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Do you have midcaps in your portfolio?
July 2014
Diary of a curious investor
1
Diary of a curious investor
2
Diary of a curious investor
3
What are midcaps?
4
Source: Bloomberg, As on 30th June, 2014
A search beyond the bluechips
Large Caps
Top 100 Stocks
INR 67 lac crores
Market Cap
Mid & Small
Caps
Next 400 Stocks
INR 18 lac crores
Market Cap
CNX 500 INR 85 lac crores Market Cap
India’s Equity Market Cap INR 88 lac crores
5
Midcaps – Diverse nature of ideas
Big Fish in a Growing PondSmall Fish in a Big Pond
Different Fish in Different Pond
Small Fish in a Big Pond
6
Competing through market share gain
• Medium sized businesses in
large conventional sectors
− Banks
− Utilities
− Energy
− Information Technology
− Materials
• Growing through market share gain
• Often differentiated from the larger
players
• Regulations generally tend to play a
crucial role in large conventional
sectors
Small Fish in a Big Pond
7
• One of the new age banks in India
• With increased presence it offers good exposure to the rising financial
services penetration theme
• An engineering company in energy sector
• Business in 75 countries worldwide
• Leaders* in process heat for over four decades
• The drug manufacturer derives bulk of its revenues from US & EU
markets
• Provides good exposure to the increased offshore manufacturing theme
Competing through market share gain
Disclaimer: Franklin Templeton Investments is not associated with these brands and may or may not have these stocks / securities in their fund portfolio. They are
used for illustration purposes only. This is neither a recommendation to buy or sell nor a view on quality or profitability of investing in these securities. The reader
should not assume that investment in the securities listed was or will be profitable.
Source: *http://www.thermaxindia.com/Fileuploader/Files/Thermax-Corporate-Brochure-Technology-In-Action.pdf
Big Fish in a growing pond
8
Competing through market growth
• Leaders in their space
− Media and Entertainment sector
− Ancillary manufacturers
− Niche Engineering companies
− Logistics
• Growing with the sector
• A mix of regulated and not so regulated
(Some sectors/companies are more regulated as
compared to others)
Big Fish in a Growing Pond
9
• India's first, one of the largest, and most prominent credit rating agency*
• India's largest independent research house, providing comprehensive
research coverage to more than 1200 Indian and global customers*
• One of the leading players^ in India’s storage battery industry
• Largest & dominant market leader of standby batteries in Railways,
Telecom, Power Generating stations in India^
• A world leader# in the areas of crop protection, pest control, seeds and
plant biotechnology
• Comprehensive solutions for modern, sustainable agriculture and non-
agricultural applications
Competing through market growth
Disclaimer: Franklin Templeton Investments is not associated with these brands and may or may not have these stocks / securities in their fund portfolio. They are
used for illustration purposes only. This is neither a recommendation to buy or sell nor a view on quality or profitability of investing in these securities. The reader
should not assume that investment in the securities listed was or will be profitable.
Source: *http://www.crisil.com/about-crisil/about-overview.html. ^http://www.amararaja.co.in/achievements.asp. #http://www.bayer.ca/?q=en/node/10
Different Fish in Different Pond
10
Businesses at different stages of evolution
• Innovating and creating distinct
businesses
− Internet led businesses
− Retail and consumption sectors
− Unique services
• Exploring new opportunities
• Entrepreneurship led models
Different Fish in Different Pond
11
• One of the largest chain of gyms, fitness clubs and health centers in
India*
• 145 ultramodern branches across 75 cities in India*
• Market leader# in adhesives and sealants, construction chemicals,
hobby colors and polymer emulsions in India.
• Its product Fevicol has become synonymous with adhesives to millions
in India
Businesses at different stages of evolution
Disclaimer: Franklin Templeton Investments is not associated with these brands and may or may not have these stocks / securities in their fund portfolio. They are
used for illustration purposes only. This is neither a recommendation to buy or sell nor a view on quality or profitability of investing in these securities. The reader
should not assume that investment in the securities listed was or will be profitable.
Source: *http://talwalkars.net/History.aspx. #http://www.pidilite.com/about-chairman-message.html
Midcaps – Offering a variety
CNX Midcap Index
Exposure (total sectors)
Concentration
17
62%
CNX Nifty
77%
12
Weightage In top 5 sectors
11
CNX Midcap Index is more diversified
vis-a-vis the CNX Nifty Index at both sector and stock levels
Midcaps are represented by CNX Midcap and Large Caps are represented by CNX Nifty
Source: As on 30th
Jun ‘14(latest available data). http://nseindia.com/content/indices/ind_cnx_nifty.pdf. http://nseindia.com/content/indices/ind_cnx_midcap.pdf
Why Midcaps throw opportunities?
13
The Information Gap
Midcaps are represented by CNX Midcap and Large Caps are represented by CNX Nifty
Source: Bloomberg, IIFL Analysis as on 30th
June ‘14
CNX Midcap Index
Average Number of
Analysts tracking a stock 24
CNX Nifty
52
Over 20% of CNX Midcap Stocks are tracked by < 10 Analysts
Then why do investors shy away from midcaps?
14
• Midcaps are not “quality” companies
• Midcaps are small businesses
• Midcaps are generally cyclical businesses
• Midcaps don’t give good returns
• Midcaps may not have good growth potential
The Five Fallacies of Midcaps
Fallacy 1
15
Midcaps are
not “quality”
companies
Fallacy 1
16
Certain midcap companies
•are “compounders”
− Consistent RoCEs
− Large opportunity size
− Competitive advantage
•are run by competent managements
•have efficient capital allocation
•have simpler structures, easier to understand
Midcaps are not quality companies
Fallacy 2
17
Midcaps are
small businesses
Fallacy 2
18
• Some midcaps
– are strong market leaders
– have enviable competitive advantage
– have demonstrated ability to manage scale
• Midcap universe is a good mix of cyclical
and compounding ideas
Midcaps are small businesses
Fallacy 3
19
Midcaps are generally
cyclical businesses!
Fallacy 3
20
Midcaps are generally cyclical businesses!
CNX Midcap has good allocation to consumer facing businesses
Defensive sectors / Consumer Facing businesses
comprise:
•Consumer Goods
•Pharma & Healthcare Services
are generally perceived to be less volatile
compared to other sectors
Midcaps are represented by CNX Midcap and Large Caps are represented by CNX Nifty
Source: As on 30th
Jun 2014 (latest available data). www.nseindia.com. http://nseindia.com/content/indices/ind_cnx_nifty.pdf.
http://nseindia.com/content/indices/ind_cnx_midcap.pdf
Allocation to Defensive sectors (in %)
Fallacy 4
21
Midcaps
don’t give good returns
Fallacy 4
22
Midcaps don’t give good returns
Midcaps have given reasonably good returns over various time
periods
Past performance may or may not be sustained in future. Midcaps are represented by CNX Midcap and Large Caps are represented by CNX Nifty
Source: Bloomberg. The data is taken for the respective period ending Jun‘14. Returns less than 1 year are absolute and over 1 year are
compounded annualized returns.
Indices returns
Fallacy 5
23
Midcaps may lack
good growth potential
High Growth Potential
24
Estimated Sales Growth* (in %)
41%
higher than CNX Nifty
Source: * Nomura(based on Bloomberg Estimates) as on 30th May ‘14. ** Data is taken from Factset. EPS is estimated for FY14-FY17. These are
only projections and not an assurance of sales growth/growth in earnings.
Estimated 3 yrs EPS Growth**
19.5%
For CNX
Midcap
VS
17.3%
For CNX Nifty
20%
higher than CNX Nifty
Why Midcaps can be a part of every portfolio?
25
High Growth Potential
Potential for transition to large caps of tomorrow
Midcaps aid portfolio diversification
Exposure to emerging businesses
Why invest in Midcaps now
26
Midcap Outperformance over Nifty in
Earnings growth
27
Past Performance may or may not be sustained in future
Source: India Midcaps by CLSA dated 23rd
May ’14. Midcaps are represented by CNX Midcap and Large Caps are represented by CNX Nifty
Market expects midcap earnings
growth to outperform large caps
Relative earnings growth of Midcaps over Nifty
Midcaps tend to do better during recovery in
economy
28
Economic recovery and midcap performance
Past Performance may or may not be sustained in future
Source: Bloomberg as on 30th May ’14. The index values for CNX Nifty and CNX Midcap were rebased to 100. Midcaps are represented by CNX Midcap and Large
Caps are represented by CNX Nifty
GDPin(%)
What hurts Midcaps.
And how to manage it.
Macroeconomic Scenario and Midcaps
Risk Aversion
Lack of Investor
Interest
Policy Paralysis High Interest rates
Economic
Environment
Affects
Investor
Behavior
30
Macroeconomic Scenario and Midcaps
Policy Paralysis High Interest rates
Economic
Environment
Impacts midcaps as they are highly leveraged
Debt / EBITDA
Source: India Midcaps by CLSA dated 23rd
May ’14.
Higher Debt/EBITDA indicates higher leverage.
Companies with higher leverage are generally impacted by higher interest rates as their borrowing cost may increase.
