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CONTINUOUS OFFER OFFER DOCUMENT Templeton India Money Market Account An Open – end Scheme Sale of units on an ongoing basis at a Net Asset Value (NAV) related price Asset Management Company : Mutual Fund : Trustee Company : Templeton Asset Management (India) Pvt. Ltd Templeton Mutual Fund Templeton Trust Services Pvt. Ltd. The particulars of Templeton India Money Market Account have been prepared in accordance with the Securities and Exchange Board of India (Mutual Funds) Regulations 1993 as amended till date, and filed with SEBI, the units being offered for public subscription have not been approved or disapproved by the Securities and Exchange Board of India nor has the Securities and Exchange Board of India certified the accuracy or adequacy of the Offer Document. The Offer Document sets forth concisely the information about the scheme that a prospective investor ought to know before investing. Please retain this Offer Document for future reference. The date of this revised Offer Document is October 31, 2003. This Offer Document shall remain effective until a 'material change' (other than a change in fundamental attributes and within the purview of the Offer Document) occurs and thereafter changes shall be filed with SEBI and circulated to the unitholders along with the quarterly/half yearly report. In this Offer Document all references to “U.S.$” or “$” are to United States of America Dollars and “Rs.” are to Indian Rupees. The Offer Document should be retained for future reference. Before investing, investors should also ascertain about any further changes in this Offer Document after the date of Offer Document From the Mutual Fund/ Investor Service Centres/Website/Distributors or Brokers. 1 CONTENTS S. No. CHAPTER PAGE NO. 01. 02. 03. 04. 05. 06. 07. 08. 09. 10. 11. 12. 13. 14. 15. 16. 17. 18. HIGHLIGHTS & RISK FACTORS INTRODUCTION DEFINITIONS DUE DILIGENCE CERTIFICATE SUMMARY OF THE SCHEME SUMMARY OF EXPENSES AND FINANCIAL INFORMATION CONDENSED FINANCIAL INFORMATION CONSTITUTION / MANAGEMENT OF THE MUTUAL FUND INVESTMENT OBJECTIVES AND POLICIES HOW TO INVEST VALUATION OF ASSETS AND NET ASSET VALUE HOW TO REDEEM UNITS OF THE SCHEME ASSOCIATE TRANSACTIONS UNITHOLDER INFORMATION TAX BENEFITS INVESTOR SERVICES GENERAL INFORMATION PENDING LITIGATION OR PROCEEDINGS 03 04 05 08 09 09 12 28 48 53 57 59 63 64 72 75 78 83 2 01. HIGHLIGHTS • An open-end Templeton India Money Market Account scheme sponsored by the Franklin Templeton Group, one of the world’s largest investment management companies, which has over 50 years of experience in international investment management and manages US$314.30 billion in assets (approximately Rs.14,24,408 crores) as on 31st October 2003. India’s first money market mutual fund. No load fund with no charges for entry / exit. Provides high liquidity along with current income. Low minimum investment of Rs.5000/-. Bank type convenience - can invest or withdraw anyday (subject to a lock-in period). Withdrawal by cheque permitted (as per applicable rules). • • • • • • RISK FACTORS • • • • • Mutual Funds and Securities Investments are subject to market risks and the net asset value of Templeton India Money Market Account (TIMMA) may fluctuate depending on factors affecting the Money Markets. The funds invested in Templeton India Money Market Account (TIMMA) will not have Insurance Cover from the Deposit Insurance and Credit Guarantee Corporation of India. Templeton India Money Market Account is only the name of the scheme and it does not indicate in any manner the quality of the fund, its future prospects or the returns. Past performance of the sponsors/the asset management company/mutual fund does not indicate the future performance of the scheme of the mutual fund. Investors are requested to study the prospectus carefully before investing. Though the particulars of Templeton India Money Market Account have been prepared in accordance with the Securities and Exchange Board of India (Mutual Funds) Regulations, 1996, there can be no guarantee that the objective of the fund can be achieved. Mutual funds and securities investments are subject to market risks and there is no assurance or guarantee that the objective of the Scheme will be achieved. The Sponsor is not responsible or liable for any loss resulting from the operation of the Scheme beyond the initial contribution of Rs.1 lakh made by it towards setting up the Fund. The investors in the Scheme are not being offered any guaranteed / assured returns. • • • SCHEME SPECIFIC RISK FACTORS AND SPECIAL CONSIDERATION • Investments in debt instruments are subject to default risk and interest rate risk. Interest rate risk results from changes in demand and supply for money and other macro economic factors and creates price changes in the value of debt instruments. Consequently, the Net Asset Value of the plans under the scheme may be subject to fluctuation. The performance of the scheme may be affected by changes in Government p olicies, general levels of interest rates and risk associated with trading volumes, liquidity and settlement systems in debt markets. Prospective investors should review / study this Offer carefully and in its entirety and shall not construe the contents hereof or regard the summaries contained herein as advice relating to legal, taxation, or financial/ investment matters and are advised to consult their own professional advisor(s) as to the legal or any other requirements or restrictions relating to the subscription, gifting, acquisition, holding, disposal (sale, transfer, switch or redemption or conversion into money) of Units and to the treatment of income (if any), capitalization, capital gains, any distribution, and other tax consequences relevant to their subscription, acquisition, holding, capitalization, disposal (sale, transfer, switch or redemption or conversion into money) of Units within their jurisdiction / of 3 • • • • nationality, residence, domicile etc. or under the laws of any jurisdiction to which they or any managed Funds to be used to purchase/gift Units are subject, and (also) to determine possible legal, tax, financial or other consequences of subscribing / gifting to, purchasing or holding Units before making an application for Units. Neither this Offer Document nor the units have been registered in any jurisdiction. The distribution of this Offer Document in certain jurisdictions may be restricted or subject to registration requirements and, accordingly, persons who come into possession of this Offer Document in certain jurisdictions are required to inform themselves about, and to observe, any such restrictions. No person receiving a copy of this offer document or any accompanying application form in such jurisdiction may treat this Offer Document or such application form as constituting an invitation to them to subscribe for Units, nor should they in any event use any such application form, unless in the relevant jurisdiction such an invitation could lawfully be made to them and such application form could lawfully be used without compliance with any registration or other legal requirements. No person has been authorized to give any information or to make any representations not confirmed in this Offer Document in connection with this Offer or the issue of Units, and any information or representations not contained herein must not be relied upon as having been authorized by the Mutual Fund, the Investment Manager. Neither the delivery of this Offer Document nor any sale made hereunder shall, under any circumstances, create any implication that the information contained herein is correct as of any time subsequent to the close of the Initial Offering Period. 02. INTRODUCTION Templeton India Money Market Account is an open end liquid scheme with an objective to provide investors with a high degree of liquidity combined with current income through investment in high quality money market instruments. Debt Markets The Indian debt markets are one of the largest markets in Asia. Government and Public Sector enterprises are predominant borrowers in the market. While interest rates were regulated till a few years back, there has been a rapid deregulation and currently both the lending and deposit rates are market determined. The bond markets are developing fast with the rapid introduction of new instruments including derivatives. Foreign Institutional Investors are also allowed to invest in Indian debt markets now. There has been a decrease in the trading volumes in the market with the average daily trading volumes of Rs.4,815/ - crores in the month of September 2003 compared to Rs.6,509/- in the month of August. In the month of October, trading volume has been healthy with average trading volume of Rs.5,975/ - crores in the month of October 2003 which was higher by Rs.1,160/- crores, compared to the average trading volume of September 2003. The trading volumes are largely concentrated in the Government of India securities which contribute about 90% to 95% of the daily trades. The various debt instruments currently available for investments are: Instruments Central/State Government securities PSU Bonds/Corporate debentures Securitised debt Commercial Papers/Certificate of deposits Call/Notice Money Repo Current Yields 4.36% -5.96% 5.10%-6.80% 5.25%-6.50% 4.60%-5.00% 4.30%-4.50% 4.00%-4.50% Liquidity Very high Medium - High Low - Medium High Very high Very high 4 The securities above could be listed and (subject to SEBI regulations), unlisted, privately placed, secured, unsecured and of any maturity. The securities may be acquired through initial public offerings, secondary market operations, private placement etc. The scheme may also invest in other fixed income instruments that may be available from time to time. The scheme may also invest in other fixed income instruments that may be available from time to time. The securities above could be listed subject to SEBI regulations, unlisted, privately placed, secured, unsecured and of any maturity. The securities may be acquired through initial public offerings, secondary market operations, private placement etc. Templeton India Money Market Account (Money Market Account) is an open end liquid scheme whose objective is to provide investors with a high degree of liquidity combined with current income through investment in high quality money market instruments such as treasury bills, dated government securities having an unexpired maturity upto 1 year, call money, repos, rated commercial papers, trade/commercial bills accepted/co-accepted by banks, certificates of deposit and other money market instruments that may be notified by RBI and SEBI from time to time. 03. DEFINITIONS In this Offer Document the following definitions have been used: AMC / Asset Templeton Asset Management (India) Pvt. Ltd., the asset management company, set up under the Companies Act, 1956 and Management authorized by SEBI to act as Asset Management Company to the Company/ schemes of Templeton Mutual Fund. Investment Manager Applicable NAV “Applicable NAV for Subscriptions” is the Net Asset Value per unit of the business day on which the application for subscription is for Subscriptions accepted. The face value of the unit is constant at Rs.1 /- (Rs.One). Applicable NAV for Redemptions Business Day “Applicable NAV for Redemptions” is the Net Asset Value per unit of the business day on which the application for redemption is accepted. A day other than: (i) Saturday and Sunday, (ii) a day on which the banks in Mumbai and/or RBI are closed for business / clearing, (iii) a day which is a public and/or bank holiday at a collection centre where the application is received, (iv) a day on which sale and repurchase of units is suspended by the AMC, (v) a day on which normal business could not be transacted due to storms, floods, bandhs, strikes or such other events as the AMC may specify from time to time. (vi) A day on which register of unitholders is closed. (vii) A day on which the underlying scheme/s is closed for Subscription/Redemption or determination of the NAV of the fund. The AMC reserves the right to declare any day as a Business Day or otherwise at any or all collection centres. 5 Custodians A custodian appointed for holding the securities and other assets of the scheme which for the time being is Deutsche Bank 422, Dr. D.N. Road, Fort, Mumbai 400 001 Load on ongoing purchases. Load on redemption other than CDSC. Investment Management Agreement (IMA) dated January 5, 1996 executed between Templeton Trust Services Pvt. Ltd. and Templeton Asset Management (India) Pvt. Ltd. Investor Service Centre of the Asset Management Company Entry Load / Sales Load Exit Load / Redemption Load Investment Management Agreement or IMA ISC Money Market Commercial papers, commercial bills, treasury bills, Government securities having an unexpired maturity upto one year, call or notice Instruments money, certificate of deposit, usance bills, (repos / reverse repos), and any other like instruments as specified by the Reserve Bank of India from time to time including mibor linked securities, fixed deposits, call products having unexpired maturity upto one year. Mutual Fund Templeton Mutual Fund , a trust set up under the provisions of Indian Trusts Act 1882, and registered with SEBI vides Registration No. MF/026/96/8. Net Asset Value of the Units of Templeton India Money Market Account. The document issued by Templeton Mutual Fund offering units of Templeton India Money Market Account. NAV Offer Document Public Offering ‘POP’ or the Sale Price is the price at which the units are proposed Price (POP) / Sale to be sold on an ongoing basis and may include permissible load amount as and when an entry load is introduced. (see Section Price “Public Offering Price”). RBI Registrars Repo / Reverse Repo Scheme SEBI Reserve Bank of India, established under the Reserve Bank of India Act, 1934. Registrar for the time being of the Mutual Fund, which is in-house, Templeton Asset Management (India) Pvt. Ltd. Sale / Purchase of Government Securities as may be allowed by RBI from time to time with simultaneous agreement to repurchase / resell them at a later date. Templeton India Money Market Account (TIMMA) Securities and Exchange Board of India established under Securities and Exchange Board of India Act, 1992. 6 SEBI Regulations Sponsor Trust Deed Trustee SEBI (Mutual Funds) Regulations, 1996, as amended from time to time, for the operation and management of Mutual Funds Templeton International Inc, a subsidiary of Franklin Resources Inc., based in San Mateo, California, USA. The Trust Deed dated January 4, 1996 of Templeton Mutual Fund. Templeton Trust Services Pvt. Ltd., a company set up under the Companies Act 1956, and approved by SEBI to act as the Trustee to the schemes of Templeton Mutual Fund. The interest of an investor which consists of one undivided share in the Net Assets of Templeton India Money Market Account. A person holding Units in Templeton India Money Market Account. Unit Unitholder TEMPLETON INDIA MONEY MARKET ACCOUNT Templeton India Money Market Account is an open-end liquid scheme of is to provide investors with a high degree of liquidity combined with current income through investment in high quality money market instruments. 7 04. DUE DILIGENCE CERTIFICATE Templeton India Money Market Account It is confirmed that: i. ii. The Offer Document forwarded to SEBI is in accordance with the SEBI (Mutual Funds) Regulations, 1996 and the guidelines and directives issued by SEBI from time to time. All legal requirements connected with the launching of the scheme as also the guidelines, instructions, etc, issued by the Government and any other competent authority in this behalf, have been duly complied with. The disclosures made in the Offer Document are true, fair a nd adequate to enable the investors to make a well informed decision regarding investment in the proposed scheme The intermediaries named in the Offer Document are registered with SEBI and till date such registrations is valid. Signature: Sd/Name: Vivek Pai Compliance Officer iii. iv. Date: October 31, 2003 Place: Mumbai 8 05. SUMMARY OF THE SCHEME Name of the Scheme Nature of the Scheme Investment Objective Templeton India Money Market Account (TIMMA) An Open-end liquid scheme. The investment objective of Templeton India Money Market Account is to provide investors with a high degree of liquidity combined with current income through investment in high quality money market instruments such as treasury bills, dated government securitie s having an unexpired maturity upto 1 year, call money, rated commercial papers, trade/commercial bills accepted/co-accepted by banks, repos, certificates of deposit and other money market instruments that may be notified by RBI/SEBI from time to time. Redemptions will be done at the Applicable NAV for redemptions*. The redemption cheque will be despatched to the unitholders within the statutory time limit of 10 business days prescribed by SEBI. However, on a best effort basis the Fund will endeavour to despatch the redemption cheque within 4 working days after a valid redemption request is received at the Registrar’s office. • NAV will be normally determined for all business days and released to the press. • NAV will be calculated upto 4 decimal places. • The Fund would publish the half-yearly and annual results as per the SEBI Regulations. • Full Portfolio disclosure every half-year as per the SEBI regulations. There are certain tax benefits available to the investors under the Scheme. (Please refer to Section on Taxation) Redemption Price Liquidity Transparency Tax Benefits * AMC reserve the right to introduce/increase/decrease the entry/exit load on a prospective basis. 