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Templeton Floating Rate Income Fund Franklin Templeton

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Templeton Floating Rate Income Fund Franklin Templeton Powered By Docstoc
					                                                     KEY INFORMATION MEMORANDUM
                                                          & APPLICATION FORM


                                                        Templeton Floating
                                                        Rate Income Fund
                                                             An Open-end Income Scheme



                                                      Offer of Units at Par Value of
                                                     Rs. 10 Per Unit for cash during
                                                      the Initial Offer Period and at
                                                    NAV based prices upon re-opening


                                                     Initial Offer Opens on : January 21, 2002
                                                     Initial Offer Closes on : February 2, 2002

                                                     Scheme Re-opens on : February 18, 2002

                                                   This Memorandum sets forth concisely the information
                                                   about the Scheme that a prospective investor ought to
                                                   know before investing. The memorandum should be
                                                   retained for future reference. For further details, investors
                                                   should refer to the full Offer Document.

                                                   The Scheme particulars have been prepared in accordance
                                                   with Securities and Exchange Board of India (Mutual
                                                   Funds) Regulations 1996, as amended till date, and filed
                                                   with Securities and Exchange Board of India (SEBI). The
                                                   units being offered for public subscription have not been
                                                   approved or disapproved by SEBI, nor has SEBI certified
                                                   the accuracy or adequacy of this Abridged Offer Document.




                                                   Templeton Mutual Fund



        Contact Franklin Templeton Services at :
                service@templeton.com
                                                     Sponsor: Templeton International Inc., Florida, USA.

                       Visit us at :                           Asset Management Company :
             www.franklintempletonindia.com             Templeton Asset Management (India) Pvt. Ltd.




TEMPLETON FLOATING RATE INCOME FUND
                   Templeton Mutual Fund                                                                             RISK FACTORS
                 Sakhar Bhavan, 1st Floor, 230, Backbay Reclamation,
                          Nariman Point, Mumbai 400 021.                                   l    Mutual Funds and securities investments are subject to market and
                                                                                                other risks and there can be no assurance or guarantee that the
                                                                                                Scheme’s objectives will be achieved.
                                                                                           l    As with any investment in securities, the NAV of the units issued
                                                                                                under the Scheme can go up or down depending upon the factors
                                                                                                and forces affecting the capital markets.
             Templeton Floating Rate                                                       l    Past performance of the Sponsor/AMC/Mutual Fund does not
                                                                                                indicate the future performance of the schemes of the Mutual Fund.
                 Income Fund                                                               l    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.
                       An Open-end Income Scheme                                           l    Templeton Floating Rate Income Fund is the name of the
                                                                                                scheme and does not in any manner indicate either the quality of
                                                                                                the Scheme, its future prospects or returns.
                                                                                           l    Investors in the Scheme are not being offered any guaranteed /
                                                                                                assured returns.
                                    HIGHLIGHTS
                                                                                                    SCHEME SPECIFIC RISK FACTORS AND
         l   An open-ended income fund sponsored by the Franklin Templeton                              SPECIAL CONSIDERATIONS
             Group, one of the world’s largest investment management
             companies, which has over 50 years of experience in international             1.   Investing in the Scheme involves certain risks and considerations
             investment management and manages US$ 261.40 billion in                            generally associated with making investments in securities. There
             assets (approximately Rs. 12,54,720 crores) as on November 30,                     can be no assurance that the Scheme can achieve its objectives.
             2001.                                                                              The value of the Scheme’s investments may be affected generally
         l   The scheme is an open-ended income scheme whose primary                            by factors affecting capital markets, such as price and volume
             objective is to provide income consistent with the prudent risk from               volatility in the securities markets, interest rates, currency exchange
             a portfolio comprising substantially of floating rate debt instruments,            rates, foreign investment, changes in Government policies, taxation,
             fixed rate debt instruments swapped for floating rate return, and                  political, economic or other developments and closure of the stock
             also fixed rate instruments and money market instruments.                          exchanges. There is also risk of loss due to lack of adequate
                                                                                                external systems for transferring, pricing, accounting and safekeeping
         l   The scheme offers two plans: Short Term Plan and a Long Term                       or record keeping of securities. Transfer risk may arise due to the
             Plan. Both the plans offer dividend and growth options.                            process involved in registering the instruments (both physical &
                                                                                                demat) in the Scheme’s name, price risk may arise on account of
         l   The Scheme will offer for Sale and Redemption of Units at NAV                      non-availability of prices during the day and at the close of the day.
             based prices on every Business Day on an ongoing basis,
                                                                                                Consequently, the NAV of the Scheme may fluctuate, and the value
             commencing not later than 30 days from the closure of Initial Offer
                                                                                                of the Scheme’s Units may go down as well as up. Past performance
             Period. The redemption cheque will be despatched to the unit                       of mutual funds managed by the Franklin Templeton Group and its
             holders within the statutory time limit of 10 business days prescribed             affiliates is not necessarily indicative of future performance of the
             by SEBI. However, on a best effort basis the Fund will endeavour                   Scheme.
             to despatch the redemption cheque within 72 hours after a valid
             redemption request is received at the Registrar’s office at Hyderabad.        2.   The scheme may invest in derivative instruments like interest rate
                                                                                                swaps, options on interest rates, warrants, forward rate agreement
         l   The NAV of the Scheme will be calculated for all business days and                 or any such instruments, for the purpose of hedging and portfolio
             the full portfolio of investments will be disclosed half-yearly.                   balancing as permitted under the Regulations and guidelines, which
                                                                                                carries credit and market risks. Further, there could be an element
         l   Investors can avail of the following Tax Benefits under the Income
             Tax Act, 1961:                                                                     of settlement risk, which could be different from the risk in settling
                                                                                                physical instruments and there is a risk attached since the Indian
             l     Income from Units is fully exempt from Tax at the hands of                   market for derivative instruments is untried and untested.
                   the investors.                                                          3.   Risks of investing in floating rate debt instruments or fixed rate debt
             l     Units are not subject to Wealth Tax and Gift tax.                            instruments swapped for floating rate return:
                                                                                                l    Interest rate movement (Basis Risk): As the fund will invest
             l     Dividends tax-free in the hands of investors (the scheme will
                                                                                                     in floating rate instruments, these instruments’ coupon will be
                   pay a distribution tax, presently @ 10% plus surcharge)
                                                                                                     reset periodically in line with the benchmark index movement.
             l     No tax deduction at source on redemption irrespective of the                      Normally, the interest rate risk of a floating rate instrument
                   amount redeemed for resident investors.                                           compared to a fixed rate instrument is limited. The changes

                                                                                       2



TEMPLETON FLOATING RATE INCOME FUND
                   in the prevailing rates of interest will likely affect the value of            /redemption requests or other short-term obligations because of
                   the Scheme’s holdings until the next reset date and thus the                   the percentage of the Scheme’s assets segregated to cover its
                   value of the Schemes’ Units. Increased rates of interest,                      obligations.
                   which frequently accompany inflation and/or a growing                     6.   Subject to necessary approvals and within the Investment Objective
                   economy, are likely to have a negative effect on the value of                  of the Scheme, the Scheme may also invest in overseas financial
                   the Units. The value of securities held by the Scheme generally                assets subject to the approval of the concerned regulatory authorities.
                   will vary inversely with changes in prevailing interest rates.The              To the extent that the assets of the Scheme will be invested in
                   fund could be exposed to the interest rate risk (i) to the extent              securities denominated in foreign currencies, the Indian Rupee
                   of time gap in resetting of the benchmark rates, and (ii) to                   equivalent of the net assets, distributions and income may be
                   the extent the benchmark index fails to capture the interest                   adversely affected by changes in the value of certain foreign
                   rate movement.                                                                 currencies relative to the India Rupee. The repatriation of capital
              l    Spread Movement (Spread Risk): Though the basis (i.e.                          to India may also be hampered by changes in regulations concerning
                   benchmark) gets readjusted on a regular basis, the spread                      exchange controls or political circumstances as well as the application
                   (i.e. markup) over benchmark remains constant. This can                        to it of other restrictions on investments.
                   result in some volatility to the holding period return of floating        7.   Subject to the SEBI Regulations, the Mutual Fund may, if the
                   rate instruments                                                               Trustee permits, engage in Securities Lending. Securities Lending
              l    Settlement Risk (Counterparty Risk): The floating rate                         means the lending of security to another person or entity for a fixed
                   assets may also be created by swapping a fixed return to a                     period of time, at a negotiated compensation in order to enhance
                   floating rate return. In such a swap, there may be an additional               returns of the portfolio. The securities lent will be returned by the
                   risk of counterparty who will pay floating rate return and                     borrower on the expiry of the stipulated period.
                   receive fixed rate return.                                                     As with other modes of extensions of credit, there are risks inherent
                                                                                                  to securities lending, including the risk of failure of the other party,
              l    Liquidity Risk: Due to the evolving nature of the floating rate                in this case the approved intermediary, to comply with the terms
                   market, there may be an increased degree of liquidity risk in                  of the agreement entered into between the lender of securities i.e.
                   the portfolio from time to time.                                               the Scheme and the approved intermediary. Such failure can result
                   For details on swapping mechanism, please refer to the                         in the possible loss of rights to the collateral put up by the borrower
                   Section on “INVESTMENTS IN DERIVATIVE INSTRUMENTS”.                            of the securities, the inability of the approved intermediary to return
                                                                                                  the securities deposited by the lender and the possible loss of any
         4.   The Scheme proposes to invest primarily in floating rate debt                       corporate benefits accruing to the lender from the securities
              instruments or fixed rate debt instruments swapped for floating rate                deposited with the approved intermediary. The Mutual Fund may
              return. Trading volumes, settlement periods and transfer procedures                 not be able to sell such lent out securities and this can lead to
              may restrict the liquidity of these investments. The length of time                 temporary illiquidity.
              for settlement may affect the Scheme in the event the Scheme
              has to meet an inordinately large number of redemption requests.               8.   The risk associated with investment in debt securities are:
              In addition, the Trustee has the right, in its sole discretion, to limit            l    Interest Rate Risk: As with all the debt securities, changes
              redemptions under certain circumstances. See section on “Right                           in the interest rates may affect the Scheme’s Net Asset Value
              to limit redemptions”. The Scheme will retain certain investments                        as the prices of securities generally increase as interest rates
              in cash or cash equivalents for its day-to-day liquidity requirements.                   decline and generally decrease as interest rates rise. Prices
                                                                                                       of long term securities generally fluctuate more in response
         5.   The Scheme will use techniques like interest rate swaps, options                         to interest rate changes than do short-term securities. Indian
              on interest rates, warrants, forward rate agreement and other                            debt markets can be volatile leading to the possibility of price
              derivative instruments that may be permitted and / or that may
                                                                                                       movements up or down in fixed income securities and thereby
              become permissible under SEBI/RBI Regulations and / or Regulations
                                                                                                       possible movements in the NAV.
              and / or statutory modification or re-enactment thereof for efficient
              portfolio management and to attempt to hedge or reduce the risk                     l    Liquidity or Marketability Risk: This refers to the ease with
              of such fluctuation. However, these techniques and instruments,                          which a security can be sold at or near to its valuation yield-
              if imperfectly used have the risk of the Scheme incurring losses                         to-maturity (YTM). The primary measure of liquidity risk is the
              due to mismatches particularly in a volatile market. The Fund’s                          spread between the bid price and the offer price quoted by
              ability to use these techniques may be limited by market conditions,                     a dealer. Liquidity risk is today characteristic of the Indian fixed
              regulatory limits and tax considerations (if any). The use of these                      income market
              techniques is dependent on the ability to predict movements in the                  l    Credit Risk: Credit risk or default risk refers to the risk that
              prices of securities being hedged and movements in interest rates.                       an issuer of a fixed income security may default (i.e. will be
              There exists an imperfect correlation between the hedging                                unable to make timely principal and interest payments on the
              instruments and the securities or market sectors being hedged.                           security). Because of this risk corporate debentures are sold
              Besides, the fact that skills needed to use these instruments are                        at a yield above those offered on Government Securities which
              different from those needed to select the Fund’s / Scheme’s                              are sovereign obligations and free of credit risk. Normally the
              securities. There is a possible absence of a liquid market for any                       value of a fixed income security will fluctuate depending upon
              particular instrument at any particular time even though the futures                     the changes in the perceived level of credit risk as well as any
              and options may be bought and sold on an organized exchange.                             actual event of default. The greater the credit risk, the greater
              The use of these techniques involves possible impediments to                             the yield required for someone to be compensated for the
              effective portfolio management or the ability to meet repurchase                         increased risk.
                                                                                         3



TEMPLETON FLOATING RATE INCOME FUND
              l    Reinvestment Risk: This risk refers to the interest rate levels
                   at which cash flows received for the securities in the Scheme                              EXPENSES OF THE SCHEME
                   is reinvested. The additional risk from reinvestment is the
                   “interest on interest” component. The risk is that the rate at          1.    UNITHOLDER TRANSACTION EXPENSES OR
                   which interim cash flows can be reinvested may be lower than                  SALES / REDEMPTION LOAD
                   that originally assumed.                                                                                       During               Upon Reopening
                                                                                                                               Initial Offer             for ongoing
         9.   Prospective investors should review / study this Offer carefully                                                                          subscriptions
              and in its entirety and shall not construe the contents hereof
              or regard the summaries contained herein as advice relating                                              Short Term       Long Term     Short       Long Term
              to legal, taxation, or financial/ investment matters and are                                                Plan             Plan     Term Plan        Plan
              advised to consult their own professional advisor(s) as to the               i     Sales Load imposed       0%                   0%      0%            0%
              legal or any other requirements or restrictions relating to the                    on Purchases
              subscription, gifting, acquisition, holding, disposal (sale, transfer,
              switch or redemption or conversion into money) of Units and                  ii    Sales Load on            0%                   0%     0%             0%
              to the treatment of income (if any), capitalization, capital                       issue of units in
              gains, any distribution, and other tax consequences relevant                       lieu of dividends
              to their subscription, acquisition, holding, capitalization, disposal              (as % of NAV)
              (sale, transfer, switch or redemption or conversion into money)              iii   Contingent Deferred      NA                   NA      NA            NA
              of Units within their jurisdiction / of nationality, residence,                    Sales Load (‘CDSC’)
              domicile etc. or under the laws of any jurisdiction to which they                  (based on any
              or any managed Funds to be used to purchase/gift Units are                         period of holding)
              subject, and (also) to determine possible legal, tax, financial                    (as % of NAV)
              or other consequences of subscribing / gifting to, purchasing                iv    Redemption/              0%         Upto Rs. 10      0%        Upto Rs. 10
              or holding Units before making an application for Units.                           Repurchase Load                     lacs: 0.50%                lacs: 0.50%
         10. Neither this Offer Document nor the units have been registered                      (as % of amount                     if redeemed                if redeemed
             in any jurisdiction. The distribution of this Offer Document in                     redeemed)                           within                     within
             certain jurisdictions may be restricted or subject to registration                                                      6 months                   6 months
             requirements and, accordingly, persons who come into                                                                    Above Rs. 10               Above Rs. 10
             possession of this Offer Document in certain jurisdictions are                                                          lacs: 0.25%                lacs: 0.25%
             required to inform themselves about, and to observe, any such                                                           if redeemed                if redeemed
             restrictions. No person receiving a copy of this offer document                                                         within                     within
             or any accompanying application form in such jurisdiction may                                                           3 months                   3 months
             treat this Offer Document or such application form as constituting            v     Switchover/              0%         Upto Rs. 10      0%        Upto Rs. 10
             an invitation to them to subscribe for Units, nor should they                       Exchange Fee                        lacs: 0.50%                lacs: 0.50%
             in any event use any such application form, unless in the                           (as % of NAV)                       if redeemed                if redeemed
             relevant jurisdiction such an invitation could lawfully be made                     redeemed)                           within                     within
             to them and such application form could lawfully be used                                                                6 months                   6 months
             without compliance with any registration or other legal                                                                 Above Rs. 10               Above Rs. 10
             requirements.                                                                                                           lacs: 0.25%                lacs: 0.25%
                                                                                                                                     if redeemed                if redeemed
         No person has been authorized to give any information or to make any                                                        within                     within
         representations not confirmed in this Offer Document in connection with                                                     3 months                   3 months
         this Offer or the issue of Units, and any information or representations
         not contained herein must not be relied upon as having been authorized            The Trustee reserves the right to introduce/increase/decrease a Load/Fee
         by the Mutual Fund, the Investment Manager. Neither the delivery of this          for the items (i) to (v) above at any time in future on a prospective basis.
         Offer Document nor any sale made hereunder shall, under any                       However such increase/decrease/introduction would be subject to the
         circumstances, create any implication that the information contained              limits prescribed under the Regulations.
         herein is correct as of any time subsequent to the close of the Initial           As and when a sales load is introduced, the sales load collected on on-
         Offering Period.                                                                  going sales of units shall be retained in the Fund and maintained in a
                                                                                           separate account and would strictly and fully be utilised by the Investment
                                                                                           Manager in providing distribution related services to the Mutual Fund
                                  DUE DILIGENCE                                            relating to the sale, promotion, advertising and marketing of Units of the
                                                                                           Scheme, including payments to brokers/registrars for their services in
         Templeton Asset Management (India) Pvt. Ltd. has exercised due diligence          connection with the distribution of the Units.
         while preparing the Offer Document of the Scheme and has submitted
         a Due Diligence Certificate to Securities and Exchange Board of India             2.    INITIAL ISSUE EXPENSES
         on November 20, 2001 in the prescribed format. Investors may refer                a) Present Scheme
         to the full Offer Document for the contents of the Due Diligence                  All expenses relating to the initial offer of units under TFIF shall be borne
         Certificate.                                                                      by the AMC.


                                                                                       4



TEMPLETON FLOATING RATE INCOME FUND
         Details of estimated initial issue expenses for the scheme are as follows:       (Schemes launched during the last one fiscal year) are given below
          Nature of expenses                        (Rs. lakh)    % of estimated          (Rs. in Lakhs):
                                                                 target amount of          Nature of expenses                           FITF           TILP
                                                                    Rs. 1 crore
                                                                                           Brokerage fees & Commission                  0.12           0.00
          Brokerage fees & Commission                 1.50            1.50                 Marketing & Advertising                      3.33           0.00
          Marketing & Advertising                     0.10            0.10                 Registrar fees                               0.00           0.00
          Registrar fees                              0.10            0.10                 Printing & Distribution                      6.54           1.16
          Printing & Distribution                     0.10            0.10                 Banker’s fees                                0.00           0.00
          Banker’s fees                               0.50            0.50                 Other expenses                               2.40           0.00
          Other expenses                              0.50            0.50                None of the expenses in any of the schemes above, have exceeded 6%
                                                      2.80            2.80                of initial resources mobilised.
         All Initial Issue Expenses will be borne by the Investment Manager. As           c) Annual Scheme Recurring Expenses
         such for every Rs. 100/- contributed by the investor, whole of Rs. 100/-         The ongoing fees and expenses of operating the Scheme on an annual
         will be available to the scheme for investment.                                  basis, expressed as a percentage of the amount of the Scheme’s
                                                                                          average weekly net assets, are estimated to be as follows:
         b)   Past Schemes
              i.  Name of the Scheme: Templeton India Growth Fund                         Nature of fees and expenses                     % of Average Weekly
                  (TIGF)                                                                                                                       Net Assets
                  This scheme was launched in August 1996. All initial expenses                                                          Short Term Long Term
                  were borne by the Investment Manager.                                                                                     Plan       Plan
              ii.    Name of the Scheme : Templeton India Income Fund                     Investment Management & Advisory Fees             0.75         1.25
                     (TIIF)
                                                                                          Trustee Fees                                      0.01         0.01
                     This Scheme was launched in February 1997. All initial
                     expenses were borne by the Investment Manager.                       Custodian Fees                                    0.02         0.04
                                                                                          Registrar & Transfer Agents Charges &
              iii.   Name of the Scheme : Templeton India Liquid Fund (TILF)
                                                                                          Investor Communication                            0.05         0.10
                     This Scheme was launched in June 1998. All initial expenses
                     were borne by the Investment Manager.                                Broker / Dealer Remuneration                      0.25         0.40
                                                                                          Audit Fees                                        0.04         0.04
              iv.    Name of the Scheme: Templeton India Government
                     Securities Fund (TGSF)                                               Cost of Funds Transfer                            0.02         0.05
                     This Scheme was launched in June 1999. All initial expenses          Cost of providing a/c statements,
                     were borne by the Investment Manager.                                dividends, etc                                    0.03         0.03
              v.     Name of the Scheme: Templeton Monthly Income Plan                    Cost of Statutory Advertisements                  0.03         0.03
                     (TMIP)                                                               Other expenses                                    0.05         0.05
                     This Scheme was launched in January 2000. All initial expenses       Total Annual Recurring Expenses                   1.25         2.00
                     were borne by the Investment Manager.
              vi.    Name of the Scheme: Franklin India Growth Fund (FIGF)                The total annual recurring expenses for Short Term Plan and Long Term
                     This Scheme was launched in January 2000. All initial expenses       Plan is estimated at 1.25% and 2.00% respectively of the average
                     were borne by the Investment Manager.                                weekly net assets, and the total expenses of the Scheme including the
                                                                                          Management and advisory fees shall not exceed the limits prescribed
              vii. Name of the Scheme : Franklin India Index Fund (FIIF)                  under Regulation 52(6) of SEBI (Mutual Funds) Regulations, 1996.
                   This scheme was launched in June, 2000. All the initial                These estimates have been made in good faith as per the
                   expenses, in excess of the entry load, were borne by the               information available to the Investment Manager based on past
                   Investment Manager.                                                    experience and are subject to change inter-se and types of the
              viii. Name of the Scheme : Franklin India Balance Fund (FIBF)               expenses charged shall be as per the Regulations.
                    This Scheme was launched in June, 2000. All the initial               As per the Regulations, the total expenses of the respective Schemes
                    expenses, in excess of the entry load, were borne by the              excluding issue or redemption expenses, whether initially borne by the
                    Investment Manager.                                                   mutual fund or by the AMC, but including the investment management
              ix.    Name of the Scheme : Franklin India Index Tax Fund                   and advisory fee shall be subject to the following limits:
                     (FITF)                                                               l    On the first Rs. 100 crores of the average weekly net assets: 2.50%
                     This Scheme was launched in February 2001. All the initial           l    On the next Rs. 300 crores of the average weekly net assets:
                     expenses, were borne by the Investment Manager.                           2.25%
              x.     Name of the Scheme : Templeton India Liquid Plus (TILP)              l    On the next Rs. 300 crores of the average weekly net assets:
                     This Scheme was launched in April 2001. All the initial                   2.00%
                     expenses, were borne by the Investment Manager.                      l    On the balance of assets: 1.75%
         The details of initial issue expenses borne by AMC for FITF and TILP                  Provided that such recurring expenses shall be lesser by at least

                                                                                      5



TEMPLETON FLOATING RATE INCOME FUND
                 0.25% of the weekly average net assets outstanding in each                                    herein and charged to the scheme and is subject to the following
                 financial year in respect of a scheme investing in bonds. Ongoing                             limits:
                 fees and expenses incurred beyond the stipulated amounts, if any,                             l     On the first Rs. 100 crores of the weekly average net assets:
                 will be borne by the AMC.                                                                           1.25%
                 In accordance with the Regulations, the investment management                                 l     On the balance of the net assets: 1.00%
                 and advisory fee is included within the ongoing expenses stated                          The ongoing fees and expenses of the schemes are charged daily.