31
Macroeconomic Scenario and Midcaps
Risk Aversion
Lack of Investor
Interest
Investor
Behavior
• Limited exposure to
equities
• Exposure restricted to
large caps
Leading to
32
What has happened now
Risk Aversion
Lack of Investor
Interest
Policy Paralysis High Interest rates
Economic
Environment
Investor
Behaviour
May start trending down
provided inflation stays
under control
May be behind us with
new government
at centre
Improvement in
33
34
Managing Midcaps Risks
Risks Mitigators
1 Liquidity at security level Portfolio Construction
2 Management Quality and
disclosure
Regular portfolio reviews
3 Interest Rate Risks Regular review of
Macroeconomic fundamentals
4 Sectoral Risks Bottom up stock picking
Manage your midcap allocation by choosing
the appropriate
35
Asset Manager Products/Schemes
Staying Put for a long term
Decision Variables for Building a Portfolio
Franklin India Equity: Investment Strategy
36
Mispriced Growth Stocks:
• Potential to generate positive cash flows or
earnings that are increasing at a rate that is
faster than that of the industry / economy
• Profitable reinvestment opportunities
• Ability to sustain high return on capital in the
long term
Out-of-favor stocks where the market is
only focusing on near-term challenges
and ignoring:
•Strong long-term business fundamentals and
opportunities
•Cash flow generation
•Return on equity
•Strong execution track record
•Embedded value, whose potential is
underestimated/ignored by the market
Turnaround in company due to internal or
external factors
Innovative businesses and management
— capable of identifying opportunities and
taking risks to capitalize on them to create
sustainable shareholder value
Growth
+
Core
The endeavor is to evaluate businesses, managements
and identifying trends in order to make better long-term investment decisions
Franklin India Equity: Research Process
37
Initial universe, screened for size, liquidity; further industry quantitative and qualitative screens
Investment Criteria
• Market opportunity
• Competitive position
• Management
• Financial strength
• Profitability
• Valuation
Proprietary Research
• Regular management interaction
• Primary Research
• Ground level interaction
• Local intelligence
• Industry demand and supply models
• In-depth company financial models
• Valuation analysis
• Specific security recommendations and investment thesis
• Reasoned target prices
• Comprehensive industry perspective and outlook
• Detailed financial projections
Conferences and
regular interaction with
Management
Public records,
financial releases
Third-party data,
analytics, research
Company and
industry news
• Longevity and experience
• Experienced in managing a diverse range of portfolios across market cycles and
across small, mid, and large cap stocks
• Well established relationships with industry analysts and observers
• Focused on the local market while tuned in to global trends
• Adhere consistently to investment objectives and philosophy
• Regular management interaction along with ground level interaction to form
independent views
Franklin India Equity Team: Key Strengths
38
Midcap Investing is all about…
• Bottom Up
• Buy and Hold
Identifying quality midcaps
39
Franklin India Prima Fund (FIPF) –
“Two Decades” In mid and small caps
• Growth + Value
• High growth potential
Identifying quality midcaps
Constructing a diversified portfolio
Product Label
This product is suitable for investors who are seeking*
•Long term capital appreciation
•A fund that invests in mid and small cap companies
(BROWN)
HIGH RISK**
Investors should consult their financial advisors if in doubt about whether the product is suitable for them.
** Note: Risk may be represented as:
BROWN: Investors understand
that their principal will be at high
risk
YELLOW: Investors understand
that their principal will be at
medium risk
BLUE: Investors understand
that their principal will be at
low risk
40
Identifying quality midcaps
Constructing a diversified portfolio
Consistency in the Product objective
• Mid and Small Cap fund
Identify at an early stage and own high-potential businesses, with
large growth opportunities run by good management teams
Franklin India Prima Fund (FIPF) –
“Two Decades” In mid and small caps
41
Investing for the long term
Past performance may or may not be sustained in future. Load is not taken into consideration. As on June 30, 2014. CNX Midcap Index  (B) was introduced on 01st January, 2003. Hence due to 
limited period of its existence, the movement of CNX Midcap is not given. # The securities were bought for the first time in the portfolio of the scheme on the date as indicated in the graph and 
are held till date. However, there might have been change in the quantity and percentage of holding of the said securities since the date of first purchase. It should not be assumed that 
investment in the said securities was or will be profitable. All portfolio holdings are subject to change. The information stated above does not constitute an investment advice or 
recommendation to subscribe or transact in these securities': Benchmark, AB: Additional Benchmark
Movement of Rs. 10,000 invested in FIPF, CNX 500 & CNX Nifty
Since Jun’03#
Since Dec’07#
Since Jun’10#
Since Jan’11#
FIPF: Rs. 497,000
B: CNX 500: Rs. 73,149
AB: CNX Nifty Rs. 75,512
42
Long-term Cumulative Fund Performance
43
Past performance may or may not be sustained in future. Load is not taken into consideration. Dividends assumed to be reinvested and Bonus is adjusted. Refer
annexure performance of other funds managed by the fund manager/s. Returns greater than 1 year period are compounded annualized. B: Benchmark, AB:
Additional Benchmark. Please refer to website [http://www.franklintempletonindia.com/content-india/documents/PDF/Direct%20Plan%20Returns%20Jun2014.pdf]
for details on performance of Direct Plans. #CNX Midcap has been included as additional benchmark for Franklin India Prima Fund (FIPF) effective May 20, 2013.
FIPF - Growth Option NAV as at Jun 30, 2014 (Rs.) 496.9996
Fund Manager
R Janakiraman,
Roshi Jain
NAV Per Unit (Rs.) FIPF B: CNX 500 B: CNX Midcap# AB: CNX Nifty
Discrete 12 months performance
Jun 28, 2013 to Jun 30, 2014 (Last 1 year) 312.5608 59.01% 36.87% 51.13% 30.28%
Jun 29, 2012 to Jun 28, 2013 264.6954 18.08% 8.16% -0.13% 10.67%
Jun 30, 2011 to Jun 29, 2012 273.6303 -3.27% -7.79% -7.77% -6.53%
Compounded Annualised Growth Rate
Performance
Last 2 years (Jun 29, 2012 to Jun 30, 2014) 36.97% 21.64% 22.82% 20.05%
Last 3 years (Jun 30, 2011 to Jun 30, 2014) 21.99% 10.92% 11.65% 10.45%
Last 5 years (Jun 30, 2009 to Jun 30, 2014) 175.4872 23.13% 12.21% 15.37% 12.14%
Last 10 years (Jun 30, 2004 to Jun 30, 2014) 70.29 21.59% 17.33% 19.07% 17.58%
Last 15 years (Jun 30, 1999 to Jun 30, 2014) 15.21 26.15% 14.53% N.A 13.17%
Since inception till Jun 30, 2014 10 20.89% 10.15% N.A 10.32%
Current Value of Standard Investment of Rs
10000
Last 2 years 18776 14804 15094 14418
Last 3 years 18163 13651 13921 13478
Last 5 years 28321 17795 20447 17738
Last 10 years 70707 49473 57317 50554
Last 15 years 326758 76592 N.A 64085
Since inception (1.12.1993) 497000 73149 N.A 75512
Franklin India Smaller Companies Fund
(FISCF)
• Growth + Value
• High growth potential
Identifying quality midcaps and small caps
Constructing a diversified portfolio
This product is suitable for investors who are seeking*
•Long term capital appreciation
•A fund that invests primarily in small and mid cap companies
(BROWN)
HIGH RISK**
Investors should consult their financial advisors if in doubt about whether the product is suitable for them.
** Note: Risk may be represented as:
BROWN: Investors understand
that their principal will be at high
risk
YELLOW: Investors understand
that their principal will be at
medium risk
BLUE: Investors understand
that their principal will be at
low risk
44
Franklin India Smaller Companies Fund
(FISCF)
• Opportunity to gain from transition: As smaller companies transition into
tomorrow’s market leaders, they exhibit very high growth rates which at times
may not get captured in their valuations
• “Quality” remains the key: As their stocks are under – researched and under –
owned , identifying quality stocks is very important
• Fund Suitability: Suitable for investors with a higher risk appetite and
investment horizon of at least 3 to 5 years
45
Serving Investors For Over 8 years
46
Past performance may or may not be sustained in future. Load is not taken into consideration. As on Jun 30, 2014.B: Benchmark, AB: Additional
Benchmark
FISCF: Rs. 28,168
B: CNX Midcap:
Rs. 26345
AB: CNX Nifty
Rs. 26,701
Movement of Rs. 10,000 invested in FISCF, CNX Midcap & CNX Nifty
47
Long-term Cumulative Fund Performance
Past performance may or may not be sustained in future. Load is not taken into consideration. Dividends assumed to be reinvested and Bonus is adjusted.
Refer annexure performance of other funds managed by the fund manager/s. Returns greater than 1 year period are compounded annualized. B: Benchmark, AB:
Additional Benchmark
Please refer to website [http://www.franklintempletonindia.com/content-india/documents/PDF/Direct%20Plan%20Returns%20Jun2014.pdf] for details on
performance of Direct Plans.
