities & Finance Co. Ltd. for over 5 years. He has worked in ICICI merchant banking division managing public issues and corporate advisory assignments. 26
  27. 27. Age Name Qualifications Functions & Experience (years) Sameer Kulkarni 34 BE (Mech), Asst. Vice President & Portfolio Manager - Fixed Total Experience Asst. Vice Income, Based at Mumbai 10 years President - Joined Templeton in February 2002. . He is Fixed responsible for Government Securities Portfolio Income across all the funds. Sameer also manages the Swap and other derivative products exposure across all the funds. He also supports the group in managing the Liquidity Risk and Interest Rate Risk of all the portfolios. Schemes managed: TGSF, FTIGF and Government Securities portfolio of other schemes. • Head of Money Markets and Investments in IndusInd Bank) (1997-2002). • Chescor Ltd. in London, building models for index funds (1995-1996). • Mukesh Babu Securities Ltd. as Senior Dealer (1994-1995). • National Stock Exchange as a member of the key start-up team responsible for setting up the exchange (1994). • Executive Assistant to the Head of International Sales Group in Larsen & Toubro (1993-1994). Rahul Goswami 31 B.Sc. Asst. Vice President – Fixed Income - Based at Total Experience (Mathematics) Mumbai 8 years M.B.A Schemes managed: TIIBA, FIMF, TIGIP, TFIF-LT, (Finance) Debt portions of FIBF, FTIBF, TMIP, FTIAAF, TICAP, TIPP and FTIMIP. • UTI Bank Limited, Mumbai - Fund Management. Part of the Team Managing SLR & Non-SLR Investment and Trading Portfolio of the Bank (Jan 2000 - October 2002). • SMIFS Securities Limited, Mumbai Senior Dealer (Debt Placement) (Jun 1998 - Dec 1999) • Khandwala Finances Limited, Mumbai Senior Dealer (Debt Placement) (Oct 1997 - May 1998) • RR Financial Consultants Limited, Mumbai Manager (Debt Placement) (Dec 1995 - Oct 1997) 27
  28. 28. Age Name Qualifications Functions & Experience (years) S Rajagopalan 38 Bsc (Maths) Senior Manager- Transfer Agency and Customer Total Experience Services (based in Chennai) 16 years • Oversees the operations and customer services of the company. • From 1999- May 2003-Karvy Consultants- Heading the Templeton MF unit and supervising all process related activities. Client co-ordination, regular review meetings with the internal auditors, internal teams and visiting distributor houses. • From 1993-1999-MCS Ltd. Mumbai. • Handling close ended Mutual Fund schemes and investor services. Maintaining relationship with client and co-ordinating with internal auditors/distributors etc. PROCEDURE FOR INVESTING The main aim of the investment process is to meet Fund specific investment objectives and to develop a well-diversified, high credit portfolio that minimises liquidity risk and credit risk. The Investment committee comprising of International CIO, CIO and Portfolio Managers meets every month for a review of performance and risk reports. The performance review includes portfolio holding, peer group review, policy deviation, performance vis-à-vis peers and benchmark indices etc. The Investment team comprising of CIO and Portfolio Managers meets every day to discuss market movement and analyse events and news. Trading strategy and asset allocations are firmed in the daily meetings. Daily meetings are formal in nature and form the basis for maintaining investment records as per SEBI regulations. There is a weekly call with the international CIO for market update, asset allocation and interaction for global information. The CIO makes presentations to the Board of the AMC and the Trustees periodically, indicating the performance of the scheme(s). The Investment process is intensely research oriented. It comprises of qualitative as well as quantitative measures. It is approved by the Boards of the AMC and the Trustee Company and forms the basis for approach to the Investment management process. It has critical insights from the rich experience gathered by Franklin Templeton Investments over 50 years across various markets and asset classes. CUSTODIAN Citibank, N.A. Mumbai branch has been appointed as the custodian (the “Custodian”). The approval for appointing Citibank as Custodian has been granted by SEBI vide Regn. No.IN/CUS/004 dated April 07, 1998. 28
  29. 29. The Custodian will keep in safe custody all the securities and other such instruments belonging to the Fund, ensure smooth inflow-outflow of securities and such other instruments as and when necessary in the best interest of the investors, and ensure that the benefits due to the holdings are recovered. The Custodian will charge the Fund a fee as per the custodial service agreement. The Trustee has the right to change the Custodian, if it deems. REGISTRARS AND TRANSFER AGENTS Sale/Repurchase/transfer/transmission of the scheme units will be processed in-house and at competitive rates. The fees will be charged to the scheme as a part of annual ongoing expenses and shall confirm to sub-clause 15 of Regulation 25 of SEBI (Mutual Funds) Regulations, 1996. AUDITORS S.R. Batliboi & Co. 18th Floor, Express Towers, Nariman Point, Mumbai 400 021, is the Auditor for this Scheme of the Mutual Fund. The Trustee shall appoint