06. SUMMARY OF EXPENSES AND FINANCIAL INFORMATION EXPENSES OF THE SCHEME The information that is provided under this section seeks to assist the investor in understanding the following: a) The expense structure of the current Scheme and types of different fees and their percentage the investor is likely to incur on purchasing and selling the units of the Scheme. b) The financial information (condensed) relating to the previous schemes launched by the Fund. 9 1. UNITHOLDER TRANSACTION EXPENSES OR SALES LOAD As a % of NAV Maximum sales Load imposed on purchase Sales Load, if any, on issue of units in lieu of dividends Redemption / Repurchase load Present charge NIL NIL NIL Maximum charge NIL NIL NIL I II III The AMC/Trustee reserves the right to introduce a load and change the load structure of the scheme if it so deems fit in the interest of and for the smooth and efficient functioning of the scheme. A load structure, introduced by the Trustee/AMC may comprise of an entry load, exit load, spread or level load or any other load represents a low flat charge to buy the fund with an equal charge upon redemption, whenever it occurs. The AMC/Trustee reserve the right to levy the exit load with a view to protect the interests of existing unitholders and the same will be levied having regard to such relevant factors such as market conditions/volatility, expenses of liquidating the securities, impact cost due to liquidating the securities etc. Any load that may be levied will be applicable on a prospective basis and will be applied for transactions after the introduction of the load. Load will be charged at rates applicable at the time of the transaction (purchase, redemption, exchange, dividend reinvestment etc.) details of which will be provided in our offices/Web site/addendum to the offer document. All loads including CDSC shall be maintai ed in a separate account and may be utilised towards n meeting the selling and distribution expenses. Any surplus in this account may be credited to the scheme, whenever felt appropriate by the AMC. As per SEBI circular MFD/CIR. No.04/11488 /2003 dated June 12, 2003; Mutual Funds are permitted to launch Fund of Funds (FOF) schemes. The A FOF scheme will invest in other mutual fund schemes, which will be treated as underlying schemes. Load in case of Fund-of-Funds scheme : As the a FOF scheme can charge a l ad, if the underlying o schemes too also charges a load, there would be a double incidence of load for the investors at the FOF level and at the underlying scheme level. Hence, t ere will not be any no load (entry/exit) will be h charged by the underlying sch emes on the investments made by Franklin Templeton Fund- of- Funds schemes in an underlying the scheme. Trail Fees: In the FOF scheme, the underlying schemes get the subscription through the vehicle of FOF. Hence, the distributor who mobilizes the investment in Franklin Templeton Fund of Fund schemes is entitled to trail fees, which the underlying scheme would have normally paid to a distributor. Accordingly, the trail fees will be paid out of the underlying scheme. Total Expenses • • Investment Management and Advisory fees not exceeding 1.25% on the first 100 crores of the Daily / Weekly Average Net Assets and 1% of the amount in excess of Rs.100 crores. The maximum annual recurring expenses that can be charged to the scheme shall be within the limits stated in Regulations 52 (6) and subject to a percentage limit of Daily / Weekly Average Net Assets as in the table below: 10 First Rs.100 crore 2.25% Next Rs.300 crore 2.00% Next Rs.300 crore 1.75% Over Rs.700 crore 1.50% Any excess over these specified ceilings will be borne by the Asset Management Company. The AMC has estimated the following recurring expenses for the first Rs.100 crores of Average Daily / Weekly Net Assets. Investment Management Fees Custodial Fees Shareholder Servicing Fee/Investor Communication Expenses Trustee Remuneration+ , Audit Fees etc 1.25% 0.50% 0.45% 0.05% 2.25%* + Trustee Remuneration: The Trustee will be entitled to a remuneration of upto 0.0025% of the daily / weekly average net assets of all schemes taken together and such remuneration shall be paid quarterly in arrears. Trusteeship fee shall be distributed equitably across all schemes of Templeton Mutual Fund. Out -ofpocket expenses incurred for attending meetings of the Trustee shall be paid separately and shall be charged to the fund. * The above heads and percentages are estimates and may vary in practice in line with actuals and amendment to SEBI regulations but will be subject to the overall ceiling of 2.25 %. The AMC will bear any expenses in excess of the ceiling. The tables given above relating to Unitholder Transaction Expenses, Initial Issue Expenses and Annual Scheme Recurring Expenses have been given to the investor to assist him/her in understanding the various costs and expenses that an investor of the scheme will bear directly or indirectly. Investment management fees are payable in arrears. The direct expenses incurred by each scheme of Templeton Mutual Fund shall be chargeable to that scheme. The common expenses incurred on various schemes will be charged on the basis of number of unitholders, the size of corpus of the scheme and in conformity with generally accepted accounting principles. The total expenses of the scheme including the investment management and advisory fee (together w ith additional management fee wherever applicable) shall not exceed the limit stated in Regulation 52(6). The AMC reserves the right to revise these charges as specified under the paragraph pertaining to fundamental attributes of the scheme. PAST SCHEMES (LAUNCHED DURING THE PAST ONE FISCAL YEAR) The details of initial issue expenses borne by Franklin India International Fund (FINTF), Franklin India Strategic Investment Plan (FISIP) (Schemes launched during the last one fiscal year) are given below: 11 (Rs. in Lakhs) FISIP -Series 1 FISIP Series-1 Nature of expenses Plan A -LT Plan A -Basic 2.63 17.85 Nil Brokerage fees & Commission 103.80 Nil Nil Marketing & Advertising 14.98 0.03 0.02 Printing & Distribution 0.38 Nil Nil Banker’s fees 7.95 Nil Nil Other expenses 129.74 17.88 0.02 Total Expenses None of the expenses in any of the schemes above have exceeded 6% of initial resources mobilized and are borne by the AMC. FINTF The initial issue expenses are borne by AMC. 07. CONDENSED FINANCIAL INFORMATION a) HISTORICAL PER UNIT STATISTICS Name of the Scheme Date of launch Information as at the end of NAV at the beginning of the year Net Income per unit (Rs.) Dividends (Rs.) / Bonus Ratio Transfer to Reserves NAV at the end of the year (Rs.) Annualised compounded return%@ Benchmark Index Benchmark Annualised compounded return%@ Net Assets (End of period) (Rs. in crores) Ratio of Recurring Expenses to Net Assets FIIF 04.08.2000 Mar 2001 10.00 a (1.09) NIL NIL 8.63 (13.70%)b S&P CNX Nifty (25.19%)b 19.24 1.28% Mar 2002 8.56 0.32 NIL NIL 8.54 (8.89%) S&P CNX Nifty (14.72%) 42.63 1.50% Mar 2003 8.61 (0.68) NIL NIL 7.4636 (10.25%) S&P CNX Nifty (14.19%) 46.26 1.50% 12 Name of the Scheme Date of launch Information as at the end of NAV at the beginning of the year Net Income per unit (Rs.) Dividends (Rs.) / Bonus Ratio Transfer to Reserves NAV at the end of the year (Rs.) Annualised compounded return%@ Benchmark Index Benchmark Annualised compounded return%@ Net Assets (End of period) (Rs. in crores) Ratio of Recurring Expenses to Net Assets Mar 2001 10.00 a (GP) 10.00 a (DP) (1.79) NIL NIL 8.38 (GP) 8.23 (DP) (16.20%) b (GP) (17.70%) b (DP) Cris il Balanced Fund Index N.A 11.19 1.91% FIBF 04.08.2000 Mar 2002 8.27 (GP) 8.13 (DP) 1.10 NIL NIL 9.83 (GP) 9.45 (DP) (1.00%) (GP) (3.28%) (DP) Crisil Balanced Fund Index N.A 13.89 2.25% Mar 2003 9.88 (GP) 9.50 (DP) 0.71 NIL NIL 10.23 (GP) 9.82 (DP) 0.84% (GP) (0.67%) (DP) Crisil Balanced Fund Index N.A 17.30 2.25% 13 Name of the Scheme Date of launch Information as at the end of NAV at the beginning of the year FTIMIP 28.9.2000 Mar 2001 10.00 (GP) a 10.00 (MP) a 10.00 (QP) a 0.46 0.36 (MP) 0.27 (QP) NIL 10.62 (GP) 10.18 (MP) 10.29 (QP) 6.20% b Crisil MIP Blended Index N.A 48.77 2.25% Mar 2002 10.63 (GP) 10.19 (MP) 10.30 (QP) 1.31 0.90 (MP) 0.90 (QP) NIL 12.11 (GP) 10.58 (MP) 10.69 (QP) 13.65% Crisil MIP Blended Index N.A 66.77 2.25% Mar 2003 12.21 (GP) 10.66 (MP) 10.77 (QP) 0.97 0.88 (MP) 0.975 (QP) 75.5 : 1000 (Bonus) NIL 13.2489 (GP) 10.6228 (MP) 10.6679 (QP) 12.2804 (Bonus) 11.89% Crisil MIP Blended Index N.A 67.55 2.25% Net Income per unit (Rs.) Dividends (Rs.) / Bonus Ratio Transfer to Reserves NAV at the end of the year (Rs.) Annualised compounded return%@ Benchmark Index Benchmark Annualised compounded return%@ Net Assets (End of period) (Rs. in crores) Ratio of Recurring Expenses to Net Assets Name of the Scheme Date of launch Information as at the end of NAV at the beginning of the year Net Income per unit (Rs.) Dividends (Rs.) / Bonus Ratio Transfer to Reserves NAV at the end of the year (Rs.) Annualised compounded return%@ Benchmark Index Benchmark Annualised compounded return%@ Net Assets (End of period) (Rs. in crores) Ratio of Recurring Expenses to Net Assets FITF 26.02.2001 Mar 2001 10.00 a (1.07) NIL NIL 8.77 (12.30%)b S&P CNX Nifty (12.51%) b 1.30 1.51% Mar 2002 8.70 0.16 NIL NIL 8.69 (12.17%) S&P CNX Nifty (12.95%) 2.37 1.50% Mar 2003 8.76 (0.92) NIL NIL 7.6362 (12.10%) S&P CNX Nifty (13.12%) 2.55 1.50% 14 Name of the Scheme Date of launch Information as at the end of NAV at the beginning of the year Net Income per unit (Rs.) Dividends (Rs.) / Bonus Transfer to Reserves NAV at the end of the year (Rs.) Annualised compounded return%@ Benchmark Index Benchmark Annualised compounded return%@ Net Assets (End of period) (Rs. in crores) Ratio of Recurring Expenses to Net Assets Name of the Scheme Date of launch Information as at the end of NAV at the beginning of the year Net Income per unit (Rs.) Dividends (Rs.) / Bonus Transfer to Reserves NAV at the end of the year (Rs.) Annualised compounded return%@ Benchmark Index Benchmark Annualised compounded return%@ Net Assets (End of period) (Rs. in crores) Ratio of Recurring Expenses to Net Assets TILP 23.04.2001 Mar 2002 10.00 a (GP) 10.00 a (DP) 0.5304 0.2004 NIL 10.6874 (GP) 10.0023 (DP) 6.87% b 131.16 0.94% FTIIF 27.08.2001 Mar 2002 Mar 2003 a 10.00 (B) 10.65 (B) 10.00 a (N) 10.83 (N) 0.86 (B) (0.05) (B) 1.09 (N) (0.36) (N) NIL NIL NIL NIL 10.55 (B) 9.1896 (B) 10.74 (N) 9.6408 (N) 5.50% b (B) (5.17%) (B) 7.40% b (N) (2.27%) (N) BSE Sensex BSE Sensex S&P CNX Nifty S&P CNX Nifty 4.55%b (BSE Sensex) (5.18%) (BSE Sensex) 5.31% b (S&P CNX (5.62%) (S&P CNX Nifty) Nifty) 4.63 (B) 5.91 (B) 7.98 (N) 8.68 (N) 1.48% (B) 1.50% (B) 1.40% (N) 1.50% (N) Mar 2003 10.6903 (GP) 10.0000 (DP) 0.5559 5.28 (DP) NIL 11.2888 (GP) 10.0000 (DP) 6.46% (GP) 5.40% (DP) 219.85 1.37% 15 Name of the Scheme Date of launch Information as at the end of NAV at the beginning of the year FTIGF 07.12.2001 Mar 2002 10.00 (I - GP) a 10.00 (I - QP) a 10.00 (L - GP) a 10.00 (L - MP) a 0.92 (I) 1.32 (L) 0.30 (I - QP) 0.225 (L - MP) NIL 10.64 (I - GP) 10.31 (I - QP) 10.41 (L - GP) 10.16 (L – MP) 6.40% b (I) 4.10% b (L) I-Sec Libex N.A 48.77 1.25% (I) 0.98% (L) Mar 2003 10.80 (I - GP) 10.47 (I - QP) 10.43 (L - GP) 10.18 (L - MP) 1.28 (I) 0.58 (L) 1.30 (I – QP) 0.60 (L – MP) 65 : 1000 (I – Bonus) NIL 12.6169 (I - GP) 10.8840 (I - QP) 11.1444 (L - GP) 10.2611 (L - MP) 11.8193 (I – Bonus) 19.38% (I) 8.61% (L) I-Sec Libex N.A 38.18 (I) 2.36 (L) 1.24% (I) 1.00% (L) Net Income per unit (Rs.) Dividends (Rs.) / Bonus Transfer to Reserves NAV at the end of the year (Rs.) Annualised compounded return%@ Benchmark Index Benchmark Annua lised compounded return%@ Net Assets (End of period) (Rs. in crores) Ratio of Recurring Expenses to Net Assets 16 Name of the Scheme Date of launch Information as at the end of NAV at the beginning of the year TISTIP 31.01.20 02 Mar 2002 1000.00 a (GP) 1000.00 a (WP) 1000.00 a (MP) 1000.00 a (QP) 22.00 5.7 (WP) 5.7 (MP) 5.7 (QP) NIL 1010.99 (GP) 1004.70 (WP) 1004.70 (MP) 1004.70 (QP) 1.10% b Crisil Liquid Fund Index N.A 82.52 1.08% Mar 2003 1012.54 (GP) 1006.24 (WP) 1006.24 (MP) 1006.24 (QP) 101.15 72 (MP) 79 (QP) 54.95 : 1000 (Bonus) NIL 1096.5752 (GP) 1089.7646 (WP) 1015.7615 (MP) 1008.9605 (QP) 1039.0168 (Bonus) 8.26% Crisil Liquid Fund Index N.A 467.63 0.90% Net Income per unit (Rs.) Dividends (Rs.) / Bonus Transfer to Reserves NAV at the end of the year (Rs.) Annualised compounded return%@ Benchmark Index Benchmark Annualised compounded return%@ Net Assets (End of period) (Rs. in crores) Ratio of Recurring Expenses to Net Assets 17 Name of the Scheme Date of launch Information as at the end of NAV at the beginning of the year Net Income per unit (Rs.) Dividends (Rs.) / Bonus Transfer to Reserves NAV at the end of the year (Rs.) Annualised compounded return%@ Benchmark Index Benchmark Annualised compounded return%@ Net Assets (End of period) (Rs. in crores) Ratio of Recurring Expenses to Net Assets TGSF – TP 11.02.2002 Mar 2002 10.00 a 0.147 NIL NIL 10.0940 (GP) 10.0940 (DP) 0.94% b I-Sec Si-Bex N.A 2.06 1.23 Mar 2003 10.0970 (GP) 10.0970 (DP) 0.880 0.85 (DP) NIL 11.3499 (GP) 10.4679 (DP) 11.84% (GP) 11.97% (DP) I-Sec S i-Bex N.A 11.85 1.25% 18 Name of the Scheme Date of launch Information as at the end of NAV at the beginning of the year TFIF 11.02.2002 Mar 2002 10.00 a (ST - GP) 10.00 a (LT- GP) 10.00 a (ST -DP) 10.00 a (LT -DP) 0.1764 (ST) 0.08 (LT) 0.106 (ST-DP) NIL (LT -DP) NIL 10.1181 (ST-GP) 10.11 (LT -GP) 10.0002 (ST-DP) 10.11 (LT -DP) 1.18% b (ST-GP) 1.10% b (LT-GP) 1.24% b (ST-DP) 1.10% b (LT-DP) Crisil Liquid Fund Index N.A 95.15 (ST) 94.10 (LT) 0.19% (ST) 1.1% (LT) Mar 2003 10.1233 (ST -GP) 10.11 (LT-GP) 10.0052 (ST -DP) 10.11 (LT-DP) 0.3266 (ST) 0.56 (LT) 0.678 (ST-DP) 0.725 (LT-DP) NIL 10.8332 (ST -GP) 10.8419 (LT -GP) 10.0028 (ST -DP) 10.1042 (LT -DP) 7.24% (LT) 7.17% (ST) Crisil Liquid Fund Index N.A 188.12 (LT) 422.82 (ST) 1.49% (LT) 0.91% (ST) Net Income per unit (Rs.) Dividends (Rs.) / Bonus Transfer to Reserves NAV at the end of the year (Rs.) Annualised compounded return%@ Benchmark Index Benchmark Annualised compounded return%@ Net Assets (End of period) (Rs. in crores) Ratio of Recurring Expenses to Net Assets 19 Name of the Scheme Date of launch Information as at the end of NAV at the beginning of the year Net Income per unit (Rs.) Dividends (Rs.) / Bonus Transfer to Reserves NAV at the end of the year (Rs.) Annualised compounded return%@ Benchmark Index Benchmark Annualised compounded return%@ Net Assets (End of period) (Rs. in crores) Ratio of Recurring Expenses to Net Assets FTIPERF 25.02.2002 Mar 2002 10.00 a 0.04 NIL NIL 9.67 (3.30%) b 46.85 1.84% Mar 2003 9.72 (0.37) NIL NIL 8.76 (11.41%) 31.76 2.50% Name of the Scheme Date of launch Information as at the end of NAV at the beginning of the year FTIAAF 25.02.2002 Mar 2002 10.00 a (PG) 10.00 a (SG) 10.00 a (BG) 10.00 a (CG) 10.00 a (IH) 0.03 NIL NIL 9.63 (PG) 9.69 (SG) 9.74 (BG) 9.78 (CG) 9.81 (IH) (3.70%) b (PG) (3.10%) b (SG) (2.60%) b (BG) (2.20%) b (CG) (1.90%) b (IH) 16.01 1.81% Mar 2003 9.68 (PG) 9.70 (SG) 9.76 (BG) 9.75 (CG) 9.81 (IH) 0.24 NIL NIL 9.5126 (PG) 9.7671 (SG) 9.9756 (BG) 10.1918 (CG) 10.4758 (IH) (4.47%) (PG) (2.13%) (SG) (0.22%) (BG) 1.75% (CG) 4.34% (IH) 10.80 2.25% Net Income per unit (Rs.) Dividends (Rs.) / Bonus Transfer to Reserves NAV at the end of the year (Rs.) Annualised compounded return%@ Benchmark Index Benchmark Annualised compounded return%@ Net Assets (End of period) (Rs. in crores) Ratio of Recurring Expenses to Net Assets 20 Name of the Scheme Date of Inception Information as at the end of NAV at the beginning of the year Net Income per unit (Rs.) Dividends (Rs.) / Bonus Transfer to Reserves NAV at the end of the year (Rs.) Annualised compounded return%@ Benchmark Index Benchmark Annualised compounded return%@ Net Assets (End of period) (Rs. in crores) Ratio of Recurring Expenses to Net Assets FINTF Dec. 20, 2002 Mar 2002 10.00 a 0.12 NIL NIL 9.9790 (0.21%) b 5.84 0.91% FISIP Mar. 28, 2003 * Mar 2003 10.00 a * 0.00 * NIL NIL 10.0293 * 0.29% b * 35.68 * 0.85% * Unaudited Half yearly financials as on September 30, 2003. NAV and Returns as of October 31, 2003 with the Benchmarks FIIF NAV at the beginning of the year (April 1, 2003) Net Income per unit (Rs.) Dividends (Rs.) / Bonus Transfer to Reserves (Rs. in Crores) NAV as on September 30, 2003 (Rs.) Annualised Returns from the date of inception @ Benchmark Returns@ Net Assets as on September 30, 2003 (Rs. in Crores) Ratio of recurring expenses to net assets NAV as on October 31, 2003 Annualised Returns from the date of inception @ Benchmark Returns @ Benchmark Indices used Net Assets as on October 31, 2003 (Rs. in Crores) 7.5088 2.16 Nil 6.82 10.8731 2.65% (1.34)% 34.46 1.49% 11.9022 5.43% 1.54% S&P CNX Nifty 34.92 FIBF 10.47 (GP) ** 10.05 (DP) ** 1.34 Nil 2.61 14.53 (GP) 13.96 (DP) 12.36% (GP) 10.97% (DP) N.A. 25.00 2.19% 15.11 (GP) 14.51 (DP) 13.37% (GP) 11.98% (DP) N.A Crisil Balanced Fund Index 34.47 21 NAV at the beginning of the year (April 1, 2003) Net Income per unit (Rs.) Dividends (Rs.) / Bonus Transfer to Reserves (Rs. in Crores) NAV as on September 30, 2003 (Rs.) FTIMIP 13.3422 (GP) ** 10.6976 (MP) ** 10.7431 (QP) ** 12.3669 (Bonus) ** 0.25 4.19% (MD) 36:1000(MB) 4.45%(QD) 2.27 14.7530 (GP) 11.3343 (MP) 11.3604 (QP) 13.1925 (Bonus) 13.81% N.A. 252.06 2.21% 15.0081 (GP) 11.5303 (MP) 11.5568 (QP) 13.4206 (Bonus) 14.04% N.A Crisil MIP Blended Index 490.01 FITF 7.6812 1.26 NIL 0.44 11.1490 Annualised Returns from the date of inception @ Benchmark Returns@ Net Assets as on September 30, 2003 (Rs. in Crores) Ratio of recurring expenses to net assets NAV as on October 31, 2003 4.29% 3.01% 3.87 1.49% 12.2186 Annualised Returns from the date of inception @ Benchmark Returns @ Benchmark Indices used Net Assets as on October 31, 2003 (Rs. in Crores) 7.77% 6.56% S&P CNX Nifty 4.25 22 TILP NAV at the beginning of the year (April 1, 2003) 11.2900 (GP) ** 10.0000 (DP) ** 0.18 2.9083% 3.55 11.5434 (GP) 10.0000 (DP) Annualised Returns from the date of inception @ Benchmark Returns@ Net Assets as on September 30, 2003 (Rs. in Crores) Ratio of recurring expenses to net assets NAV as on October 31, 2003 6.06% (GP) 5.28% (DP) 369.19 1.05% 11.5839 (GP) 10.0000 (DP) Net Income per unit (Rs.) Dividends (Rs.) / Bonus Transfer to Reserves (Rs. in Crores) NAV as on September 30, 2003 (Rs.) FTIIF 9.2839 (B) (GP/DP) 9.6954 (N) (GP/DP) 4.83 (B) 5.19 (N) Nil 1.88 (B) 2.25(N) 12.9742 (B) (GP/DP) 14.2789 (N) (GP/DP) 13.25% (B) 18.55% (N) 15.09% (B) 14.24% (N) 5.04 (B) 6.20 (N) 1.49% (B) 1.50% (N) 14.1543 (B) (GP/DP) 15.5953 (N) (GP/DP) 17.29% (B) 22.63% (N) 19.67% (B) 18.63% (N) BSE Sensex / S&P CNX Nifty 4.37 (B) 6.33 (N) Annualised Returns from the date of inception @ Benchmark Returns @ Benchmark Indices used Net Assets as on October 31, 2003 (Rs. in Crores) 6.00% (GP) 5.15% (DP) 368.43 23 NAV at the beginning of t e year (April 1, h 2003) Net Income per unit (Rs.) Dividends (Rs.) / Bonus FTIGF 12.9145 (I- GP) ** 11.1407 (I-QP) ** 11.1478 (L-GP) ** 10.2642 (L-MP) ** 12.0982 (Bonus) ** 0.96 (I) 0.47(L) 5.20% (I-QD) 40:1000(I-MB) 2.63%(L-MD) 4.60 (I) 0.05(L) 14.2347 (I- GP) 11.6739 (I-QP) 11.5168 (L-GP) 10.3028 (L-MP) 12.8139 (Bonus) 21.49% (I) 8.10% (L) N.A. 73.35 (I) 2.32 (L) 1.25% (I) 1.00% (L) 14.4025 (I-GP) 11.8115 (I-QP) 11.5581 (L-GP) 10.3398 (L-MP) 12.9649 (I-Bonus) 21.18% (I) 7.92% (L) N.A I Sec Libex 87.77 (I) 2.83 (L) TISTIP 1096.7188 (GP) 1089.9073 (WP) 1015.8945 (MP) 1009.0926 (QP) 1038.1148 (Bonus) 30.28 3.51656%(WD) 36:1000(WB) 2.72%(MD) 2.80%(QD) 16.56 1140.3636 (GP) 1092.2722 (WP) 1025.1689 (MP) 1017.3715 (QP) 1051.7376 (Bonus) 8.22% N.A. 1338.54 0.90% 1144.3485 (GP) 1089.1736 (WP) 1028.7512 (MP) 1020.9266 (QP) 1051.2017 (Bonus) 8.02% N.A CRISIL Short-Term Bond Fund Index 1390.17 Transfer to Reserves (Rs. in Crores) NAV as on September 30, 2003 (Rs.) Annualised Returns from the date of inception @ Benchmark Returns@ Net Assets as on September 30, 2003 (Rs. in Crores) Ratio of recurring expenses to net assets NAV as on October 31, 2003 Annualised Returns from the date of inception @ Benchmark Returns @ Benchmark Indices used Net Assets as on October 31, 2003 (Rs. in Crores) 24 TGSF – TP NAV at the beginning of the year (April 1, 2003) 11.3555 (GP) ** 10.4732 (DP) ** 0.48 2.58% 0.55 11.9175 (GP) 10.6938 (DP) Annualised Returns from the date of inception @ Benchmark Returns@ Net Assets as on September 30, 2003 (Rs. in Crores) Ratio of recurring expenses to net assets NAV as on October 31, 2003 13.34% (GP) 11.42% (DP) N.A. 14.19 1.25% 11.9942 (GP) 10.7605 (DP) Net Income per unit (Rs.) Dividends (Rs.) / Bonus Transfer to Reserves (Rs. in Crores) NAV as on September 30, 2003 (Rs.) Annualised Returns from the date of inception @ Benchmark Returns @ Benchmark Indices used Net Assets as on October 31, 2003 (Rs. in Crores) 11.17% (GP) 11.23% (DP) N.A I Sec Si-BEX 15.08 TFIF 10.8350 (ST -GP) 10.0044 (ST -DP) 10.8495 (LT-GP) ** 10.4732 (LT-DP) ** 0.27(ST) 0.45(LT) 2.49(ST) 2.25(LT) 7.64(ST) 3.95(LT) 11.1436 (ST -GP) 10.0061 (ST -DP) 11.1576 (LT -GP) 10.1446 (LT -DP) 6.75% (ST) 6.83% (LT) N.A. 470.71 (ST) 138.24 (LT) 1.49% (LT) 1.00% (ST) 11.1905 (ST -GP) 10.0103 (ST -DP) 11.2036 (LT -GP) 10.1863 (LT -DP) 6.67% (ST) 6.74% (LT) N.A Crisil Liquid Fund Index 421.20 (ST) 127.56 (LT) 25 FTIPERF NAV at the beginning of the year (April 1, 2003) 8.80 (GP/DP) Net Income per unit (Rs.) Dividends (Rs.) / Bonus Transfer to Reserves (Rs. in Crores) NAV as on September 30, 2003 (Rs.) 3.56 NIL 5.56 12.40 (GP/DP) Annualised Returns from the date of inception @ 14.44% Benchmark Returns@ Net Assets as on September 30, 2003 (Rs. in Crores) Ratio of recurring expenses to net assets NAV as on October 31, 2003 19.73 2.49% 13.41 (GP/DP) FTIAAF 9.6757 (PG) ** 9.8992 (SG) ** 10.0836 (BG) ** 10.2510 (CG) ** 10.5228 (IH) ** 0.22 NIL 0.40 13.6097 (PG) 13.0775 (SG) 12.4946 (BG) 12.1733 (CG) 11.4904 (IH) 21.32% (PG) 18.33% (SG) 14.99% (BG) 13.13% (CG) 9.10% (IH) 22.26 2.24% 14.6366 (PG) 13.9787 (SG) 13.0972 (BG) 12.6826 (CG) 11.8061 (IH) 25.46% (PG) 22.07% (SG) 17.43% (BG) 15.20% (CG) 10.39% (IH) 22.55 Annualised Returns from the date of inception @ 19.09% Benchmark Returns @ Benchmark Indices used Net Assets as on October 31, 2003 (Rs. in Crores) 19.68 26 FINTF NAV at the beginning of the year (April 1, 2003) Net Income per unit (Rs.) Dividends (Rs.) / Bonus Transfer to Reserves (Rs. in Crores) NAV as on September 30, 2003 (Rs.) Annualised Returns from the date of inception @ Benchmark Returns@ Net Assets as on September 30, 2003 (Rs. in Crores) Ratio of recurring expenses to net assets NAV as on October 31, 2003 Annualised Returns from the date of inception @ Benchmark Returns @ Benchmark Indices used Net Assets as on October 31, 2003 (Rs. in Crores) 9.9402 ** 0.49 Nil 0.14 9.6518 (-3.48%)b 2.71 0.90% 9.4967 -5.03% b 2.48 FISIP 10.0023 * 0.29 Nil 1.03 10.3119 * 3.12% *b 36.57 * 0.85% 10.3580 * 3.58% * b 36.58 Note: a Inception/Allotment date NAV, b Absolute Returns, GP – Growth Plan, DP - Dividend Plan, WP – Weekly Dividend Plan, MP – Monthly Dividend Plan, QP – Quarterly Dividend Plan, B – BSE Sensex Plan, N – NSE Nifty Plan, I – Investment Plan, L – Liquid Plan, PG – Pure Growth, SG – Steady Growth, BG – Balanced Growth, CG – Conservative Growth, IH – Inflation Hedge, ST – Short Term, LT – Long Term, TP – Treasury Plan. * Plan A I Long- Term Grow th (25-Apr-2005), # Plan A I Basic (04-Apr-2004The NAV as of September 30, 2003 for FTIMIP, FTIGF, TGSF-TP, TILP, TFIF (Long Term), FINTF, FISIP are Non-business day NAVs. Dividends declared from June 1999 to March 2002 are tax exempt for investors.). ** NAV as of April 3, 2003. TFIF was launched on February 11, 2002. TGSF (TP) was launched on February 11, 2002. FINTF was launched on December 20, 2002. Returns for schemes/plans with dividend distribution are computed assuming re-investment of all payouts at ex-dividend NAV. The above information is presented scheme wise for all schemes launched by the mutual fund during the last three fiscal years (excluding redeemed schemes). @ Returns for periods less than one year have been given in absolute terms without annualizing the same. Returns for periods greater than one year are on compounded annualized basis. THE ABOVE INFORMATION IS PRESENTED SCHEME WISE FOR ALL SCHEMES LAUNCHED BY THE MUTUAL FUND DURING THE LAST THREE FISCAL YEARS (EXCLUDING REDEEMED SCHEMES) The scheme abbreviations used in this offer document are as follows: Templeton India Growth Fund-(TIGF), Franklin India Index Fund -(FIIF), Franklin India Index Tax Fund-(FITF), Franklin India Balanced Fund -(FIBF), FT India PE Ratio Fund-(FTIPERF), FT India Balanced Fund-(FTIBF), FT India Index Fund-(FTIIF), Templeton Monthly Income Plan-(TMIP), FT India Monthly Income Plan(FTIMIP), Franklin FMCG Fund-(FFF), FT India Asset Allocation Fund-(FTIAAF), Franklin India Bluechip 27 Fund-(FIBCF), Franklin India Prima Fund-(FIPF), Franklin India Vista Fund-(FIVF), Franklin India Taxshield 96(FIT96), Templeton Floating Rate Income Fund- LT, Templeton Floating Rate Income Fund-ST-(TFIF), Templeton India Income Fund-(TIIF), Templeton India Children’s Asset Plan-(TICAP), Templeton India Income Builder Account-(TIIBA), Franklin India Maxima Fund-(FIMF), Templeton India Guaranteed Income Plan (TIGIP), Franklin India Growth Fund -(FIGF), Franklin Internet Opportunities Fund-(FIOF), Franklin Pharma Fund-(FPF), Franklin Infotech Fund-(FIF), Franklin India Prima Plus -(FIPP), Templeton India Pension Plan(TIPP), Franklin India Taxshield 97-(FIT97), Franklin India Taxshield-(FIT), Franklin India Taxshield 99 (FIT99), Franklin India Taxshield 98-(FIT98), Franklin India Taxshield 95-(FIT95), Templeton India Government Securities Fund-(TGSF), FT India Gilt Fund-(FTIGF), Templeton India Liquid Plus -(TILP), Templeton India Liquid Fund-(TILF), Templeton India Treasury Management Account-(TITMA), Templeton India Money Market Account-(TIMMA), Templeton India Short-Term Income Plan-(TISTIP), Franklin India Strategic Investment Plan-(FISIP) Trust Deed have been registered under the Indian Registration Act, 1908. The Mutual Fund was registered with SEBI on February 19, 1996 under Registration Code MF-026-96-8. 08. CONSTITUTION / MANAGEMENT OF THE MUTUAL FUND Templeton Mutual Fund (the “Mutual Fund”) has been constituted as a trust on January 4, 1996 in accordance with the provisions of the Indian Trusts Act, 1882 (2 of 1882) with Templeton International Inc., as the Sponsor and Templeton Trust Services Private Limited as the Trustee. The Trust Deed and the Supplementary Trust Deed have been registered under the Indian Registration Act, 1908. The Mutual Fund was registered with SEBI on February 19, 1996 under Registration Code MF-026-96-8. THE SPONSOR Templeton Mutual Fund is sponsored by Templeton International, Inc. Templeton International Inc., is a wholly owned subsidiary of Templeton worldwide Inc., which in turn is a wholly owned subsidiary of Franklin Resources Inc. The sponsor was responsible for setting up and establishing the Templeton Mutual Fund. The Sponsor is the Settler of the Mutual Fund Trust. The Sponsor has entrusted a sum of Rs.1 lakh to the Trustee as the initial contribution towards the corpus of the Mutual Fund. The Trustee has appointed Templeton Asset Management (India) Private Ltd. as the Investment Manager. The Sponsor is represented by Directors on the Board of the Trustee and the Investment Manager in accordance with the Regulations. The Sponsor shall be responsible for discharging its functions and responsibilities towards the Fund in accordance with Regulations and the various constitutive documents of the Fund. Templeton Asset Management (India) Pvt. Ltd. (TAMIL)/Nominees and Templeton Trust Services Pvt. Ltd. (TTSL)/Nominees had acquired 100% shares in Pioneer ITI AMC Ltd. and Pioneer ITI Mutual Fund Pvt. Ltd. respectively, in July 2002 after obtaining the approval from SEBI. Subsequently the license of Pioneer ITI Mutual Fund was surrendered to SEBI for cancellation. SEBI vide its letter dated February 17, 2003 cancelled the same. FINANCIAL PERFORMANCE OF THE SPONSOR (All figures are in Rupees million except per share data) (US $= Rs.48.00) YEAR ENDING 30-09-2002 30-09-2001 120,888.00 113,032.46 20,769.60 204,811.20 1344.00 23,266.60 190,939.20 1,251.84 30-09-2000 112,324.80 26,980.80 142,344.00 1,169.90 28 Total income Profit After Tax Net Worth Equity Capital Earnings per Share Book Value per Share Dividend per Share 79.68 792 13.44 92.16 732.00 12.48 109.44 584.16 11.52 THE FRANKLIN TEMPLETON GROUP Franklin Resources Inc. is a diversified financial services company based in San Mateo, California, USA. Through its operating subsidiaries it provides a wide range of investment products and services to worldwide clients. Templeton International Inc., the sponsor of the Templeton Mutual Fund, is a wholly owned subsidiary of Templeton Worldwide Inc., which in turn is a wholly owned subsidiary of Franklin Resources Inc. The Franklin Templeton Group is one of the world’s largest investment management companies. Following are some of the key data relating to Franklin Templeton’s Global Operations. 1. Assets Under Management US$314.30 billion as on 31st October, 2003 (Rs.14,24,408/- crores approximately). 2. Number of Shareholder Accounts More than 10 million worldwide. 3. Number of Schemes Managed Globally About 225 Open End Mutual Funds, Separately Managed Accounts and Other Investment Vehicles. 4. Global Offices There are offices all over the world in over 28 countries including The United States of America, Bahamas, Canada, Argentina, France, Germany, Italy, Luxembourg, Poland, Russia, United Kingdom, Hong Kong, Singapore, Korea, India, China, Australia & South Africa. THE FRANKLIN TEMPLETON EDGE The Franklin Templeton Group is one the world’s largest investment management groups. Created from the merger of Franklin Resources, Inc., Mutual Fund Series and Templeton Worldwide, Inc., this group offers a wide range of investment products and services to worldwide clients. The group’s equity funds are largely driven by the following two philosophies. First, the group manages a large number of global funds following the firm’s well known ‘bottom-up value investing’ approach. One of the most prominent tenets of this approach is: “Never follow the crowd. Superior performance is possible only if you invest differently from the crowd.” This is reflected in Templeton’s time tested strategy of buying bargains wherever they exist. Second, the group manages a number of funds following a growth-oriented style of equity investing. This includes funds like Franklin Growth Fund, Franklin Blue Chip Fund, and Franklin Dynatech Fund (focused on technology stocks). These funds take a more top-down approach and may be focused on a country, industry or sector. Funds following this approach essentially seek investment opportunities in those companies that are geared towards growth or are experiencing a turn-around in their operations. 