FISCF - Growth Option NAV as at Jun 30, 2014 (Rs.) 28.1676
Fund Manager
R. Janakiraman, Roshi
Jain
NAV Per Unit (Rs.) FISCF B: CNX Midcap AB: CNX Nifty
Discrete 12 months performance
Jun 28, 2013 to Jun 30, 2014 (Last 1 year) 16.2196 73.66% 51.13% 30.28%
Jun 29, 2012 to Jun 28, 2013 13.5247 19.93% -0.13% 10.67%
Jun 30, 2011 to Jun 29, 2012 14.2698 -5.22% -7.77% -6.53%
Compounded Annualised Growth Rate Performance
Last 2 years (Jun 29, 2012 to Jun 30, 2014) 44.24% 22.82% 20.05%
Last 3 years (Jun 30, 2011 to Jun 30, 2014) 25.42% 11.65% 10.45%
Last 5 years (Jun 30, 2009 to Jun 30, 2014) 9.4570 24.38% 15.37% 12.14%
Since inception till Jun 30, 2014 10 13.01% 12.12% 12.30%
Current Value of Standard Investment of Rs 10000
Last 2 years 20827 15094 14418
Last 3 years 19739 13921 13478
Last 5 years 29785 20447 17738
Since inception (13.1.2006) 28168 26345 26701
The Right Stock Selection!
Vintage Matters
Stock selection clearly the key contributor to performance
Stock picking ability has ensured performance holds up well over the medium to long
term, irrespective of how allocation decisions fared
5 Years (ending June 30,
2014)
Attribution Analysis
Asset
Allocation
(A)
Stock
Selection
(B)
Interaction
(C )
Total Alpha
(A+B+C)
Franklin India
Smaller Companies Fund
0.61 19.61 -0.72 19.50
Franklin India
Prima Fund
-0.94 18.06 0.90 18.02
Source: Factset
48
49
Last but not the least,
it is important
to stay invested
for the long term
because…
Investment in CNX Midcap from 2004 to 2014*
(Returns in CAGR)
‘Timing the market’ may take away your
potential gains
50
Past performance mat or may not be sustained in future.
Source: Bloomberg. The data is taken for CNX Midcap from 31st May 2004 to 30th May 2014. Returns shown are CAGR returns .
By missing
each best day,
the return on
investment
decreases
ReturnsinCAGR
51
The information contained in this literature is not a complete representation of every material fact regarding any
industry, security or the fund and is neither an offer for units nor an invitation to invest. The views expressed by
the portfolio managers are based on current market conditions and information available to them and do not
constitute investment advice. Investors are requested to review the prospectus carefully and obtain expert
professional advice with regard to specific legal, tax and financial implications of the investment/participation in
the scheme. This material is intended for residents of India.
Neither the Scheme Information Document nor the units of the Schemes have been registered in any jurisdiction.
The distribution of the Scheme Information Document/ literature in certain jurisdictions may be restricted or
subject to registration requirements and, accordingly, persons who come into possession of this literature in
certain jurisdictions are required to inform themselves about, and to observe, any such restrictions. No person
receiving a copy of this literature or Scheme Information Document or any accompanying application form in such
jurisdiction may treat this literature or Scheme Information 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.
Scheme Classification and Objective: Franklin India Prima Fund (FIPF): An open-end growth scheme,
seeking to provide investors medium to long term capital appreciation as a primary objective and income as a
secondary objective. Franklin India Smaller Companies Fund (FISCF): An open-end diversified equity fund that
seeks to provide long term capital appreciation by investing in mid and small cap companies. Risk Factors:
Mutual Fund investments are subject to market risks, read all scheme related documents carefully.
Load Structure: The investors are requested to check the prevailing load structure of the scheme before
investing. Please refer website/latest SID/addenda for the latest load structure of the respective schemes.
The NAVs of the schemes may go up or down depending upon the factors and forces affecting the securities
market. The Mutual Fund is not guaranteeing or assuring any dividend under any of the schemes and the same is
subject to the availability and adequacy of distributable surplus. The past performance of the mutual funds
managed by the Franklin Templeton Group and its affiliates is not necessarily indicative of future performance of
the schemes.
Disclaimers & Risk Factors
51
Annexures
For Broker/Professional Use Only. Not for public distribution
53
Equity Product Labels
Fund This product is suitable for investors who are seeking* (level of risk)
Franklin India Prima Plus (FIPP) • Long term capital appreciation
• Primarily a large cap fund with some allocation to small/mid cap stocks
Franklin India Flexi Cap Fund
(FIFCF)
• Long term capital appreciation
• A fund that invests in stocks of companies across the market cap range
Franklin India High Growth
Companies Fund (FIHGCF)
• Long term capital appreciation
• A fund that invests in stocks of companies/sectors with high growth rates or above
average potential
Franklin India Prima Fund (FIPF) • Long term capital appreciation
• A fund that invests in mid and small cap stocks
Franklin India Smaller Companies
Fund (FISCF)
• Long term capital appreciation
• A fund that invests primarily in small and mid cap companies
Franklin India Opportunities Fund
(FIOF)
• Long term capital appreciation
• A fund that takes concentrated stock or sector exposures based on four themes
Franklin Asian Equities Fund
(FAEF)
• Long term capital appreciation
• A fund that invests primarily in stocks of Asian companies/sectors(excluding Japan)
Franklin Build India Fund (FBIF) • Long term capital appreciation
• A fund that invests in Infrastructure and allied sectors
Franklin India Feeder – Franklin US
Opportunities Fund (FIF – FUSOF)
• Long term capital appreciation
• A fund of funds investing in an overseas equity fund
*Investors should consult their financial advisors if in doubt whether a product is suitable for them.
**Note Risk may be represented as
53
54
Performance of other schemes managed by
Fund Managers of FIPF and FISCF
Franklin India Flexi Cap Fund (FIFCF)
Past performance may or may not be sustained in future. Load is not taken into consideration. Dividends assumed to be reinvested and Bonus is adjusted.
Returns greater than 1 year period are compounded annualized. B: Benchmark, AB: Additional Benchmark.
Please refer to website [http://www.franklintempletonindia.com/content-india/documents/PDF/Direct%20Plan%20Returns%20Jun2014.pdf] for details on
performance of Direct Plans.
FIFCF - Growth Option NAV as at Jun 30, 2014 (Rs.) 49.3706
Fund Manager
R. Janakiraman / Roshi
Jain, Anand Vasudevan
NAV Per Unit (Rs.) FIFCF B: CNX 500 AB: CNX Nifty
Discrete 12 months performance
Jun 28, 2013 to Jun 30, 2014 (Last 1 year) 32.9366 49.90% 36.87% 30.28%
Jun 29, 2012 to Jun 28, 2013 30.1038 9.41% 8.16% 10.67%
Jun 30, 2011 to Jun 29, 2012 32.7142 -7.98% -7.79% -6.53%
Compounded Annualised Growth Rate Performance
Last 2 years (Jun 29, 2012 to Jun 30, 2014) 28.02% 21.64% 20.05%
Last 3 years (Jun 30, 2011 to Jun 30, 2014) 14.69% 10.92% 10.45%
Last 5 years (Jun 30, 2009 to Jun 30, 2014) 22.2975 17.22% 12.21% 12.14%
Since inception till Jun 30, 2014 10 18.66% 13.95% 14.83%
Current Value of Standard Investment of Rs 10000
Last 2 years 16400 14804 14418
Last 3 years 15091 13651 13478
Last 5 years 22142 17795 17738
Since inception (2.3.2005) 49371 33826 36361
55
Franklin India Opportunities Fund (FIOF)
Past performance may or may not be sustained in future. Load is not taken into consideration. Dividends assumed to be reinvested and Bonus is adjusted.
Returns greater than 1 year period are compounded annualized. B: Benchmark, AB: Additional Benchmark
Please refer to website [http://www.franklintempletonindia.com/content-india/documents/PDF/Direct%20Plan%20Returns%20Jun2014.pdf] for details on performance
of Direct Plans.
Performance of other schemes managed by the
Fund Managers of FIPF and FISCF
FIOF - Growth Option NAV as at Jun 30, 2014 (Rs.) 43.4741
Fund Manager
R. Janakiraman,
Anil Prabhudas
NAV Per Unit (Rs.) FIOF B: S&P BSE 200 # AB: CNX Nifty
Discrete 12 months performance
Jun 28, 2013 to Jun 30, 2014 (Last 1 year) 31.0630 39.95% 34.45% 30.28%
Jun 29, 2012 to Jun 28, 2013 28.8213 7.78% 8.69% 10.67%
Jun 30, 2011 to Jun 29, 2012 31.2132 -7.66% -7.63% -6.53%
Compounded Annualised Growth Rate Performance
Last 2 years (Jun 29, 2012 to Jun 30, 2014) 22.78% 20.85% 20.05%
Last 3 years (Jun 30, 2011 to Jun 30, 2014) 11.67% 10.51% 10.45%
Last 5 years (Jun 30, 2009 to Jun 30, 2014) 24.4161 12.22% 12.07% 12.14%
Last 10 years (Jun 30, 2004 to Jun 30, 2014) 8.07 18.33% 17.45% 17.58%
Since inception till Jun 30, 2014 10 10.77% -0.54% 10.76%
Current Value of Standard Investment of Rs 10000
Last 2 years 15084 14613 14418
Last 3 years 13928 13498 13478
Last 5 years 17806 17681 17738
Last 10 years 53871 49991 50554
Since inception (21.2.2000) 43474 9246 43407
# Index adjusted for the period February 21, 2000 to
March 10, 2004 with the performance of ET Mindex.