                                                                          CONDENSED FINANCIAL INFORMATION
         a)      Historical Per Unit Statistics
                                               TIGF                TIIF          TILF          TGSF                FIGF             TMIP                FIIF               FIBF               FITF
             Date of Allotment             10-Sep-1996      05-Mar-1997      17-Jun-1998*   21-Jun-1999      7-Feb-2000       7-Feb-2000            4-Aug-2000          4-Aug-2000         26-Feb-2001
             Financial Year                1-Apr-2000 to   1-Apr-2000 to 1-Apr-2000 to 1-Apr-2000 to 1-Apr-2000 to 1-Apr-2000 to 26-Jun-2000 to 26-Jun-2000 to 26-Feb-2001 to
                                           31-Mar-2001     31-Mar-2001 31-Mar-2001 31-Mar-2001 31-Mar-2001 31-Mar-2001 31-Mar-2001               31-Mar-2001     31-Mar-2001
                                               (Rs.)           (Rs.)         (Rs.)         (Rs.)         (Rs.)         (Rs.)          (Rs.)          (Rs.)           (Rs.)
             NAV at the beginning             15.45          15.03 (GP)     11.8417 (GP)    11.369 (GP)            9.25       10.10 (GP)               9.84             9.74 (GP)             10.00
             of the year                                     10.53 (DP)     10.0022 (DP)    10.326 (DP)                       10.04 (MP)                                9.74 (DP)
                                                                                                                              10.10 (QP)
                                                                                                                              10.09 (HP)
             Dividends                        1.45              0.83           0.6851          0.925                Nil          2.05                   Nil                Nil                 Nil
             NAV at the end of                11.34          16.73 (GP)     13.0144 (GP)    13.123 (GP)            4.93       10.84 (GP)               8.63             8.38 (GP)             8.78
             the year                                        10.69 (DP)     10.0143 (DP)    10.712 (DP)                       10.18 (MP)                                8.23 (DP)
                                                                                                                              10.21 (QP)
                                                                                                                              10.03 (HP)
             Annualised Returns from          5.28%         12.90% (GP)      9.91% (GP)     16.52% (GP)       (46.07%)        7.30% (GP)              (13.70%)        (16.20%) (GP)         (12.20%)
             the date of allotment @                        12.43% (DP)      7.29% (DP)     14.11% (DP)                       8.36% (MP)                              (17.70%) (DP)
                                                                                                                              8.25% (QP)
                                                                                                                              5.11% (HP)
             Benchmark Returns @              1.06%                  –            –            15.13%         (42.46%)             –                  (12.92%)              –               (13.04%)
                                            BSE Sensex                                       I-SEC Bond       BSE 100                                   Nifty                                 Nifty
                                                                                                 Index
             Net Asset at the                 130.40             1535.59       302.13           248.00          23.31               155.11             19.24              11.19               1.30
             end of the period (Rs. cr.)
         * TILF (DP) was launched on April 7, 2000.
         b)      Half-yearly Audited Financial Results for the period ended September 30, 2001
                                                TIGF              FIGF         FIIF           FITF          FIBF             TIIF            TMIP              TGSF               TILF       TILP   #


             NAV at the beginning              11.34              4.93         8.63          8.78         8.38(GP)             10.84 (GP)
                                                                                                                          16.73 (GP)                      13.123 (GP)      13.0144 (GP)     10.0033
             of the Half year                                                                             8.23 (DP)            10.18 (MP)
                                                                                                                          10.69 (DP)                      10.712 (DP)      10.0143 (DP)
                                                                                                                               10.21 (QP)
                                                                                                                               10.03 (HP)
             Dividends                           Nil               Nil          Nil            Nil         Nil        0.525       1.17                       0.575            0.3643        0.0000
             NAV at the                         9.74              4.06         6.97           7.12     7.91 (GP)    17.94 (GP) 11.36 (GP)                 14.595 (GP)      13.5443 (GP)     10.3317
             end of the Half year                                                                      7.62 (DP)    10.93 (DP) 10.27 (MP)                 11.192 (DP)         10.0000
                                                                                                                               10.35 (QP)                                   (DP- Ex Div)
                                                                                                                               10.19 (HP)
             Annualised Returns from           1.66%             (42.26%)    (26.93%)       (28.80%) (18.43%) (GP) 13.63% (GP) 8.02% (GP)                 18.06% (GP)      9.66% (GP)        7.56%
             the date of allotment @                                                                 (21.04%) (DP) 13.22% (DP) 9.72% (MP)                 15.62% (DP)      7.28 % (DP)
                                                                                                                               9.39% (QP)
                                                                                                                               6.10% (HP)
             Benchmark Returns @               (3.89%)       (41.69%)        (27.28%)       (30.79%)        –           –           –                        16.70%                –           –
                                             BSE Sensex     BSE Sensex         Nifty          Nifty                                                        I-SEC Bond
                                                                                                                                                              Index
             Net Asset at the end of the       111.07             18.94       25.29          1.38          10.04           1853.08           169.20          459.41             751.80      124.52
             period (Rs crores)
         #
               The date of allotment of TILP is April 23, 2001

                                                                                                      6



TEMPLETON FLOATING RATE INCOME FUND
         c)    NAV and Returns as on November 30, 2001
                                            TIGF            FIGF            FIIF           FITF             FIBF            TIIF        TMIP         TGSF           TILF            TILP
           Net Asset Value as on            11.74           4.86           8.12            8.28         9.01 (GP)        18.78 (GP)   11.83 (GP) 16.130 (GP) 13.7132 (GP)       10.4573 (GP)
           November 30, 2001                                                                            8.63 (DP)        11.44 (DP)   10.49 (MP) 12.385 (DP) 10.0094 (DP)       10.0000 (DP)
                                                                                                                                      10.76 (QP)
                                                                                                                                      10.71 (HP)
           Annualised Returns from          5.31%         (32.86%)       (14.59%)        (17.20%)     (7.59%) (GP)        14.22(GP) 9.72% (GP) 21.61% (GP) 9.56%(GP)             7.59% (GP)
           the date of allotment till                                                                (10.56%) (DP)        13.80(DP) 10.99% (MP) 19.33% (DP) 7.17%(DP)            4.24% (DP)
           November 30, 2001@                                                                                                       10.83% (QP)
                                                                                                                                     8.45% (HP)
           Net Asset as on November        139.91           24.90          33.24           1.80             11.21         1,937.10     174.80       624.83        699.53           128.05
           30, 2001 (Rs in crores)
         GP-Growth Plan, DP-Dividend Plan, MP-Monthly Dividend Plan, QP-Quarterly Dividend Plan, HP-Half-Yearly Dividend Plan;
         TILP was launched on April 23, 2001. The date of allotment of TILP (DP) is November 8, 2001.
         @ Returns for periods less than one year have been given in absolute terms without annualising the same. Returns for periods greater than one year are on compounded annualised basis.
         For all dividend plans : Returns for schemes/plans with dividend distribution are computed assuming re-investment of all payouts at ex-dividend NAV.
         TILP returns are calculated by simple annualisation of yields.

         d) Borrowings of the Fund
         As of March 31, 2001 the Fund did not have any borrowings other RBI
                                                                                                                    THE TRUSTEE COMPANY (THE TRUSTEE)
         refinance facility (less than 20% of NAV) against government securities
                                                                                                        Templeton Trust Services Private Limited is a company incorporated with
         under Templeton India Government Securities Fund (TGSF).
                                                                                                        limited liability under the Companies Act, 1956. The Registered Office
                                                                                                        of the Trustee is situated at 1st Floor, Sakhar Bhavan, Nariman Point,
                      THE FRANKLIN TEMPLETON GROUP                                                      Mumbai 400 021. Following are the details of the Directors of the
                                                                                                        Trustee Company :-
         The Franklin Templeton Group is one of the world’s largest Investment
                                                                                                        l          Samuel J. Forester, Jr.*, Chairman
         Management Companies with US $261.4 billion as at November 30,
         2001 (Rs. 12,54,720 crores approximately) in assets under management                                      Templeton Worldwide, Inc., 500 East Broward Boulevard, Suite
         as on including nearly 225 Open End Mutual Funds, Separately Managed                                      2100, Fort Lauderdale, FL - 33394, U.S.A.
         Accounts and other investment vehicles. The Franklin Templeton Group
                                                                                                                   Other Directorships: Templeton Research and Management
         has over 50 years of experience in International Investment Management.
                                                                                                                   Venezuela CA, Templeton Funds Trust Company, Closed Joint Stock
         The Group has over 40 offices worldwide.
                                                                                                                   Company Templeton

                   CONSTITUTION OF THE MUTUAL FUND                                                      l          Gregory E. McGowan*, Executive Vice President, Director and
                                                                                                                   General Counsel for International Development of Templeton
         THE FUND                                                                                                  Worldwide, Inc.
         Templeton Mutual Fund (the “Mutual Fund”) has been constituted as                                         500 East Broward Boulevard, Suite 2100, Fort Lauderdale,
         a trust under the Indian Trusts Act, 1882 and registered with SEBI                                        FL - 33394, U.S.A.
         bearing registration no. MF/026/96/8 dated February 19,1996.
                                                                                                                   Other Directorships: Templeton Investment Holdings (Cyprus) Ltd,
         THE SPONSOR                                                                                               Franklin Templeton Holding Limited, Templeton/Franklin Investment
         The sponsor of Templeton Mutual Fund is Templeton International, Inc.                                     Services (Asia) Ltd., Templeton Investment Management (Australia)
         Templeton International Inc., is a wholly owned subsidiary of Templeton                                   Ltd., Templeton Nat’l Bank of Greece Mngmt (Lux) S.A., Templeton
         Worldwide Inc., which in turn is a wholly owned subsidiary of Franklin                                    Investment Management (HK) Ltd., Templeton Worldwide Inc.,
         Resources Inc.                                                                                            Templeton International Inc, T.G.H. Holdings Ltd., Templeton Global
         The Sponsor was responsible for setting up and establishing the Templeton                                 Strategic Services, S.A., Templeton/Franklin Investment Services S
         Mutual Fund. The Sponsor is the Settler of the Mutual Fund Trust. The                                     A, Templeton Quantitative Advisors Inc., The DAIS Group, Inc,
         Sponsor has entrusted a sum of Rs. 1 lakh to the Trustee as the initial                                   Templeton Global Bond Managers, Inc., Templeton Management
         contribution towards the corpus of the Mutual Fund. The sponsor has                                       (Lux) S A, Templeton Financial Advisory Services S A
         delegated the trustee functions to the Trustee and the Investment                              l          Anand J. Vashi, Chartered Accountant
         Management functions to The Investment Manager. The Sponsor is
         represented by the Directors on the Boards of the Trustee and the                                         D-J, Mehta Estate, 262 Thakurdwar, Mumbai 400 002.
         Investment Manager in accordance with the Regulations. The Sponsor                                        Other Directorships: The Acme Mfg. Co Ltd., A.J. Patel Investment
         shall be responsible for discharging its functions and responsibilities                                   & Trading Co. Pvt Ltd., Millars Mach Co. Pvt. Ltd., Lucid Technologies
         towards the Fund in accordance with Regulations and the various                                           Pvt. Ltd., Lucid International Pvt. Ltd., Pedershaab Acme India Pvt.
         constitutive documents of the Fund.                                                                       Ltd.

                                                                                                    7



TEMPLETON FLOATING RATE INCOME FUND
         l    Percy Jal Pardiwalla, Advocate                                                 Trustee shall exercise due diligence as under :
              16, Vishnu Mahal, ‘D’ Road, Churchgate, Mumbai 400 020.                        A.   General Due Diligence:
         l    Bharat Doshi, Company Executive                                                     i.     The Trustee shall be discerning in the appointment of the
                                                                                                         directors on the Board of the asset management company.
              8, St. Helen’s Court, Dr. Gopalrao Deshmukh Marg, Mumbai 400 026
                                                                                                  ii.    Trustee shall review the desirability of continuance of the asset
              Other Directorship: Mahindra Intertrade Limited, Mahindra &                                management company if substantial irregularities are observed
              Mahindra Financial Services Limited, Mahindra Steel Service Centre                         in any of the schemes and shall not allow the asset
              Limited, Mahindra & Mahindra Limited, Mahindra Information                                 management company to float new scheme.
              Technology Services Limited, Mahindra Consulting Limited, Mahindra
              Holdings & Finance Limited, Ford Credit Kotak Mahindra Limited,                     iii.   The trustee shall ensure that the trust property is properly
              Ford India Limited, Mahindra British Telecom Limited, Indian                               protected, held and administered by proper persons and by
              Opportunities Fund Limited, Indian Oppurtunities Fund (Mauritius)                          proper number of such persons.
              Limited, NSE.IT Limited, Mahindra InfoTech Inc., Godrej Consumer                    iv.    The trustee shall ensure that all service providers are holding
              Products Ltd.                                                                              appropriate registrations from the Board of concerned regulatory
         *    These Directors represent sponsors of the Trustee Company and                              authority.
              are associates of the sponsor.                                                      v.     The Trustee shall arrange for test checks of service contracts.
         SUMMARY OF THE SUBSTANTIAL PROVIONS OF THE                                               vi.    Trustee shall immediately report to Board of any special
         TRUST DEED                                                                                      developments in the Mutual Fund.
         a)   The Trustee shall ensure before the launch of any scheme that the              B.   Specific Due Diligence :
              asset management company has:-
                                                                                                  i.     obtain internal audit reports at regular intervals from
              i)     systems in place for its back office, dealing room and                              independent auditors appointed by the Trustee.
                     accounting,
                                                                                                  ii.    obtain compliance certificates at regular intervals from the
              ii)    appointed all key personnel including fund manager(s) for the                       asset management company
                     scheme(s) and submitted their biodata, which shall contain
                     the educational qualifications, past experience in the securities            iii.   hold meeting of Trustee more frequently
                     market, to the Trustee, within fifteen days of their appointment,            iv.    consider the reports of the independent auditor and compliance
              iii)   appointed auditors to audit the accounts,                                           reports of asset management company at the meetings of
                                                                                                         Trustee for appropriate action.
              iv)    appointed a compliance officer to comply with regulatory
                     requirement and to redress investor grievances,                              v.     maintain records of the decisions of the Trustee at their
                                                                                                         meetings and of the minutes of the meetings.
              v)     appointed registrars and laid down parameters for their
                     supervision,                                                                 vi.    prescribe and adhere to a code of ethics by the Trustee, asset
                                                                                                         management company and its personnel
              vi)    prepared a compliance manual and designed internal control
                     mechanisms including internal audit systems,                                 vii.   communicate in writing to the asset management company
                                                                                                         of the deficiencies and checking on the rectification of
              vii)   specified norms for empanelment of brokers and marketing
                                                                                                         deficiencies.
                     agents.
         b)   In accordance with Regulation 18(15A) of SEBI Regulations, the                 The Trustee shall not be held liable for acts done in good faith if they
              trustees shall ensure that no change in the fundamental attributes             have exercised adequate due diligence honestly.
              of any scheme or the trust or fees and expenses payable or any                 The independent directors of the Trustee or asset management company
              other change which would modify the scheme and affects the                     shall pay specific attention to the following, as may be applicable,
              interest of unit holders, shall be carried out unless, -                       namely :
              i)     a written communication about the proposed change is sent                    i.     the Investment Management Agreement and the compensation
                     to each unitholder and an advertisement is given in one                             paid under the agreement.
                     English daily newspaper having nationwide circulation as well                ii.    service contracts with affiliates – whether the asset
                     as a newspaper published in the language of the region where                        management company has charged higher fees than outside
                     the head office of the mutual fund is situated; and                                 contractors for the same services
              ii)    the unitholders are given an option to exit at the prevailing                iii.   selection of the asset management company’s independent
                     Net Asset Value without any exit load.                                              directors
         c)   The Trustee shall ensure that the AMC has not given any undue
                                                                                                  iv.    securities transactions involving affiliates to the extent such
              or unfair advantage to any associates or dealt with any of the
                                                                                                         transactions are permitted.
              associates of the AMC in any manner detrimental to the interest
              of unitholders.                                                                     v.     selecting and nominating individuals to fill independent directors
                                                                                                         vacancies.
         d)   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                   vi.    code of ethics must be designed to prevent fraudulent,
              for the benefit of the unitholders in accordance with SEBI Regulations                     deceptive or manipulative practices by insiders in connection
              and the provisions of the trust deed.                                                      with personal securities transactions.