29 FRANKLIN TEMPLETON IN INDIA: A LONG TERM COMMITMENT As part of Franklin Templeton’s major thrust on investing in emerging markets around the world, Franklin Templeton has been investing in India for the past several years. These investments are based on original research and first hand understanding of the forces those influence the economic environment. Franklin Templeton has established offices at more than 33 places in India including Ahmedabad, Bangalore, Calcutta, Chennai, Hyderabad, Kochi, Lucknow, Mangalore, Mumbai, New Delhi and Pune with the current total staff numbers at 123. Templeton Asset Management (India) Pvt. Ltd. (TAMIL) / Nominees and Templeton Trust Services Pvt. Ltd. (TTSL) / Nominees had acquired 100% shares in Pioneer ITI AMC Ltd. and Pioneer ITI Mutual Fund Pvt. Ltd. respectively, in July 2002 after obtaining the approval from SEBI. Subsequently the license of Pioneer ITI Mutual Fund was surrendered to SEBI for cancella tion. SEBI vide its letter dated February 17, 2003 cancelled the same. THE TRUSTEE Templeton Trust Services Private Limited (the “Trustee”), through its Board of Directors, shall discharge its obligations to the Templeton Mutual Fund as the Trustee of the Mutual Fund. The Trustee ensures that the transactions entered into by the AMC are in accordance with the SEBI Regulations and reviews the activities carried on by the AMC on a quarterly basis. The Board of Directors of Templeton Trust Services Private Limited held seven meetings during the year 2002-2003. In accordance with Regulation 18(15) of SEBI Regulations, the Trustees shall obtain the consent of the unitholders a) whenever required to do so by SEBI in the interest of the unitholders; or b) whenever required to so on the requisition made by three -fourths of the unitholders of any Scheme; or c) When the majority of the trustees decide to wind up or prematurely redeem the units. In accordance with Regulation 18(15A) of SEBI Regulations, the trustees shall ensure that no change in the fundamental attributes of any scheme or the trust or fees and expenses payable or any other change which would modify the scheme and affects the interest of unitholders, shall be carried out unless, i a written communication about the proposed change is sent to each unitholder and an advertisement is given in one English daily newspaper having nation wide circulation as well as a newspaper published in the language of the region where the head office of the mutual fund is situated; and ii the unitholders are given an option to exit at the prevailing Net Asset Value without any exit load. Explanation: In terms of SEBI Regulations and circular dated February 4, 1998, “Fundamental Attributes” means and includes the following: i. Type of a Scheme • An Open end Scheme • Sectoral Fund-Equity Fund-Balance Fund-Income Fund-Index Fund-Fund of Funds, any other type of Fund. Investment Objective • Main Objective - Growth-Income-Both • Investment p attern - The tentative Equity-Debt -Money Market portfolio break-up with minimum and maximum asset allocation, while retaining the option to alter the asset allocation for a Institutional period on defensive considerations. Terms of Issue 30 ii. iii. • • • Liquidity provisions such as listing, repurchase, redemption Aggregate fees and expenses charged to the Scheme Any safety net or guarantee provided The members of the Board of Directors of the Trustee (“the Board of the Trustee”) are: • Gregory E. McGowan* Templeton Worldwide, Inc., 500 East Broward Boulevard, Suite 2100, Fort Lauderdale, FL - 33394, U.S.A. Gregory E. McGowan is Executive Vice President, Director and General Counsel for International Development of Templeton Worldwide, Inc. Mr. McGowan serves on various Templeton Boards of Directors and also serves as Executive Vice President and General Counsel of Templeton International Inc., the Organisation responsible for the expansion and operation of Templeton business outside of North America. Prior to joining the Templeton organisation in 1986, Mr. McGowan was a senior attorney for the United States Securities and Exchange Commission. He holds a B.A. Degree in Economics/International Affairs from the University of Pennsylvania , an M.A. Degree from the University of Paris and a Juris Doctor from Georgetown University Law Centre. Details of other Directorships are as under: Name Franklin Templeton Management Luxembourg SA Templeton Worldwide, Inc. Templeton Asian Direct Investments Ltd. Templeton International, Inc. Templeton Franklin Global Distributors Ltd. Templeton Global Advisors Limited Templeton Research & Management Venezuela, C.A. Franklin Templeton Asset Manage ment S.A. Franklin Templeton Services Ltd. Franklin Templeton International Services Franklin Templeton Italia SIM SpA S.A. Templeton Global Holdings Ltd. Franklin Templeton France S.A. Franklin Templeton Investments Australia Franklin Templeton Asset Management S.A. Ltd. Franklin Templeton Holding Limited Happy Dragon Holdings Ltd. Templeton Trust Services Private Ltd. TRFI Investments Limited Templeton Research Poland SP. Z.o.o. Name Franklin Templeton Investments (Asia) Ltd. • Anand J. Vashi, Chartered Accountant th Kalpataru Heritage, 5 F loor, 127 M G Road Mumbai 400023 Anand Vashi is practicing Chartered Accountant and is Senior Partner of a firm of Chartered Accountants and is a fellow member of the Institute of Chartered Accountants of India. He is also on the board of various companies and is a trustee of several charitable trusts. Details of other Directorships are as under: 31 Name A.J. Patel Investment & Trading Co. Pvt. Ltd. Lucid Technologies Pvt Ltd. Millars India Ltd. Millars Mach Co. Pvt. Ltd. Pedershaab Millars India Pvt Ltd. Details Director Director Director Director Director • Percy Jal Pardiwalla, Advocate 16, Vishnu Mahal, 'D' Road, Churchgate, Mumbai 400 020. • Bharat Doshi, Company Executive 8, St. Helen's Court, Dr. Gopalrao Deshmukh Marg, Mumbai 400 026 Mr. Bharat Doshi is presently the Executive Director - Finance & Corporate Affairs and President Trade & Financial Services Sector of Mahindra & Mahindra Ltd. Mr. Doshi holds a Bachelor's Degree in Commerce and Master's Degree in Law from Mumbai University, and is a Fellow Member of the Institute of Chartered Accountants of India and the Institute of Company Secretaries of India. He has also attended the Programme for Management Development (PMD) at the Harvard Business School. Mr. Doshi joined Mahindra & Mahindra in 1973 and has held various managerial positions over the past 27 years and was elevated to the Company's Board in 1992. Mr Doshi serves on the Boards of several subsidiaries and associate companies in the Mahindra Group, including Ford India Ltd. and Mahindra British Telecom Ltd. and is a member of the Board of Governors of The Mahindra United World College of India and the Indian Institute of Management, Kozhikode. Details of other Directorships are as under: Name Mahindra Intertrade Limited Mahindra & Mahindra Financial services Limited Mahindra Steel Service Centre Limited Mahindra & Mahindra Limited Mahindra Information Technology Services Limited Mahindra Consulting Limited Mahindra Holdings & Finance Limited Ford India Limited Mahindra British Telecom Limited Godrej Consumer Product Limited NSE.IT Limited Mahindra Consulting Inc. Details Director Director Director Director Director Director Director Director Director Director Director Director • Stephen Dover*, International Chief Investment Officer, Franklin Templeton Advisors, 336, Royal Oaks, Vacaville, CA 95687, USA Stephen H. Dover, CFA, is responsible for overseeing the investment functions of the locally managed and distributed products outside of the United States and Canada. Currently he is overseeing the investment areas of Franklin Templeton’s local asset management companies in: South Korea, Japan, China, Taiwan, France, Italy, Hong Kong, Singapore, India, and Brazil. Mr. Dover is a member of the Boards of Directors of Franklin Templeton’s Italian asset management company, Indian Asset Management Company, South African joint venture, and the Brazilian joint venture. Prior to serving in his current role, Mr. Dover was a founder and Chief Investment Officer of Bradesco Templeton Asset Management (BTAM), in San Paulo, Brazil. BTAM, a joint venture formed to serve the institutional market in Brazil, was sold to Bradesco in May 2001. While there Mr. Dover specialized in the 32 management of Corporate Governance Funds. Prior to joining Franklin Templeton in 1997, Mr. Dover was a portfolio manager and principle at Newell Associates in Palo Alto, CA. Newell Associates is a subadvisor for the Vanguard Equity Income Fund well as other institutional assets. Previously, Mr. Dover worked for Towers Perrin Consulting in New York, London and San Francisco. Prior to graduate school, Mr. Dover was vice president of Financial Planning at Lefcourt Financial Group, a Palo Alto, CA, based money management and venture capital firm. Mr. Dover earned a B.A. in business administration from Lewis and Clark College in Portland, OR and a M.B.A in Finance from The Wharton School of the University of Pennsylvania. He is a Chartered Financial Analyst (CFA) as well as a Certified Financial Planner (CFP). Stephen has worked or studied in: China, Costa Rica, England, Brazil and the United States. Details of other Directorships are as under: Name Franklin Resources, San Mateo Details Managing Director * These Directors represent sponsors of the Trustee Company and are associates of the sponsor. RESPONSIBILITIES AND DUTIES OF THE TRUSTEE (Substantial Provisions of the Trust Deed and the Regulations) Pursuant to the Deed of Trust constituting the Mutual Fund and SEBI (MF) Regulations, the Trustee, inter alia, has the following responsibilities and duties: a) The Trustee shall ensure before the launch of any scheme that the asset management company has: i) systems in place for its back office, dealing room and accounting, ii) appointed all key personnel including fund manager(s) for the scheme(s) and market, to the Trustee, within fifteen days of their appointment, submitted their bio-data, which shall contain the educational qualifications, past experience in the securities iii) appointed audit ors to audit the accounts, iv) appointed a compliance officer who shall be responsible for monitoring the compliance of the Act, rules and regulations, notifications, guidelines, instructions etc. issued by SEBI or the Central Government and for redressal of investor’s grievances, v) appointed registrars and laid down parameters for their supervision, vi) prepared a compliance manual and designed internal control mechanisms including internal audit systems, vii) specified norms for empanelment of brokers and marketing ag ents. b) The Trustee shall obtain consent of the unit holders of the Scheme(s): i) When the Trustee is required to do so by SEBI in the interests of the unitholders; or ii) Upon the request of three-fourths of the unit holders of any scheme(s) under the Mutual Fund; or iii) If a majority of the directors of the Trustee company decide to wind up the scheme(s) or prematurely redeem the units c) In carrying out his / her responsibilities as a member of the Board of Trustee each Trustee shall maintain an arms' length relationship with other companies, or institutions or financial intermediaries or any body corporate with which he may be associated in any transaction also involving the Mutual Fund. 33 d) No Trustee shall participate in the meetings of the Board of Trustee when any decisions for investments in which he / she may be interested are taken. e) All the Trustee shall furnish to the Board of Trustee, particulars of interest which he/she may have in any other company, or institution or financial intermediary or any corporate by virtue of his/her position as director, partner or with which he -she may be associated in any other capacity. f) The Trustee shall have the right to obtain from the AMC such information as is considered necessary by the Trustee. g) The Trustee shall ensure that the AMC has been diligent in empanelling brokers, in monitoring securities transactions with brokers and avoiding undue concentration of business with any broker. h) The Trustee shall ensure that the AMC has not given any undue or unfair advantage to any associates or dealt with any of the associates of the AMC in any manner detrimental to the interest of unitholders. i) The Trustee shall ensure that the transactions entered into by the AMC are in accordance with the SEBI Regulations and the Scheme. j) The Trustee shall ensure that the AMC has been managing the Scheme independently of other activities and have taken adequate steps to ensure that the interest of the Scheme are not being compromised with those of any other Scheme or of other activities of the AMC. k) The Trustee shall ensure that all the activities of the AMC are in accordance with the provisions of SEBI Regulations. l) Where the Trustee have reason to believe that the conduct of business of the Mutual Fund is not in accordance with SEBI Regulations, they sh forthwith take remedial steps as are considered all necessary by them and shall inform the SEBI of the violation and the action taken by them. m) Each Trustee shall file the details of his/her transactions in securities on a quarterly basis with the trust. n) The Trustee shall be accountable for, and be the custodian of, the funds and property of the Scheme and shall hold the same in trust for the benefit of the unitholders in accordance with SEBI Regulations and the provisions of the trust deed. o) The Trustee shall take steps to ensure that the transactions of the Mutual Fund are in accordance with the trust deed. p) The Trustee shall be responsible for the calculation of any income due to be paid to the Mutual Fund and also of any income received in the Mutual Fund for the holders of the units of the Scheme in accordance with the SEBI Regulations and the trust deed. q) The Trustee shall call for the transactions in securities of the key personnel of the AMC in his own name or on behalf of the AMC and shall report to SEBI as and when required. r) The Trustee shall review, on a quarterly basis, all transactions carried out between the Mutual Fund, AMC and its associates. s) The Trustee shall review the net worth of the AMC on a quarterly basis and in case of any shortfall, ensure that the AMC make up for the shortfall as per clause (f) of sub-regulation (1) of regulation 21 of the SEBI Regulations. t) The Trustee shall periodically review all service contracts such as custody arrangements, transfer agency and satisfy itself that such contracts are executed in the interest of the unitholders. u) The Trustee shall ensure that there is no conflict of interest between the manner of deployment of its net worth by the AMC and the interests of the unitholders. v) The Trustee shall periodically review the investor complaints received and the redressal of the same by the AMC. w) The Trust Deed can be amended only with the prior approval of SEBI and Unitholders, where it affects the interests of the unitholders. 34 Modifications, if any, in the rights and/or obligations and duties of the Trustee are on account of amendments to the Regulations and the Regulations supersede/override the provisions of the Trust Deed, wherever the two are in conflict. Trustee shall exercise due diligence as under: A. i) ii) iii) iv) v) vi) B. i) ii) iii) iv) v) vi) vii) General Due Diligence: The Trustee shall be discerning in the appointment of the directors on the Board of the asset management company. Trustee shall review the desirability of continuance of the asset management company if substantial irregularities are observed in any of the schemes and shall not allow the asset management company to float new scheme. The trustee shall ensure that the trust property is properly protected, held and administered by proper persons and by proper number of such persons. The trustee shall ensure that all service providers are holding appropriate registrations from the Board of concerned regulatory authority. The Trustee shall arrange for test checks of service contracts. Trustee shall immediately report to Board of any special developments in the Mutual Fund. Specific Due Diligence: Obtain internal audit reports at regular intervals from independent auditors appointed by the Trustee. Obtain compliance certificates at regular intervals from the asset management company. Hold meeting of Trustee more frequently. Consider the reports of the independent auditor and compliance reports of Asset Management Company at the meetings of Trustee for appropriate action. Maintain records of the decisions of the Trustee at their meetings and of the minutes of the meetings. Prescribe and adhere to a code of ethics by the Trustee, Asset Management Company and its personnel. Communicate in writing to the asset management company of the deficiencies and checking on the rectification of defic iencies. The Trustee shall not be held liable for acts done in good faith if they have exercised adequate due diligence honestly. The independent directors of the Trustee or asset management company shall pay specific attention to the following, as may b applicable, namely: e i) ii) iii) iv) v) vi) vii) the Investment Management Agreement and the compensation paid under the agreement. service contracts with affiliates – whether the asset management company has charged higher fees than outside contractors for the same services. selection of the asset management company’s independent directors. securities transactions involving affiliates to the extent such transactions are permitted. selecting and nominating individuals to fill independent directors vacancies. code of ethics must be designed to prevent fraudulent, deceptive or manipulative practices by insiders in connection with personal securities transactions. the reasonableness of fees paid to sponsors, asset management company and any others for services provided. 35 viii) ix) principal underwriting contracts and their renewals. any service contract with the associates of the asset management company. Pursuant to the Deed of Trust constituting the Mutual Fund, the Mutual Fund is authorized to pay to the Trustee, which in turn pays to its individual directors, a fee for their services in such capacity. The Trustee shall charge the Fund a Trusteeship Fee of 0.01% (or at such other percentage as may be agreed upon) of the daily average asset value of the Fund. Mr. McGowan and Mr. Stephen Dover, however, will not receive any fees to act as Directors of the Trustee. The Trustee has appointed Templeton Asset Management (India) Private Ltd. as the Investment Manager and the Investment Manager has appointed Deutsche Bank as the Custodians. RIGHTS OF UNITHOLDERS 1) Unitholders under the Scheme have a proportionate right in the beneficial ownership of the assets of and to the dividend declared, if any, by the scheme under the Fund. 2) The Unitholders shall have right to ask the Trustee about any information, which may have an adverse bearing on their investments, and the Trustee shall be bound to disclose such information to the Unitholders. 3) In case the Mutual Fund declares a dividend under the Scheme, the Unitholders are entitled to receive dividend warrants within 30 days of the date of declaration of the dividend and in case of redemptions, unitholders are entitled to receive redemption proceeds within 10 working days subject to certain limitations as described under “Right to Limit Redemptions”. 