56
Franklin Asian Equities Fund(FAEF)
Past performance may or may not be sustained in future. Load is not taken into consideration. Dividends assumed to be reinvested and Bonus is adjusted.
Returns greater than 1 year period are compounded annualized. B: Benchmark, AB: Additional Benchmark.
Please refer to website [http://www.franklintempletonindia.com/content-india/documents/PDF/Direct%20Plan%20Returns%20Jun2014.pdf] for details on
performance of Direct Plans.
Performance of other schemes managed by the
Fund Managers of FIPF and FISCF
FAEF - Growth Option NAV as at Jun 30, 2014 (Rs.) 15.3041
Fund Manager Roshi Jain
NAV Per Unit
(Rs.)
FAEF
B: MSCI Asia (ex Japan)
Standard Index
AB: CNX Nifty
Discrete 12 months performance
Jun 28, 2013 to Jun 30, 2014 (Last 1 year) 13.4403 13.87% 15.32% 30.28%
Jun 29, 2012 to Jun 28, 2013 11.8279 13.63% 13.46% 10.67%
Jun 30, 2011 to Jun 29, 2012 11.1221 6.35% 5.14% -6.53%
Compounded Annualised Growth Rate Performance
Last 2 years (Jun 29, 2012 to Jun 30, 2014) 13.73% 14.36% 20.05%
Last 3 years (Jun 30, 2011 to Jun 30, 2014) 11.22% 11.21% 10.45%
Last 5 years (Jun 30, 2009 to Jun 30, 2014) 8.8466 11.58% 13.52% 12.14%
Since inception till Jun 30, 2014 10 6.81% 7.14% 3.93%
Current Value of Standard Investment of Rs 10000
Last 2 years 12939 13084 14418
Last 3 years 13760 13757 13478
Last 5 years 17299 18861 17738
Since inception (16.1.2008) 15304 15615 12823
57
Franklin India High Growth Companies Fund (FIHGCF)
Past performance may or may not be sustained in future. Load is not taken into consideration. Dividends assumed to be reinvested and Bonus is
adjusted. Returns greater than 1 year period are compounded annualized. B: Benchmark, AB: Additional Benchmark
Please refer to website [http://www.franklintempletonindia.com/content-india/documents/PDF/Direct%20Plan%20Returns%20Jun2014.pdf] for details on
performance of Direct Plans.
Performance of other schemes managed by the
Fund Managers of FIPF and FISCF
FIHGCF - Growth Option NAV as at Jun 30, 2014 (Rs.) 21.6903
Fund Manager
Roshi Jain, R.
Janakiraman
NAV Per Unit (Rs.) FIHGCF B: CNX 500 AB: CNX Nifty
Discrete 12 months performance
Jun 28, 2013 to Jun 30, 2014 (Last 1 year) 13.8473 56.64% 36.87% 30.28%
Jun 29, 2012 to Jun 28, 2013 11.9437 15.94% 8.16% 10.67%
Jun 30, 2011 to Jun 29, 2012 12.8575 -7.11% -7.79% -6.53%
Compounded Annualised Growth Rate Performance
Last 2 years (Jun 29, 2012 to Jun 30, 2014) 34.71% 21.64% 20.05%
Last 3 years (Jun 30, 2011 to Jun 30, 2014) 19.02% 10.92% 10.45%
Last 5 years (Jun 30, 2009 to Jun 30, 2014) 8.7659 19.85% 12.21% 12.14%
Since inception till Jun 30, 2014 10 11.81% 7.05% 7.47%
Current Value of Standard Investment of Rs 10000
Last 2 years 18160 14804 14418
Last 3 years 16870 13651 13478
Last 5 years 24744 17795 17738
Since inception (26.7.2007) 21690 16041 16475
58
Franklin Build India Fund (FBIF)
Past performance may or may not be sustained in future. Load is not taken into consideration. Dividends assumed to be reinvested and Bonus is adjusted.
Returns greater than 1 year period are compounded annualized. B: Benchmark, AB: Additional Benchmark
Please refer to website [http://www.franklintempletonindia.com/content-india/documents/PDF/Direct%20Plan%20Returns%20Jun2014.pdf] for details on
performance of Direct Plans.
Performance of other schemes managed by the
Fund Managers of FIPF and FISCF
FBIF - Growth Option NAV as at Jun 30, 2014 (Rs.) 20.7525
Fund Manager
Anand Radhakrishnan,
Roshi Jain
NAV Per Unit (Rs.) FBIF B: CNX 500 AB: CNX Nifty
Discrete 12 months performance
Jun 28, 2013 to Jun 30, 2014 (Last 1 year) 12.6389 64.20% 36.87% 30.28%
Jun 29, 2012 to Jun 28, 2013 11.2923 11.92% 8.16% 10.67%
Jun 30, 2011 to Jun 29, 2012 11.5538 -2.26% -7.79% -6.53%
Compounded Annualised Growth Rate Performance
Last 2 years (Jun 29, 2012 to Jun 30, 2014) 35.51% 21.64% 20.05%
Last 3 years (Jun 30, 2011 to Jun 30, 2014) 21.54% 10.92% 10.45%
Since inception till Jun 30, 2014 10 16.35% 10.36% 10.61%
Current Value of Standard Investment of Rs 10000
Last 2 years 18378 14804 14418
Last 3 years 17962 13651 13478
Since inception (4.9.2009) 20753 16088 16262
59
Franklin India Feeder US Opportunities Fund (FIF -
FUSOF)*
Past performance may or may not be sustained in future. Load is not taken into consideration. Dividends assumed to be reinvested and Bonus is adjusted.
Returns greater than 1 year period are compounded annualized. B: Benchmark, AB: Additional Benchmark
Please refer to website [http://www.franklintempletonindia.com/content-india/documents/PDF/Direct%20Plan%20Returns%20Jun2014.pdf] for details on
performance of Direct Plans.
*The name of the scheme FT India Feeder US Opportunities Fund (FTIF - FUSOF) stands changed to Franklin India Feeder - Franklin U.S.
Opportunities Fund (FIF-FUSOF) with effect from June 30,2014.
Performance of other schemes managed by the
Fund Managers of FIPF and FISCF
FIF-FUSOF - Growth Option NAV as at Jun 30, 2014 (Rs.) 17.5338
Fund Manager Roshi Jain
NAV Per Unit (Rs.) FIF-FUSOF B: Russell 3000 Growth AB
Discrete 12 months performance
Jun 28, 2013 to Jun 30, 2014 (Last 1 year) 13.7500 27.52% 28.45%Not Applicable
Jun 29, 2012 to Jun 28, 2013 11.1260 23.58% 25.49%Not Applicable
Compounded Annualised Growth Rate Performance
Last 2 years (Jun 29, 2012 to Jun 30, 2014) 25.50% 26.92%Not Applicable
Since inception till Jun 30, 2014 10 26.63% 28.85%Not Applicable
Current Value of Standard Investment of Rs 10000
Last 2 years 15759 16120 Not Applicable
Since inception (13.2.2012) 17534 18271 Not Applicable
60
Performance of other schemes managed by the
Fund Managers of FIPF and FISCF
Franklin India Prima Plus (FIPP)
Past performance may or may not be sustained in future. Load is not taken into consideration. Dividends assumed to be reinvested and Bonus is adjusted.
Returns greater than 1 year period are compounded annualized. B: Benchmark, AB: Additional Benchmark
Please refer to website [http://www.franklintempletonindia.com/content-india/documents/PDF/Direct%20Plan%20Returns%20Jun2014.pdf] for details on
performance of Direct Plans.