                                                                                         8



TEMPLETON FLOATING RATE INCOME FUND
              vii.   the reasonableness of fees paid to sponsors, asset                                                                       Allocation as %      Risk
                     management company and any others for services provided                           Type of Security                           of Corpus       Profile
              viii. principal underwriting contracts and their renewals
                                                                                                                                             Minimum Maximum
              ix.    any service contract with the associates of the asset
                     management company.                                                               than 1 year, Repos/Reverse
                                                                                                       Repos or any other instrument
                                                                                                       permitted by RBI/SEBI)
                                      THE SCHEME
                                                                                                   l   Non-Money market instruments
         FUNDAMENTAL ATTRIBUTES                                                                        (including bonds & debentures
                                                                                                       issued by corporates or PSUs,
         The following aspects of Templeton Floating Rate Income Fund are the
                                                                                                       gilts, securitised debt, fixed
         Fundamental Attributes of the Scheme:
                                                                                                       deposits or any other instrument
         1) Type of the Scheme                                                                         permitted by RBI/SEBI)
         Open-ended Income Scheme offering two Plans: Short Term Plan and
         Long Term Plan with Dividend and Growth options.                                          Floating Rate debt instruments*:           65%       100%     Low to
         2) Investment Objective                                                                   l  Money market instruments                                   Medium
                                                                                                      (Money at call, mibor linked
         The Primary Objective of the Scheme is to provide income consistent
                                                                                                      debentures, floating rate CPs,
         with the prudent risk from a portfolio comprising substantially of floating
                                                                                                      CDs, floating rate bonds < 182
         rate debt instruments, fixed rate debt instruments swapped for floating
                                                                                                      days or any other instrument
         rate returns, and also fixed rate instruments and money market
                                                                                                      permitted by RBI/SEBI)
         instruments.
         However, there can be no assurance that the investment objective of                       l   Non-Money market instruments
         the scheme will be realised.                                                                  (including floating rate bonds &
                                                                                                       debentures issued by corporates
         3) Investment Pattern                                                                         or PSUs, floating rate gilts, fixed
         The Primary Objective of the Scheme is to provide income consistent                           rate debentures/bonds with swap
         with the prudent risk from a portfolio comprising substantially of floating                   or any other instrument
         rate debt instruments, fixed rate debt instruments swapped for floating                       permitted by RBI/SEBI)
         rate returns, and also fixed rate instruments and money market
         instruments. To achieve this objective, the scheme shall substantially                *       Floating rate debt instruments include fixed rate instruments swapped
         invest, inter-alia, in                                                                        for floating rate returns.
         Floating Rate Debt Instruments                                                        Under normal circumstances, at least 65% of the total portfolio will be
         l     Short Term / Money Market instruments such as money at call,                    invested in floating rate debt instruments.
               mibor linked debt instruments, floating rate Commercial Papers                  It is the intention of the Fund that the investments in securitised debts
               (CPs), Certificate of Deposits (CDs), floating rate bonds less than             will not, normally, exceed 35% of the Net Assets of the scheme.
               182 days to maturity and
                                                                                               The portfolio of the Short Term Plan will normally be skewed towards short
         l     Long term debt instruments such as floating rate bonds & debentures             term maturities and the portfolio of the Long Term Plan will be normally
               issued by corporates or PSUs, floating rate gilts, fixed rate debentures/       skewed towards longer term maturities.
               bonds with swap or any other instrument permitted by RBI/SEBI
                                                                                               The above allocation pattern would be applicable under normal
         Fixed Rate Debt Instruments
                                                                                               circumstances and generally the allocation would not be allowed to raise
         l     Short Term / Money Market instruments such as money at call,                    beyond these levels unless the markets are extremely turbulent and there
               Commercial Paper (CP), Certificate of Deposits (CD) of commercial               is a need to protect the unitholders’ interest by reallocating the portfolio.
               banks of development financial institutions, treasury bills,                    In other words, the scheme would be maintaining the above ratios
               governments securities less than 1 year, Repo/Reverse Repos or                  diligently which the investor can assume would be the steady state
               any other instruments permitted by RBI/SEBI and                                 allocation strategy.
         l     Bonds and debentures issued by corporates or PSUs, Government
               securities, securitised debt, fixed deposits or any other instruments           CHANGE IN THE INVESTMENT PATTERN
               permitted by RBI/SEBI                                                           Subject to the Regulations, the asset allocation pattern indicated above
                                                                                               may change from time to time, keeping in view market conditions,
         Under normal circumstances, it is anticipated that the asset allocation
                                                                                               availability of investment options, market opportunities, applicable
         shall be as follows:
                                                                                               regulations and political and economic factors. It must be clearly
                                                        Allocation as %       Risk             understood that the percentages stated above are only indicative and
              Type of Security                              of Corpus        Profile           not absolute and that they can vary substantially depending upon the
                                                                                               perception of the Investment Manager, the intention being at all times
                                                      Minimum Maximum
                                                                                               to seek to protect the interests of the Unitholders. Such changes in the
          Fixed Rate debt instruments:                   0%        35%      Low to             Investment pattern will be for short term and defensive considerations.
          l  Money market instruments                                       Medium             The Fund will seek approval of the Unitholders of the Scheme in
             (including money at call, CPs,                                                    accordance with the Regulations, if there is any change in the fundamental
             CDs, treasury bills, gilts less                                                   attributes pursuant to change in investment pattern.

                                                                                           9



TEMPLETON FLOATING RATE INCOME FUND
         It is clarified that this scheme is not a money market mutual fund                  l    The redemption request should be for a minimum of Re.1/- (Rupee
         scheme.                                                                                  One only)
         OVERVIEW OF DEBT MARKETS                                                            l    The units will be redeemed at the “Applicable NAV for redemptions”
         The major players in the Indian debt markets today are banks, financial             “Applicable NAV for Redemptions” for the Short Term Plan is the NAV
         institutions, insurance companies and mutual funds. The instruments in              of the day prior to immediately following business day from the business
         the market can be broadly categorised as those issued by corporates,                day on which the application for redemption is accepted.
         banks, financial institutions and those issued by state/central governments.
         The risks associated with any investments are – credit risk, interest rate          “Applicable NAV for Redemptions” for the Long Term Plan is the NAV at
         risk and liquidity risk. While corporate papers carry credit risk due to            the close of business day on which the application for redemption is
         changing business conditions, government securities are perceived to                accepted.
         have zero credit risk. Interest rate risk is present in all debt securities         The date of receipt of a redemption request will be the actual Business
         and depends on a variety of macroeconomic factors. The liquidity risk               Day of either the mail receipt at an Investor Service Centre of a
         in corporate securities market is higher compared to those of government            redemption request, or of actual receipt of an in-person redemption
         securities. Liquidity in the corporate debt market has been improving due           request within any prescribed time, on such business day. Also refer to
         to the entry of more players and due to various measures taken by the               Section on “How to Redeem Units of the Scheme”.
         regulators in this direction over a period of time. SEBI’s directive of a
                                                                                             Any redemption request after prescribed time on such Business Day will
         compulsory rating by a rating agency for any public issuance over 18
                                                                                             be deemed to be received as of the next Business Day.
         months is a case in point. In times to come, dematerialisation, entry
         of private insurance companies and growth of fixed income mutual funds              (Please note that the Trustee has a right to introduce/change an entry/
         are expected to enhance liquidity in corporate debt market. The fiscal              exit load or a combination of both at any point of time. The Trustee also
         budget 2001-2002 has announced setting up of clearing corporation,                  reserves its right to limit the redemptions as laid down under the section
         real time gross settlement and electronic clearing system for government            ‘Right to Limit Redemptions’.)
         securities. This will considerably enhance the depth and width of Indian            b. Listing
         debt markets and bring it at par with developed markets. The RBI in its             Being an open-ended scheme the units of the scheme will not be listed
         credit policy for the second half of financial year 2001-2002 has laid              at any stock exchange.
         down the time frame for Negotiated Dealing System and clearing
         corporation.                                                                        c.   Fees and Expenses
                                                                                                  l   Initial Expenses: The initial issue expenses will be borne by
         The following table attempts to give a broad overview of the available
                                                                                                      the Investment Manager.
         instruments in the financial markets and their risk – return profile. The
         data is based on the market conditions as on the date of the offer                       l     Annual Recurring Expenses: The on-going fees and expenses
         document and may vary substantially depending upon the factors and                             for operating the Scheme on an annual basis are estimated
         forces affecting the securities market including the fluctuations in the                       at 1.25% p.a. and 2.00% p.a. of weekly average net assets
         interest rates.                                                                                of the Scheme, for the Short Term Plan and the Long Term
                                                                                                        Plan respectively.
          Security                   Liquidity     Risk          Indicative
                                                                 returns (p.a.)              These limits are within the limits specified by the SEBI Regulations. Any
                                                                                             expenditure in excess of the limits specified by the SEBI Regulations shall
          GOI Securities             High          Low           6.75% - 9.00%               be borne by the AMC and /or by the sponsors and/or Trust.
          Call Money                 High          Low           6.25% - 7.25%               PORTFOLIO TURNOVER
          Bank/FI Bonds,                                                                     Portfolio turnover in the schemes will be a function of market opportunities.
          Certificate of Deposits,                                                           The economic environment changes on a continuous basis and exposes
          Commercial Papers,                                                                 debt portfolio to systematic as well as non-systematic risk. The Scheme
          Fixed Deposits             Medium-High Low-Medium 7.00% - 8.50%                    is an open-ended scheme. It is expected that there would be a number
                                                                                             of subscriptions and repurchase on a daily basis. Consequently, it is
          PSU Bonds                  Medium- High Medium         8.00% - 10.50%              difficult to estimate with any reasonable measure of accuracy, the likely
          Corporate Debts            Low-Medium    Medium        8.00% - 10.50%              turnover in the portfolio. The Investment Manager will endeavour to
                                                                                             optimise portfolio turnover to optimise risk adjusted return keeping in
          Securitised Debts          Low           Medium        8.25% - 11.00%              mind the cost associated with it. A high portfolio turnover rate is not
          MIBOR linked                                                                       necessarily a drag on portfolio performance and may be representative
          instruments                High          Medium        6.75% - 7.75%               of arbitrage opportunities that exist for scrips/securities held in the
                                                                                             portfolio rather than an indication of a change in AMC’s view on a scrip,
          Derivatives                Low-Medium    Medium-High NA                            etc.

         4) Terms of the issue                                                               SUBSCRIPTIONS
         a. Liquidity                                                                        The Scheme opens for subscription on January 21, 2002 and closes
         Subsequent to the closure of the Initial Offer Period, the scheme will              for subscription on February 2, 2002. The Scheme re-opens on February
         open for continuous purchase and redemption with effect from February               18, 2002 and is perpetually open thereafter with announcements of NAV
         18, 2002. However, the AMC reserves the right to extend the reopening               for every Business Day.
         date but not later than 30 days from the closure of the Initial Offer Period        The Trustee has a right to extend the Closing Date subject to the
         of the Scheme.                                                                      condition that the Scheme shall not be kept open for more than 30 days.

                                                                                        10



TEMPLETON FLOATING RATE INCOME FUND
         The allotment for Subscriptions during the initial offer period will be made              limit shall not be applicable to investments in government securities
         at Rs. 10.00 per unit, without any entry load. For on-going subscriptions,                and money market instruments.
         units will be offered to investors at Public Offering Price.                          3. The Scheme shall not invest more than 10% of its NAV in unrated
         MINIMUM SUBSCRIPTION                                                                      debt instruments issued by a single issuer and the total investment
                                                                                                   in such instruments shall not exceed 25% of the NAV of the
         The Fund has targeted a minimum amount of Rs.1 crore which shall be
                                                                                                   scheme. All such investments shall be made with prior approval
         raised during the initial public offering. In the event the aforesaid target
                                                                                                   of the Board of Trustee and Investment Manager or the committee
         amount is not collected within the aforesaid time period, the amount
                                                                                                   constituted by the Boards of Trustee Company and of the Investment
         collected shall be refunded to the investors, as described under the
                                                                                                   Manager for approval of such instruments
         section “Issuance of Units/Allotment/Refund”.
                                                                                               4. The Mutual Fund under all its Schemes taken together will not own
                                                                                                   more than 10% of any Company’s paid up capital carrying voting
                  CHANGE IN FUNDAMENTAL ATTRIBUTES                                                 rights.
                                                                                               5. Transfer of investments from one Scheme to another Scheme in
         In accordance with Regulation 18 (15A) of the SEBI Regulations, the
                                                                                                   the Mutual Fund shall be allowed only if:
         trustees shall ensure that no change in the fundamental attributes of
         any scheme or the trust or fees and expenses payable or any other                         a) such transfers are done at the prevailing market price for
         change which would modify the scheme and affects the interest of                                 quoted instruments on spot basis;
         unitholders, shall be carried out unless, -                                               b) the securities so transferred shall be in conformity with the
         i.     a written communication about the proposed change is sent to                              investment objective of the Scheme to which such transfer
                each unitholder and an advertisement is given in one English daily                        has been made, the registration and accounting of the
                newspaper having nationwide circulation as well as in a newspaper                         transactions is completed and is ratified in the next meeting
                published in the language of the region where the Head Office of                          of the Board of the Trustee, if the regulations so require.
                the mutual fund is situated; and                                               6. The scheme may invest in another scheme under the same asset
                                                                                                   management company or any other Mutual Fund without charging
         ii.    the unitholders are given an option to exit at the prevailing Net Asset
                                                                                                   any fees, provided that aggregate interscheme investment made
                Value without any exit load.”
                                                                                                   by all the schemes under the same management or in schemes
         Explanation: In terms of SEBI Regulations and circular dated February                     under the management of any other asset management company
         4, 1998, “Fundamental Attributes” means and includes the following:                       shall not exceed 5% of the net asset value of the mutual fund.
         i.     Type of a Scheme                                                               7. The Mutual Fund shall get the securities purchased transferred in
         l      Open ended-Close ended-Interval Scheme                                             the name of the Fund on account of the Scheme, wherever
         l      Sectoral Fund-Equity Fund-Balance Fund-Income Fund-Index Fund-                     investments are intended to be of a long-term nature.
                Any other type of Fund.                                                        8. Pending deployment of funds of a scheme in securities in terms
         ii.    Investment Objective                                                               of investment objectives of the Scheme, the AMC can invest the
         l      Main Objective - Growth-Income-Both                                                funds of the scheme in short term deposits of scheduled commercial
                                                                                                   banks or in call deposits.
         l      Investment pattern - The tentative Equity-Debt-Money Market portfolio
                break-up with minimum and maximum asset allocation, while                      9. The investment manager may invest in the Scheme from time to
                retaining the option to alter the asset allocation for a short term                time. The percentage of such investments to the total net assets
                period on defensive considerations.                                                may vary from time to time and can be upto 100% of the net assets
                                                                                                   of the Scheme. However the investment manager shall not charge
         iii.   Terms of Issue
                                                                                                   any fees on its investments in the Scheme in accordance with sub-
         l      Liquidity provisions such as listing, repurchase, redemption                       clause (3) of Regulation 24 of the Regulations.
         l      Aggregate fees and expenses charged to the Scheme
                                                                                               10. The Mutual Fund may borrow to meet liquidity needs, for the
         l      Any safety net or guarantee provided                                               purpose of repurchase, redemption of units or payment of interest
                                                                                                   or dividend to the unit holders and such borrowings shall not exceed
                       INVESTMENT RESTRICTIONS AND                                                 20% of the net asset of the Scheme and duration of the borrowing
                           OTHER CONSIDERATIONS                                                    shall not exceed 6 months. The Fund may borrow from permissible
                                                                                                   entities at prevailing market rates and may offer the assets of the
         All the investments by the Scheme and the Mutual Fund, however, will                      Fund as collateral for such borrowing.
         always be within the investment restrictions as specified in SEBI (MF)                11. The scheme shall not make any investment in:
         Regulations, 1996, as amended from time to time. Pursuant to the                          a) any unlisted security of an associate or group company of the
         “SEBI Regulations”, the following investment and other limitations are                           sponsor; or
         presently applicable to the Scheme.                                                       b) any security issued by way of private placement by an associate
         1.     No term loans for any purpose will be advanced by the Scheme.                             or group company of the Sponsor; or
         2.     The Scheme shall not invest more than 15% of its NAV in debt                       c) the listed securities of group companies of the Sponsor which
                instruments issued by a single issuer which are rated not below                           is in excess of 25% of the net assets.
                the investment grade by a credit rating agency authorized to carry             12. The Mutual Fund will buy and sell securities on the basis of
                out such activity under the Act. Such investment limit may be                      deliveries and will in all cases of purchase, take delivery of relative
                extended to 20% of the NAV of the Scheme with the prior approval                   securities and in all cases of sale, deliver the securities and will
                of the Boards of Trustee and Investment Manager. However such                      in no case put itself in a position whereby it has to make short sales

                                                                                          11



TEMPLETON FLOATING RATE INCOME FUND
              or carry forward transactions or engage in badla finance (carry                The Board of Directors of the Investment Manager are: -
              forward).                                                                      l   Charles E. Johnson *, President and Chief Executive Officer -
              Provided that the Mutual Fund shall enter into derivatives transactions            Templeton Worldwide Inc. Chairman
              in a recognised stock exchange for the purpose of hedging and                  l    Vijay C. Advani * (Alternate Director to C. E. Johnson): Managing
              portfolio balancing, in accordance with the guidelines issued by                    Director, Templeton Asset Management Ltd.
              SEBI.
                                                                                             l    Dr. J. Mark Mobius *, President - Templeton Emerging Markets
         13. The Scheme will comply with any other Regulations applicable to                      Fund Inc.
             the investments of Mutual Funds from time to time.
                                                                                             l    Rajan Raheja *, Industrialist.
         The Trustee of the Mutual Fund may alter these limitations/objectives
         from time to time to the extent the SEBI Regulations change. All                    l    Deepak M. Satwalekar, Managing Director and CEO – HDFC
         investments of the Scheme will be made in accordance with the SEBI                       Standard Life Insurance Company Ltd.
         Regulations, including Schedule VII thereof.                                        l    P. Vaidyanathan, Managing Director - Integrated Enterprises (India)
                                                                                                  Ltd.
                        MANAGEMENT OF THE FUND                                               l    Dina Wadia, Advocate and Solicitor - Partner - Little & Co
                                                                                             * These Directors are associated with the sponsor or its associates.
         Templeton Asset Management (India) Pvt. Ltd.
         (The Investment Manager)                                                            Compliance Officer:
         Templeton Asset Management (India) Private Ltd. situated at 1st floor,                 Vivek Pai
         Sakhar Bhavan, Nariman Point, Mumbai 400 021 (the “Investment                          Compliance Officer
         Manager”), a company incorporated under the Companies Act, 1956                        1st Floor, Sakhar Bhavan, 230 Backbay Reclamation,
         is the Asset Management Company of the Mutual Fund.                                    Nariman Point, Mumbai 400 021 India.


         INFORMATION ON KEY PERSONNEL OF THE AMC
          Name                            Age            Qualifications                      Functions & Experience
                                          (years)
          Rajiv Vij                       35             B. Tech. (IIT-Delhi),               Regional Head, India & Middle East since April 2001,
          Total experience 12 years                      PGDM (IIM-Calcutta)                 responsible for expanding Franklin Templeton’s business interests in
                                                                                             India & the Middle East region.
                                                                                             l    Prior to that, as the Country Head and Chief Executive Officer
                                                                                                  of the India office since November 1999, he managed the
                                                                                                  firm’s domestic asset management business in the country
                                                                                                  and was instrumental in rapidly growing the firm’s assets
                                                                                                  under management in the country.
                                                                                             l    Prior to that, he was the Vice President for Sales and
                                                                                                  Marketing with the firm from December 1995 to October
                                                                                                  1999. As a member of the key start-up team, he played a
                                                                                                  crucial role in developing and implementing the strategy for
                                                                                                  Franklin Templeton Funds’ market entry into India
                                                                                             l    He joined Franklin Templeton from Hindustan Lever Limited
                                                                                                  where he worked across the sales and marketing functions for
                                                                                                  6 years
                                                                                             l    He is a Member of the SEBI Mutual Fund Advisory Committee
                                                                                                  and a Member of the Board of Association of Mutual Funds in
                                                                                                  India (AMFI).
          B. Swaminathan                  38             ACS, CAIIB                          Director and Chief Operating Officer since November 1999.
          Total experience 18 years                                                          He is responsible for developing and executing the company’s
                                                                                             strategy for operational, legal and technology functions. This largely
                                                                                             involves general management of several functions within the
                                                                                             operations department such as Fund Accounting, Custody & Cash
                                                                                             Management and Transfer Agency functions. He also oversees the
                                                                                             Legal and other Corporate Affairs.
                                                                                             l     Prior to that he was Vice President Operations in the company
                                                                                                   since 1995.
                                                                                             l     Prior to joining Templeton, he was Head (Operations) and
                                                                                                   Company Secretary in 20th Century Asset Management (now,
                                                                                                   Zurich Asset Management, India)


                                                                                        12



TEMPLETON FLOATING RATE INCOME FUND
          Name                        Age       Qualifications               Functions & Experience
                                      (years)
          Nilesh Shah                 33        ACA, Grad. CWA, completed Chief Investment Officer since December 1999 handling
          Total experience 11 years             GFM-25 programme at       Templeton Debt Funds and Franklin Equity Funds in India.
                                                JP Morgan, New York, USA l    Prior to that he was Portfolio Manager – Fixed Income from
                                                                              March 1997 to November 1999.
                                                                             l   Prior to joining Franklin Templeton, Nilesh worked as Head of
                                                                                 structured products group at ICICI Securities & Finance Co.
                                                                                 Ltd. (A joint venture of ICICI and JP Morgan) for over 5 years.
                                                                                 He has managed various jobs including distribution of fixed
                                                                                 income products in institutional and retail markets, managing
                                                                                 short-term credit book and dealing in a wide range of
                                                                                 structured products.
                                                                             l   He has worked in ICICI merchant banking division managing
                                                                                 public issues and corporate advisory assignments.
          Suraj Kaeley                37        B. Sc., MMS                  Vice President (Marketing) since January 2000 and is
          Total experience 11 years                                          responsible for managing the distribution network and marketing
                                                                             and sales support.
                                                                             l   Prior to that he Headed Sales & Distribution in Southern India
                                                                                 Region from May 1996 to January 2000
                                                                             l   Prior to that he was the AVP – Retail Broking in IIT InvesTrust
                                                                                 Ltd. from May 1995 to April, 1996.
                                                                             l   Prior to that he was Sr. Officer Management Services Dept.
                                                                                 with HDFC Ltd. from October 1991 to April 1995 handling
                                                                                 MIS and Risk Management.
                                                                             l   Prior to that he was Sr. Officer Operations at HDFC Ltd. in
                                                                                 Retail lending, from June 1988.
          Chetan Sehgal               33        B.E. (Mech), PGDBA           Director – Research India and is part of the team managing
          Total experience 10 years             (IIM-Bangalore), CFA         TIGF.
                                                                             l   He joined Templeton in 1995 as Investment Analyst with the
                                                                                 emerging markets group and is currently a Portfolio Manager.
                                                                             l   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.
                                                                             l   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.
          Deepesh Pandey              30        B. Tech. (IIT-Delhi),        Fund Manager, Franklin Equity Funds since January 2000.
          Total experience 7 years              PGDM (IIM-Calcutta)          l   He manages 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.
                                                                             l   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.