4) The appointment of an AMC for the Fund may, with the prior approval of SEBI, be terminated by 75% of the Unitholders or by a majority of the Board of Directors of the Trustee. 5) Unitholders have the right to inspect all the documents listed under the heading “Documents Available for Inspection”. Procedure for Unitholder Approvals The Trustee will call for a meeting of the Unitholders of the Scheme or adopt postal ballot or any other appropriate method whenever it is required to do so in the interest of the Unitholders, or as required by the SEBI Regulations for the time being in force or if the Trustee determines to modify the Scheme or prematurely redeem the Units or wind up the Scheme. INVESTMENT MANAGER Templeton Asset Management (India) Private Ltd. is a private limited company incorporated under the Companies Act, 1956 on October 6, 1995, having its Registered Office at 1st Floor, Sakhar Bhavan, 230 Backbay Reclamation, Nariman Point, Mumbai 400 021. Templeton Asset Management (India) Private Ltd. has been appointed as the Asset Management Company of the Mutual Fund by the Trustee vide Investment Management Agreement (IMA) dated January 5, 1996, executed between Templeton Trust Services Pvt. Ltd and Templeton Asset Management (India) Pvt. Ltd. Out of the Investment Manager’s total equity paid-up capital of Rs.59.33 cr., 75% is held by Franklin Templeton Holding Ltd., Mauritius with the balance of about 25% being held by Hathway Investments Pvt. Ltd. Hathway Investments is an 36 Indian investment company, a member of the Rajan Raheja group of companies. The Investment Manager was approved by SEBI to act as the AMC for the Mutual Fund vide their letter no. IIMARP/406/96 dated February 19, 1996. As per SEBI Regulations currently in force, the Investment Manager is entitled to charge a Management Fee of 0.25 % within the overall fees of 0.75% of the daily / weekly average NAV, for the services rendered by it to the Scheme. DUTIES AND OBLIGATIONS OF THE INVESTMENT MANAGER Under the IMA, the Investment Man ager has, inter alia , the following duties and obligations: a) To manage the acquisition, holding and disposal of the assets of the Mutual Fund and the various schemes framed thereunder in accordance with the investment objectives, policies and restrictions s et out in each Scheme’s offer document and with the SEBI Regulations. b) To act as the Investment Manager of the Mutual Fund with respect to the investment and reinvestment of the cash, securities and other properties comprising the assets of each Scheme organized under the Mutual Fund with full discretionary authority in accordance with the investment policies set forth in the Deed of Trust and by the SEBI Regulations from time to time. c) To provide the Trustee or any party designated by the Trustee with:• evaluation of current economic conditions; • evaluation of particular prospects in the securities markets; • investment research and advice for the assets of the Mutual Fund consistent with the provisions of the Deed of Trust and the investment policies and guidelines adopted and declared by the Trustee; and • any other activities as may be directed by the Trustee. d) To assume day to day investment management of the Mutual Fund and, in that capacity, make investment decisions and manage the Mutual Fund in accordance with the Scheme Objectives, the Deed of Trust and provisions of the SEBI Regulations. e) To ensure that the delivery of scrips purchased is taken and that delivery is given in the case of scrips sold and that the Mutual Fund in no case engages in short selling or carryforward transactions or badla finance. f) To ensure that no Offer Document of a Scheme, Key Information Memorandum, abridged half yearly results and annual results is issued or published without the prior approval of the Trustee. g) To report all investments to the Trustee and the Custodian of the Mutual Fund. h) To hold all assets of the Mutual Fund separate from its own assets, free and clear of all liens, claims and encumbrances of any party, except as provided in the IMA and segregate the assets under its management, Scheme-wise. i) To submit such quarterly reports to the Trustee regarding the Investment Manager’s activities as specified in the IMA as the Trustee or SEBI may prescribe from time to time. j) To maintain books and registers about the operation of various schemes of the Mutual Fund under its management to ensure compliance with the SEBI Regulations, and demonstrate that such compliance by it has been achieved. k) To report market prices of the securities in which the Mutual Fund’s assets are invested to the Trustee and Custodian(s) of the Mutual Fund, as required for the purpose of determining the NAV of the Mutual Fund. l) To disclose the basis of calculating the re-purchase price and NAV of the various schemes in the Scheme particulars and to disclose the same to investors at such intervals as may be specified by the Trustee and SEBI. 37 m) To obtain from the Custodian(s) of the Mutual Fund, from time to time, such financial reports, proxy statements and other information relating to the business and affairs of the Mutual Fund as the Investment Manager may reasonably require in order to discharge its duties and obligations as specified in the IMA, or to comply with the SEBI Regulations, or any applicable law, rules and regulations. Modifications, if any, in the rights and/or obligations and duties of the Investment Manager are on account of amendments to the Regulations and the Regulations supercede/override the provisions of the IMA, wherever the two are in conflict. The AMC has obtained a certificate from SEBI dated November 8, 2000 to act as a Portfolio Manager under Securities and Exchange Board of India (Portfolio Managers) Rules and Regulations, 1993, vide registration No.INP000000464 and commenced the activity. The AMC has also obtained a No-Objection letter from SEBI under Regulation 24(2) of Securities and Exchange Board of India (Mutual Funds) Regulations, 1996 for commencing the Portfolio Managers activity. The asset management company certifies that the key personnel of the asset management company, the systems, back office, bank and securities accounts are segregated activity wise and there exists a system to prohibit access to inside information of various activities. BOARD OF DIRECTORS The Board of Directors of the Investment Manager is: Gregory E Johnson (Chairman of Board of Director of Templeton Asset Management (India) Pvt. Ltd. Franklin Resources Inc. 920 Park Place, 4th Floor, San Mateo, CA 94403, U.S.A. Mr. Gregory Johnson is a president of Franklin Templeton USA, a member of the office of the President of Franklin Resources, Inc., chairman of Franklin Templeton Distributors, Inc., President of Templeton/Franklin Investment Services, Inc., and Vice President of Franklin Advisers, Inc. Mr. Johnson is responsible for the retail, institutional, private client, and strategic alliance businesses as well as domestic shareholder services and human resources. Mr. Johnson joined Franklin in 1986, after working as a senior accountant for Coopers & Lybrad. Mr. Johnson received his Bachelor of Science degree in accounting and business administration in 1983 from Washington and Lee University and his Certified Public Accountant certificate in 1985. He is the past vice -chairman of the Mutual Fund Forum, is past chairman of the Western district of the Securities Industry Association and is a past president of the San Francisco Bond Club. He is also a board member of Command Audio Corporation. • Vijay C. Advani (Alternate Director to Mr. Gregory E. Johnson) * 62 Swiss View, # 09-02 La Suisse 1, Singapore. Mr. Vijay C. Advani is the Alternate Director for Mr. Gregory E. Johnson. Mr. Advani is currently Executive Managing Director, International Retail Development, Franklin Templeton Investments. He joined the Templeton organisation in 1995 and was responsible for developing Templeton's activities in India. Prior to joining the Templeton organisation, Mr. Advani was employed by the International Finance Corporation (IFC), the private sector arm of the World Bank Group, where his primary responsibility was in providing advisory and technical assistance to government authorities on the development of securities and financial markets, structuring, establishing and financing specialised financial institutions; and mobilising equity, quasi-equity and debt financing. During his ten -year career with the IFC, Mr. Advani worked on several emerging economies in the former Soviet Union, Asia, Middle East and Africa. Mr. Advani received an MBA from the University of Massachusetts, Amherst, where he graduated as a Foreign Student Scholar and received a Bachelor's Degree in Accounting and Finance from the University of Mumbai, India. 38 • Dr. J. Mark Mobius * Block 11, Waterside Apartments, No. 06-02, Panjorg Rhu Road, Singapore. Mark Mobius joined the Temple ton organization in 1987 as president of Templeton Emerging Markets Fund Inc. in Hong Kong. He currently directs the analysts based in Templeton’s eleven emerging markets offices and manages the emerging markets portfolios. Dr. Mobius has spent over thirty years working in Asia and other parts of the emerging markets world. As a result of his experience, in 1999 Dr. Mobius was appointed joint chairman of the World Bank and Organization for Economic Cooperation and Development (OECD) Global Corporate Governance Forum’s Investor Responsibility Taskforce. In 2001, Dr. Mobius was awarded “Emerging Markets Equity Manager of the Year 2001” by International Money Marketing in the United Kingdom. In 1999, Dr. Mobius was named one of the “Ten Top Money Managers of the 20th Century” in a survey by the Carson Group, a leading global capital markets intelligence-consulting firm. In the 1998 Reuters Survey, Dr. Mobius was named the number one global emerging market fund manager. CNBC named him “1994 First in Business Money Manager of the Year.” Morningstar in the United States awarded Dr. Mobius the “Closed -End Fund Manager of the Year” for 1993. In 1992, Dr. Mobius was named “Investment Trust Manager of the Year” by The Sunday Telegraph in the United Kingdom. Prior to joining Templeton, he was President of International Investment Trust Company Ltd. in Taipei, Taiwan, the country's first and largest investment management firm. Prior to that, he served at Vickersda-Costa, an international securities firm, which later merged with Citibank. Before joining Vickers, for ten years, Dr. Mobius operated his own regional economics and research-consulting firm in Hong Kong. Dr. Mobius holds Bachelors and Masters Degrees from Boston University, and received his Ph.D. in Economics and Political Science in 1964 from the Massachusetts Institute of Technology. Dr. Mark Mobius is the author of ‘The Investor's Guide to Emerging Markets'. • Rajan Raheja * "Rahejas", 87/1, Gangadhar Baskar Marg, Juhu, Mumbai 400 049. Mr. Raheja is a renowned businessman, who has been involved in the construction business for the past 25 years. The R. Raheja group is diversified into other business areas that include cement, petrochemicals, hotels, automotive batteries, ceramic tiles and cable TV network. • Deepak Satwalekar 9, Nutan Alka Co -op. Hsg. Society Ltd. Relief Road, Santacruz (West), Mumbai – 400 054 Mr. Satwalekar obtained a Bachelors Degree in Technology with a Major in Mechanical Engineering from the Indian Institute Technology, Mumba i. He has completed a Masters Degree in Business Administration from the American University, Washington D. C. and has worked in the Operations Department of a major U.S. headquartered multinational bank. Mr. Satwalekar is currently, the Managing Director and CEO of HDFC Standard Life Insurance Co. Ltd. Until recently, he was the Managing Director of Housing Development Finance Corporation Ltd. He has been a consultant to the World Bank, the United States Agency for International Development (USAID) and the United Nations Centre for Human Settlements (HABITAT). Mr. Satwalekar is actively involved in various committees of the Bombay Chamber of Commerce & Industries as well as the Confederation of Indian Industries. Recipient of the “Distinguished Alumnus Award” from IIT, Mumbai. He is also a Director on the boards of several Companies. • P. Vaidyanathan 7 AB, 3 rd Block. 7 th Floor, Kences Enclave, No. 1 Ramakrishna Street, T. Nagar, Chennai 600017 Mr. Vaidyanathan, B. Com., FCA, AICWA, ACS, started his career as a practising Chartered 39 Accountant in his family Chartered Accountancy firm. After a few years of practice, he chose to enter into the line of investment consultancy. He took up marketing and distribution of financial products and promoted the concept to various investors and companies. Today, this has grown into a venture now known as “Integrated Enterprises (India) Ltd.” which is acting as a Total Financial Service Provider for investors who constitute the bottom end of the income pyramid. • Navro z Seervai, 8, Shiv Shanti Bhavan, M. Karve Marg, Mumbai 400 020 Mr. Navroz H. Seervai is a leading Advocate in Mumbai. He is actively involved in public interest litigation in the field of Environmental Law and Civil Liberties and Human Rights. He starte d practice in the Bombay High Court in the Chambers of R. J. Joshi and A. M. Setalvad, specialised in Constitutional and Administrative Law, Company and Corporate Law, and Environmental Law. He completed his B.A. (Hons) from Elphinstone College in 1977 and earned his Law degree from the Government Law College, Mumbai in 1981. While studying law, Navroz won many awards - the Kinloch Forbes Gold Medal for Jurisprudence & the Telang Memorial Gold Medal. Navroz also dedicates a lot of his time and energy to va rious social activities. He is a member of the Peoples’ Union for Civil Liberties & the Bombay Environmental Action Group since 1981. * These Directors are associated with the sponsor or its associates. Compliance Officer: Vivek Pai Compliance Officer 1st Floor, Sakhar Bhavan 230 Backbay Reclamation Nariman Point, Mumbai 400 021 India. 40 INFORMATION ON KEY PERSONNEL: Name Rajiv Vij Total Experience 14 years Age (years) 36 Qualifications B. Tech. (IITDelhi), PGDM (IIM-Calcutta) Functions & Experience Managing Director, Asia (based at Mumbai) Responsible for growing the firm’s retail businesses in India, Singapore, Hong Kong and South Korea. Franklin Templeton Asia offices currently have assets of over US$ 6.5 billion. • Regional Head, India & Middle East (2001-2002) • Country Head and Chief Executive Officer of the India office (1999-2001) • Vice President for Sales and Marketing (19951999), a member of the key start-up team. • He joined Franklin Templeton from Hindustan Lever Limited where he worked across the sales and marketing functions for 6 years • He is a Member of the SEBI Mutual Fund Advisory Committee and on Board of Association of Mutual Funds in India (AMFI). Ravi Mehrotra Total Experience 18 years 42 B.Com, PGDBM (XLRI, Jamshedpur) President - Templeton Asset Management (India) Pvt. Ltd. (based at Mumbai) Responsible for Sales, Marketing, Investment management, Portfolio risk management, Human Resources and Corporate Accounting functions of the business. • Senior Vice President and Chief Investment officer - Pioneer ITI AMC Ltd. (1993-2002). He managed Taxshield 95, Taxshield 98, Taxshield 99 and Taxshield (open end) • Executive Vice President, Prime Securities (1991-1993) • AVP, Bank of America- Investment Banking and Treasury Group (1985-1991). Head TA Operations & Customer Service - India (based at Mumbai) Responsible for the company’s Transfer Agency Operations and Customer Service functions in India (2003 to date). Franklin Templeton International Services (India) Pvt. Ltd. (2002 – 2003) Manager, Global Enterprise Consulting (Asia) (2002-2003), Templeton Asset Management (India) Pvt Ltd (2001 – 2002) eBusiness Manager (Asia). Prior Assignments: • Various Management positions at Thomas Cook (India) Limited (1997 – 2001) including responsibilities in the areas of Technology, Marketing support, Special projects and Vendor Management Operations Manager with Pinnacle Data Systems, Inc. in the USA (1993 – 1995) handling the purchase and o perations functions of the company. • Purchasing Manager / Director with Henkel Chemicals (India) Limited (1990 – 1992) 41 Sanjay Sapre Total Experience 10 years 34 M.B.A (USA) Name Vivek Pai Total Experience 9 years Age (years) 32 Qualifications B. Com, ACA Functions & Experience Head, Compliance & Internal Audit Having joined Templeton on October 2000, he is responsible to Trustees for Compliance and Internal Audit of the Mutual Fund. Prior to this he was acting as a Consultant for setting up back office operations for a new company. Birla Sun Life Asset management Company Limited from (1996-2000) as Head of Fund Accounting. Apollo Finvest (India) Ltd as Asst. Manager, Corporate Finance handling Lease & HP financing (1994-1996). Senior Vice President and Chief Investment Officer (Franklin