FIPP - Growth Option NAV as at Jun 30, 2014 (Rs.) 339.6662
Fund Manager
Anand Radhakrishnan,
R. Janakiraman
NAV Per Unit (Rs.) FIPP B: CNX 500 AB: CNX Nifty
Discrete 12 months performance
Jun 28, 2013 to Jun 30, 2014 (Last 1 year) 240.9067 40.99% 36.87% 30.28%
Jun 29, 2012 to Jun 28, 2013 217.1948 10.92% 8.16% 10.67%
Jun 30, 2011 to Jun 29, 2012 223.3016 -2.73% -7.79% -6.53%
Compounded Annualised Growth Rate Performance
Last 2 years (Jun 29, 2012 to Jun 30, 2014) 25.02% 21.64% 20.05%
Last 3 years (Jun 30, 2011 to Jun 30, 2014) 14.99% 10.92% 10.45%
Last 5 years (Jun 30, 2009 to Jun 30, 2014) 154.557 17.05% 12.21% 12.14%
Last 10 years (Jun 30, 2004 to Jun 30, 2014) 46.17 22.07% 17.33% 17.58%
Last 15 years (Jun 30, 1999 to Jun 30, 2014) 14.29 23.50% 14.53% 13.17%
Since inception till Jun 30, 2014 10 19.53% 9.18% 9.31%
Current Value of Standard Investment of Rs 10000
Last 2 years 15639 14804 14418
Last 3 years 15211 13651 13478
Last 5 years 21977 17795 17738
Last 10 years 73569 49473 50554
Last 15 years 237695 76592 64085
Since inception (29.9.1994) 339666 56737 58038

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Time for Midcaps 2014

  • 1. Do you have midcaps in your portfolio? July 2014
  • 2. Diary of a curious investor 1
  • 3. Diary of a curious investor 2
  • 4. Diary of a curious investor 3
  • 5. What are midcaps? 4 Source: Bloomberg, As on 30th June, 2014 A search beyond the bluechips Large Caps Top 100 Stocks INR 67 lac crores Market Cap Mid & Small Caps Next 400 Stocks INR 18 lac crores Market Cap CNX 500 INR 85 lac crores Market Cap India’s Equity Market Cap INR 88 lac crores
  • 6. 5 Midcaps – Diverse nature of ideas Big Fish in a Growing PondSmall Fish in a Big Pond Different Fish in Different Pond
  • 7. Small Fish in a Big Pond 6 Competing through market share gain • Medium sized businesses in large conventional sectors − Banks − Utilities − Energy − Information Technology − Materials • Growing through market share gain • Often differentiated from the larger players • Regulations generally tend to play a crucial role in large conventional sectors
  • 8. Small Fish in a Big Pond 7 • One of the new age banks in India • With increased presence it offers good exposure to the rising financial services penetration theme • An engineering company in energy sector • Business in 75 countries worldwide • Leaders* in process heat for over four decades • The drug manufacturer derives bulk of its revenues from US & EU markets • Provides good exposure to the increased offshore manufacturing theme Competing through market share gain Disclaimer: Franklin Templeton Investments is not associated with these brands and may or may not have these stocks / securities in their fund portfolio. They are used for illustration purposes only. This is neither a recommendation to buy or sell nor a view on quality or profitability of investing in these securities. The reader should not assume that investment in the securities listed was or will be profitable. Source: *http://www.thermaxindia.com/Fileuploader/Files/Thermax-Corporate-Brochure-Technology-In-Action.pdf
  • 9. Big Fish in a growing pond 8 Competing through market growth • Leaders in their space − Media and Entertainment sector − Ancillary manufacturers − Niche Engineering companies − Logistics • Growing with the sector • A mix of regulated and not so regulated (Some sectors/companies are more regulated as compared to others)
  • 10. Big Fish in a Growing Pond 9 • India's first, one of the largest, and most prominent credit rating agency* • India's largest independent research house, providing comprehensive research coverage to more than 1200 Indian and global customers* • One of the leading players^ in India’s storage battery industry • Largest & dominant market leader of standby batteries in Railways, Telecom, Power Generating stations in India^ • A world leader# in the areas of crop protection, pest control, seeds and plant biotechnology • Comprehensive solutions for modern, sustainable agriculture and non- agricultural applications Competing through market growth Disclaimer: Franklin Templeton Investments is not associated with these brands and may or may not have these stocks / securities in their fund portfolio. They are used for illustration purposes only. This is neither a recommendation to buy or sell nor a view on quality or profitability of investing in these securities. The reader should not assume that investment in the securities listed was or will be profitable. Source: *http://www.crisil.com/about-crisil/about-overview.html. ^http://www.amararaja.co.in/achievements.asp. #http://www.bayer.ca/?q=en/node/10
  • 11. Different Fish in Different Pond 10 Businesses at different stages of evolution • Innovating and creating distinct businesses − Internet led businesses − Retail and consumption sectors − Unique services • Exploring new opportunities • Entrepreneurship led models
  • 12. Different Fish in Different Pond 11 • One of the largest chain of gyms, fitness clubs and health centers in India* • 145 ultramodern branches across 75 cities in India* • Market leader# in adhesives and sealants, construction chemicals, hobby colors and polymer emulsions in India. • Its product Fevicol has become synonymous with adhesives to millions in India Businesses at different stages of evolution Disclaimer: Franklin Templeton Investments is not associated with these brands and may or may not have these stocks / securities in their fund portfolio. They are used for illustration purposes only. This is neither a recommendation to buy or sell nor a view on quality or profitability of investing in these securities. The reader should not assume that investment in the securities listed was or will be profitable. Source: *http://talwalkars.net/History.aspx. #http://www.pidilite.com/about-chairman-message.html
  • 13. Midcaps – Offering a variety CNX Midcap Index Exposure (total sectors) Concentration 17 62% CNX Nifty 77% 12 Weightage In top 5 sectors 11 CNX Midcap Index is more diversified vis-a-vis the CNX Nifty Index at both sector and stock levels Midcaps are represented by CNX Midcap and Large Caps are represented by CNX Nifty Source: As on 30th Jun ‘14(latest available data). http://nseindia.com/content/indices/ind_cnx_nifty.pdf. http://nseindia.com/content/indices/ind_cnx_midcap.pdf
  • 14. Why Midcaps throw opportunities? 13 The Information Gap Midcaps are represented by CNX Midcap and Large Caps are represented by CNX Nifty Source: Bloomberg, IIFL Analysis as on 30th June ‘14 CNX Midcap Index Average Number of Analysts tracking a stock 24 CNX Nifty 52 Over 20% of CNX Midcap Stocks are tracked by < 10 Analysts
  • 15. Then why do investors shy away from midcaps? 14 • Midcaps are not “quality” companies • Midcaps are small businesses • Midcaps are generally cyclical businesses • Midcaps don’t give good returns • Midcaps may not have good growth potential The Five Fallacies of Midcaps
  • 16. Fallacy 1 15 Midcaps are not “quality” companies
  • 17. Fallacy 1 16 Certain midcap companies •are “compounders” − Consistent RoCEs − Large opportunity size − Competitive advantage •are run by competent managements •have efficient capital allocation •have simpler structures, easier to understand Midcaps are not quality companies
  • 19. Fallacy 2 18 • Some midcaps – are strong market leaders – have enviable competitive advantage – have demonstrated ability to manage scale • Midcap universe is a good mix of cyclical and compounding ideas Midcaps are small businesses
  • 20. Fallacy 3 19 Midcaps are generally cyclical businesses!
  • 21. Fallacy 3 20 Midcaps are generally cyclical businesses! CNX Midcap has good allocation to consumer facing businesses Defensive sectors / Consumer Facing businesses comprise: •Consumer Goods •Pharma & Healthcare Services are generally perceived to be less volatile compared to other sectors Midcaps are represented by CNX Midcap and Large Caps are represented by CNX Nifty Source: As on 30th Jun 2014 (latest available data). www.nseindia.com. http://nseindia.com/content/indices/ind_cnx_nifty.pdf. http://nseindia.com/content/indices/ind_cnx_midcap.pdf Allocation to Defensive sectors (in %)
  • 23. Fallacy 4 22 Midcaps don’t give good returns Midcaps have given reasonably good returns over various time periods Past performance may or may not be sustained in future. Midcaps are represented by CNX Midcap and Large Caps are represented by CNX Nifty Source: Bloomberg. The data is taken for the respective period ending Jun‘14. Returns less than 1 year are absolute and over 1 year are compounded annualized returns. Indices returns
  • 24. Fallacy 5 23 Midcaps may lack good growth potential
  • 25. High Growth Potential 24 Estimated Sales Growth* (in %) 41% higher than CNX Nifty Source: * Nomura(based on Bloomberg Estimates) as on 30th May ‘14. ** Data is taken from Factset. EPS is estimated for FY14-FY17. These are only projections and not an assurance of sales growth/growth in earnings. Estimated 3 yrs EPS Growth** 19.5% For CNX Midcap VS 17.3% For CNX Nifty 20% higher than CNX Nifty
  • 26. Why Midcaps can be a part of every portfolio? 25 High Growth Potential Potential for transition to large caps of tomorrow Midcaps aid portfolio diversification Exposure to emerging businesses
  • 27. Why invest in Midcaps now 26
  • 28. Midcap Outperformance over Nifty in Earnings growth 27 Past Performance may or may not be sustained in future Source: India Midcaps by CLSA dated 23rd May ’14. Midcaps are represented by CNX Midcap and Large Caps are represented by CNX Nifty Market expects midcap earnings growth to outperform large caps Relative earnings growth of Midcaps over Nifty
  • 29. Midcaps tend to do better during recovery in economy 28 Economic recovery and midcap performance Past Performance may or may not be sustained in future Source: Bloomberg as on 30th May ’14. The index values for CNX Nifty and CNX Midcap were rebased to 100. Midcaps are represented by CNX Midcap and Large Caps are represented by CNX Nifty GDPin(%)
  • 30. What hurts Midcaps. And how to manage it.