                                                                        13



TEMPLETON FLOATING RATE INCOME FUND
          Name                           Age            Qualifications                     Functions & Experience
                                         (years)
          Shobhit Mehrotra               36             MBA (Clemson Univ., USA), Asst. Vice President - Fixed Income, functioning as fixed income
          Total experience 11 years                                               analyst since 1997.
                                                                                           l    Prior to that he was a Senior Rating Analyst and member of
                                                                                                Executive Rating Committee with ICRA for over 4.5 years from
                                                                                                1992-1997.
                                                                                           l    Prior to that he worked as a Process Engineer with Beaulieu
                                                                                                of America, a textile producer in USA.
          Rakesh Parekh                  38             MBA-Finance from                   Investment Analyst with the Emerging Markets Group, under
          Total Experience 15 years                     University of Stirling (UK),       Dr. Mark Mobius. He identifies and evaluates investment
                                                        Associate of Chartered             opportunities for the global funds as well as TIGF, and looks after
                                                        Insurance Institute (UK),          Israel and India markets. He joined Templeton in Nov 1999
                                                        Business Administration with
                                                        Honours from University            l    Prior to that he worked with B & K Securities India as a
                                                        of Dundee (UK).                         Senior Analyst from July’98 to Oct’99 focusing mainly on the
                                                                                                pharmaceutical and auto sectors.
                                                                                           l    Prior to that he worked with Caspian Securities as a Senior
                                                                                                Analyst from June’96 to June’98 again covering the
                                                                                                pharmaceutical and auto sectors.
                                                                                           l    Prior to that he worked with Oppenhiemer India as an
                                                                                                Investment Analyst from May’93 to May’96, where he was
                                                                                                responsible for India equity research.
                                                                                           l    Prior to that between 1986 to the end of 1992, Rakesh
                                                                                                Parekh has been involved in various roles primarily as an
                                                                                                insurance underwriter with General Accident Plc and
                                                                                                Commercial Union Plc in the UK.
          Vivek Pai                      31             B.Com, ACA,                        l    Templeton Trust Services Pvt. Ltd.(from Oct-2000) Head of
          Total Experience 7 years                                                              Compliance and Internal Audit
                                                                                           l    Consultant (May-2000 to Sep–2000)
                                                                                           l    Birla Sun Life Asset Management Company Ltd.
                                                                                                (Nov-1996 to May–2000) Head of Fund Accounting
                                                                                           l    Apollo Finvest (India) Limited Assistant Manager- Corporate
                                                                                                Finance (Dec-1994 to Oct-1996)
                                                                                           l    M/s. Rakesh Garg & Associates (Chartered Accountants)
                                                                                                Consultant (Aug-1994 to Nov-1994)


         FUND MANAGER                                                                      from the rich experience gathered by Franklin Templeton Investments
         The Scheme will be managed by a portfolio management team consisting              over 50 years across various markets and asset classes.
         of:                                                                               The Investment team comprising of CIO, Analyst and Portfolio Managers
         Nilesh D. Shah (Chief Investment Officer) and Shobhit Mehrotra                    take a top down and bottom up approach to define investment strategy.
         (AVP-Fixed Income).                                                               The investment strategy covers factors such as asset class exposure
                                                                                           (government securities vs. corporate debt vs. money market securities
                                                                                           etc), maturity profile, rating profile and liquidity factors etc.
              PROCEDURE FOR INVESTMENT DECISIONS
                                                                                           Based on such investment strategy defined by the CIO, the investment
         The Scheme’s investment management process in terms of defining of                management team will take investment decisions with respect to selection
         factors such as credit risks, liquidity risks, interest rate risks, sector        of securities in a portfolio, timing of investment and disinvestment,
         exposure, scrip exposure, maturity exposure, risk management practices            weightage of individual securities/class in the portfolio and asset allocation.
         etc. are explained in the investment process note. The Chief Executive            The investment team will follow the disciplined process of fundamental
         Officer (CEO), Chief Investment Officer (CIO) and International Investment        analysis to create portfolio for optimum risk adjusted return for long term
         Head (based outside India) define such investment process note wherein            out-performance.
         the above mentioned broad parameters are laid down for making                     All these investment decisions will be recorded as per the standards
         investment decisions. The investment process note is approved by the              prescribed by the Board of Directors and in accordance with the
         Boards of the AMC and the Trustee Company and forms the basis for                 regulatory guidelines issued by SEBI. The portfolio will be monitored on
         approach to the Investment management process. It has critical insights           a constant basis by the investment team.


                                                                                      14



TEMPLETON FLOATING RATE INCOME FUND
         Currently, no appropriate benchmark index is available for comparison.                    Purpose Vehicles (SPVs) approved by the appropriate authority
         The funds’ performance and the investment managers’ adherence to the                      (subject to RBI approval).
         investment process would be reviewed on a monthly basis with the CEO                 10. International Multilateral Agencies approved by the Government of
         and the International Investment Head. The same alongwith a periodical                   India
         analysis would also be reviewed by the Board of Directors of the AMC
         and the Board of Trustees on a regular basis at the Board Meetings.                  11. Army / Navy / Air Force, Para Military Units and other eligible
                                                                                                  institutions
         Investor Relations Officer
                                                                                              12. Mutual Funds registered with SEBI
         Please refer to the list of Investor Services Centres (ISCs) and Contact
         Persons at the back cover of this document.                                          13. Foreign Companies/Firms/Other Body Corporate incorporated outside
                                                                                                  India subject to FIPB-RBI approval
         Registrar and Transfer Agents
              Karvy Consultants Ltd.,                                                         14. Scientific and Industrial Research Organizations
              21, Avenue 4, Street No.1,                                                      15. Banks (including Co-operative Banks and Regional Rural Banks)
              Banjara Hills,                                                                      and Financial Institutions and Investment Institutions.
              Hyderabad 500 034
                                                                                              16. Trustee, AMC or Sponsor or their associates may subscribe to Units
         Custodian of the Scheme                                                                  under this Scheme;
             Citibank, N. A.,
                                                                                              Note:
             Plot C/61, ‘G’ Block,
             Bandra Kurla Complex, Bandra (East),                                             1.   NRIs/PIOs/OCBs/FIIs have been granted a general permission by
             Mumbai 400 051                                                                        RBI [Schedule 5 of the Foreign Exchange Management (Transfer
                                                                                                   or Issue of Security by a Person Resident Outside India) Regulations,
         Statutory Auditors for the Scheme                                                         2000] for investing in /redeeming units of the schemes subject to
              Arthur Anderson & Associates,                                                        conditions set out in the aforesaid regulations.
              17th Floor, Express Towers,
              Nariman Point,                                                                  2.   In case of OCBs, NRIs/PIOs shall hold (irrevocably) atleast 60% of
              Mumbai 400 021                                                                       the beneficial interest directly or indirectly in the said body/firm/
                                                                                                   society/trust. OCB investors should submit an auditors certificate
                                                                                                   in original in Form OAC/OAC-1 to the ISC where the Application
                         INVESTING IN TEMPLETON                                                    Form is submitted.
                       FLOATING RATE INCOME FUND                                              3.   In case of application under a Power of Attorney or by a limited
                                                                                                   company or a corporate body or an eligible institution or a registered
         WHO CAN APPLY FOR UNITS                                                                   society or a trust fund, the original Power of Attorney or a certified
         The following are eligible to apply for the purchase of the Units:                        true copy duly notarised or the relevant resolution or authority to
         1.   Resident Adult Individuals, either singly or jointly (not exceeding                  make the application / redemption as the case may be, or duly
              three), resident in India                                                            notarised copy thereof, alongwith a certified copy of the Memorandum
                                                                                                   and Articles of Association and/or bye laws and/or trust deed and/
         2.   Parents/Lawful guardians on behalf of Minors                                         or partnership deed and Certificate of Registration should be
                                                                                                   submitted. The officials should sign the application under their
         3.   Companies, corporate bodies, public sector undertakings,
                                                                                                   official designation. In case of a Trust / Fund it shall submit a
              associations of persons or bodies of individuals and societies
                                                                                                   certified true copy of the resolution from the Trustee(s) authorising
              registered under the Societies Registration Act, 1860 (so long as
                                                                                                   such purchases / redemption.
              the purchase of Units is permitted under their respective constitutions)
                                                                                              4.   Returned cheques are liable not to be presented again for collection,
         4.   Religious and Charitable Trusts, Wakfs or endowments of private                      and the accompanying Application Forms are liable to be rejected.
              trusts (subject to receipt of necessary approvals as required) and                   In case the returned cheques are presented again, the necessary
              Private trusts authorised to invest in mutual fund schemes under                     charges are liable to be debited to the investor.
              their trust deeds;
                                                                                              INITIAL OFFER PERIOD
         5.   Partnership Firms                                                               The Scheme opens for subscription on January 21, 2002 and closes
         6.   Hindu Undivided Families (HUFs), in the sole name of the Karta.                 for subscription on February 2, 2002. The Scheme re-opens on February
                                                                                              18, 2002 and is perpetually open thereafter with announcements of NAV
         7.   Non-Resident Indians- Persons of Indian origin resident abroad                  for every Business Day.
              (NRIs) on full repatriation or non-repatriation basis
                                                                                              The Trustee has a right to extend the Closing Date subject to the
         8.   Overseas Corporate Bodies (OCBs), firms and societies which are                 condition that the Scheme shall not be kept open for more than 30 days.
              held directly or indirectly but ultimately to the extent of at least 60%        Thereafter, the scheme shall remain open perpetually with announcements
              by NRIs and trusts in which at least 60% of the beneficial interest             of NAV for every Business Day.
              is similarly held irrevocably by such persons, on full repatriation             MINIMUM SUBSCRIPTION
              basis.
                                                                                              The Scheme seeks to collect Rs.1 crore as the minimum subscription
         9.   Foreign Institutional Investors (FIIs) registered with SEBI / Special           and would retain any excess subscription collected. If the Scheme does

                                                                                         15



TEMPLETON FLOATING RATE INCOME FUND
         not collect the minimum subscription during the Initial Public Offer,                   of a Draft in Indian Rupees purchased abroad or by a cheque drawn
         refund will be made within six weeks of the date of closure of the Initial              on Non Resident (External) Accounts / FCNR Accounts, payable at
         Offer Period. If the fund refunds the amount after six weeks, interest @                par in Mumbai. Payments may also be made through Demand
         15% per annum shall be paid by the AMC.                                                 Drafts or other permitted instruments.
         HOW TO PURCHASE                                                                    l    FIIs and International Multilateral Agencies shall pay their subscription
         During IPO: Investors can purchase units of the Scheme by simply filling                by way of direct remittance from abroad or out of their special Non-
         the attached application form. Fully completed application forms,                       Resident Rupee account maintained with a designated bank in
         accompanied with subscription amount, should be submitted at any of                     India.
         the Bank listed in this document.
                                                                                            NON-REPATRIATION BASIS
         After Reopening: Existing and New Investors can purchase units of the              l    NRIs / OCBs can invest by cheques / demand drafts drawn out of
         Schemes by simply filling the attached application form. Fully completed                Non-Resident Ordinary (NRO) account / Non-Resident Special
         application forms, accompanied with subscription amount, should be                      Rupee Account (NRSR).
         submitted/mailed to any of the ISCs listed in this document. Investors
         can also lodge their completed application forms with brokers/agents/              l    FIIs may pay their subscription amounts by direct remittance from
         distributors, appointed by the Mutual Fund from time to time, for onward                abroad or out of their special Non-Resident Rupee Accounts
         submission to any of the ISCs.                                                          maintained with a designated bank in India or as may be permitted
                                                                                                 by law.
         Payment Details
         During the IPO, all cheques and drafts should be made out in favour                ISSUANCE OF UNITS/ALLOTMENT/ REFUND
         of “Templeton Floating Rate Income Fund” and crossed “A/c Payee                    The allotment for Subscriptions during the initial offer period will be made
         only”. During the IPO, the applications will be accepted at the designated         at Rs. 10.00 per unit, without any entry load. For on-going subscriptions,
         Bank Collection Centres. No outstation cheques / stock invest or post              units will be offered to investors at Public Offering Price. Please refer
         dated cheques will be accepted.                                                    to the section on “Public Offering Price” and “Applicable NAV for
         When the scheme opens for ongoing purchase, all cheques and drafts                 Subscriptions”.
         should be made out in favour of “Franklin Templeton Funds” and                     Investors can purchase units of the Scheme during the Initial Public Offer
         crossed “A/c Payee only”. For ongoing purchases, applications can be               by completing the Application Form and submitting it at any of te
         submitted at any of the Investor Service Centres at the locations set forth        branches of the Banks acting as Collection Centres (the “Bank Collection
         on the reverse of this Offer Document.                                             Centres”) as listed in the Aplication Form along with the subscripton
         The Investor Service Centres will not accept cash.                                 amount. Payments will be accepted only by local cheque or draft.
                                                                                            Purchases should be for a minimum of Rs. 1,00,000/- under the Short
         The scheme may also make arrangements to apply online through the                  Term Plan and Rs.2,000/- under the Long Term Plan, and any amount
         official website of the fund www.franklintempletonindia.com provided               thereafter.
         that they are account holders with HDFC Bank or ICICI Bank or any other
         bank which the fund may tie-up with in future and have obtained the                The Scheme will open for continuos purchase and redemption on
         facility to transact online on the websites of these banks. This facility          February 18, 2002.
         will continue to be available when the scheme reopens for ongoing                  Once an investor has opened an account he may purchase additional
         purchase.                                                                          units by filling-up the pre-printed forms or simply fill in the account
         As per the directives issued by SEBI, it is mandatory for applicants               number in the application form and mail the same to the Investor Service
         to mention their bank account numbers in their applications and                    Centres along with the payment, by a local cheque or draft. Additional
         therefore, investors are requested to fill-up the appropriate box                  purchases of Units by existing unit holders can also be made for a
         in the application form.                                                           minimum of Rs. 1,000/- or any amount thereafter. The fund urges the
                                                                                            investors to maintain a balance of at least Rs.1,00,000/- and Rs.2,000/-
         Mode of Payment : Resident Investors                                               under the Short Term Plan and the Long Term Plan respectively, at
         Payment may be made by cheque or bank draft and crossed “A/c Payee                 anytime.
         Only” drawn on any bank, which is situated at and is a member of the               The Scheme would endeavour to expedite redemption payments and
         Bankers’ Clearing House, located at any of the Investor Service Centres.           facilitate easy subscription process. To achieve this objective, the Fund
         Bank charges for outstation demand drafts will be borne by the Fund                may tie up with Commercial Banks and other institutions and may
         and will be limited to the bank charges stipulated by the Indian Banks             introduce new facilities to utilise the infrastructure of such banks and
         Association. Outstation demand draft has been defined as a demand                  institutions for enabling easy subscriptions and easy redemptions to the
         draft issued by a bank in a place other than Mumbai. The AMC will not              investors.
         accept any request for refund of demand draft charges.
                                                                                            Full allotment will be made to all valid applications received during the
         As per the directives issued by SEBI, it is mandatory for applicants to            Initial Offer and from the opening of the Scheme for continuous purchase.
         mention their bank account numbers in their applications and therefore,            Issuance of Units on Application shall be made in the following manner:
         investors are requested to fill-up the appropriate box in the application
         form.                                                                              a)   An Account Statement containing the number of Units allotted will
                                                                                                 be issued within 30 days after the close of the initial offer period.
         Mode of Payment : NRIs, OCBs, FIIs
                                                                                            b)   Refund of subscription money to applicants, in case applications
         REPATRIATION BASIS                                                                      are invalid or rejected or in case the Fund fails to receive the
         l    In the case of NRIs and OCBs, payment may be made by means                         minimum targeted amount of Rs.1 crore during the initial offering

                                                                                       16



TEMPLETON FLOATING RATE INCOME FUND
              of the Scheme, will be made within six weeks from the date of                   in the manner described hereunder) depending on the amount invested,
              closure of the Scheme. No interest will be payable on any subscription          as explained under the head Expenses.
              money so refunded within six weeks. If the Mutual Fund refunds
                                                                                              To further elaborate, the POP is calculated by dividing the “Applicable
              the amount after six weeks, interest at the rate of 15% p.a. shall
                                                                                              NAV” by the reciprocal of the sales load. For example, if the NAV is Rs.14/
              be paid out of the assets of the AMC for the period thereafter.
                                                                                              - and the sales load applied is 1%, the POP will be calculated as follows:
              Refund orders will be marked “A/c Payee only” and drawn in the
              name of the applicant in the case of a sole applicant and in the
                                                                                               Public Offering Price:      NAV       =            14       = Rs. 14.14
              name of the first applicant in all other cases. All refund cheques
              will be mailed by Registered Post.                                                       (POP)          (1-Sales Load)           (1-0.01)
         c)   The Trustee is entitled, in its sole and absolute discretion, to reject         To further clarify, load is always calculated on the reciprocal basis as
              any Application.                                                                explained in the above example and not as a direct percentage on the
         After the scheme reopens for continuous purchase, an Account Statement               amount invested.
         bearing the details such as number of units allotted, amount invested,               As per Regulations, while determining the prices of the Units, the Mutual
         etc. will be mailed to the registered address of the investor, within 3 days         Fund will ensure that the repurchase (i.e. redemption) price is not lower
         from the date of submission of Application Form at any ISC.                          than 93% of the Net Asset Value and the sale price (i.e. POP) is not
                                                                                              higher than 107% of the Net Asset Value, provided that the difference
         Joint Name Applicants
                                                                                              between the repurchase price and sale price shall not exceed 7%
         In the event an Account has more than one registered owner, the first-               calculated on the sale price.
         named holder shall receive the Account Statements, all notices and
         correspondence with respect to the Account, as well as the proceeds                  APPLICABLE NAV FOR SUBSCRIPTIONS
         of any Redemption requests or dividends or other distributions. In                   “Applicable NAV for Subscriptions” for the Short Term Plan is NAV of
         addition, such Unit holders shall have the voting rights, as permitted,              the day prior to the day on which the Mutual Fund has received the clear
         associated with such Units, as per the applicable guidelines.                        funds in its bank account.
         Applicants can specify the ‘mode of holding’ in the application form as              “Applicable NAV for Subscriptions” for the Long Term Plan is NAV at
         ‘Joint’ or ‘Anyone or Survivor’. In the case of holding specified as ‘Joint’,        the close of the business day on which the application for subscription
         Redemptions would have to be signed by all joint holders in the same                 is accepted. The date of receipt of a subscription request will be the
         order as registered with the Mutual Fund. However, in cases of holding               actual Business Day of either the mail receipt at an Investor Service
         specified as ‘Anyone or Survivor’, any one of the Unit holder will have              Centre or of actual receipt of an in-person subscription request or by
         the power to make Redemption requests, without it being necessary for                any other prescribed mode, before the prescribed time.
         all the Unit holders to sign. However, in all cases, the proceeds of the             USE OF SALES LOAD
         Redemption will be paid only to the first-named holder.
                                                                                              The sales load collected on on-going sales of units shall be retained in
         COMPANIES/CORPORATE BODIES ETC.                                                      the Fund and would strictly and fully be used by the Investment Manager
         In case of an application under a Power of Attorney or by a limited                  in providing distribution related services to the Mutual Fund relating to
         company, body corporate, registered society, trust or partnership, the               the sale, promotion, advertising and marketing of Units of the Scheme,
         relevant Power of Attorney or the relevant resolution or authority to make           including payments to brokers/registrars for their services in connection
         the application or the Trust Deed or the Partnership Deed as the case                with the distribution of the Units.
         may be, or duly certified copy thereof, along with a certified copy of the           FRACTIONAL UNITS
         Memorandum and Articles of Association and-or bye-laws must be
                                                                                              Investors may have Account Statements that show an issuance of
         lodged at the any ISC within three days from the date of investments.
                                                                                              fractional Units. Fractional Units in no way will affect an investor’s ability
         INITIAL OFFER PRICE (IOP)                                                            to redeem Units. Fractional Units will be computed and accounted for
         All purchases during IPO will be at Rs. 10/- per unit. On reopening of               upto three decimal places.
         the Scheme, units are proposed to be sold at “Zero Entry Load”.                      AVAILABILITY OF FORMS
         Therefore, the POP would be the “Applicable NAV for Subscriptions”.                  Application Forms and copies of the Offer Document are available from
         Please refer to the section on “Applicable NAV for Subscriptions”.                   the Investor Service Centres at their respective locations set forth in the
         However, the Trustees reserve the right to introduce/chnage an entry/exit            Application Forms or on the reverse of this Abridged Offer Document,
         load any time thereafter.                                                            in addition to the Head Office of the Mutual Fund. Application Forms are
         PUBLIC OFFERING PRICE (POP) FOR ONGOING PURCHASES                                    also available with the approved intermediaries of the Mutual Fund as
                                                                                              well as on the website of the mutual fund www.franklintempletonindia.com
         The Scheme opens for subscription on January 21, 2002 and closes
         for subscription on February 2, 2002. The Scheme re-opens on February                SYSTEMATIC INVESTMENT PLAN (SIP)
         18, 2001 and is perpetually open thereafter. The Trustee has a right to              Mutual Fund Investors can benefit by investing specified rupee amounts
         extend the Closing Date subject to the condition that the Scheme shall               periodically for a continuous period. This concept is called Rupee Cost
         not be kept open for more than 30 days.                                              Averaging.
         For on-going subscriptions, units will be offered to investors at “Public            This savings program allows investors to save a fixed amount of rupees
         Offering Price” (POP). POP is the price at which the units are proposed              every month by purchasing additional units of the Fund. Therefore, the
         to be sold. POP is calculated based on the “Applicable NAV for                       average unit cost will always be less than the average sale price per unit
         subscriptions” and will additionally include the permissible load (computed          irrespective of the market being rising, falling or fluctuating.