Equity) (based at Chennai) Manages FIT, FIGF, FIF, FPF, FIPP, TIPP – Equity • Vice President and Fund Manager - Pioneer ITI AMC Ltd. (1994-2002) • Asst. Vice President - Indbank Merchant Banking Services Ltd. (1990-1994) advising Indian Opportunities Fund Franklin Equity Team R. Sukumar 39 Total Experience 15 years B.E (Univ. of Roorkee); PGDM (IIM Bangalore) • K.N. Siva Subramanian Total Experience 15 years 41 BE (REC Jaipur); PGDM (IIM Calcutta) Decision Support Systems Group, Tata Steel (1986 – 1988) Senior Vice President and Portfolio Manager – Equity – Based at Chennai Manages FTIAAF - Equity, FIBCF, FFF, FIPF, FIVF, FIOF • Vice President and Fund Manager – Pioneer ITI AMC Ltd. (1993 – 2002) • Industrial Finance Officer, Industrial Development Bank of Ind ia (1988 – 1993) 42 Name Deepesh Pandey Total Experience 8 years Age (years) 31 Qualifications B. Tech. (IITDelhi), PGDM (IIM-Calcutta) Functions & Experience Asst. Vice President & Portfolio Manager (Equity) – Based at Mumbai Responsible for Balanced Funds, Nifty, Sensex & PE Ratio Funds, equity portion of Monthly Income Plan. Schemes managed: FIIF, FTIIF, FTIPERF, TMIP-H, G equity portion, FTIMIP- Equity portion, FTIBF – Equity portion, FIBF – Equity portion, FITF , TICAP – Equity, FIT97, FIT99, FIT95, FIT98, FIT96 • He managed the Franklin India Growth Fund and equity components of Franklin India Balanced Fund and Templeton Monthly Income Plan. He also oversees the Franklin India Index Fund and Franklin India Index Tax Fund (2000-2002) • His previous ass ignment 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. Assistant Vice President and Senior Research Analyst (based at Chennai)- Provides Research support on Software, Cement, Metals, Banking Sectors • Asst. Vice President– Pioneer ITI AMC Ltd. (1994- 2002) • Industrial Finance Corporation of India Ltd. (1986-1994) • Kothari Industrial Corporation Ltd (1981 – 1986) Assistant Vice President and Senior Research Analyst (based at Chennai) • Asst. Vice President – Investments – Pioneer ITI AMC Ltd. (Since 1993) • Petrosil Oil Co. Ltd. • L. U. Krishnan & Co. Provides Research support on Oil & Gas, Petrochemicals, Engineering, Power and Hotel sectors. AVP & Senior Research Analyst (based at Chennai) Responsible for Research coverage of Pharma, Auto, Media and Power sectors • 1991-1993, SBI Mutual Fund – Investment Analyst. • 1993-1996, ITC Peregrine / Peregrine Capital India – Research Analyst for Basic Industries (Designation : General Manager) • 1997-1999, Socgen Crosby Securities, Research of Basic Industries including Cement, Metals, Capital goods (Designation Vice President) • 2000-2003, ABN Amro Asia Equities, Research of Bas ic Industries including, Oil & Gas, Capital Goods, Power Utilities, Metals (Designation: Assistant Director) S. Chellappa Total Experience 22 years 44 MBA, (Madras Univ.), Diploma in Computer Applications (NITIE) Anil Prabhudas Total Experience 17 years 42 CA B Sashikanth Total Experience 12 years 36 B. Com., C.A. 43 Age (years) Templeton Equity Team Chetan Sehgal 34 Total Experience 12 years Name Qualifications B.E. (Mech), PGDBA (IIMBangalore), CFA Functions & Experience Director – Research India and is part of the team managing TIGF, based at Mumbai • He joined Templeton in 1995 as Investment Analyst with the emerging markets group and is currently a Portfolio Manager. • As a Portfolio Manager and Analyst, Chetan analyses stocks across a wide gamut of sectors, industries and geographies within the emerging markets group which invests in about 40 countries under the direct supervision of Dr. Mark Mobius. • Before joining Templeton, he had a 3-year stint at CRISIL, India’s largest rating agency currently affiliated with Standard & Poor. He has experience in rating corporate securities across various industries and was also involved in structuring debt instruments including securitisation assig nments. Investment Analyst with the Emerging Markets Group, under Dr. Mark Mobius. Based at Mumbai He identifies and evaluates investment opportunities for the global funds as well as TIGF, and looks after Israel and India markets. He joined Templeton in Nov 1999. • Worked with B & K Securities India as a Senior Analyst from (1998-1999) focusing mainly on the pharmaceutical and auto sectors. • Caspian Securities as a Senior Analyst (19961998) again covering the pharmaceutical and auto sectors. • Oppenhiemer India as an Investment Analyst from (1993-1996) • Rakesh Parekh has been involved in various roles primarily as an insurance underwriter with General Accident Plc and Commercial Union Plc in the UK (1986-1992). 44 Rakesh Parekh Total Experience 17 years 39 MBA-Finance from University of Stirling (UK), Associate of Chartered Insurance Institute (UK), Business Administration with Honours from University of Dundee (UK). Age (years) Fixed Income/Debt Te am Nilesh Shah 34 Total Experience 13 years Name Qualifications ACA, Grad. CWA, completed GFM-25 programme at JP Morgan, New York, USA Functions & Experience Director and Chief Investment Officer – (Fixed Income) – Based at Mumbai Responsible for investment strategy and asset allocation for all fixed income funds. He manages TIIF and FINTF. • Handling Templeton Debt Funds and Franklin Equity Funds in India (1999-2002). • Portfolio Manager – Fixed Income (1997-1999). • Prior to joining Franklin Templeton, Mr. Nilesh worked as Head of structured products group at ICICI Securities & Finance Co. Ltd. for over 5 years. He has worked in ICICI merchant banking division managing public issues and corporate advisory assignments. Asst. Vice President & Portfolio Manager - Fixed Income - Based at Mumbai Responsible for the Liquid Funds, all the Money Market and short-term instruments portfolio across all funds and be directly responsible for all Short tenure Income/ Bond funds. Schemes managed: TILF, TITMA, TIMMA, TISTIP, TILP, FISIP, TFIF-ST Also functioning as fixed income analyst since 1997. • Senior Rating Analyst and member of Executive Rating Committee with ICRA (1992-1997). • Worked as a Process Engineer with Beaulieu of America, a textile producer in USA. Shobhit Mehrotra Total Experience 13 years 37 MBA (Clemson Univ., USA), 45 Name Sameer Kulkarni Total Experience 10 years Age (years) 34 Qualifications Functions & Experience Asst. Vice President & Portfolio Manager - Fixed Income, Based at Mumbai Joined Templeton in February 2002. . He is responsible for Government Securities Portfolio across all the funds. Sameer also manages the Swap and other derivative products exposure across all the funds. He also supports the group in managing the Liquidity Risk and Interest Rate Risk of all the portfolios. Schemes managed: TGSF, FTIGF and Government Securities portfolio of other schemes. • Head of Money Markets and Investments in IndusInd Bank) (1997-2002). • Chescor Ltd. in London, building models for index funds (1995-1996). • Mukesh Babu Securities Ltd. as Senior Dealer (1994-1995). • National Stock Exchange as a member of the key start-up team responsible for setting up the exchange (1994). • Executive Assistant to the Head of International Sales Group in Larsen & Toubro (1993-1994). Asst. Vice President – Fixed Income - Based at Mumbai Schemes managed: TIIBA, FIMF, TIGIP, TFIF-LT, Debt portions of FIBF, FTIBF, TMIP, FTIAAF, TICAP, TIPP and FTIMIP. • UTI Bank Limited, Mumbai - Fund Management. Part of the Team Managing SLR & Non-SLR Investment and Trading Portfolio of the Bank (Jan 2000 - October 2002). • SMIFS Securities Limited, Mumbai Senior Dealer (Debt Placement) (Jun 1998 - Dec 1999) • Khandwala Finances Limited, Mumbai Senior Dealer (Debt Placement) (Oct 1997 - May 1998) • RR Financial Consultants Limited, Mumbai Manager (Debt Placement) (Dec 1995 - Oct 1997) BE (Mech), Asst. Vice President Fixed Income Rahul Goswami Total Experience 8 years 31 B.Sc. (Mathematics) M.B.A (Finance) 46 Name S Rajgopalan Total Experience 16 years Age (years) 38 Qualifications Bsc (Maths) Functions & Experience Senior Manager- Transfer Agency and Customer Services (based in Chennai) • Oversees the operations and customer services of the company. • From 1999- May 2003-Karvy ConsultantsHeading the Templeton MF unit and supervising all process related activities. Client co-ordination, regular review meetings with the internal auditors, internal teams and visiting distributor houses. • From 1993-1999-MCS Ltd. Mumbai • Handling close ended Mutual Fund schemes and investor services. Maintaining relationship with client and co-ordinating with internal auditors/distributors etc. PROCEDURE FOR INVESTING The main aim of the investment process is to meet Fund specific investment objectives and to develop a well-diversified, high credit portfolio that minimises liquidity risk and credit risk. The Investment committee comprising of International CIO, CIO and Portfolio Managers meets every month for a review of performance and risk reports. The performance review includes portfolio holding, peer group review, policy deviation, performance vis-à-vis peers and benchmark indices etc. The Investment team comprising of CIO and Portfolio Managers meets every day to discuss market movement and analyse events and news. Trading strategy and asset allocations are firmed in the daily meetings. Daily meetings are formal in nature and form the basis for maintaining investment records as per SEBI regulations. There is a weekly call with the international CIO for market update, asset allocation and interaction for global information. The CIO makes presentations to the Board of the AMC and the Trustees periodically, indicating the performance of the scheme(s). The Investment process is intensely research oriented. It comprises of qualitative as well as quantitative measures It is approved by the Boards of the AMC and the Trustee Company and forms the basis for approach to the Investment management process. It has critical insights from the rich experience gathered by Franklin Templeton Investments over 50 years across various markets and asset classes. CUSTODIAN Deutsche Bank 422, Dr. D.N. Road, Fort, Mumbai 400 001 has been appointed the custodian (the “Custodian”). The approval for appointing Deutsche Bank as Custodian has be en granted by SEBI vide their letter No. IN/CUS/003 dated March 20, 1998. The Custodian will keep in safe custody all the securities and other such instruments belonging to the Fund, ensure smooth inflow -outflow of securities and such other instruments as and when necessary in the best interest of the investors, and ensure that the benefits due to the holdings are recovered. The Custodian will charge the Fund a fee as per the custodial service agreement. The Trustee has the right to change the Custodian, if it deems REGISTRARS AND TRANSFER AGENTS Sale/Repurchase/transfer/transmission of the scheme units will be processed in-house and at competitive rates. The fees will be charged to the scheme as a part of annual ongoing expenses and shall confirm to sub-clause 15 of Regulation 25 of SEBI (Mutual Funds) Regulations, 1996. 47 AUDITORS S.R. Batliboi & Co. 18th Floor, Express Towers, Nariman Point, Mumbai 400 021, is the Auditor for this Scheme of the Mutual Fund. The Trustee shall appoint auditors for each Scheme of the Mutual Fund. Further, the Trustee has the right to change the Auditors. S.R. Batliboi & Co. have however, not performed any services in connection with this Offer Document. INVESTOR RELATION OFFICER S. Rajagopalan, Sr. Manager , Transfer Agency and Customer Service, Century Centre, 75, T.T.K Road, Alwarpet, Chennai 600 018. The Trustee is satisfied that the investor services division has adequate capacity and systems to discharge the various obligations relating to investor servicing as provided in the regulations and to handle investor complaints. 09. INVESTMENT OBJECTIVES AND POLICIES The investment objective of Templeton India Money Market Account is to provide investors with a high degree of liquidity combined with current income through investment in high quality money market instruments such as treasury bills, dated government securities having an unexpired maturity upto 1 year, call money, rated commercial papers, trade/commercial bills accepted/co-accepted by banks, repos, certificates of deposit and other money market instruments that may be notified by RBI/SEBI from time to time. Investment Policies: The policies to achieve the investment objectives are in conformity with the Memorandum & Articles of Association of the Asset Management Company (AMC), Investment Management Agreement executed between the Asset Management Company & Board of Trustees and the Trust Deed. The investment policies shall be in accordance with SEBI [Mutual Funds] Regulations, 1996 and within the following guidelines: Asset Allocation Type of Investment Money Market Instruments (including cash/call money) Allocation % of corpus 100% Risk Profile Low The investment policies of Money Market Account shall be as per SEBI (Mutual Funds) Regulations, 1996 and the investments will be made in accordance with the guidelines/directives of RBI, wherever applicable. Being a Money Market fund, the porfolio will be invested in money market instruments. Asset allocation / Investment pattern being a fudnamental attribute, any modifications thereto will be done after complying with the procedure described prescribed under SEBI (Mutual Funds) Regulations 1996 (the procedure is outlined in the paragraph, “Fundamental attributes” in this offer document). 48 INVESTMENT IN INTEREST RATE SWAPS Templeton India Money Market Account (TIMMA) will engage in Interest Rate Swap transactions for the purpose of hedging and portfolio balancing, in accordance with Guidelines issued by SEBI. Ø Purpose of Interest Rate Swaps: • The Indian markets have faced high volatility in debt and equity markets. An interest rate swap is a contractual agreement between two counter-parties to exchange streams of interest amount on a national principal basis. In this, one party agrees to pay a fixed stream of interest amount against receiving a variable or floating stream of interest amount. The variable or floating part is determined on a periodical basis. The scheme shall use derivative position for hedging the portfolio risk on a non-leverage basis. The scheme shall fully cover their positions in the derivatives market by holding underlying securities / cash or cash equivalents / option and / or obligation for acquiring underlying assets to honour the obligations contracted in the derivatives market. • Ø Basic Structure of an Interest Rate Swap: Present regulations do not allow short -selling of fixed income securities. This restriction exposes the fund to high risk when interest rate rises. Derivative Market offers an opportunity to neutralize the risk of rising interest rate on fixed income portfolio by paying in swap market. Use of derivative product such as interest rate swap will help in containing the portfolio risk. In a typical interest rate swap, one party agrees to pay a fixed ra te over the term of the agreement and to receive a variable or floating rate of interest. The counter-party receives a stream of fixed rate payments at regular intervals as described in the agreements and pays the floating rate of interest. A fixed / floating interest rate swap is characterized by: 1) 2) 3) 4) A fixed interest rate. A variable or floating interest rate, which is periodically reset. A notional principal amount upon which total interest payments are based, and The terms of the agreement, including a schedule of interest rate reset dates, payment dates and termination date. Example: Fixed – Rate Payer NSE MIBOR Fixed Rate Payment Floating – Rate Payer Terms: Fixed Interest Rate Variable Interest Rate Notional Principal Amount Period of Agreement Payment Frequency : : : : : 7% p.a. NSE Over-night MIBOR reset daily and compounded daily. Rs.50 crore 1 year Semi – Annual 49 Now, suppose the six month period from the effective date of the swap to the first payment date comprises 182 days and the daily compounded NSE over – Night MIBOR is 6% p.a. on the first payment date, then the fixed and variable rate payment on the first payment date would be as follows: Fixed Rate Payment: Rs.1,74,52,055 = (Rs.50,00,00,000) X (182 Days / 365 Days) Variable Payment: Rs.1,49,58,904 = (Rs.50,00,00,000) X (182 Days / 365 Days) Often, a swap agreement will call for only the exchange of net amount between the counter-parties. In the above examples, the fixed – rate payer will pay the variable – rate payer a net amount of Rs.24,93,151 = Rs.1,74,52,055 – Rs. 1,49,58,904. The second and final payment will depend on the daily NSE MIBOR compounded daily for the remaining 183 days. The fixed rate payment will also change to reflect the change in holding period from 182 days to 183 days. Please note that this example is given for illustrative purpose only and the actual returns may vary depending on the market conditions. Ø Exposure to Derivatives – Interest Rate Swaps: Interest rate swaps may be used to hedge up to 100% net assets of the scheme. The details of the nature