auditors for each Scheme of the Mutual Fund. Further, the Trustee has the right to change the Auditors. S.R. Batliboi & Co. have however, not performed any services in connection with this Offer Document. INVESTOR RELATION OFFICER S. Rajagopalan, Sr. Manager, Transfer Agency and Customer Service, Century Centre, 75, T.T.K Road, Alwarpet, Chennai 600 018. The Trustee is satisfied that the investor services division has adequate capacity and systems to discharge the various obligations relating to investor servicing as provided in the regulations and to handle investor complaints. V INVESTMENT OBJECTIVES AND POLICIES The investment objective of Franklin India Opportunities Fund is to generate capital appreciation by capitalizing on the long-term growth opportunities in the Indian economy The fund managers will follow an active investment strategy taking defensive/aggressive postures depending on opportunities available at various points in time. On defensive considerations, the scheme may invest substantially in money market instruments to protect the interest of the investors in the schemes. The scheme’s investment strategy will include investing in shares of Indian companies listed on Indian stock exchanges/overseas stock exchanges. The scheme will invest in securities of Indian/foreign companies listed overseas as per guidelines issued by the Central Government, RBI and SEBI from time to time. 29
  30. 30. Investment Policies The policies to achieve the investment objectives are in conformity with the Memorandum & Articles of Association of the Asset Management Company (AMC), Investment Management Agreement executed between the Asset Management Company & Board of Trustees and the Trust Deed. The investment policies shall be in accordance with SEBI [Mutual Funds] Regulations, 1996 and within the following guidelines:- Under normal market circumstances, the investment range would be as follows: Asset Allocation: Instruments Risk Profile % Equities Medium to high Upto 100% Money Market instruments Low to Medium Upto 35% • Under normal circumstances at least 65% of the scheme’s assets will be invested in equities. Upon defensive consideration the AMC may reduce the allocation to below 65% and correspondingly increase allocation to money market instruments. • The asset allocation pattern described above may alter from time to time on a short term basis on defensive considerations, keeping in view market conditions, market opportunities, applicable regulations and political and economic factors. However, if the asset allocation pattern is to be altered for other reasons, as this is a fundamental attribute, the procedure outlined in the paragraph on fundamental attributes below, shall be followed. INVESTMENT RESTRICTIONS: In pursuance of the Regulations, the following restrictions are currently applicable to the scheme: • Investment in securities from Franklin India Opportunities Fund corpus would be only in transferable securities in accordance with Regulation 43 of Chapter VI of SEBI [Mutual Funds] Regulations, 1996. • The scheme shall buy and sell securities on the basis of deliveries and shall in all cases of purchases, take delivery of relative securities and in all cases of sale, deliver the securities and shall in no case put itself in a position whereby it has to make short sale or carry forward transaction or engage in badla finance. • The aggregate inter scheme investment made by all schemes under the same management or in schemes under the management of any other AMC having similar investment objectives shall not exceed 5% of the NAV of the mutual fund. No fees shall be charged 30
  31. 31. for investing in other schemes of the fund or any other mutual fund. The fund, under all its schemes shall not own more than 10% of any company’s voting rights. • SEBI vide it’s circular dated November 7, 2002, has clarified that Clause 4 of Seventh Schedule of the SEBI (Mutual Funds) Regulations 1996 which restricts investments in mutual fund units upto 5% of net assets and prohibits charging of fees, shall not be applicable to investments in mutual funds in foreign countries made in accordance with guidelines. However, the management fees and other expenses charged by the mutual fund(s) in foreign countries along with the management fee and recurring expenses charged to the domestic mutual fund scheme shall not exceed the total limits on expenses as prescribed under Regulation 52(6). • The scheme can invest a maximum of 5% of the net assets in unlisted equity and equity related instruments. The exit route in such cases is usually through an offer to the public at a later date. • Transfers of investments from one scheme to another will be done as follows: - such transfers will be done at the prevailing market price for quoted instruments on spot basis. - the securities so transferred shall be in conformity with the investment objective of the scheme to which such transfer has been made. • No investment shall be made in any unlisted security of an associate or group company of the sponsor; any security issued by way of private placement by an associate or group company of the sponsor and that investment in