  • 31. Macroeconomic Scenario and Midcaps Risk Aversion Lack of Investor Interest Policy Paralysis High Interest rates Economic Environment Affects Investor Behavior 30
  • 32. Macroeconomic Scenario and Midcaps Policy Paralysis High Interest rates Economic Environment Impacts midcaps as they are highly leveraged Debt / EBITDA Source: India Midcaps by CLSA dated 23rd May ’14. Higher Debt/EBITDA indicates higher leverage. Companies with higher leverage are generally impacted by higher interest rates as their borrowing cost may increase. 31
  • 33. Macroeconomic Scenario and Midcaps Risk Aversion Lack of Investor Interest Investor Behavior • Limited exposure to equities • Exposure restricted to large caps Leading to 32
  • 34. What has happened now Risk Aversion Lack of Investor Interest Policy Paralysis High Interest rates Economic Environment Investor Behaviour May start trending down provided inflation stays under control May be behind us with new government at centre Improvement in 33
  • 35. 34 Managing Midcaps Risks Risks Mitigators 1 Liquidity at security level Portfolio Construction 2 Management Quality and disclosure Regular portfolio reviews 3 Interest Rate Risks Regular review of Macroeconomic fundamentals 4 Sectoral Risks Bottom up stock picking
  • 36. Manage your midcap allocation by choosing the appropriate 35 Asset Manager Products/Schemes Staying Put for a long term
  • 37. Decision Variables for Building a Portfolio Franklin India Equity: Investment Strategy 36 Mispriced Growth Stocks: • Potential to generate positive cash flows or earnings that are increasing at a rate that is faster than that of the industry / economy • Profitable reinvestment opportunities • Ability to sustain high return on capital in the long term Out-of-favor stocks where the market is only focusing on near-term challenges and ignoring: •Strong long-term business fundamentals and opportunities •Cash flow generation •Return on equity •Strong execution track record •Embedded value, whose potential is underestimated/ignored by the market Turnaround in company due to internal or external factors Innovative businesses and management — capable of identifying opportunities and taking risks to capitalize on them to create sustainable shareholder value Growth + Core The endeavor is to evaluate businesses, managements and identifying trends in order to make better long-term investment decisions
  • 38. Franklin India Equity: Research Process 37 Initial universe, screened for size, liquidity; further industry quantitative and qualitative screens Investment Criteria • Market opportunity • Competitive position • Management • Financial strength • Profitability • Valuation Proprietary Research • Regular management interaction • Primary Research • Ground level interaction • Local intelligence • Industry demand and supply models • In-depth company financial models • Valuation analysis • Specific security recommendations and investment thesis • Reasoned target prices • Comprehensive industry perspective and outlook • Detailed financial projections Conferences and regular interaction with Management Public records, financial releases Third-party data, analytics, research Company and industry news
  • 39. • Longevity and experience • Experienced in managing a diverse range of portfolios across market cycles and across small, mid, and large cap stocks • Well established relationships with industry analysts and observers • Focused on the local market while tuned in to global trends • Adhere consistently to investment objectives and philosophy • Regular management interaction along with ground level interaction to form independent views Franklin India Equity Team: Key Strengths 38
  • 40. Midcap Investing is all about… • Bottom Up • Buy and Hold Identifying quality midcaps 39
  • 41. Franklin India Prima Fund (FIPF) – “Two Decades” In mid and small caps • Growth + Value • High growth potential Identifying quality midcaps Constructing a diversified portfolio Product Label This product is suitable for investors who are seeking* •Long term capital appreciation •A fund that invests in mid and small cap companies (BROWN) HIGH RISK** Investors should consult their financial advisors if in doubt about whether the product is suitable for them. ** Note: Risk may be represented as: BROWN: Investors understand that their principal will be at high risk YELLOW: Investors understand that their principal will be at medium risk BLUE: Investors understand that their principal will be at low risk 40
  • 42. Identifying quality midcaps Constructing a diversified portfolio Consistency in the Product objective • Mid and Small Cap fund Identify at an early stage and own high-potential businesses, with large growth opportunities run by good management teams Franklin India Prima Fund (FIPF) – “Two Decades” In mid and small caps 41
  • 43. Investing for the long term Past performance may or may not be sustained in future. Load is not taken into consideration. As on June 30, 2014. CNX Midcap Index  (B) was introduced on 01st January, 2003. Hence due to  limited period of its existence, the movement of CNX Midcap is not given. # The securities were bought for the first time in the portfolio of the scheme on the date as indicated in the graph and  are held till date. However, there might have been change in the quantity and percentage of holding of the said securities since the date of first purchase. It should not be assumed that  investment in the said securities was or will be profitable. All portfolio holdings are subject to change. The information stated above does not constitute an investment advice or  recommendation to subscribe or transact in these securities': Benchmark, AB: Additional Benchmark Movement of Rs. 10,000 invested in FIPF, CNX 500 & CNX Nifty Since Jun’03# Since Dec’07# Since Jun’10# Since Jan’11# FIPF: Rs. 497,000 B: CNX 500: Rs. 73,149 AB: CNX Nifty Rs. 75,512 42
  • 44. Long-term Cumulative Fund Performance 43 Past performance may or may not be sustained in future. Load is not taken into consideration. Dividends assumed to be reinvested and Bonus is adjusted. Refer annexure performance of other funds managed by the fund manager/s. Returns greater than 1 year period are compounded annualized. B: Benchmark, AB: Additional Benchmark. Please refer to website [http://www.franklintempletonindia.com/content-india/documents/PDF/Direct%20Plan%20Returns%20Jun2014.pdf] for details on performance of Direct Plans. #CNX Midcap has been included as additional benchmark for Franklin India Prima Fund (FIPF) effective May 20, 2013. FIPF - Growth Option NAV as at Jun 30, 2014 (Rs.) 496.9996 Fund Manager R Janakiraman, Roshi Jain NAV Per Unit (Rs.) FIPF B: CNX 500 B: CNX Midcap# AB: CNX Nifty Discrete 12 months performance Jun 28, 2013 to Jun 30, 2014 (Last 1 year) 312.5608 59.01% 36.87% 51.13% 30.28% Jun 29, 2012 to Jun 28, 2013 264.6954 18.08% 8.16% -0.13% 10.67% Jun 30, 2011 to Jun 29, 2012 273.6303 -3.27% -7.79% -7.77% -6.53% Compounded Annualised Growth Rate Performance Last 2 years (Jun 29, 2012 to Jun 30, 2014) 36.97% 21.64% 22.82% 20.05% Last 3 years (Jun 30, 2011 to Jun 30, 2014) 21.99% 10.92% 11.65% 10.45% Last 5 years (Jun 30, 2009 to Jun 30, 2014) 175.4872 23.13% 12.21% 15.37% 12.14% Last 10 years (Jun 30, 2004 to Jun 30, 2014) 70.29 21.59% 17.33% 19.07% 17.58% Last 15 years (Jun 30, 1999 to Jun 30, 2014) 15.21 26.15% 14.53% N.A 13.17% Since inception till Jun 30, 2014 10 20.89% 10.15% N.A 10.32% Current Value of Standard Investment of Rs 10000 Last 2 years 18776 14804 15094 14418 Last 3 years 18163 13651 13921 13478 Last 5 years 28321 17795 20447 17738 Last 10 years 70707 49473 57317 50554 Last 15 years 326758 76592 N.A 64085 Since inception (1.12.1993) 497000 73149 N.A 75512
  • 45. Franklin India Smaller Companies Fund (FISCF) • Growth + Value • High growth potential Identifying quality midcaps and small caps Constructing a diversified portfolio This product is suitable for investors who are seeking* •Long term capital appreciation •A fund that invests primarily in small and mid cap companies (BROWN) HIGH RISK** Investors should consult their financial advisors if in doubt about whether the product is suitable for them. ** Note: Risk may be represented as: BROWN: Investors understand that their principal will be at high risk YELLOW: Investors understand that their principal will be at medium risk BLUE: Investors understand that their principal will be at low risk 44
  • 46. Franklin India Smaller Companies Fund (FISCF) • Opportunity to gain from transition: As smaller companies transition into tomorrow’s market leaders, they exhibit very high growth rates which at times may not get captured in their valuations • “Quality” remains the key: As their stocks are under – researched and under – owned , identifying quality stocks is very important • Fund Suitability: Suitable for investors with a higher risk appetite and investment horizon of at least 3 to 5 years 45
  • 47. Serving Investors For Over 8 years 46 Past performance may or may not be sustained in future. Load is not taken into consideration. As on Jun 30, 2014.B: Benchmark, AB: Additional Benchmark FISCF: Rs. 28,168 B: CNX Midcap: Rs. 26345 AB: CNX Nifty Rs. 26,701 Movement of Rs. 10,000 invested in FISCF, CNX Midcap & CNX Nifty