of the Interest Rate Swaps instruments to which the Fund proposes to be exposed to and the risks attached thereto is mentioned herein below: Ø Risks attached with the use of Interest Rate Swaps: As and when the Schemes enter into Interest rate swaps agreement, there are risk factors and issues concerning the use of this derivative that the investors should understand. Interest rate swaps require the maintenance of adequate controls to monitor the transactions entered into, the ability to asses the risk that the derivative adds to the portfolio and the ability to forecast failure of another party (usually referred to as the “counter -party”) to comply with the terms of the derivatives contract. Other risks in using derivatives include the risk of mis -pricing or improper valuation of derivatives, the credit risk where the danger is that of a counter-party failing to honor its commitment, liquidity risk where the danger is that the derivative cannot be sold at prices that reflect the underlying assets, rates and indices, and price risk where the market price may move in adverse fashion. Ø Valuation of Derivative Products: The valuation of the derivative products would be in conformity with the stipulation of: 1. in case of the traded derivative: - sub clauses (i) to (v) of clause 1 of the Eighth Schedule to the SEBI (Mutual Funds) Regulations, 1996 2. in case of the untraded derivative: - sub clauses (i) and (ii) of clause 2 of the Eighth Schedule to the Securities and Exchange Boar d of India (Mutual Funds) Regulations, 1996 as amended by SEBI from time to time. 50 It may be noted that the trading in derivatives is risk – hedging mechanism and introduction of the same under the Scheme does not constitute a change in the fundamental attributes of the Schemes. • • The fund managers will follow an active investment management strategy taking defensive/aggressive postures depending on opportunities available at various points in time. The asset allocation pattern described above may alter from time to time on a short-term basis on defensive considerations, keeping in view of market conditions, market opportunities, applicable regulations and political and economic factors. However, if the asset allocation pattern is to be altered for other reasons, as this is a fundamental attribute, the procedure outlined in the paragraph on the “fundamental attributes” shall be followed. The AMC may invest in Templeton India Money Market Account Fund and as per current regulations will not charge an asset mana gement fee. • INVESTMENT RESTRICTIONS In pursuance of the Regulations, the following restrictions are currently applicable to the scheme: • • Investment from the Money Market’s Corpus would be only in money market instruments. Transfers of investments from one Templeton Mutual Fund scheme to another will be done as follows: - such transfers will be done at the prevailing market price for quoted instruments on spot basis. - the securities so transferred shall be in conformity with the investment objective of the scheme to which such transfer has been made. The scheme has identified “Crisil Liquid Fund Index” as the benchmark. The AMC / Trustee reserve the right to change / modify the index after giving an advance notice of 15 days through an addendum. The addendum will be published in the website/ offices of AMC and the offices of the distributors / agents. • The scheme may invest in any other scheme with similar investment objective without charging any fees, provided that the aggregate interscheme investments made by all schemes under the management of Templeton Asset Management (India) Private Ltd or in schemes under the management of any other AMC shall not exceed 5% of the net assets of all schemes of the fund Pending deployment of funds in terms of investment o bjectives of the scheme, the scheme can invest the funds in short term deposits of scheduled commercial banks. Money Market Account may invest in listed securities issued by group companies of the sponsor. The aggregate of investments in the listed securities of the group companies of the sponsor shall not exceed 1% of the aggregate net assets of all the schemes. Further, the scheme shall not invest in any unlisted securities of the group/associate companies of the sponsor and in any privately placed securities issued by associate or group companies of the sponsor. The investment restrictions specified as a percentage of net assets will be computed at the time of making the investment and it is clarified that changes need not be effected, merely by reason of appreciation or depreciation in value or by reason of factors beyond the control of the scheme (such as receipt of any corporate or capital benefits or amalgamations). In case the limits are exceeded due to reasons beyond its control, the AMC shall adopt necessary measures of prudence to reset the situation having regard to the interest of the investors. The Trustee/AMC may alter in conformity with SEBI regulations these restrictions from time to time, to the extent the regulations/policies of SEBI/RBI cha nge/allow so as to allow investments in the full universe of permitted investments, for the purpose of achieving the investment objective. 51 • • • • Investment by AMC in the scheme Templeton Asset Management (India) Private Ltd, the asset management company may invest in Templeton India Money Market Account. However, as per SEBI (Mutual Funds) Regulations, 1996 Templeton Asset Management (India) Private Ltd will not charge any Investment Management Fee for its investment in Templeton India Money Market Account. In addition, the funds managed by the sponsors, Franklin Templeton Investments Group may invest in the Templeton India Money Market Account. Portfolio turnover Since the scheme intends to hold the investments in the portfolio to maturity, the portfolio tur nover is expected to be lower. The scheme being an open- ended scheme, it is difficult to estimate the portfolio turnover accurately. FUNDAMENTAL ATTRIBUTES Please note that the following are the fundamental attributes of the scheme: • • • • • Type of scheme Investment objective Investment pattern, minimum and maximum asset allocation. The fund retains the option to alter the asset allocation on a short -term basis in the interest of unitholders on defensive considerations Liquidity provisions such as repurchase or redemption Aggregate fees and expenses charged to the scheme The Trustee can change the fundamental attributes of the scheme provided that • unitholders are informed about the proposed change in fundamental attribute by sending individual communication and an advertisement is given in one national English newspaper and in a newspaper published in the language of the region where the Head Office of the mutual funds is situated, and the unitholders are given an option to exit at the prevailing Net Asset Value without any exit load. • Policy for borrowing The scheme may borrow upto a maximum of 20% of the net assets of the scheme for a maximum duration of 6 months in order to meet redemption of units/dividends or interest payouts as a temporary liquidity measure as per Regulation 44[2] of Chapter VI of SEBI [Mutual Funds] Regulations, 1996, on such terms (as to creation of charge on the properties of the scheme, rate of interest, margins etc.) as the Trustee/AMC considers to be in the interest of investors. Such borrowings if made may result in interest cost. The limit of 20% may be revised at the discretion of the Fund and to the extent the Regulations hereafter permit. As of October 31, 2003 the fund had no borrowing. 52 10. HOW TO INVEST Ongoing basis allotments: On an ongoing basis, since the per unit sale price is expected to be constant at Rs.1 (rounding off the NAV to the nearest paisa), Templeton India Money Market Account units allotted would be equal to the amount invested. Who can buy The scheme units can be purchased by the following entities (subject to the applicable legislation/regulation governing such entities): 1. Adult individuals, either singly or jointly (not exceeding three), resident in India. 2. Parents/Guardian on behalf of minors. 3. Companies/Domestic Corporate Bodies/Societies/Association of Persons/Body of individuals/Clubs/Public Sector Undertakings registered in India. 4. Charitable or Religious Trusts* authorized to invest in units of mutual funds. 5. Banks, Financial Institutions and Investment Institutions. 6. Non-Resident Indians, persons of Indian origin residing abroad (NRIs) on full repatriation basis and on non-repatriation basis. 7. Foreign institutional investors on full repatriation basis (subject to RBI approval). 8. Hindu Undivided Family (HUF), in the name of Karta. 9. Wakf Boards or endowments and Registered Societies (including registered co-operative societies) and private trusts authorized to invest in units of mutual funds. 10. Partnership firms in the names of their partners. 11. An association of persons or body of individuals whether incorporated or not 12. Army/Air Force/Navy/Para-military funds and other eligible institutions. 13. Scientific and/or industrial research organizations. 14. Other Associations, Institutions, Bodies etc. authorized to invest in the units of mutual funds. 15. Such other individuals/institutions/body corporate etc., as may be decided by the AMC from time to time, so long as wherever applicable they are in conformity with SEBI Regulations. * Templeton Mutual Fund is notified under Sec 10 [23 D] of the Income Tax Act 1961 and the units of the scheme are approved security under Sec 11[5] of the Income Tax Act read with Rule 17C of the Income Tax Rules, 1962. Note: 1. NRIs/PIOs/ FIIs have been granted a general permission by RBI [Schedule 5 of the Foreign Exchange Management (Transfer or Issue of Security by a Person Resident Outside India) Regulations, 2000] for investing in /redeeming units of the schemes subject to conditions set out in the aforesaid regulations. 2. 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 society or a trust fund, the original Power of Attorney or a certified true copy duly notarized or the relevant resolution or authority to make the application / redemption as the case may be, or duly notarized copy thereof, along with a certified copy of the Memorandum and Articles of Association and/or bye laws and/or trust deed and/or partnership deed and Certificate of Registration should be submitted. The officials should sign the application under their official designation. In case of a Trust / Fund it shall submit a certified true copy of the resolution from the Trustee(s) authorizing such purchases / redemption. 53 3. Returned cheques are liable not to be presented again for collection, and the accompanying Application Forms are liable to be rejected. In case the returned cheques are presented again, the necessary charges are liable to be debited to the investor. From Whom The scheme units are being offered for subscription through AMFI registered Agents/Stock Exchanges Brokers and can also be purchased directly from the Fund through various Branches/District Representative Centres of Templeton Mutual Fund excepting during the period when there is a book closure. At what price: Templeton India Money Market Account units will be allotted at Rs.1 per unit. PROCEDURE FOR PURCHASE OF UNITS Duly completed Account Applications along with full payment must be remitted at Templeton Mutual Fund Branches/District Representative Centres or may be routed through an Agent/Stock Exchange Broker. Outstation cheques/drafts, money orders, postal orders/stock invests and post dated cheques will not be accepted. The Templeton India Money Market Account units are being offered for sale on all working days at Rs.1/- per unit Public Offering Price (POP) applicable on the date when the application form or additional purchase request is received at any of the Templeton Mutual Fund branches. While determining the price of units, the fund shall ensure that the repurchase price is not lower than 93% of the Net Asset Value (NAV) and the sale price is not higher than 107% of the NAV. Provided further, that the difference between the repurchase price and the sale price of the units shall not exceed 7% calculated on the sale price. Minimum amount The minimum investment for subscribing to Templeton India Money Market Account is Rs.5,000/- for regular account and Rs.10,000/- for cheque writing facility and in multiples of Rs.1000/- thereafter. Subsequent investment in an account shall be a minimum of Rs.1,000/- and in multiples of Rs.1,000/-. The Trustee reserves the right to vary these limits from time to time, in the interest of investors. All applications/additional purchase requests received before 3.00 p.m on a business day will be processed at that day's POP. Applications/additional purchase requests received after 3.00 p.m will be processed at the next working day's POP. The number of Templeton India Money Market units so allotted, shall be added to the unitholder's designated account and a statement to this effect shall be issued to the unitholders. The Trustee reserves the right to change the cut-off time on a prospective basis. All allotments are subject to realisation of the payment instrument. In case of investments of Rs.50,000/- and above, income tax P.A.N./G.I.R. number and I.T. circle office address are to be furnished by the investors. Allotment: The number of Money Market Account units allotted would equal the amount invested. Allotment of Money Market Account units on application shall be at the discretion of the Board of Trustees. 54 Payment Details All cheques and drafts should be made out in favour of “Templeton India Money Market Account” and crossed “ A/c Payee only”. The investors may also use credit card for their investments subject to the conditions prescribed by AMC from time to time. The applications will be accepted at the designated Bank Collection Centres. No outstation cheques / stock invest or post dated cheques will be accepted. The Investor Service Centres will not accept cash. As per the directives issued by SEBI, it is mandatory for applicants to mention their bank account numbers in their applications and therefore , investors are requested to fill-up the appropriate box in the application form. Mode of Payment: Resident Investors Payment may be made by cheque or bank draft and crossed “A/c Payee Only” drawn on any bank, which is situated at and is a member of the Bankers’ Clearing House, located at any of the Investor Service Centres. Bank charges for demand drafts will be borne by the Fund/AMC and will be limited to the bank charges stipulated by the Indian Banks Association. The AMC will not accept any request for refund of demand draft charges. JOINT APPLICANTS In the event an Account has more than one registered owner, the first-named holder shall receive the Account Statements, all notices and correspondence with respect to the Account, as well as the proceeds of any Redemption requests or dividends or other distributions. In addition, such Unit holders shall have the voting rights, as permitted, associated with such Units, as per the applicable guidelines. Applicants can specify the ‘mode of holding’ in the application form as ‘Joint’ or ‘Anyone or Survivor’. In the case of holding specified as ‘Joint’, Redemptions would have to be signed by all joint holders in the same order as registered with the Mutual Fund. However, in cases of holding specified as ‘Anyone or Survivor’, any one of the Unit holder will have the power to make Redemption requests, without it being necessary for all the Unit holders to sign. However, in all cases, the proceeds of the Redemption will be paid only to the first-named holder. COMPANIES/CORPORATE BODIES ETC. In case of an application under a Power of Attorney or by a limited company, body corporate, registered society, trust or partnership, the relevant Power of Attorney or the relevant resolution or authority to make the application or the Trust Deed or the Partnership Deed as the case may be, or duly certified copy thereof, along with a certified copy of the Memorandum and Articles of Association and-or byelaws must be lodged at the any ISC within three days from the date of investments. PUBLIC OFFERING PRICE (POP) / Sale Price for ongoing purchases For on-going subscriptions, units will be offered to investors at “Public Offering Price” (POP). POP is the price at which the units are proposed to be sold. POP is calculated based on the “Applicable NAV for subscriptions” and will additionally include the permissible load in terms of the SEBI Circular no. MFD/CIR/08/514/2002 September 22, 2002 (computed in the manner described hereunder) depending on the amount invested, as explained under the head Expenses. 