listed securities of group companies of the sponsor shall not exceed 1% of the net assets of all the schemes of the fund • The investment in single scrip will not exceed the weightage of the scrip in the representative sectoral index/sub index, or 10% of the NAV of the scheme which ever is higher. To reflect the investment universe in line with the investment objective, the scheme uses a specific benchmark index viz., BSE 200. • The scheme has identified “BSE 200” as the benchmark. Investment in the equity/ equity related instruments of any of the companies will not exceed the weightage of the scrips in the index “BSE 200” or 10% of the NAV of the scheme, whichever is higher. The AMC / Trustee reserve the right to change / modify the index after giving an advance notice of 15 days through an addendum. The addendum will be published in the website/ offices of AMC and the offices of the distributors / agents. • Pending deployment of funds of the scheme in securities in terms of investment objectives of the scheme, the scheme can invest the funds in short term deposits of scheduled commercial banks. • The scheme may invest in other investment avenues/instruments as allowed/permitted under SEBI regulations, from time to time. • SEBI has permitted investments by schemes of mutual funds in ADRs/GDRs of Indian companies listed on overseas stock exchanges. Investments in ADRs/GDRs shall be 31
  32. 32. made to the extent and in the manner approved by RBI. The scheme will employ necessary measures to manage foreign exchange movements arising out of such investments. Service of custodian and other intermediaries /advisors of international repute will be used for safe custody, advice, settlement and reporting of trades done in overseas stock exchanges. The investment restrictions specified as a percentage of net assets will be computed at the time of making the investment and it is clarified that changes need not be effected, merely by reason of appreciation or depreciation in value or by reason of factors beyond the control of the scheme (such as receipt of any corporate or capital benefits or amalgamations). In case the limits are exceeded due to reasons beyond its control, the AMC shall adopt necessary measures of prudence to reset the situation having regard to the interest of the investors. SECURITIES LENDING The scheme may also engage in scrip lending as provided under Securities Lending scheme 1997, and other applicable guidelines/regulations. Scrip lending means lending a security to another person or entity for a fixed period of time, at a negotiated compensation. The security lent will be returned by the borrower on expiry of the stipulated period. The AMC will comply with the required reporting obligations and the Trustee will carry out the reviews required under SEBI/RBI guidelines. Further a maximum of 40% of net assets will be deployed in securities lending and the maximum single party exposure will be restricted to 10% of net assets outstanding at any point of time. Engaging in scrip lending is subject to risks related to fluctuations in the collateral value/settlement/liquidity/counter party. Use of Derivatives Investments in Derivative Instruments Brief note on investment in derivative instruments As part of the Fund Management process, the Trustee may permit the use of derivative instruments such as index futures, stock futures and options contracts, warrants, convertible securities, swap agreements or any other derivative instruments that are permissible or may be permissible in future under applicable regulations and such investments shall be in accordance with the investment objectives of the scheme. Index futures/options are meant to be an efficient way of buying/selling an index compared to buying/selling a portfolio of physical shares representing an index for ease of execution and settlement. Index futures/options can be an efficient way of achieving the scheme’s investment objective. In case of investments in index futures/options, the risk/reward would be the same as 32
  33. 33. investments in portfolio of shares representing an index. On the fixed income side, an interest rate swap agreement from fixed rate to floating rate is an example of how derivatives can be an effective hedge for the portfolio in a rising interest rate environment. Purpose of investment: − Trading in derivatives by the scheme shall be restricted to hedging and portfolio balancing purposes. − The scheme shall fully cover its positions in the derivatives market by holding underlying securities/cash or cash equivalents/option and/or obligation for acquiring underlying assets to honour the obligations contracted in the derivatives market. − Separate records shall be maintained for holding the cash and cash equivalents/securities for this purpose. − The securities held shall be marked to market by the AMC to ensure full coverage of investments made in derivative products at all time. Valuation: − The traded derivatives shall be valued at market price in conformity with the stipulations of sub clauses (i) to (v) of clause 1 of the Eighth Schedule to the Securities and Exchange Board of India (Mutual