  • 48. 47 Long-term Cumulative Fund Performance Past performance may or may not be sustained in future. Load is not taken into consideration. Dividends assumed to be reinvested and Bonus is adjusted. Refer annexure performance of other funds managed by the fund manager/s. Returns greater than 1 year period are compounded annualized. B: Benchmark, AB: Additional Benchmark Please refer to website [http://www.franklintempletonindia.com/content-india/documents/PDF/Direct%20Plan%20Returns%20Jun2014.pdf] for details on performance of Direct Plans. FISCF - Growth Option NAV as at Jun 30, 2014 (Rs.) 28.1676 Fund Manager R. Janakiraman, Roshi Jain NAV Per Unit (Rs.) FISCF B: CNX Midcap AB: CNX Nifty Discrete 12 months performance Jun 28, 2013 to Jun 30, 2014 (Last 1 year) 16.2196 73.66% 51.13% 30.28% Jun 29, 2012 to Jun 28, 2013 13.5247 19.93% -0.13% 10.67% Jun 30, 2011 to Jun 29, 2012 14.2698 -5.22% -7.77% -6.53% Compounded Annualised Growth Rate Performance Last 2 years (Jun 29, 2012 to Jun 30, 2014) 44.24% 22.82% 20.05% Last 3 years (Jun 30, 2011 to Jun 30, 2014) 25.42% 11.65% 10.45% Last 5 years (Jun 30, 2009 to Jun 30, 2014) 9.4570 24.38% 15.37% 12.14% Since inception till Jun 30, 2014 10 13.01% 12.12% 12.30% Current Value of Standard Investment of Rs 10000 Last 2 years 20827 15094 14418 Last 3 years 19739 13921 13478 Last 5 years 29785 20447 17738 Since inception (13.1.2006) 28168 26345 26701
  • 49. The Right Stock Selection! Vintage Matters Stock selection clearly the key contributor to performance Stock picking ability has ensured performance holds up well over the medium to long term, irrespective of how allocation decisions fared 5 Years (ending June 30, 2014) Attribution Analysis Asset Allocation (A) Stock Selection (B) Interaction (C ) Total Alpha (A+B+C) Franklin India Smaller Companies Fund 0.61 19.61 -0.72 19.50 Franklin India Prima Fund -0.94 18.06 0.90 18.02 Source: Factset 48
  • 50. 49 Last but not the least, it is important to stay invested for the long term because…
  • 51. Investment in CNX Midcap from 2004 to 2014* (Returns in CAGR) ‘Timing the market’ may take away your potential gains 50 Past performance mat or may not be sustained in future. Source: Bloomberg. The data is taken for CNX Midcap from 31st May 2004 to 30th May 2014. Returns shown are CAGR returns . By missing each best day, the return on investment decreases ReturnsinCAGR
  • 52. 51 The information contained in this literature is not a complete representation of every material fact regarding any industry, security or the fund and is neither an offer for units nor an invitation to invest. The views expressed by the portfolio managers are based on current market conditions and information available to them and do not constitute investment advice. Investors are requested to review the prospectus carefully and obtain expert professional advice with regard to specific legal, tax and financial implications of the investment/participation in the scheme. This material is intended for residents of India. Neither the Scheme Information Document nor the units of the Schemes have been registered in any jurisdiction. The distribution of the Scheme Information Document/ literature in certain jurisdictions may be restricted or subject to registration requirements and, accordingly, persons who come into possession of this literature in certain jurisdictions are required to inform themselves about, and to observe, any such restrictions. No person receiving a copy of this literature or Scheme Information Document or any accompanying application form in such jurisdiction may treat this literature or Scheme Information 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. Scheme Classification and Objective: Franklin India Prima Fund (FIPF): An open-end growth scheme, seeking to provide investors medium to long term capital appreciation as a primary objective and income as a secondary objective. Franklin India Smaller Companies Fund (FISCF): An open-end diversified equity fund that seeks to provide long term capital appreciation by investing in mid and small cap companies. Risk Factors: Mutual Fund investments are subject to market risks, read all scheme related documents carefully. Load Structure: The investors are requested to check the prevailing load structure of the scheme before investing. Please refer website/latest SID/addenda for the latest load structure of the respective schemes. The NAVs of the schemes may go up or down depending upon the factors and forces affecting the securities market. The Mutual Fund is not guaranteeing or assuring any dividend under any of the schemes and the same is subject to the availability and adequacy of distributable surplus. The past performance of the mutual funds managed by the Franklin Templeton Group and its affiliates is not necessarily indicative of future performance of the schemes. Disclaimers & Risk Factors 51
  • 54. For Broker/Professional Use Only. Not for public distribution 53 Equity Product Labels Fund This product is suitable for investors who are seeking* (level of risk) Franklin India Prima Plus (FIPP) • Long term capital appreciation • Primarily a large cap fund with some allocation to small/mid cap stocks Franklin India Flexi Cap Fund (FIFCF) • Long term capital appreciation • A fund that invests in stocks of companies across the market cap range Franklin India High Growth Companies Fund (FIHGCF) • Long term capital appreciation • A fund that invests in stocks of companies/sectors with high growth rates or above average potential Franklin India Prima Fund (FIPF) • Long term capital appreciation • A fund that invests in mid and small cap stocks Franklin India Smaller Companies Fund (FISCF) • Long term capital appreciation • A fund that invests primarily in small and mid cap companies Franklin India Opportunities Fund (FIOF) • Long term capital appreciation • A fund that takes concentrated stock or sector exposures based on four themes Franklin Asian Equities Fund (FAEF) • Long term capital appreciation • A fund that invests primarily in stocks of Asian companies/sectors(excluding Japan) Franklin Build India Fund (FBIF) • Long term capital appreciation • A fund that invests in Infrastructure and allied sectors Franklin India Feeder – Franklin US Opportunities Fund (FIF – FUSOF) • Long term capital appreciation • A fund of funds investing in an overseas equity fund *Investors should consult their financial advisors if in doubt whether a product is suitable for them. **Note Risk may be represented as 53
  • 55. 54 Performance of other schemes managed by Fund Managers of FIPF and FISCF Franklin India Flexi Cap Fund (FIFCF) Past performance may or may not be sustained in future. Load is not taken into consideration. Dividends assumed to be reinvested and Bonus is adjusted. Returns greater than 1 year period are compounded annualized. B: Benchmark, AB: Additional Benchmark. Please refer to website [http://www.franklintempletonindia.com/content-india/documents/PDF/Direct%20Plan%20Returns%20Jun2014.pdf] for details on performance of Direct Plans. FIFCF - Growth Option NAV as at Jun 30, 2014 (Rs.) 49.3706 Fund Manager R. Janakiraman / Roshi Jain, Anand Vasudevan NAV Per Unit (Rs.) FIFCF B: CNX 500 AB: CNX Nifty Discrete 12 months performance Jun 28, 2013 to Jun 30, 2014 (Last 1 year) 32.9366 49.90% 36.87% 30.28% Jun 29, 2012 to Jun 28, 2013 30.1038 9.41% 8.16% 10.67% Jun 30, 2011 to Jun 29, 2012 32.7142 -7.98% -7.79% -6.53% Compounded Annualised Growth Rate Performance Last 2 years (Jun 29, 2012 to Jun 30, 2014) 28.02% 21.64% 20.05% Last 3 years (Jun 30, 2011 to Jun 30, 2014) 14.69% 10.92% 10.45% Last 5 years (Jun 30, 2009 to Jun 30, 2014) 22.2975 17.22% 12.21% 12.14% Since inception till Jun 30, 2014 10 18.66% 13.95% 14.83% Current Value of Standard Investment of Rs 10000 Last 2 years 16400 14804 14418 Last 3 years 15091 13651 13478 Last 5 years 22142 17795 17738 Since inception (2.3.2005) 49371 33826 36361
  • 56. 55 Franklin India Opportunities Fund (FIOF) Past performance may or may not be sustained in future. Load is not taken into consideration. Dividends assumed to be reinvested and Bonus is adjusted. Returns greater than 1 year period are compounded annualized. B: Benchmark, AB: Additional Benchmark Please refer to website [http://www.franklintempletonindia.com/content-india/documents/PDF/Direct%20Plan%20Returns%20Jun2014.pdf] for details on performance of Direct Plans. Performance of other schemes managed by the Fund Managers of FIPF and FISCF FIOF - Growth Option NAV as at Jun 30, 2014 (Rs.) 43.4741 Fund Manager R. Janakiraman, Anil Prabhudas NAV Per Unit (Rs.) FIOF B: S&P BSE 200 # AB: CNX Nifty Discrete 12 months performance Jun 28, 2013 to Jun 30, 2014 (Last 1 year) 31.0630 39.95% 34.45% 30.28% Jun 29, 2012 to Jun 28, 2013 28.8213 7.78% 8.69% 10.67% Jun 30, 2011 to Jun 29, 2012 31.2132 -7.66% -7.63% -6.53% Compounded Annualised Growth Rate Performance Last 2 years (Jun 29, 2012 to Jun 30, 2014) 22.78% 20.85% 20.05% Last 3 years (Jun 30, 2011 to Jun 30, 2014) 11.67% 10.51% 10.45% Last 5 years (Jun 30, 2009 to Jun 30, 2014) 24.4161 12.22% 12.07% 12.14% Last 10 years (Jun 30, 2004 to Jun 30, 2014) 8.07 18.33% 17.45% 17.58% Since inception till Jun 30, 2014 10 10.77% -0.54% 10.76% Current Value of Standard Investment of Rs 10000 Last 2 years 15084 14613 14418 Last 3 years 13928 13498 13478 Last 5 years 17806 17681 17738 Last 10 years 53871 49991 50554 Since inception (21.2.2000) 43474 9246 43407 # Index adjusted for the period February 21, 2000 to March 10, 2004 with the performance of ET Mindex.