                                                                                         17



TEMPLETON FLOATING RATE INCOME FUND
         By investing a fixed amount of Rupees at regular intervals, investors can                                               TIGF
         take advantage of the benefits of Rupee Cost Averaging, at the same
         time, saving a fixed amount each month. The investment under SIP has               Month         Opening     Applicable Amount    No. of Closing
         to be for a minimum prescribed amount. A minimum of 6 cheques in                                 Balance       NAV     Redeemed   Units  Balance
         case of monthly and minimum of 4 cheques in case of quarterly SIP                                of Units      (Rs.)     (Rs.)  Redeemed of Units
         needs to be provided.                                                                               (a)         (b)       (c)       (d)     (e)
         Here is an illustration using hypothetical figures to show how a Systematic                                                        [c-b]   [a-d]
         Investment Plan can benefit an investor. Let us assume that Mr. ABC
         would like to invest Rs.1,000/- as a quarterly investment for a period                  1       5,000.000       11.00     1,000.00      90.909    4,909.091
         of four quarters, i.e. a total of Rs.4,000/-                                            2       4,909.091       11.08     1,000.00      90.253    4,818.838
            Quarter        Amount          Public Offering        No. of Units
                                                                                                 3       4,818.838       11.15     1,000.00      89.686    4,729.152
                        Invested (Rs.)    Price (POP) (Rs.)        purchased
                                                                                                 4       4,729.152       11.20     1,000.00      89.286    4,639.866
               1            1000                  12                83.333
               2            1000                  15                66.667
                                                                                                                                 TGSF
               3            1000                  9                 111.111
                                                                                            Month              Amount       Applicable       No. of         Closing
               4            1000                  12                83.333                                    Invested        NAV            Units          Balance
                                                                                                                (Rs.)         (Rs.)         Allotted        of Units
             Total          4000                  48               344.444                                       (f)           (g)             (h)             (i)
                                                                                                                                              [f-g]
         Average price (per unit) per quarter (quarters)=Rs.12.00 (i.e. Rs. 48/4)
         Average cost per unit = Rs.11.61 (i.e. Rs. 4000/344.444 units)                          1            1000.00         11.000        90.909          90.909
         As can be seen from the example above, the average cost per unit is                     2            1000.00         11.092        90.155         181.064
         always lower than the average market price per unit, irrespective of a
         rise, fall or fluctuations in the market. A greater number of units were                3            1000.00         11.129        89.855         270.919
         purchased when the per-unit cost was low; fewer units were purchased                    4            1000.00         11.222        89.111         360.030
         when the per-unit cost was high. Thus, Mr. ABC automatically gains
         without having to monitor prices (NAV) on a day-to-day basis.                      Note:
         However, an investor should note that the market value of the Scheme’s             The Fund may close an investor’s account if the balance falls below
         units is subject to fluctuations. Before undertaking any plan for                  the minimum prescribed balance (based on applicable NAV) in the
         Systematic Investment, the investor should keep in mind that such                  Schemes from which Transfer is proposed to be done due to
         a program does not assure a profit or protect against a loss.                      redemptions or SWP and the investor fails to invest sufficient funds
         SYSTEMATIC TRANSFER PLAN (STP)                                                     to bring the value of the account to the prescribed minimum (based
                                                                                            on applicable NAV) after a written intimation in this regard is sent
         A unit holder may establish a systematic transfer plan and choose to
                                                                                            to the Unitholder.
         transfer on a monthly or quarterly basis from the Scheme to another
         Templeton scheme. The transfer will be effected by way of redemption               TRANSFER FACILITY
         of units (with appropriate exit load, if any) and a reinvestment (with             As the Fund stands ready to buy-back (redeem) its units at any time the
         appropriate entry load, if any) of the redemption proceeds in another              transfer facility is found redundant. However, if a transferee becomes
         Scheme(s).                                                                         a holder of the Units by operation of law or upon enforcement of a pledge,
         Unitholders may change the amount (but not below the specified                     then the AMC shall, subject to production of such evidence, which in
         minimum) by giving written notice to the registrars.                               their opinion is sufficient, proceed to effect the transfer, if the intended
                                                                                            transferee is otherwise eligible to hold the Units.
         Currently, STP from the Scheme is available for transfer into TIGF,
         FIGF, FIIF, FITF, FIBF, TIIF, TMIP, TGSF and TILF.                                 A person becoming entitled to hold the Units in consequence of the
                                                                                            death, insolvency, or winding up of the sole holder or the survivors of
         The unitholder may avail of this plan by completing the enclosed
                                                                                            joint holders, upon producing evidence to the satisfaction of the Fund,
         Application Form or by filling up the relevant portion of the transaction
                                                                                            shall be registered as a holder.
         statements. A systematic transfer plan may be terminated on appropriate
         written notice by the unitholder of the fund, and it will terminate                PLEDGE OF UNITS
         automatically if all the units are liquidated or withdrawn from the
                                                                                            The Units under the Scheme, may be offered as security by way of a
         account, or upon the Fund’s receipt of notification of death or incapacity
                                                                                            pledge/charge in favour of scheduled banks, financial institutions, non-
         of the unitholder. The Investment Manager may change rules relating                banking finance companies (NBFCs), or any other body. The AMC and/
         to the plan from time to time.                                                     or the ISC will note and record such Pledged Units. A standard form for
         Here is an illustration using hypothetical figures to explain the concept          this purpose is available on request from any ISC. Disbursement of such
         of a Systematic Transfer Plan. Let us assume that Mr. ABC would like               loans will be at the entire discretion of the bank/financial institution/NBFC
         to transfer Rs. 1000/- every month from TIGF to TGSF for a period of               or any other body concerned and the Mutual Fund assumes no
         four months, i.e. a total of Rs.4000/-.                                            responsibility thereof.

                                                                                       18



TEMPLETON FLOATING RATE INCOME FUND
         The Pledgor will not be able to redeem Units that are pledged until the          redemption) price is not lower than 93% of the Net Asset Value and the
         entity to which the Units are pledged provides written authorisation to          sale price (i.e. POP) is not higher than 107% of the Net Asset Value,
         the Mutual Fund that the pledge/lien charge may be removed. As long              provided that the difference between the repurchase price and sale price
         as Units are pledged, the pledgee will have complete authority to redeem         shall not exceed 7% calculated on the sale price. Any such change in
         such Units.                                                                      the load structure will be on a prospective basis and will only be
                                                                                          applicable to Units purchased by investors after the new entry/exit load
                                                                                          structure comes into effect.
                             REDEMPTION OF UNITS
                                                                                          APPLICABLE NAV FOR REDEMPTIONS
         HOW TO REDEEM UNITS                                                              “Applicable NAV for Redemptions” for the Short Term Plan is the NAV
         The scheme will open for continuous redemption from February 18,                 of the day prior to immediately following business day from the business
         2002. Notice for redemption can be sent to the Fund at its ISCs.                 day on which the application for redemption is accepted.
         Redemption of the Units will be made on any Business Day at the
         Applicable NAV, as defined below. A Business day has been defined as:            Eg. If a redemption request is received on a Friday, the “Applicable NAV
                                                                                          for Redemptions” will be the NAV of Sunday. On any other business day,
         A day other than:                                                                on which the application for redemption is accepted, which is not
         (i)    Saturday and Sunday,                                                      followed by a non-business day, the “Applicable NAV for Redemptions”
         (ii)   a day on which the banks in Mumbai and/or RBI are closed for              will effectively be the NAV at the close of the business day on which
                business / clearing,                                                      the application for redemption is accepted.
         (iii) a day on which the Bombay Stock Exchange and/or National Stock             “Applicable NAV for Redemptions” for the Long Term Plan is the NAV
               Exchange are closed,                                                       at the close of business day on which the application for redemption
         (iv) a day which is a public and/or bank holiday at a collection centre          is accepted
              where the application is received,
                                                                                          REDEMPTION AMOUNT
         (v)    a day on which sale and repurchase of units is suspended by the           Unit holder may request the redemption of a certain specified Rupee
                AMC,                                                                      amount or of a certain number of Units. If a redemption request is for
         (vi) a day on which normal business could not be transacted due to               both a specified Rupee amount and a specified number of Units, the
              storms, floods, bandhs, strikes or such other events as the AMC             specified number of Units will be considered the definitive request. In
              may specify from time to time.                                              the case where a Rupee amount is specified or deemed to be specified
                                                                                          for redemption, the number of Units redeemed will be the amount
         The AMC reserves the right to declare any day as a Business Day or
                                                                                          redeemed divided by the applicable NAV. Redemption requests will be
         otherwise at any or all collection centres.
                                                                                          honored to the extent permitted by the credit balance in the Unit holder’s
         The Fund, however, may limit the right to make redemptions. See “Right           account. The number of Units so redeemed will be subtracted from the
         to Limit Redemptions” below. In order to redeem units, investors must            Unit holder’s account and a statement to this effect will be issued to
         submit a redemption request by filling-up the pre-printed forms and mail         the Unit holder. If the redemption request exceeds the Balance in the
         the same to the Mumbai ISC. Redemption requests may only be made                 account then the account would be closed and balance sent to the
         at ISC, Mumbai. All redemption request forms must contain the investor’s         investors.
         Folio Number and be duly signed by all of the Unitholders on record or
                                                                                          To further elaborate, the redemption amount is calculated by deducting
         their Power of Attorney holders. Redemption requests by telephone,
                                                                                          from the “Applicable NAV for Redemptions”, the exit load, if any . For
         telegram, fax or other means or that lack valid signatures may not be
                                                                                          example, if the “Applicable NAV for Redemption” is Rs.14/- and the exit
         accepted.
                                                                                          load applied is 1%, the redemption amount will be calculated as follows:
         REDEMPTION PRICE
         If a redemption request is received before the specified cut-off time on                            (Applicable NAV
         any business day the redemption will be on the “Applicable NAV for                Redemption   = for Redemptions)* = 14 *(1-1%) = 14 * (1 - 0.01) = Rs. 13.86
         Redemptions” (See “Applicable NAV for Redemptions”) adjusted for exit             Amount
         load, if any. All redemption requests received after the prescribed time                            (1- Exit Load%)
         will be treated as having been received on the next business day and
         the units will be redeemed accordingly. Investors may note that the              PAYMENT OF REDEMPTION PROCEEDS
         Trustee has a right to introduce an exit load or a combination of entry          Redemption proceeds will be paid by cheque and payments will be made
         and exit loads subject to the Regulations.                                       in favour of the Unitholder’s registered name and bank account number
         EXIT LOAD/CHARGE                                                                 unless the unitholder instructs otherwise. Redemption cheques will be
                                                                                          sent to the Unitholder’s address (or, if there is more than one holder
         Currently, the redemptions in the Scheme will attract an exit load (as
                                                                                          of record, the address of the first-named holder on the original application
         a % of the “Applicable NAV for redemptions” as defined below) as
                                                                                          for Units) or the credit the redemption proceeds to the bank account
         mentioned under the section “Fees and Expenses” Unitholders should
                                                                                          of the investor if the investor so instructs, subject to the AMC having
         note that the AMC retains the right to change/impose an exit load upto
                                                                                          necessary arrangements with the bank. All redemption payments will be
         6%. This exit load set forth above is subject to change at the discretion
                                                                                          made, in favour of the registered holder of the Units (unless the
         of the AMC and such changes shall be implemented prospectively.
                                                                                          Unitholder instructs otherwise) or, if there is more than one registered
         The Trustee reserves the right to increase/decrease/introduce entry/exit         holder, of the first registered holder on the original application for Units.
         load at any time subject to the condition that the repurchase (i.e.              Units purchased can be redeemed only after realization of cheques.

                                                                                     19



TEMPLETON FLOATING RATE INCOME FUND
         The redemption cheque will be despatched to the unitholders within the               to bring the value of the account to the prescribed minimum (based on
         statutory time limit of 10 business days prescribed by SEBI. However,                applicable NAV) after a written intimation in this regard is sent to the
         on a best effort basis the Fund will endeavour to despatch the redemption            Unitholder.
         cheque within 72 hours after a valid redemption request is received at
                                                                                              RIGHT TO CLOSE AN INVESTOR’S ACCOUNT
         the Registrar’s office at Hyderabad, subject to the Fund’s right to limit
         redemption as described in “Right to Limit Redemptions”.                             The Mutual Fund may close out an investor’s account whenever, due to
                                                                                              redemptions, the value of the account falls below the minimum account
         To safeguard the interests of the Unitholders from loss or theft of their            balance of Rs. 1,00,000/- and Rs. 2,000/- for Short Term Plan and Long
         redemption cheques, SEBI has made it mandatory for applicants to                     Term Plan respectively, and the investor fails to purchase sufficient Units
         mention their bank account numbers in their application for                          to bring the value of the Account upto the minimum amount or more,
         purchase or redemption of Units. Investors are required to provide                   after written notice is sent by the Mutual Fund.
         the name of their bank, branch address and account number in the
         Application. Redemption cheques will be sent in accordance with such                 RIGHT TO LIMIT REDEMPTIONS
         information.                                                                         The Trustee may, in its sole discretion in response to unforeseen
                                                                                              circumstances or unusual market conditions, limit the total number of
         REDEMPTION BY NRIS, OCBS AND TRUSTS                                                  Units which may be redeemed on any Business day to 5% of the total
         NRIs/PIOs/OCBs/FIIs have been granted a general permission by RBI                    number of Units then in issue (or such higher percentage as the Trustee
         [Schedule 5 of the Foreign Exchange Management (Transfer or Issue of                 may determine in any particular case). In addition, the Trustee reserves
         Security by a Person Resident Outside India) Regulations, 2000] for                  the right, in its sole discretion, to limit redemptions with respect to any
         investing in / redeeming units of the schemes subject to conditions set              single account to an amount of Rs. 1 crore in a single day. Any Units
         out in the aforesaid regulations.                                                    which, by virtue of these limitations, are not redeemed on a particular
         SYSTEMATIC WITHDRAWAL PLAN (SWP)                                                     Business Day will be carried forward for redemption on the next following
                                                                                              Business Day in order of receipt. Redemptions carried forward will be
         A Unitholder may establish a Systematic Withdrawal Plan in any scheme
                                                                                              made at the NAV in effect on the subsequent Business Day(s) on which
         and receive regular/ quarterly payments from the account. The Unitholder
         can opt to withdraw a fixed amount subject to a prescribed minimum                   the condition for redemption request is fulfilled. To the extent multiple
         amount per month or per quarter. The investor can alternatively withdraw             redemptions are being satisfied in a single day under these circumstances,
         capital appreciation. In case of withdrawal of capital appreciation, SWP             such payments will be made pro-rata based on the size of each
         is available in Growth Option only. The Unitholder may avail of SWP by               redemption request. Under such circumstances, redemption cheques
                                                                                              may be mailed out to investors within a reasonable period of time and
         filling up the relevant portion of the transaction statement or by completing
                                                                                              will not be subject to the normal response time for redemption cheque
         an Application Form and sending it to any of the ISCs mentioned at the
         reverse of this Offer Document.                                                      mailing.

         The amount thus withdrawn by redemption shall be converted into Units
         at the applicable NAV (which is generally the first business day of the                                   SWITCHING FACILITY
         month in which the payment is scheduled), and such Units will be
         subtracted from the unit balance of that Unit holder.                                Unitholders will have an option to switch all or part of their investment
                                                                                              in one Scheme/Plan to another Scheme/Plan established by the Fund
         Unitholders may change the amount by giving appropriate written notice               that is available for investment at that time. The AMC would not charge
         to the Registrars. A Systematic Withdrawal Plan may be terminated on                 any separate fees for such switching currently. The switch will be effected
         written notice by the unitholder of the Fund, and it will terminate                  by way of redemption of units (with appropriate exit load, if any) and
         automatically if all Units are liquidated or withdrawn from the account,             a reinvestment (with appropriate entry load, if any) of the redemption
         or upon the Fund’s receipt of notification of death or incapacity of the             proceeds in another Scheme(s)/Plan(s). To effect a switch, a unitholder
         Unitholder.                                                                          must provide clear instructions to the Fund. Such instructions may be
         Here is an illustration using hypothetical figures to explain the concept            provided by completing a form and lodging the same on any Business
         of a Systematic Withdrawal Plan. Let us assume that Mr. ABC has                      Day with any of the Investor Service Centres or the office of the Registrar
         invested Rs. 10,000/- and been allotted 1000 units during the initial                and Transfer Agent. The form may also be sent by post as above. An
         offer. Subsequently he would like to receive Rs. 1000/- for a period of              account statement reflecting the new holdings will be dispatched to the
         four months, commencing from the beginning of the next month.                        Unitholder within three days of completion of the switch transaction.
         Month     Opening       Amount      Applicable No. of units     Closing
                  Balance of    Withdrawn      NAV       redeemed        Balance                     SUSPENSION OF SALE OR REDEMPTION
                     Units          (Rs.)      (Rs.)                     of Units                                OF UNITS
         1.        1000.000       1000           12         83.333       916.667
                                                                                              With the approval of the Boards of Directors of the Trustee and the Asset
         2.         916.667       1000           15         66.667       850.000              Management Company, the sale or redemption of Units may be suspended
         3.         850.000       1000            9        111.111       738.889              temporarily or indefinitely when any of the following conditions exist:
         4.         738.889       1000           12         83.333       655.556              i.   The debt market stops functioning or trading is restricted;
                                                                                              ii.  Periods of extreme volatility in the debt market, which, in the
         Total                    4000                     344.444
                                                                                                   opinion of the Investment Manager, is prejudicial to the interest of
         Note: The Fund may close an investor’s account if the balance falls                       the investors;
         below the prescribed minimum balance (based on applicable NAV) due                   iii. When there is a strike by the banking community or trading is
                               ,
         to redemptions or SWP and the investor fails to invest sufficient funds                   restricted by RBI or other authority