Funds) Regulations, 1996. − The valuation of untraded derivatives shall be done in accordance with the valuation method for untraded investments prescribed in sub clauses (i) and (ii) of clause 2 of the Eighth Schedule to the Securities and Exchange Board of India (Mutual Funds) Regulations, 1996. Reporting requirements: The AMC shall cover the following aspects in their reports to the Trustees periodically, as provided for in the Regulations: − Transactions in derivatives, both in volume and value terms. − Market value of cash or cash equivalents/securities held to cover the exposure. − Any breach of the exposure limit laid down in the scheme offer document. − Short-fall, if any, in the assets covering investment in derivative products and the manner of bridging it. The Trustee shall offer their comments on the above aspects in the report filed with SEBI under sub regulation (23) (a) of regulation 18 of Securities and Exchange Board of India (Mutual Funds) Regulations, 1996. • The scheme may enter into derivatives for hedging/portfolio balancing purposes and in line with the guidelines prescribed by SEBI vide circular number MFD/CIR/011/061/2000 dated 01/02/2000. • The scheme may take exposure in derivatives upto a maximum of 50% of its spot exposure. The Stock Exchange, Mumbai and the National Stock Exchange have introduced Index futures on BSE Sensex (BSE 30) and Nifty (NSE-50). For example, in say month 1, three futures of 33
  34. 34. month 2, month 3 and month 4, will be traded. These futures will expire on the last working Thursday of the respective month. Let us assume the Nifty Index is 1475 on the last working day of month 1 and three future indexes are available as under: Month Bid Price Offer Price Month 2 1480 1485 Month 3 1500 1515 Month 4 1510 1530 The Fund can buy an Index of month 2 as on last working day of month 1 at the offer price of 1485. The following is a hypothetical example of a typical likely index future trade and the associated costs. (All figures in Rs.) Particulars Index Future Actual Purchase of Stocks Index as on last working day of Month 1 1475 1475 Month 2 Futures Cost 1485 A. Execution Cost 10 Nil Carry and other Index Future costs (1485-1475) B. Brokerage Cost 3.71 7.38 Assumed at 0.25% for Index Future and 0.50% for spot Stocks (0.25% of 1485) (0.50% of 1475) C. Gains on Surplus Funds 9.82 Nil (assumed 9% return on 90% of the money left after paying 10% margin) (9%*1475*90%*30 days/365) Total Cost (A+B-C) 3.89 7.38 34
  35. 35. In this example, the Index Future trade has resulted in better profitability compared to an actual purchase of the underlying index stocks. Typically, the relative attractiveness of an Index Future vis-à-vis individual securities will depend upon the carrying cost, the interest available on surplus funds and the transaction cost. Let us look at an example of an interest rate swap: Entity A has a Rs.20 crores, 3 month asset which is being funded through call. Entity B, on the other hand, has deployed in overnight call money market a Rs.20 crores, 3 month liability. Both the entities are taking on an interest rate risk. To hedge against the interest rate risk, both the entities can enter into a 3 month swap agreement based on say MIBOR (Mumbai Inter Bank Offered Rate). Through this swap, entity B will receive a fixed preagreed rate (say 8%) and pay NSE MIBOR (“the benchmark rate”) which will neutralize the interest rate risk of lending in call. Similarly, entity A will neutralize its interest rate risk from call borrowing as it will pay 8% and receive interest at the benchmark rate. Assuming the swap is for Rs.20 crores 1 September to 1 December, Entity A is a floating rate receiver at the overnight compounded rate and Entity B is a fixed rate receiver. On a daily basis, the benchmark rate fixed by NSE will be tracked by them. On December 1, they will calculate as explained below: Entity A is entitled to receive daily compounded call rate for 92 days and pay 8% fixed. Entity B is entitled to receive interest on Rs.20 crores @ 8% i.e. Rs.40.33 lakhs, and pay the compounded benchmark rate. Thus on December 1, if the total interest on the daily overnight compounded benchmark rate is higher than Rs.40.33 lakhs, entity B will pay entity A the difference and vice versa. As is clear from the above examples, engaging in derivatives has the potential to help the scheme in minimising the portfolio risk and/or improve the overall portfolio returns. Please note these examples are given for illustration purposes only and the actual returns may vary depending on the market conditions. Derivatives are high risk, high return instruments. As they are highly leveraged, even a small price movement in the underlying security could have a large impact on their value and may also result in a loss. Underwriting The scheme may accept underwriting obligations consistent with its investment objective and asset allocation subject to the fund obtaining the necessary approval/registration under SEBI (underwriters) Regulations, 1993 and the capital adequacy norms as prescribed by SEBI. The total underwriting obligations will not exceed the scheme’s total net asset value. 35