  • 57. 56 Franklin Asian Equities Fund(FAEF) Past performance may or may not be sustained in future. Load is not taken into consideration. Dividends assumed to be reinvested and Bonus is adjusted. Returns greater than 1 year period are compounded annualized. B: Benchmark, AB: Additional Benchmark. Please refer to website [http://www.franklintempletonindia.com/content-india/documents/PDF/Direct%20Plan%20Returns%20Jun2014.pdf] for details on performance of Direct Plans. Performance of other schemes managed by the Fund Managers of FIPF and FISCF FAEF - Growth Option NAV as at Jun 30, 2014 (Rs.) 15.3041 Fund Manager Roshi Jain NAV Per Unit (Rs.) FAEF B: MSCI Asia (ex Japan) Standard Index AB: CNX Nifty Discrete 12 months performance Jun 28, 2013 to Jun 30, 2014 (Last 1 year) 13.4403 13.87% 15.32% 30.28% Jun 29, 2012 to Jun 28, 2013 11.8279 13.63% 13.46% 10.67% Jun 30, 2011 to Jun 29, 2012 11.1221 6.35% 5.14% -6.53% Compounded Annualised Growth Rate Performance Last 2 years (Jun 29, 2012 to Jun 30, 2014) 13.73% 14.36% 20.05% Last 3 years (Jun 30, 2011 to Jun 30, 2014) 11.22% 11.21% 10.45% Last 5 years (Jun 30, 2009 to Jun 30, 2014) 8.8466 11.58% 13.52% 12.14% Since inception till Jun 30, 2014 10 6.81% 7.14% 3.93% Current Value of Standard Investment of Rs 10000 Last 2 years 12939 13084 14418 Last 3 years 13760 13757 13478 Last 5 years 17299 18861 17738 Since inception (16.1.2008) 15304 15615 12823
  • 58. 57 Franklin India High Growth Companies Fund (FIHGCF) Past performance may or may not be sustained in future. Load is not taken into consideration. Dividends assumed to be reinvested and Bonus is adjusted. Returns greater than 1 year period are compounded annualized. B: Benchmark, AB: Additional Benchmark Please refer to website [http://www.franklintempletonindia.com/content-india/documents/PDF/Direct%20Plan%20Returns%20Jun2014.pdf] for details on performance of Direct Plans. Performance of other schemes managed by the Fund Managers of FIPF and FISCF FIHGCF - Growth Option NAV as at Jun 30, 2014 (Rs.) 21.6903 Fund Manager Roshi Jain, R. Janakiraman NAV Per Unit (Rs.) FIHGCF B: CNX 500 AB: CNX Nifty Discrete 12 months performance Jun 28, 2013 to Jun 30, 2014 (Last 1 year) 13.8473 56.64% 36.87% 30.28% Jun 29, 2012 to Jun 28, 2013 11.9437 15.94% 8.16% 10.67% Jun 30, 2011 to Jun 29, 2012 12.8575 -7.11% -7.79% -6.53% Compounded Annualised Growth Rate Performance Last 2 years (Jun 29, 2012 to Jun 30, 2014) 34.71% 21.64% 20.05% Last 3 years (Jun 30, 2011 to Jun 30, 2014) 19.02% 10.92% 10.45% Last 5 years (Jun 30, 2009 to Jun 30, 2014) 8.7659 19.85% 12.21% 12.14% Since inception till Jun 30, 2014 10 11.81% 7.05% 7.47% Current Value of Standard Investment of Rs 10000 Last 2 years 18160 14804 14418 Last 3 years 16870 13651 13478 Last 5 years 24744 17795 17738 Since inception (26.7.2007) 21690 16041 16475
  • 59. 58 Franklin Build India Fund (FBIF) Past performance may or may not be sustained in future. Load is not taken into consideration. Dividends assumed to be reinvested and Bonus is adjusted. Returns greater than 1 year period are compounded annualized. B: Benchmark, AB: Additional Benchmark Please refer to website [http://www.franklintempletonindia.com/content-india/documents/PDF/Direct%20Plan%20Returns%20Jun2014.pdf] for details on performance of Direct Plans. Performance of other schemes managed by the Fund Managers of FIPF and FISCF FBIF - Growth Option NAV as at Jun 30, 2014 (Rs.) 20.7525 Fund Manager Anand Radhakrishnan, Roshi Jain NAV Per Unit (Rs.) FBIF B: CNX 500 AB: CNX Nifty Discrete 12 months performance Jun 28, 2013 to Jun 30, 2014 (Last 1 year) 12.6389 64.20% 36.87% 30.28% Jun 29, 2012 to Jun 28, 2013 11.2923 11.92% 8.16% 10.67% Jun 30, 2011 to Jun 29, 2012 11.5538 -2.26% -7.79% -6.53% Compounded Annualised Growth Rate Performance Last 2 years (Jun 29, 2012 to Jun 30, 2014) 35.51% 21.64% 20.05% Last 3 years (Jun 30, 2011 to Jun 30, 2014) 21.54% 10.92% 10.45% Since inception till Jun 30, 2014 10 16.35% 10.36% 10.61% Current Value of Standard Investment of Rs 10000 Last 2 years 18378 14804 14418 Last 3 years 17962 13651 13478 Since inception (4.9.2009) 20753 16088 16262
  • 60. 59 Franklin India Feeder US Opportunities Fund (FIF - FUSOF)* Past performance may or may not be sustained in future. Load is not taken into consideration. Dividends assumed to be reinvested and Bonus is adjusted. Returns greater than 1 year period are compounded annualized. B: Benchmark, AB: Additional Benchmark Please refer to website [http://www.franklintempletonindia.com/content-india/documents/PDF/Direct%20Plan%20Returns%20Jun2014.pdf] for details on performance of Direct Plans. *The name of the scheme FT India Feeder US Opportunities Fund (FTIF - FUSOF) stands changed to Franklin India Feeder - Franklin U.S. Opportunities Fund (FIF-FUSOF) with effect from June 30,2014. Performance of other schemes managed by the Fund Managers of FIPF and FISCF FIF-FUSOF - Growth Option NAV as at Jun 30, 2014 (Rs.) 17.5338 Fund Manager Roshi Jain NAV Per Unit (Rs.) FIF-FUSOF B: Russell 3000 Growth AB Discrete 12 months performance Jun 28, 2013 to Jun 30, 2014 (Last 1 year) 13.7500 27.52% 28.45%Not Applicable Jun 29, 2012 to Jun 28, 2013 11.1260 23.58% 25.49%Not Applicable Compounded Annualised Growth Rate Performance Last 2 years (Jun 29, 2012 to Jun 30, 2014) 25.50% 26.92%Not Applicable Since inception till Jun 30, 2014 10 26.63% 28.85%Not Applicable Current Value of Standard Investment of Rs 10000 Last 2 years 15759 16120 Not Applicable Since inception (13.2.2012) 17534 18271 Not Applicable
  • 61. 60 Performance of other schemes managed by the Fund Managers of FIPF and FISCF Franklin India Prima Plus (FIPP) Past performance may or may not be sustained in future. Load is not taken into consideration. Dividends assumed to be reinvested and Bonus is adjusted. Returns greater than 1 year period are compounded annualized. B: Benchmark, AB: Additional Benchmark Please refer to website [http://www.franklintempletonindia.com/content-india/documents/PDF/Direct%20Plan%20Returns%20Jun2014.pdf] for details on performance of Direct Plans. FIPP - Growth Option NAV as at Jun 30, 2014 (Rs.) 339.6662 Fund Manager Anand Radhakrishnan, R. Janakiraman NAV Per Unit (Rs.) FIPP B: CNX 500 AB: CNX Nifty Discrete 12 months performance Jun 28, 2013 to Jun 30, 2014 (Last 1 year) 240.9067 40.99% 36.87% 30.28% Jun 29, 2012 to Jun 28, 2013 217.1948 10.92% 8.16% 10.67% Jun 30, 2011 to Jun 29, 2012 223.3016 -2.73% -7.79% -6.53% Compounded Annualised Growth Rate Performance Last 2 years (Jun 29, 2012 to Jun 30, 2014) 25.02% 21.64% 20.05% Last 3 years (Jun 30, 2011 to Jun 30, 2014) 14.99% 10.92% 10.45% Last 5 years (Jun 30, 2009 to Jun 30, 2014) 154.557 17.05% 12.21% 12.14% Last 10 years (Jun 30, 2004 to Jun 30, 2014) 46.17 22.07% 17.33% 17.58% Last 15 years (Jun 30, 1999 to Jun 30, 2014) 14.29 23.50% 14.53% 13.17% Since inception till Jun 30, 2014 10 19.53% 9.18% 9.31% Current Value of Standard Investment of Rs 10000 Last 2 years 15639 14804 14418 Last 3 years 15211 13651 13478 Last 5 years 21977 17795 17738 Last 10 years 73569 49473 50554 Last 15 years 237695 76592 64085 Since inception (29.9.1994) 339666 56737 58038