                                                                                         20



TEMPLETON FLOATING RATE INCOME FUND
         iv.   Period of extreme volatility in the debt/money market, which in the
               opinion of the Board of Directors of AMC and Trustee is prejudicial                    PROCEDURE AND MANNER OF WINDING UP
               to the interest of the scheme’s investors.
                                                                                               i)     The Trustee shall call a meeting of the Unitholders to consider and
         v.    As and when directed by the Government of India or RBI or SEBI                         pass necessary resolutions by simple majority of the Unitholders
               to do so or conditions relating to natural calamity/external aggression/               present and voting at the meeting for authorizing the Trustees or
               internal disturbances etc. arises, so as to cause volatile movements                   any other person to take steps for winding up the Scheme.
               in the money or debt market, which in the opinion of the AMC, will
               be prejudicial to the interest of the unitholders, if further trading           ii)    a)    The Trustee or the person authorized as above, shall dispose
               in the scheme is continued.                                                                  off the assets of the Scheme concerned in the best interest
                                                                                                            of the Unitholders of that Scheme.
         vi. Break down in the information processing/communication systems
               affecting the valuation of investments/processing of sale/repurchase                   b)    The proceeds of the sale made in pursuance of the above,
               request                                                                                      shall, in the first instance be utilized towards discharge of such
         vii. Natural calamity;                                                                             liabilities as are properly due under the Scheme and after
                                                                                                            making appropriate provision for meeting the expenses
         viii. SEBI, by order, so directs.                                                                  connected with such winding up, the balance shall be paid
         ix.    Any other circumstances which in the opinion of the Board of                                to the Unitholders in proportion to their respective interest in
                Directors of AMC and Trustee is prejudicial to the interest of the                          the assets of the Scheme as on the date when the decision
                scheme’s investors.                                                                         for the winding up was taken.
         The approval from the Boards of the Trustee giving details of circumstances           iii)   On the completion of the winding up, the Trustee shall forward to
         and justification for the proposed action shall also be informed to SEBI.                    the Board and the Unitholders, a report on the winding up containing
                                                                                                      particulars such as circumstances leading to the winding up, the
         The Trustee also reserves the right in its sole discretion to withdraw sale
                                                                                                      steps taken for disposal of assets of the Fund before winding up,
         of Units in the Scheme temporarily or indefinitely, if the Trustee views
                                                                                                      expenses of the Fund for winding up, net assets available for
         that increasing the Scheme’s size further may prove detrimental to the
                                                                                                      distribution to the Unitholders and a certificate from the Auditors
         existing Unitholders of the Scheme.
                                                                                                      of the Fund.
                                                                                               iv)    Notwithstanding anything contained herein, the application of the
                UNCLAIMED DIVIDEND/REDEMPTION AMOUNT                                                  provisions of the SEBI Regulations in respect of disclosures of half-
                                                                                                      yearly reports and annual reports shall continue to apply.
         The unclaimed redemption and dividend amount may be deployed by
         the mutual fund in call money market or money market instruments only                 After the receipt of the report referred to above under ‘Procedure and
         and the investors who claim these amounts during a period of three years              Manner of Winding Up’, if SEBI is satisfied that all measures for winding
         from the due date shall be paid at the prevailing Net Asset Value. After              up of the Scheme have been completed, the Scheme shall cease to
         a period of three years, this amount may be transferred to a pool account             exist.
         and the investor can claim the amount at NAV prevailing at the end of
         the third year. The income earned on such funds may be used for the                               BORROWING BY THE MUTUAL FUND
         purpose of investor education. The AMC would make a continuous effort
         to remind the investors through letters to take their unclaimed amounts.              In terms of Regulations as presently prevailing, the Scheme shall have
         The investment management fees charged by the AMC for managing                        the power to borrow upto 20% of its assets under management outstanding
         unclaimed amounts will not exceed 50 basis points.                                    as on the date of borrowing. This borrowing shall be used only for the
                                                                                               purposes of paying redemptions or for the dividend distributions that may
                          DURATION OF THE SCHEME                                               have to be paid by the Mutual Fund. The Mutual Fund may tie up with
                                                                                               various banks/institutions for the above mentioned facility for which it
         The duration of the Scheme is perpetual. However, in terms of the SEBI                may have to give guarantee or the delivery of the securities held by it
         Regulations, the Scheme may be wound up if:                                           as collateral. The AMC may be exposed to losses on account of its
         i.     There are changes in the capital markets, fiscal laws or legal                 inability to get its securities back in time from the bank(s)/institution(s).
                system, or any event or series of events occurs, which, in the                 The limit of 20% may be revised at the discretion of the Fund and to
                opinion of the Trustee, requires the Scheme to be wound up; or                 the extent the Regulations hereafter permit.

         ii.    75% of the Unitholders of the Scheme pass a resolution that the
                Scheme be wound up;                                                                        NET ASSET VALUE CALCULATION AND
         iii.   SEBI directs the Scheme to be wound up in the interests of the                                   VALUATION OF ASSETS
                Unitholders; or
                                                                                               NAV is the actual value of a Unit on any Business Day and is computed
         Where a Scheme is to be wound up pursuant to the above, the Trustee                   as shown below:
         shall give notice of the circumstances leading to the winding up of the
         Scheme -                                                                                               (Market Value of the Scheme's Investments + Other Assets
                                                                                                                 (including accrued interest) + Unamortized Issue Expenses
         i.     to SEBI; and                                                                                            – All Liabilities except Unit Capital & Reserves)
                                                                                               NAV =
         ii.    in two daily newspapers having circulation all over India and also             (Rs. Per unit)       Number of Units Outstanding at the end of the day
                in a vernacular newspaper circulating at the place where the Fund
                is established.                                                                Valuation of Scheme’s assets and calculation of the Scheme’s NAV will

                                                                                          21



TEMPLETON FLOATING RATE INCOME FUND
         be subject to such rules or regulations that SEBI may prescribe from time                7.   From time to time, subject to the Regulations, the Sponsors, the
         to time and shall be subject to audit on an annual basis.                                     Mutual Funds managed by them, their affiliates-associates, the
                                                                                                       Sponsors and the AMC may acquire a substantial portion of the
         Valuation of Assets will be in accordance with the provisions of the SEBI
                                                                                                       Scheme’s units and collectively constitute a majority investor in the
         Regulations/Guidelines/Directives as amended from time to time.
                                                                                                       Scheme.

                                  TRANSACTIONS
                                                                                                                  UNITHOLDER INFORMATION
                            WITH SPONSOR - ASSOCIATES
                                                                                                  ACCOUNT NUMBER
         1.   The Schemes of Templeton Mutual Fund, from the date of their
              inception, till the date of this offer document, have not underwritten              Every investor will have an Account number. The number of Units issued
              any issue lead managed by the associate companies.                                  to an investor or redeemed by an investor will be reflected in his or her
                                                                                                  Account and a statement to this effect will be issued to the Unitholder.
         2.   Templeton Mutual Fund has not utilized the services of associate                    Reports / Disclosures
              companies for purchase-sale of securities.
                                                                                                   Information Type                   Frequency
         3.   Templeton Mutual Fund has utilized the services of one of the                        Disclosure of NAV                  Calculated Daily - Published Daily
              associates namely, Spur Cable And Datacom Pvt. Ltd (formerly,                                                           - Press Release daily
              Hathway Securities Ltd.), a subsidiary of Hathway Investments Ltd.
                                                                                                   Performance Review                 Quarterly
              for procuring unit subscriptions for both Templeton India Growth
                                                                                                   Portfolio Information              Complete holding - Half Yearly
              Fund (TIGF) and Templeton India Income Fund (TIIF). The details
              of the brokerage commission and the trail fees paid for such                         Redemption and Resale Prices       Calculated Daily - Press release daily
              subscriptions are given below. These commissions have been                          Other Service Standards
              computed and paid at the same rates offered to other distributors
              by the Scheme.                                                                       Description of Service             Service Commitment
                                                                                                   Account Statement                  3 Days
                                                                         (Rs. in millions)
                                                                                                   Address change                     3 Days
                                                                             For the               Nomination                         3 Days
                  Scheme                    For the year ended          half year ended            Transmission                       5 Days
                               31-03-1999 31-03-2000       31-03-2001    30-09-2001                Redemption Cheque mailing          72 hours
                                                                                                   SIP/SWP/STP Account Statements     5 Days
                  TIGF            1.48         2.02          1.77           0.289
                  TIIF            0.54         0.21          0.03           0.004                 ACCOUNT STATEMENTS
                                                                                                  Each Unitholder will receive an Account Statement each time additional
         4.   The AMC may, subject to SEBI regulations, utilize the services of                   purchases or redemptions of Units are made, or dividends or other
              the associate companies for the following:                                          distributions in respect of Units are declared and paid. In addition, each
              l          Purchase or sale of securities;                                          Unitholder also will receive an annual Account Statement as soon as
                                                                                                  practicable after 31st March each year. Such annual Account Statement
              l          Marketing, sale and distribution of the units of the Schemes
                                                                                                  will detail the investor’s opening balance of Units held as of 1st April
                         of Templeton Mutual Fund
                                                                                                  of the prior year, all transactions that occurred during the preceding
              However, the AMC shall ensure that brokerage paid to affiliate                      months with respect to the Account, such as additional purchases,
              broker will be in line with what will be paid to non-affiliate broker               redemptions and reinvestments of dividends, and a closing balance of
              and the quantum of business shall be subject to the limits prescribed               Units held and the NAV of the Units as on the date of issue of the
              by SEBI                                                                             Statement.
              The AMC shall also ensure that the brokerage - trail fee paid to
              the affiliate brokers for the sale and distribution of units is at the              NAV, REDEMPTION AND ISSUE PRICES
              same rates offered to the other distributors.                                       Following are the statutory provisions governing the repurchase and
                                                                                                  resale prices of units of Mutual Funds:
         5.   The AMC may, subject to the regulations, may subscribe on behalf
              of the Schemes in the Government securities issued and lead                         a)   The Mutual Fund, in case of open-ended scheme, shall publish in
              managed by any of the associate. The AMC shall ensure that                               a daily newspaper of all India circulation, the NAV, sale and
              investments in such issues will be in line with the investment                           repurchase price of units on a daily basis.
              objectives of the Scheme.
                                                                                                  b)   While determining the prices of the units, the scheme shall ensure
         6.   No investment shall be made in any unlisted security of an                               that the repurchase price is not lower that 93% of the Net Asset
              associate or group company of the sponsor; or any security issued                        Value and the sale price is not higher that 107% of the Net Asset
              by way of private placement by an associate or group company of                          Value.
              the sponsor. The Scheme may however invest in the listed securities
              of group companies of the sponsor provided that such investments                         Provided further that the difference between the repurchase price
              are not in excess of 25% of the net assets of all the Schemes of                         and the sale price of the unit shall not exceed 7% calculated on
              the Fund.                                                                                the sale price.

                                                                                             22



TEMPLETON FLOATING RATE INCOME FUND
         c)   The price of units shall be determined with reference to the last             However, the investors should be aware that the nominee may not
              determined Net Asset Value unless,                                            acquire title or beneficial interest in the property by virtue of the
              –     the scheme announces the Net Asset Value on a daily basis;              nomination and that neither the Mutual Fund or the Investment Manager
                    and                                                                     or the Registrar and Transfer Agent of the Fund will be bound to transfer
                                                                                            the units to the nominee in the event of any dispute in relation to the
              –     the sale price is determined with or without a fixed premium            nominee’s entitlement to the units.
                    added to the future NAV.
         The Scheme shall comply with Regulations 48 and 49 of SEBI Regulations             If the Mutual Fund or the Investment Manager or the Trustee were to
         regarding computation and publication of NAV, redemption and re-sale               incur, suffer or any claim, demand, liabilities, proceedings or actions are
         prices.                                                                            filed or made or initiated against any of them in respect of or in
                                                                                            connection with the nomination, they shall be entitled to be indemnified
         Notwithstanding what is contained in the foregoing paragraph the Fund              absolutely for any loss, expenses, costs, and charges that any of them
         would compute NAV, redemption and issue prices daily and make press                may suffer or incur absolutely from the investor’s estate.
         releases every day to newspapers widely circulated for publication.
         The publishing of NAV and redemption and Issue Prices as outlined above            RECEIVING ACCOUNT STATEMENT/UNIT CERTIFICATES/
         are as per the extant SEBI Regulations and are subject to change from              CORRESPONDENCE BY E-MAIL
         time to time.                                                                      The Mutual Fund will encourage the Unit holder to provide their e-
                                                                                            mail addresses for all correspondence. The Mutual Fund’s Website
         ANNUAL FINANCIAL REPORTS                                                           would facilitate request for Account Statement by Unit holders. The
         As required by the SEBI Regulations, the Fund will publish, as soon as             Mutual Fund will endeavour to send Account Statement and any
         practical after 31st March each year but not later than six months                 other correspondence using e-mail as the mode of communication.
         thereafter, as the Trustee may decide, accounts relating to its affairs for
         the period ending 31st March. The Fund will also mail an abridged                  The Unit holder will be required to download and print the Account
         scheme-wise annual report to all the unitholders. The full annual report           Statement after receiving e-mail from the Mutual Fund. Should the
         of the Fund will be furnished to the Unitholders upon a written request            Unit holder experience any difficulty in accessing the electronically
         and will be available at the Head Office of the Investment Manager for             delivered Account Statement, the Unit holder shall promptly advise
         inspection. The Fund will make all disclosures required by the SEBI                the Mutual Fund to enable the Mutual Fund to make the delivery
         Regulations, including information about the entire portfolio held by the          through alternate means. Failure to advise Templeton Mutual Fund
         Fund under this Scheme.                                                            or Karvy Consultants Ltd. of such difficulty within 24 hours after
                                                                                            receiving the e-mail, will serve as an affirmation regarding the
         HALF YEARLY DISCLOSURES                                                            acceptance by the Unit holder of the Account Statement.
         The Fund shall before the expiry of one month from the close of each
         half year that is on 31st March and 30th September, publish its                    It is deemed that the Unit holder is aware of all security risks
         unaudited financial results, containing details specified in Regulation 59         including possible third party interception of the Account Statement
         read with Twelfth Schedule of SEBI Regulations, in one English newspaper           and content of the Account Statement becoming known to third
         circulating in the whole of India and in one regional newspaper circulating        parties.
         in the region where the head office of the Fund is situated. In addition,          Subject to the consent of the Unitholder, the mutual fund will
         the Scheme shall mail or publish the complete portfolio to the investors           endeavour to send the account statement, annual report, half yearly
         before the expiry of one month from March 31 an September 30 each                  portfolio statement to the unitholder by e-mail. Alternately, the AMC
         year. These shall also be displayed on the web site of the mutual fund             may also send an e-mail to the investor giving the link to the website
         and that of AMFI.                                                                  of the Mutual Fund for the aforesaid statements.
         DISCLOSURE UNDER REGULATION 25(11) OF SEBI (MF)
                                                                                            GIFT FACILITY
         REGULATIONS, 1996
                                                                                            The Unitholder, at any time after the allotment of units may write to any
         For the details of investments in companies which have invested more               Investor Service Centre, requesting that the Units be transferred on
         than 5% of NAV of schemes managed by the AMC, as on September                      account of a gift made by the unitholder subject to the provisions of
         30, 2001, please refer the Offer Document.                                         applicable law.
         NOMINATION & TRANSFER FACILITY
         If an Application is made in the name of a single holder, the Unitholder
         can nominate a successor to receive the Units upon his-her death,                                                TAXATION
         subject to the prescribed formalities.
                                                                                            The following summary outlines the tax benefits available to the Unitholders
         Furnishing of the death certificate by way of proof of the death of the            of the Scheme and to the Fund and is based on the prevailing tax laws,
         unitholder, signature of the nominee, furnishing proof of guardianship             as they stood on the date of this Offer Document.
         in case the nominee is a minor, acknowledging receipt of amounts to
         the credit of the single unitholder, execution of Indemnity Bond of or such        THE FOLLOWING INFORMATION IS PROVIDED FOR GENERAL
         other documents as may be required from the nominee in favour of and               INFORMATION PURPOSES ONLY. HOWEVER, IN VIEW OF THE INDIVIDUAL
         to the satisfaction of Templeton Mutual Fund (TMF), Templeton Asset                NATURE OF THE IMPLICATIONS, EACH INVESTOR IS ADVISED TO CONSULT
         Management (I) Pvt. Ltd. (TAMIL), that will constitute full discharge of           HIS OR HER OWN TAX ADVISERS WITH RESPECT TO THE SPECIFIC TAX
         liabilities of TMF and/ or TAMIL towards the single unitholder’s estate,           IMPLICATIONS ARISING OUT OF HIS OR HER PARTICIPATION IN THE
         legal heirs, executors, administrators and successors.                             SCHEME.

                                                                                       23



TEMPLETON FLOATING RATE INCOME FUND
         TAX IMPLICATIONS TO THE MUTUAL FUND                                                Accordingly, income in respect of units of the Scheme shall not be liable
         Tax benefit to the Fund                                                            to taxation and/or to any deduction of tax at source.
         Templeton Mutual Fund is registered with SEBI and the entire income                Tax on capital gains
         of the Fund is exempt from income-tax under Section 10(23D) of the                 As per Section 2(42A) of the Act, units of the Scheme held as a capital
         Act; the Fund is therefore entitled to receive income without any                  asset, for a period of more than twelve months immediately preceding
         deduction of tax at source.                                                        the date of transfer, will be treated as a long-term capital asset for the
                                                                                            computation of capital gains; in all other cases, it would be treated as
         Distribution tax
                                                                                            a short-term capital asset.
         As per Section 115R of the Act, any amount of income distributed by
         a Mutual Fund to its unit holders shall be chargeable to tax and such              NRIs/OCBs/PIOs
         Mutual Fund shall be liable to pay additional income-tax at the rate of            Long-term and short-term capital gains arising to NRIs/PIOs/OCBs from
         10 percent. A surcharge of 2 percent on this additional tax would also             the transfer of the units of the Scheme will be taxable at the following
         be payable.                                                                        rates:
         However, these provisions will not be applicable to any income distributed          Nature of income               Tax rate*
         by an open-ended equity oriented fund for a period of three years
                                                                                             Short-term capital gains       Rate applicable as per the slabs
         commencing from April 1, 1999.
                                                                                                                            prescribed in the case of NRIs/PIOs
         An open ended equity oriented fund has been defined to mean such                                                   (note 1), and at 48 percent in the case
         fund where the investible funds are invested by way of equity shares in                                            of OCBs
         domestic companies to the extent of more than fifty percent of the total
         proceeds of such fund.                                                              Long-term capital gains        20 percent with the cost inflation index
                                                                                                                            benefit or 10 percent without the cost
         TAX IMPLICATIONS TO RESIDENT UNITHOLDERS
                                                                                                                            inflation index benefit, whichever is
         Tax on income in respect of units                                                                                  beneficial
         As per Section 10(33) of the Act, income received in respect of units
                                                                                            * excluding surcharge as may be applicable (note 2).
         of a mutual fund specified under Section 10(23D) of the Act, is exempt
         from income-tax.                                                                   The above rates would be subject to applicable tax treaty relief.
         Tax on capital gains                                                               Note 1:
         Under Section 2(42A), units of the Schemes are treated as long-term                Currently, NRIs/PIOs are liable to tax in respect of their total income as
         capital assets if held for a period of more than 12 months. Under Section          per the following rates:
         112 of the Act, the capital gains arising from transfer of a long-term              Slab                                       Tax rate
         capital asset will be subject to tax at 20 percent with the cost inflation
         index benefit, or at 10 percent without the cost inflation index benefit,           Total income not exceeding Rs. 50,000      Nil
         whichever is beneficial.
                                                                                             Rs. 50,001 ~ not exceeding Rs. 60,000      10 percent of excess over
         Further, capital gains arising from the transfer of short-term capital
                                                                                                                                        Rs. 50,000
         assets will be subject to tax at the normal rates of tax applicable to such
         assessees.                                                                          Rs. 60,001 ~ not exceeding Rs 150,000      20 percent of excess over
         The tax payable on total income from all sources shall be increased by                                                         Rs. 60,000 + Rs. 1,000
         a surcharge of 2 percent for individuals and trusts having total income             Exceeding Rs 150,000                       30 percent of excess over
         exceeding Rs 60,000, and for all categories of taxpayers.                                                                      Rs. 150,000 + Rs. 19,000
         Tax deducted at source
                                                                                            Note 2:
         As per Section 194K of the Act, no tax is required to be withheld or
                                                                                            Surcharge is currently applicable at the rate of 2 percent in the case
         deducted at source, where any income is credited or paid by a mutual
                                                                                            of NRIs/PIOs/non-resident trusts having total income exceeding
         fund.
                                                                                            Rs. 60,000. Foreign corporates (such as for instance, FIIs organised as
         Further, no tax is required to be deducted at source from capital gains            companies and OCBs) are not liable to any surcharge.
         arising at the time of repurchase or redemption of the units.
                                                                                            Note 3:
         Religious and charitable trusts                                                    As per Section 195 of the Act, in respect of short-term capital gains,
         Investments in the units of the Fund by Religious and Charitable Trusts            tax is required to be deducted at source at the rate of 30 percent if the
         is an eligible investment under Section 11(5) of the Act, read with Rule           payee is a non-resident non-corporate assessee, and at the rate of 48
         17C of the Income Tax Rules, 1962.                                                 percent if the payee is a foreign company. As regards long-term capital
         TAX IMPLICATIONS TO NRIS/OCBS/PIOS/FIIS                                            gains, tax is required to be deducted under Section 195 at the rate of
                                                                                            20 percent in all cases.
         Tax on income in respect of units
         As per Section 10(33) of the Act, income received in respect of units              These withholding tax rates will be further increased by the applicable
         of a mutual fund specified under Section 10(23D) are exempt from                   surcharge (note 2).
         income tax. Further, as per the proviso to Section 196A(1) of the Act,
                                                                                            FIIs
         no tax shall be deducted at source from any income credited or paid
         to non-resident investors in respect to units of a Mutual Fund specified           As per Section 115AD of the Act, long-term capital gains on sale of units
         under Section 10(23D).                                                             would be taxed at the rate of 10 percent and short-term capital gains

                                                                                       24



TEMPLETON FLOATING RATE INCOME FUND
         would be taxed at 30 percent [plus the surcharge as applicable (note 2)].
         The said rates would be subject to applicable tax treaty relief.                                                       GENERAL INFORMATION
         The gains, in either case, would be calculated without indexation of cost                           DECLARATION OF DIVIDENDS
         of acquisition and without conversion of cost of acquisition in foreign
                                                                                                             The Trustee may declare dividends in the scheme from time to time
         currency.
                                                                                                             though there is no assurance or guarantee to the Unitholders as to the
         No tax would be deductible at source from the capital gains (whether                                rate of dividend distribution nor that the dividend will be regularly paid.
         long-term or short-term) arising on repurchase/redemption of units in                               The Trustees may declare dividends at any periodicity as it deems fit to
         view of the provisions of Section 196D(2) of the Act.                                               Unitholders, whose names appear on the Unitholders’ register on the
                                                                                                             record date. Dividends will be paid by cheque, net of taxes as may be
         WEALTH TAX BENEFITS (FOR RESIDENT UNITHOLDERS
                                                                                                             applicable, and payments will be in favour of the Unitholder’s registered
         AND NRIs/OCBs/PIOs/FIIs)                                                                            name and, if provided, bank account number. Dividend cheques will be
         Units are not to be treated as assets as defined under Section 2(ea)                                sent to the Unitholder’s address stated on the Application Form. All
         of the Wealth-Tax Act, 1957 and hence will not be liable to wealth-tax.                             dividend payments will be made in favour of the registered holder of Units
         OTHER INCOME TAX PROVISIONS                                                                         or, if there is more than one registered holder, of the first-named
                                                                                                             registered holder on the original Application Form. To safeguard the
         Under Section 94(7), losses arising on the sale of securities or units,
                                                                                                             interest of Unitholders from loss or theft of dividend cheques, investors
         in respect of which the dividend or income received or receivable is
                                                                                                             are encouraged to provide the details of their bank account in the
         exempt from tax, will be disallowed if such securities or units have been
                                                                                                             Application Form. Dividend cheques will be sent in accordance with such
         purchased upto 3 months prior to the record date and have been sold
                                                                                                             information. The Trustee may not declare a dividend at all in the event
         within 3 months after such date. The amount of loss to be disallowed
                                                                                                             of inadequacy of distributable income. There is no assurance or guarantee
         will be restricted to the amount of dividend or income received or
                                                                                                             to Unitholders as to the periodicity of dividend, rate of dividends
         receivable in respect of such securities or units.
                                                                                                             distribution nor that dividends will be regularly paid.
         Gift Tax
                                                                                                             Dividend Reinvestment Facility: Investors may choose to reinvest the
         The Gift Tax Act, 1958, has ceased to apply to gifts made on or after
                                                                                                             dividend to be received by them in additional Units of the Schemes.
         1st October, 1998. Gifts of Units, purchased under the Scheme, would
                                                                                                             Under this option, the dividend due and payable to the Unitholders will
         therefore, be exempt from gift-tax.
                                                                                                             be reinvested in the respective Schemes at the first ex-dividend NAV.
                                                                                                             The dividends so reinvested shall be constructive payment of dividends
                                    INVESTOR SERVICES                                                        to the Unitholders and constructive receipt of the same amount from
                                                                                                             each Unitholder for reinvestment in Units.
         The Fund intends to promptly follow up on all complaints and enquiries
                                                                                                             POWER TO MAKE RULES
         received from investors regarding the issue of Units with a view to
         resolving them quickly. For further assistance in this regard, investors are                        Subject to the prior approval of SEBI, if required, the Trustee may, from
         urged to contact the ISCs mentioned on the reverse of this Abridged Offer                           time to time, prescribe such terms and make such rules for the purpose
         Document.                                                                                           of giving effect to the provisions of this Scheme with power to the
                                                                                                             Investment Manager to add to, alter or amend all or any of the terms
         History of performance regarding redressal of investor grievances                                   and rules that may be framed from time to time.
         (as on November 30, 2001)
                                                                                                             POWER TO REMOVE DIFFICULTIES
         Scheme     01-04-1999 to 31-03-2000    01-04-2000 to 31-03-2001    01-04-2001 to 30-11-2001
                                                                                                             If any difficulty arises in giving effect to the provisions of this Scheme,
                   Received Redressed Pending Received Redressed Pending   Received Redressed Pending        the Trustee may do anything not inconsistent with such provisions, which
                                                                                                             appear to them to be necessary, desirable or expedient, for the purpose
           TIGF     316      316        Nil     271      271        Nil     117       117       Nil          of removing the difficulty.

           FIGF      15       15        Nil     179      179        Nil       6        6        Nil          SCHEME TO BE BINDING ON THE UNITHOLDERS
                                                                                                             The Trustee may, from time to time, add to or otherwise vary or alter
            FIIF    N.A.     N.A.      N.A.     75        74        1        11       12        Nil          all or any of the features, investment plans and terms of this Scheme
           FIBF     N.A.     N.A.      N.A.     38        38        Nil       8        8        Nil          after obtaining the prior approval of SEBI and the Government of India
                                                                                                             where necessary and the Unitholders in accordance with the SEBI
            TIIF    440      440        Nil    1027     1023        4       660       663        1           Regulations, and the same shall be binding on each Unitholder and any
                                                                                                             person or persons claiming through or under him as if each Unitholder
           TMIP      17       17        Nil     450      449        1       171       172        0
                                                                                                             or such person expressly agreed that such features, plans and terms
           TGSF      29       29        Nil     157      157        Nil     106       106       Nil          should be so binding.

           TILF      63       63        Nil     111      111        Nil       8        8        Nil          WEBSITE
                                                                                                             The website of Templeton Mutual Fund is intended solely for the use
           FITF     N.A.     N.A.      N.A.      0        0         Nil       3        3        Nil          of Resident Indians, Non Resident Indians, persons of Indian Origin and
           TILP     N.A.     N.A.      N.A.     N.A.     N.A.      N.A.       0        0        Nil          Foreign Institutional Investors registered with Securities and Exchange
                                                                                                             Board of India. It should not be regarded as a solicitation for business
         Investor Relations Officers                                                                         in any jurisdiction other than India. In particular the information is not
         Please refer to the list of Investor Service Centres and contact persons                            for distribution and does not constitute an offer to sell or the solicitation
         as listed in this Abridged Offer Document.                                                          of an offer to buy securities in any jurisdiction where such activity is

                                                                                                        25



TEMPLETON FLOATING RATE INCOME FUND
         prohibited including the United States of America. Any persons resident              of the distributor for this purpose. In such event, the Power of Attorney
         outside India who nevertheless intend to respond to this material must               should be submitted to the Fund.
         first satisfy themselves that they are not subject to any local requirements
                                                                                              BROKERS
         which restrict or prohibit them from so doing. Information other than
         that relating specifically to Templeton Asset Management (India) Pvt.                The Fund intends to utilize the services of select financial intermediaries
         Ltd., Templeton Mutual Fund and its products, is for information                     for distribution and may pay brokerage depending upon the efficiency
         purposes only and should not be relied upon as a basis for investment                and other factors as may be decided by the AMC. The Investment
         decisions. Templeton Asset Management (India) Pvt. Ltd. cannot be                    manager is the sole authority to select such financial intermediary/
         responsible for any information contained in any website linked from                 intermediaries who would distribute the product. Further, the AMC may
         this website.                                                                        appoint one or more exclusive distributors, at its discretion, based on
                                                                                              the parameters decided by the AMC.
         WEB TRANSACTIONS
                                                                                              The Fund may use the services of associate brokers or take the sale of
         In the new era of liberalisation and modernisation, the Fund wishes to
                                                                                              its units into account when allocating brokerage. However, the brokerage
         take optimum advantage of the modern techniques of communication
                                                                                              paid to Associate Brokers shall be at the same rate offered to any other
         and transactions to serve its investors in a more efficient manner. As               broker who procures subscription.
         a step towards the same, the Fund has introduced and is allowing online
         subscription and redemption/ repurchase of the Units of the Fund or any              BOOKS AND RECORDS
         other transaction such as change in address, change in bank details,                 The books and records of the Fund will be maintained at the Registered
         change in mode of payment etc. The investor availing this facility will              Office of the Investment Manager. The fiscal year of the Fund ends on
         be able to subscribe for and redeem the Units of the Fund or carry out               31st March in each year. The Register of Unitholders of the Scheme shall
         other transactions through web-based transaction links. Online transactions          be maintained at the Registered office of the Investment Manager along
         will save cost & time of the investor and will also enable the Fund to               with that of the Registrars, Karvy Consultants Ltd. at their office at 46,
         serve its clients in a faster and efficient way. However the investors               Road No.4 Street No.1, Banjara Hills, Hyderabad 500 034 and such
         intending to take benefit of the web-based transaction facility should               other places as the Trustees may decide.
         note that the investor may use this service at their own risk. The Fund,
         the AMC, the Trustee, alongwith its directors, employees and
         representatives shall not be liable for any damages or injuries arising out
                                                                                                    DOCUMENTS AVAILABLE FOR INSPECTION
         of or in connection with the use of the website or its non-use including
                                                                                              The following documents will be available for inspection by the prospective
         non-availability or failure of performance, loss or corruption of data, loss
                                                                                              investors between 11.00 a.m. and 1.00 p.m. on any day (excluding
         of or damage to property (including profit and goodwill), work stoppage,
                                                                                              Saturdays, Sundays and public holidays), at the office of the Fund: -
         computer failure or malfunctioning, or interruption of business; error,
         omission, interruption, deletion, defect, delay in operation or transmission,        l    Copy of Registration Certificate from SEBI
         computer virus, communication line failure, unauthorised access or use
                                                                                              l    Copy of the Trust Deed and Supplementary Trust Deed
         of information.
                                                                                              l    Copy of Investment Management Agreement
         PERSONAL IDENTIFICATION NUMBER (PIN)
                                                                                              l    Copy of Memorandum & Articles of Association of Trustee
         The PIN facility will be made available to the Unit holders to facilitate
         transactions through the website of the Fund and may also be introduced              l    Copy of Memorandum & Articles of Association of the Investment
         to facilitate transactions through other modes like telephone, ATM,                       Manager
         Smart Cards etc. Unit holders will be required to indicate their desire              l    Copy of the Custodian Agreement
         to avail of this facility and also indicate their Bank Account No., Name
                                                                                              l    Consent of Registrar and Transfer Agents to act in the said capacity
         of the Bank and Branch in the application for purchasing units at a future
         date. The Mutual Fund on request, will mail to such Unit holders, the                l    Consent of Auditors to act in the said capacity
         ‘HPIN Agreement’ together with detailed terms and conditions subject                 l    A copy of this Offer Document
         to which its usage will be permitted. On receipt of the ‘HPIN Agreement’
                                                                                              l    SEBI (Mutual Funds) Regulations, 1996
         duly signed by the Unit holder, the PIN will be mailed to each Unit holder.
         For transactions using the website, Unit holders may first use the PIN               l    Copy of Indian Trust Act, 1882
         to create his own log-in name and password. The Unit holder will be first            l    Annual Report of the Asset Management Company
         asked to enter the log-in name and password before the request for
         purchase, redemption switch or any other transaction is accepted. In the
         interest of the Unit holder, the Mutual Fund/ISC reserves the right to ask                    PENALTIES AND PENDING LITIGATION
         for a fax confirmation of the request and any other additional information
         about the account of the Unit holder. All transactions conducted with                l    All cases of penalties awarded by SEBI under the SEBI Act or any
         use of this PIN will be the responsibility of the Unit holder and the Unit                of its regulations against the Sponsor of the Mutual Fund or any
         holder will abide by the record of the transactions generated. The Mutual                 company associated with the Sponsor in any capacity including the
         Fund and the ISC / Registrar shall not accept any responsibility for the                  Asset Management Company, Trustee Company/Board of Trustees,
         unauthorised use of the PIN.                                                              or any of the directors or key personnel specifically the fund
                                                                                                   managers) of the Asset Management Company and Trustee Company
         TRANSACTION BY DISTRIBUTOR                                                                The nature of the penalty must be disclosed. For Sponsor and its
         Franklin Templeton may introduce a facility for distributors to transact                  associates, other than the penalties as mentioned above, the
         on the web on behalf of their clients, provided the client has authorised                 penalties awarded by any financial regulatory body, including stock
         the distributors to do so by executing a Power of Attorney (PoA) in favour                exchanges, for defaults in respect of shareholders, debentureholders

                                                                                         26



TEMPLETON FLOATING RATE INCOME FUND
             and depositors shall also be disclosed. Additionally, penalties                         Mutual Fund as one of the respondents. The Honourable Delhi
             awarded for any economic offence and violation of any securities                        High Court vide its order dated 3rd August, 2000 directed
             laws shall be disclosed : Nil                                                           SEBI to dispose off the representation filed by the investor.
                                                                                                     The investor then filed a representation with SEBI. After
         l   Any pending material litigation proceedings incidental to the business                  hearing the petitioner and the respondents, SEBI rejected the
             of the Mutual Fund to which the Sponsor of the Mutual Fund or                           representation vide order dated September 4, 2000 upholding
             any company associated with the Sponsor in any capacity including                       the stand of the Mutual Fund.
             the AMC, Board of Trustees /Trustee Company or any of the
             directors or key personnel is a party. Any pending criminal cases                       Subsequently, the investor had filed a Memorandum of Appeal
             against the Sponsor or any company associated with the Sponsor                          with the Securities Appellate Tribunal, Mumbai against the
             in any capacity including the AMC, Board of Trustees/Trustee                            SEBI order dated September 4, 2000. The Tribunal dismissed
             Company or any of the directors or key personnel should also be                         the appeal vide its order dated February 15, 2001 and upheld
             disclosed separately:                                                                   the stand of the Mutual Fund. The investor has now filed a
                                                                                                     petition in the Delhi High Court challenging the order of the
             International Operations:
                                                                                                     Securities Appellate Tribunal and challenging the Central
             l    Three individual plaintiffs filed a consolidated complaint in the
                                                                                                     Board of Direct Taxes (CBDT) order.
                  U.S. District Court for the Southern District of Florida against
                  Templeton Vietnam Opportunities Fund, Inc. (now known as                 l    Any deficiency in the systems and operations of the Sponsor of the
                  Templeton Vietnam and Southeast Asia Fund, Inc.); Templeton                   Mutual Fund or any company associated with the sponsor in any
                  Asset Management, Ltd., an indirect wholly-owned subsidiary                   capacity including the AMC or the Trustee Company which SEBI has
                  of FRI and the investment manager of the closed-end                           specifically advised to be disclosed in the offer document, or which
                  investment company; certain of the fund's officers and directors;             has been notified by any other regulatory agency , shall be
                  FRI; and Templeton Worldwide, Inc., an FRI subsidiary. The                    disclosed : Nil
                  plaintiffs in that action, moved to certify a class with respect
                  to certain claims raised in the consolidated complaint. The              l    Any enquiry/adjudication proceedings under the SEBI Act and the
                  court has not ruled on the motion to certify a class.                         Regulations made thereunder, that are in progress against the
                                                                                                Sponsor of the Mutual Fund or any company associated with the
             l    Templeton International Inc. is involved from time to time in                 Sponsor in any capacity including the AMC, Board of Trustees/
                  litigation relating to claims arising in the normal course of                 Trustee Company or any of the Directors or key personnel of the
                  business. Management is of the opinion that the ultimate                      Asset Management Company shall be disclosed: Nil
                  resolution of such claims will not materially affect Franklin
                  Templeton Investments' business or financial position.                   Notwithstanding anything contained in this Abridged Offer Document the
                                                                                           provisions of the SEBI (Mutual Funds) Regulations, 1996 and the
             Indian Operations:
                                                                                           Guidelines thereunder shall be applicable.
             l    One of the investors under Templeton India Growth Fund had
                  made investment to the tune of Rs.1,00,00,001/- under                    For Templeton Asset Management (India) Pvt. Ltd.
                  Section 54EB of the Income Tax Act, 1961. In accordance                  Investment Manager: Templeton Mutual Fund
                  with the legal opinion of the counsel of the Fund, the Fund
                  is of the view that investments under Section 54EB of the
                  Income Tax Act, 1961 read with CBDT notification no. 10247
                  dated December 19, 1996, the units had to be locked-in for               Rajiv Vij
                  a period of seven years from the date of investment. However,            Regional Head, India And Middle East
                  the investor had disputed this stand and had filed a writ
                  petition in the High Court of Delhi seeking the direction of the         Place: Mumbai
                  court for premature redemption of units, with Templeton                  Date: December 28, 2001




                                                                                      27



TEMPLETON FLOATING RATE INCOME FUND
                                                    DIRECTORY


                   SPONSOR                                      CUSTODIANS
                   Templeton International, Inc.,               Citibank, N. A.
                   500 East Broward Boulevard,                  Plot C/61, Bandra Kurla Complex,
                   Suite 2100, Fort Lauderdale,                 'G' Block, Bandra (East), Mumbai 400 051
                   Florida 33394 - 3091, USA.

                                                                TRUSTEE
                   REGISTRARS                                   Templeton Trust Services Pvt. Ltd.
                   Karvy Consultants Ltd.,                      1st Floor, Sakhar Bhavan,
                   46, Avenue 4, Street No. 1,                  230 Backbay Reclamation,
                   Banjara Hills,                               Nariman Point, Mumbai 400 021.
                   Hyderabad 500 034
                                                                AUDITORS
                                                                Arthur Andersen & Associates
                   INVESTMENT MANAGER
                                                                17th Floor, Express Towers,
                   Templeton Asset Management                   Nariman Point, Mumbai 400 005.
                   (India) Pvt. Ltd.
                   1st Floor, Sakhar Bhavan,
                   230 Backbay Reclamation,                     LEGAL ADVISORS
                   Nariman Point,
                                                                Little & Co.
                   Mumbai 400 021.
                                                                Central Bank Building
                                                                M.G. Road, Mumbai - 400 001




                                                       28



TEMPLETON FLOATING RATE INCOME FUND
                                            FRANKLIN TEMPLETON INVESTOR SERVICE CENTRES

        City               Contact Person        Address                                               Phone No.

        Ahmedabad          Banashree Desai       Templeton Asset Management (India) Pvt. Ltd.,         079-6568935
                                                 Dishman Business Centre
                                                 301-306, Samudra Annexe
                                                 Off C. G. Road, Navrangpura
                                                 Ahmedabad 380 009
        Bangalore          Ayesha Irfan /        Templeton Asset Management (India) Pvt. Ltd.,         080-2267272
                           Mona Teresa           DBS Corporate Club, 26, Cunningham Road
                                                 Bangalore 560 052
        Chennai            Padmini Priya         Templeton Asset Management (India) Pvt. Ltd.,         044-8275191
                                                 DBS Executive Club
                                                 1st Floor, 31/A, Cathedral Garden Road
                                                 Chennai 600 034
        Hyderabad          Madhuri Sharma        Templeton Asset Management (India) Pvt. Ltd.,         040-7846970
                                                 DBS Corporate Club
                                                 111-115, Chenoy Trade Centre
                                                 Park Lane, Secunderabad 500 003
        Kochi              Anugeetha Sabu        Templeton Asset Management (India) Pvt. Ltd.,         0484-363116
                                                 C/o. Business Communication Centre
                                                 Chiramal Chambers
                                                 Ground Floor, Kurisupally Road
                                                 Kochi 682 015
        Kolkata            Sharmistha Pande      Templeton Asset Management (India) Pvt. Ltd.,         033-2405264
                                                 DBS Corporate Club, Suite No. 303, 2nd Floor,
                                                 8, A.J.C. Bose Road, Kolkata 700 017
        Lucknow            Sunanda Raina         Templeton Asset Management (India) Pvt. Ltd.,         0522-237289
                                                 The Business Bridge, 1st Floor
                                                 Saran Chambers 2, 5-Park Road
                                                 Lucknow 226 001
        Mangalore          Anjali Shetty         Templeton Asset Management (India) Pvt. Ltd.,         0824-425282
                                                 C/o. Raj Business Centre, Raj Towers, Balmatta Road
                                                 Mangalore 575 001
        Mumbai             Sameera Khan          Templeton Asset Management (India) Pvt. Ltd.,         022-2886123
                                                 Sakhar Bhavan, 1st Floor                              1600-117283
                                                 230, Backbay Reclamation                              (Free phone)
                                                 Nariman Point, Mumbai 400 021
        New Delhi          Bharati Ranjan /      Templeton Asset Management (India) Pvt. Ltd.,         011-3329000
                           Meera Chawla          International Business Centre
                                                 M-38/1, 3rd Floor, Connaught Place
                                                 New Delhi 110 001
        Pune               Prerna Prasad         Templeton Asset Management (India) Pvt. Ltd.,         020-4016334
                                                 Masters Executive Centre Pvt. Ltd.
                                                 Cabin No. 15 & 16, Citi Point
                                                 Dhole Patil Road, Pune 411 001


                                      Contact Franklin Templeton Services at : service@templeton.com
                                                Visit us at : www.franklintempletonindia.com


                                                                         29



TEMPLETON FLOATING RATE INCOME FUND
                                           BANK COLLECTION CENTRES DURING IPO

         City                Bank         Address

         Ahmedabad           Citibank     Ground Floor, "Rembrandt", C.G. Road, Near Panchvati Circle, Ahmedabad 380 006

         Bangalore           Citibank     104, Prestige Meridian 2, 30 M. G. Road, Bangalore 560001
                             Vysya Bank   10/4, Mitra Towers, Kasturba Road, Bangalore 560 001

         Bhubaneshwar        Vysya Bank   Narayan Market Complex, Plot No. 48, 1st Floor, Ashok Nagar, Janpath Road,
                                          Unit 2, Bhubaneshwar 751 009

         Chandigarh          Vysya Bank   SCO 70-71, Ground Floor, Sector 8C, Madhya Marg, Chandigarh 160 018

         Chennai             Citibank     Shakti Towers, 766 Anna Salai, Chennai 600 002
                             Vysya Bank   185, Anna Salai (Near TVS), Mount Road, Chennai 600 006

         Coimbatore          Citibank     Unit 4 & 5, 3rd Floor, People’s Park, Arts College Road, Coimbatore 641 018

         Hubli               Vysya Bank   Umachagi complex, Koppikar Road, Hubli 580 020

         Hyderabad           Citibank     Pulla Reddy Bldg, Road No.G-3 879, Greenland Road, Begumpet, Hyderabad 500 016
                             Vysya Bank   No. 4-1-3172-319, Troop Bazar, Abid Road, Hyderabad 500 001

         Indore              Vysya Bank   9/1/3, Hotel Embassy, M. G. Road, Indore 452 001

         Jaipur              Citibank     Bhagwati Bhawan, Government Hostel Crossing, M. I. Road, Jaipur

         Kanpur              Vysya Bank   Upsea Ltd., 1st Floor, 14,113 Civil Lines, Padam Towers II, Kanpur 208 001

         Kochi               Vysya Bank                                     .
                                          No. XI, 6870K, Thekkera Mansion, P B. No. 3669, Opp. Kavita Theatre,
                                          M. G. Road, Ernakulum, Kochi 682 035

         Kolkata             Citibank     Kanak Bldg, 1st floor, 41 Chowringhee Road, Kolkata 700 001

         Lucknow             Vysya Bank   Commerce House, 1st Floor, Habibulla Estate, Halwasiya Court, 24, M. G. Road,
                                          Hazratganj, Lucknow 226 001

         Ludhiana            Citibank     Ground Floor, Ludhiana Stock Exchange Building, Feroze Gandhi Market, Ludhiana 141 001

         Mangalore           Vysya Bank                                         .
                                          Navarathana Complex, K. S. Rao Road, P B. No. 225, Mangalore 575 001

         Mumbai              Citibank     Bombay Mutual Bldg, Mezzanine Floor, 208 D. N. Road, Fort, Mumbai 400 001
                             Vysya Bank   1) Mittal Tower, A Wing, Ground Floor, 210 Nariman Point, Mumbai 400 021
                                          2) 103/104, ‘A’ Wing, 1st Floor, Floral Deck Plaza, MIDC Central Road, Andheri (E), Mumbai 400 093

         Mysore              Vysya Bank   6 to 9, 1st Floor, D Devaraj URS Road, Mysore 570 001

         New Delhi           Citibank     Jeevan Vihar Bldg, 3 Sansad Marg, New Delhi 110 001
                             Vysya Bank   G-35 Connaught Circus, Connaught Place, New Delhi 110 001

         Patna               Vysya Bank   Room No. 101A & 101B, 1st Floor, Ashiana Plaza, Plot No. 120, Ward No. 2,
                                          Circle No. 6, Budh Marg, Patna 800 001

         Pune                Citibank     2413 Kumar Capital, East Street, Pune 411 001
                             Vysya Bank   928, Mantri Centre, F. C. Road, Pune 411 004

                                                                     30



TEMPLETON FLOATING RATE INCOME FUND
         City                Bank           Address

         Rajkot              Vysya Bank                                             .
                                            Saurashtra Kutch Stock Exchange Bldg., P B. No. 235, Sadar Bazar, Harihar Chowk, Rajkot 360 001

         Surat               Vysya Bank     1420, Rajhans Complex, Opp J. K. Tower, Ring Road, Near Majura Gate, Surat 395 002

         Trichy              Vysya Bank                              .
                                            47, Chinnakadai Street, P B. No. 314, Tiruchirapalli 620 002

         Trivandrum          Vysya Bank     TC 14/46/1 Shekar Mansion, Vazhuthacaud, Trivandrum 695 014

         Udipi               Vysya Bank                                                                        .B.
                                            1st Floor, Shivaprasad Commercial Complex, Head Post Office Road, P No. 96,
                                            Maruthi Veethica, Udipi 576 101

         Vadodara            Citibank       Ground Floor, Pelican Race Course Circle, Vadodara 390 007

         Vijayawada          Vysya Bank     D No. 29-4-19, Kodandarami Reddy Street, Governorpet, Vijayawada 520 002

         Vizag               Vysya Bank     47-7-26, 1st Floor, Sri Kanya Arcade, Dwarkanagar, 4th Lane, Visakhapatnam 530 016




                                          BANK COLLECTION CENTRES FOR NRI DURING IPO

         City                Bank              Address

         Mumbai              Citibank          Bombay Mutual Bldg., Mezzanine Floor, 208 D. N. Road, Fort, Mumbai 400 001




                                                                       31



TEMPLETON FLOATING RATE INCOME FUND
                                      NOTES




                                       32



TEMPLETON FLOATING RATE INCOME FUND
                                                                          INSTRUCTIONS

         INSTRUCTION 1                                                                     INSTRUCTION 3
         Please fill the Application Form and submit it at any of the                      3a) E-mail Communications
         branches of banks acting as Collecting Centres as listed herein,                  Delivering service through Web / E-mail helps the fund to reduce
         along with your payment. Kindly retain the Acknowledgement Slip                   expenses in the fund and is a more efficient delivery channel. Currently,
         initialled / stamped by the Bank Collection Centre.                               we provide, based on your choice, most of the service deliverables
         This application form is for Resident Investors/ NRIs/ OCBs, etc. and             through emails. In case of large documents, a suitable link would be
         should be completed in ENGLISH in BLOCK LETTERS only. Please Tick                 provided and investor through email can download, save and print these
         (3) in the appropriate box (2), where boxes have been provided. Please            documents. The investor always has a right to demand a physical
         refer to the Key Information Memorandum / Abridged Offer Document                 copy of any or all the service deliverables and the fund would
         carefully before filling the Application Form. All applicants are deemed          arrange to send the same to the investor.
         to have accepted the terms subject to which this offer is being made
                                                                                           3b) Nomination Details
         and bind themselves to the terms upon signing the Application Form and
         tendering the payment. Any application may be accepted or rejected at             Applicants applying with mode of holding as "Single" can make a
                                                                                           nomination. Please refer to Section on “Nomination & Transfer Facility”
         the sole and absolute discretion of the Trustee, without assigning any
         reason whatsoever.                                                                in Key Information Memorandum.

         Please refer to the Section "Investing in Templeton Floating Rate                 INSTRUCTION 4
         Income Fund" of Key Information Memorandum for a list of                          Investment Details
         eligible investors.
                                                                                           1.   Applicants should indicate their preference of the Plan (Dividend
         Application by Trust, HUF, Corporation, Business or Others                             Plan/ Growth Plan). Please opt for reinvesting the dividend or payout
         In case of an application under a Power of Attorney or by a limited                    by ticking (3) the appropriate box (2).
         company/body corporate/registered society/trust/ partnership firm, the            2.   Applicants should indicate their preference for dividend distribution
         relevant Power of Attorney/the relevant resolution or authority to make                by opting for reinvesting the dividend or payout by ticking (ü) the
         the application/ the Trust Deed/the Partnership Deed as the case may                   appropriate box. (Refer section on "Distribution of Dividends" in Key
         be, or duly certified copy thereof along with specimen signatures and                  Information Memorandum).
         attested copy of the Memorandum and Articles of Association/bye-laws              3.   Please mention the total amount of investment under the scheme
         must be lodged at any of the Investor Service Centres within 3 days from               in figures and words in the space provided. The application must
         the date of application, quoting the details of the application. All                   be for a minimum of Rs. 1,00,000 under Short Term Plan and
         communication and payments shall be made to the first applicant or the                 Rs. 2,000 under Long Term Plan.
         Karta in case of HUF.

         Purchases by NRIs and OCBs                                                        INSTRUCTION 5
         NRIs/PIOs/OCBs/FIIs have been granted a general permission by RBI                 Payment Details
         [Schedule 5 of the Foreign Exchange Management (Transfer or Issue of              1.   The subscription amounts can be tendered by cheque/demand
         Security by a Person Resident Outside India) Regulations, 2000] for                    drafts favouring "Templeton Floating Rate Income Fund",
         investing in/redeeming units of the schemes subject to conditions set                  crossed "A/c. Payee Only" and payable locally. No
         out in the aforesaid regulations.                                                      outstation cheques would be accepted.
                                                                                           2.   In case of NRIs/OCBs/ Persons of Indian Origin applying on repatriation
         INSTRUCTION 2                                                                          basis, payments may be made by Cheques / Demand Drafts drawn
         Applicant Information                                                                  on NRE/FCNR/NRSR Accounts.
         1.   Name and Address of First/Sole Applicant must be given in full (P .O.        3.   Investors from places where there is no Collection Centre, can
              Box No. alone is not sufficient). In case of NRI/OCBs, 'Overseas                  send their application form along with a demand draft favouring
              Address' should be provided.                                                      "Templeton Floating Rate Income Fund", payable at Mumbai,
         2.   In case of Institutional Investors, please provide the Name of the                by Registered Post only, to the address of AMC i.e. "Templeton
              contact person.                                                                   Asset Management (I) Pvt. Ltd., Sakhar Bhavan, 1st Floor,
                                                                                                Nariman Point, Mumbai 400021" which should reach us on or
         3.   Applicant's PAN/GIR No. and I.T. Circle /Ward/District (if available)
                                                                                                before closure date. Bank charges for outstation demand drafts
              should be mentioned if the amount invested is Rs. 50,000/- or
                                                                                                (issued in a city where there is no Investor Service Centre) will be
              more.



                                                                                      33



TEMPLETON FLOATING RATE INCOME FUND
              borne by the Investment Manager and may be deducted by the                 Option. Unitholders who do not avail of the above direct credit facility
              investors while making the application. Subsequently Templeton             will receive cheques payable at par.
              Mutual Fund will not entertain any request for reimbursement of
              demand draft charges.                                                      INSTRUCTION 7
                                                                                         Bank Account Details
         INSTRUCTION 6                                                                   Applicants should provide the name of the bank, branch address,
         Direct Credit of Dividend : Arrangement For Payment of                          account type and account number of the sole/first applicant. Please
         Dividends                                                                       note that as per SEBI Directives, it is mandatory for the investors
         This section should be filled only for Investments in the Dividend Plan.        to mention their bank account details in applications.
         See section on Dividends of the Key Information Memorandum.
                                                                                         INSTRUCTION 8
         The Mutual Fund has tied up with selected banks to enable direct credit
         of dividends declared in Dividend Plan into the bank accounts of the
                                                                                         Declaration & Signatures
         investors who have an account at the designated banks. Please tick (3)          1.   Signatures can be in English or in any other language. Thumb
         the bank where you have an account and wish to directly credit the                   impressions must be attested by a Magistrate /Notary Public under
         dividend. However, the list of banks is subject to change from time to               his/her official seal. In case of HUF, the Karta will sign on behalf
         time and the Mutual Fund reserves the right to issue a demand draft/                 of the HUF.
         payable at par cheque inspite of an investor opting for Direct Credit           2.   Applications by minors should be signed by their guardian.




                                                                                    34



TEMPLETON FLOATING RATE INCOME FUND
        Templeton Mutual Fund                                                                      APPLICATION                                     FORM
                                                                                                   Please read the instructions before completing the
                                                                                                   Application Form
      Templeton Floating                                                                            Initial Offer Opens on : January 21, 2002
      Rate Income Fund                                                                              Initial Offer Closes on : February 2, 2002
                                                                                                    Scheme Re-opens on : February 18, 2002
            An Open-end Income Scheme

1    BROKER INFORMATION & APPLICATION DATE (Not to be filled in by the Applicant)
                       Broker Name & Code                                           Sub-Broker Code                             Bank Serial No.                      Registrar Serial No.                  Application Date




2    APPLICANT INFORMATION
     Name of Sole / First Applicant                         Salutation               Mr.          Ms.           Dr.            Prof.             Sex              Male           Female            Date of Birth
                                                                                                                                                                                                   (First holder / Minor)

     Name of Guardian (in case of Minor) Contact Person (in case of Institutional Investors)
                                                                                                                                                                                                     DD       MM        YYYY

                                                                                                                                                                                                   Mode of Holding (please 4)
     Name of Second Applicant
                                                                                                                                                                                                          Single
                                                                                                                                                                                                          Joint
     Name of Third Applicant                                                                                                                                                                              Anyone or Survivor


     Address of Sole / First Applicant and Communication [(P.O. Box Address is not sufficient) (Overseas Address in case of NRIs/FIIs/OCBs)]




      City                                                                                      State                                                                                Pin Code
      Off. Tel.                                                                                                                    Resi. Tel.
      Fax                                                                                                                          Mobile
      E-Mail

     Occupation (please 4)                      Service                  Professional                Business               Housewife                        Retired                Student            Others______________

                                                Individual               HUF             Company                            FIIs              NRI                                   Trust             OCB            Society
     Status (please 4)                          Partnership              AOP             Body Corporate                     BOI               On behalf of Minor                    Others_________________
     PAN / GIR No. (For investment above Rs. 50,000)                                                                       Circle/Ward/District



3    A. E-MAIL COMMUNICATION
    I wish to receive the following via e-mail instead of physical document (please 3)
         Account Statement                 Quarterly Review & Annual Report                                                                Communication on Change of Address, Bank, etc.

     B. NOMINATION DETAILS
     I want a Nomination Form to be mailed / e-mailed to me (please 4)                                                                           (Available only for Single holders)

    Templeton Floating Rate Income Fund
     ACKNOWLEDGEMENT SLIP                                   (To be filled in by the Investor)                                        Date : ................................ Serial No.

     Received from Mr./Ms.....................................................................................................................................................................
     an Application for Units of ‘Templeton Floating Rate Income Fund’ along with Cheque/DD No................................................
     dated........................ drawn on...............................................................................................................for Rs................................
                                                                                                                                                                                                          Bak Collection Centre
     Note : All subscriptions are subject to realisation of cheques/demand drafts. All cheques/drafts should be made favouring “Templeton Floating Rate Income Fund”.                                      Signature & Stamp




                                                                                                                                                                                                            Floating Rate Income Fund   35
4   INVESTMENT DETAILS
    (Provide SEPARATE CHEQUES for more than one Plan & Option Investment)
    Application must be for a minimum of Rs. 1,00,000 under Short Term Plan and Rs. 2,000 under Long Term Plan.
                                             Dividend Distribution
        Plan      Option (please 4)            Option (please 4)                             Amount (Rs.)                                                                                                           DD Charges

       Short                 Dividend                    Reinvest          Payout
       Term
       Plan                  Growth                             N.A.

       Long                  Dividend                    Reinvest          Payout
       Term
       Plan                  Growth                              N.A.
     Total Amount
     Rs. in Words

5   PAYMENT DETAILS (Cheques/Drafts should be drawn in favour of “Templeton Floating Rate Income Fund”)
    Cheque/Draft No.                                Cheque/Draft Dated                    Drawn on (Name of Bank and Branch)



       LOCAL CHEQUE              DEMAND DRAFT               For NRI Investors Only (please 3)              NRO                   NRE               FCNR                 NRSR                            REPATRIABLE
                                                                                                                                                                                                        NON-REPATRIABLE
6   DIRECT CREDIT OF DIVIDEND / REDEMPTIONS*
     This Section needs to be filled in only if you have opted for Investment in Dividend Plans of TFIF. Unitholders who do not select the Direct Credit option will receive their dividends
     by payable at par cheque. Please (3) and provide Account Details in Step 7.
     I authorise TEMPLETON MUTUAL FUND to directly credit the dividends to my account maintained with one of the following banks.
         ABN AMRO Bank                       Centurion Bank                  Citibank                                                                   Deutsche Bank                                                HDFC Bank
         HSBC                                ICICI Bank                      Standard Chartered Grindlays Bank                                          Standard Chartered Bank
     I hereby declare that the particulars given herein are correct and complete. If the transaction is delayed or not effected at all for reasons of incomplete or incorrect information,
     I would not hold Templeton Mutual Fund responsible. I have read the instructions and agree to discharge the responsibility of me as a participant under the Direct Credit arrangement.
    * (as & when available)
7   BANK ACCOUNT DETAILS (As per Directives of SEBI, it is mandatory to provide these details)
    Please provide the following details relating to the Sole/First Holder for Redemption/Dividend Warrants.
    Name of the Bank                                                                                 Account No.


    Branch Address
                                                                                                                                    Account Type (Please 4)
                                                                                                                                       Current     Savings                                  NRO                 NRE               NRSR

8   DECLARATION AND SIGNATURES
    Having read and understood the contents of the Offer Document and Key Information Memorandum                               Sole/First
    of Templeton Floating Rate Income Fund, I/We hereby apply to the Trustee of Templeton Mutual                               Applicant
                                                                                                              SIGNATURES




    Fund for units of Templeton Floating Rate Income Fund as indicated above and agree to abide by
    the terms, conditions, rules and regulations of the Scheme.                                                            ...........................................................................................................................
                                                                                                                               Second
    *I/We confirm that I am/we are Non-Residents of Indian Nationality/Origin and that I/we hereby                             Applicant
    confirm that the funds are remitted from abroad through approved banking channels or from my/                          ...........................................................................................................................
    our funds in my/our Non-Resident External Account/FCNR/NRSR Account.                                                       Third
    *Applicable to NRI / OCB only                    Date                                                                      Applicant



    INVESTOR SERVICE CENTRES (service@templeton.com)

    Contact Franklin Templeton Service Centres at :
    l Ahmedabad – Banashree (079-6568935) l Bangalore – Ayesha/Mona (080-2267272) l Chennai – Padmini (044-

    8275191) l Hyderabad – Madhuri (040-7846970) l Kochi – Anugeetha (0484-363116) l Kolkata – Sharmistha (033-
    2405264) l Lucknow – Sunanda (0522-237289) l Mangalore – Anjali (0824-425282) l Mumbai – Sameera (022-
    2886123, 1600 - 117283 Free Phone) l New Delhi – Bharati/Meera (011-3329000) l Pune – Prerna (020-4016334)                                                      Visit us at : www.franklintempletonindia.com
                                                                                                                                                                                                                                                           graphics
                                                                                                                                                                                                                                                         alok




                                                                                                                                                                                                              Floating Rate Income Fund                               36

				
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