55 The sales load shall be charged as a percentage of Net Assets Value (NAV) i.e. applicable load as a percentage of NAV will be added to NAV to calculate POP / sale price. To further elaborate, the POP is calculated by multiplying the “Applicable NAV” by (1+ Sales Load). For example, if the NAV is Rs.14/- and the sales load applied is 1%, the POP / Sale Price will be calculated as follows: Public Offering Price: (POP) NAV * (1+ Sales Load) = 14 * (1+0.01) = Rs. 14.14 As per Regulations, while determining the prices of the Units, the Mutual Fund will ensure that the repurchase (i.e. redemption) price is not lower 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 between the repurchase price and sale price shall not exceed 7% calculated on the sale price. However in the case of Templeton Money Market Account the sale price of unit is expected to be constant at Rs.1/ - (rounding off the NAV to the nearest price) per unit. All investment requests submitted through an agent/broker or Templeton District Representative Centres will be processed at the POP applicable on the date of their receipt at the Customer Service Department in Chennai or branches of Templeton Mutual Fund. The Trustee/AMC reserves the right to waive the load wholly or in part in cases where no significant selling or distribution expenses are involved APPLICABLE NAV FOR SUBSCRIPTIONS “Applicable NAV for Subscriptions” is the Net Asset Value per unit of the business day on which the application for subscription is accepted which is expected to be constant at Rs1/ -. USE OF SALES LOAD The sales load collected on on-going sales of units shall be retained in the Fund and would strictly and fully be used by the Investment Manager in providing distribution related services to the Mutual Fund relating to the sale, promotion, advertising and marketing of Units of the Scheme, including payments to brokers/registrars for the ir services in connection with the distribution of the Units. FRACTIONAL UNITS Investors may have Account Statements that show an issuance of fractional Units. Fractional Units in no way will affect an investor’s ability to redeem Units. Fractional Units will be computed and accounted for upto three decimal places. AVAILABILITY OF FORMS Application Forms and copies of this Offer Document are available from the Investor Service Centres at their respective locations set forth in the Application Forms or on the reverse of this Offer Document, in addition to the Head Officer of the Mutual Fund. Application Forms are also available with the approved intermediaries of the Mutual Fund as well as on the website of the mutual fund www.franklintempletonindia.com . 56 ISSUANCE OF UNITS For continuous purchase, an Account Statement bearing the details such as number of units allotted, amount invested, etc. will be mailed to the registered address of the investor, within 4 days from the date of the submission of Application Form at any ISC. TRANSFER FACILITY As the Fund stands ready to buy-back (redeem) its units at any time the transfer facility is found redundant. However, if a transferee becomes a holder of the Units by operation of law or upon enforcement of a pledge, then the AMC shall, subject to production of such evidence, which in their opinion is sufficient, proceed to effect the transfer, if the intended transferee is otherwise eligible to hold the Units. 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 joint holders, upon producing evidence to the satisfaction of the Fund, shall be registered as a holder. PLEDGE OF UNITS The Units under the Scheme may be offered as security by way of a pledge/charge in favour of scheduled banks, financial institutions, non-banking finance companies (NBFC’s), or any other body. The AMC and/or the ISC will note and record such Pledged Units. A standard form for this purpose is available on request from any ISC. Disbursement of such loans will be at the entire discretion of the bank/financial institution/NBFC or any other body concerned and the Mutual Fund assumes no responsibility thereof. The Pledgor will not be able to redeem Units that are pledged until the entity to which the Units are pledged provides written authorisation to the Mutual Fund that the pledge/lien charge may be removed. As long as Units are pledged, the pledgee will have complete authority to redeem such Units. 11. VALUATION OF ASSETS AND NET ASSET VALUE NET ASSET VALUE CALCULATION NAV is the actual value of a Unit on any Business Day and is computed as shown below: (Market Value of the Scheme’s Investments + Other Assets (including NAV = accrued interest) + Unamortized Issue Expenses - All Liabilities except (Rs. Per Unit Capital & Reserves) unit) Number of Units Outstanding at the end of the day Valuation of Scheme’s assets and calculation of the Scheme’s NAV will be subject to such rules or regulations that SEBI may prescribe from time to time and shall be subject to audit on an annual basis. ACCOUNTING POLICIES AND STANDARDS In accordance with Regulation 50 read with Ninth Schedule to SEBI Regulations, the Fund shall follow the following accounting policies: 57 a) AMC for each Scheme shall keep and maintain proper books of accounts, records and documents, for each Scheme so as to explain its transactions and to disclose at any point of time the financial position of each Scheme and in particular give a true and fair view of the state of affairs of the Fund. b) For the purposes of the financial statements, Mutual Funds shall mark all investments to market and carry investments in the balance sheet at market value. However, since the unrealized gain arising out of appreciation on investments cannot be distributed, provisions shall be made for exclusion of this item when arriving at distributable income. c) In respect of all interest-bearing investments, income would be accrued on a day to day basis as it is earned. Therefore when such investments are purchased, interest paid for the period from the last interest due date upto the date of purchase shall not be treated as a cost of purchase but shall be debited to Interest Recoverable Account. Similarly, interest received at the time of sale for the period from the last interest due date upto the date of sale shall not be treated as an addition to sale value but shall be credited to Interest Recoverable Account. d) In determining the holding cost of investments and the gains or loss on sale of investments, the “average cost” method shall be followed. e) Transactions for purchase or sale of investments would be recognized as of the trade date and not as of the settlement date, so that the effect of all investments traded during a financial year are recorded and reflected in the financial statements for that year. Where investment transactions take place outside the market, for example, acquisitions through private placement or purchases or sales through private treaty, the transaction would be recorded, in the event of a purchase, as of the date on which the Scheme obtains an enforceable obligation to pay the price or, in the event of a sale, when the Scheme obtains an enforceable right to collect the proceeds of sale or an enforceable obligation to deliver the instruments sold. f) Where income receivable on investments has been accrued and has not been received for period of 12 months beyond the due date, provision sha ll be made by debit to the revenue account for the income so accrued and no further accrual of income shall be made in respect of such investment. g) When in the case of an Open -ended Scheme units are sold, the difference between the sale price and the face value of the unit, if positive, shall be credited to reserves and if negative is debited to reserve, the face value being credited to Capital Account. Similarly, when in respect of such a Scheme, units are repurchased, the difference between the purchase p rice and face value of the unit, if positive, shall be debited to reserves and, if negative, shall be credited to reserves, the face value being debited to the capital account. h) In the case of an Open- ended Scheme, when units are sold, an appropriate part of the sale proceeds shall be credited to an Equalization Account and when units are repurchased an appropriate amount would be debited to Equalization Account. The net balance on this account shall be credited or debited to the Revenue Account. The balance on the Equalization Account debited or credited to the Revenue Account shall not decrease or increase the net income of the Fund but is only an adjustment to the distributable surplus. It shall therefore, be reflected in the Revenue Account only after the net income of the Fund is determined. i) The cost of investments acquired or purchased would include inter-alia brokerage, stamp charges and any charge customarily included in the broker’s bought note. In respect of privately placed debt instruments any front-end discount offered shall be reduced from the cost of the investment. j) Underwriting commission shall be recognized as revenue only when there is no devolvement on the Scheme. Where there is devolvement on the Scheme, the full underwriting commission received and not merely the portion applicable to the devolvement shall be reduced from the cost of the investment. The accounting policies and standards as outlined above are as per the SEBI Regulations extant at this time and, hence, are subject to cha nge as per any changes in the SEBI Regulations. 58 12. HOW TO REDEEM UNITS OF THE SCHEME REDEMPTION OF UNITS Notice for redemption can be sent to the Fund at its ISCs. Redemption of the Units will be made on any Business Day at the Applicable NAV. The Fund, however, may limit the right to make redemptions. See “Right to Limit Redemptions” below. In order to redeem units, investors must submit a redemption request by filling-up the pre-printed forms and mail the same to the Investor Service Centres ISC. All redemption request forms must contain the investor’s Folio Number and be duly signed by all of the Unitholders on record or their Power of Attorney holders. Redemption requests by telephone, telegram, fax or other means or that lack valid signatures may not be accepted. Templeton India Money Market Account units can be sold back to the Fund on any working day after a lock-in period of 15 days. The lock-in period commences from the date of allotment. Each purchase made into the fund will be subject to a lock period of 15 days from the date of allotment of that -in purchase. Redemption will take place at NAV, which is expected to be Re 1.00 on account of rounding off to the nearest paisa. For redemption purposes, income will be determined upto the day of receiving the redemption request. The Truststee reserves the right to change the lock-in period (by reducing or removing the lock-in period) for redemptions prospectively. In such a case the reduction/ removal of the lock in period will apply for investments made after the date of change. Facilities Cheque -writing facility Since the scheme is a Templeton India Money Market Mutual Fund, the scheme is authorised to provide cheque writing facility to the investors. The facility wil be subject to the policies of the Reserve Bank of India (RBI) as applicable from time to time. Apart from this, the Trustee may also prescribe the procedures and conditions from time to time, subject to which the facility will be available. For this purpose, the fund may have a tie -up arrangement with any bank, (currently the designated branches of ABN Amro Bank). The tie -up arrangement to offer the cheque writing facility is purely a commerical arrangement between the fund and the designated bank and as such the servicing of the units of the scheme will not in any way be the direct obligation of the designated bank. The facility will be available only with respect to units which are eligible for redemption. RBI has clarified that the drawing account should not be used as a regular bank account and that cheques should be only in favour of the investor himself and not in favour of third parties. The Trustee reserves the right to withdraw or modify the terms of the cheque writing facility. The Trustee may add/introduce new plans/features in the scheme, in the interest of investors. A Templeton India Money Market Account unitholder may request for 59 a) a partial redemption (or) total redemption of units, standing to their credit b) redemption of a specified rupee amount The redemption request must be for a minimum of Rs.1,000/1000 units and in multiples of Rs.1,000/1000 units thereafter. However, in case of full redemption, this will not apply. For purposes of calculating the units standing to the investors credit, the units allotted towards the original amount invested and the unit attributable thereto after 30 days from the date of allotment of units towards the original investment will be included. If the redemption request specifies an amount which exceeds the units held by the unitholder, then redemption will be for the actual number of units held by the unitholder. The capital of the Fund shall stand reduced by an amount equivalent to the amount withdrawn by the investor. The number of units so redeemed shall be subtracted from the Templeton India Money Market Account unitholder's designated account and a statement to this effect shall be issued to the Templeton India Money Market Account unitholder. The First In First Out (FIFO) method will be adopted in ascertaining units which will be redeemed, meaning that the longest held units will be redeemed first. If the investor is availaing of the cheque writing facility then the unused cheques must be returned to the fund at the time of redemption. Redemption Price If a redemption request is received before the specified cut-off time which is currently 3.00 p.m on any business day the redemption will be on the “Applicable NAV for Redemptions” which is expected to be constant at Rs.1/- (See “Applicable NAV for Redemptions”) adjusted for exit load, if any. All redemption requests received after the prescribed time will be treated as having been received on the next business day and the units will be redeemed accordingly. Investors may note that the Trustee has a right to introduce an exit load or a combination of entry and exit loads subject to the Regulations. “Applicable NAV for Redemptions” “Applicable NAV for Redemptions” which is expected to be constant at Rs.1/-is the Net Asset Value per unit of the business day on which the application for redemption is accepted on or before the cut of time which is currently 3.00 p.m. Since the per unit sale price is expected to be constant at Rs.1 (rounding off the NAV to the nearest paisa), Templeton India Money Market Account units allotted would be equal to the amount invested. Redemption Amount Unitholder may request the redemption of a certain specified Rupee amount or of a certain number of Units. If a redemption request is for both a specified Rupee amount and a specified number of Units, the specified number of Units will be considered the definitive request. In the case where a Rupee amount is specified or deemed to be specified for redemption, the number of Units redeemed will be the amount redeemed divided by the applicable NAV. Redemption requests will be honored to the extent permitted by the credit balance in the Unitholder’s account. The number of Units so redeemed will be subtracted from the Unitholder’s account and a statement to this effect will be issued to the Unitholder. If the redemption request exceeds the Balance in the account then the account would be closed and balance sent to the investors. To further elaborate, the redemption amount is calculated by deducting from the “Applicable NAV for Redemptions”, the exit load, if any. For example, if the “Applicable NAV for Redemption” is Rs.14/and the exit load applied is 1%, the redemption amount will be calculated as follows: 60 Redemption Amount = (Applicable NAV for Redemptions) * (1- Exit Load%) = 14 *(1-1%) = 14 * (1 - 0.01) = Rs. 13.86 However in the case of Templeton Money Market Account the sale price of unit is expected to be constant at Rs.1/ - (rounding off the NAV to the nearest price) per unit. Payment of Redemption Proceeds Redemption proceeds will be paid by cheque and payments will be made in favour of the Unitholder’s registered name and bank account number unless the unitholder instructs otherwise. Redemption cheques will be sent to the Unitholder’s address (or, if there is more than one holder of record, the address of the first-named holder on the original application for Units) or the credit the redemption proceeds to the bank account of the investor if the investor so instructs, subject to the AMC having necessary arrangements with the bank. All redemption payments will be made, in favour of the registered holder of the Units (unless the Unitholder instructs otherwise) or, if there is more than one registered holder, of the first registered holder on the original application for Units. Units purchased can be redeemed only after realization of cheques. The redemption cheque will be dispatched to the unitholders within the statutory time limit of 10 business days prescribed by SEBI. However, on a best effort basis the Fund will endeavor to dispatch the redemption cheque within 4 working days after a valid redemption request is received at Chennai, subject to the Fund’s right to limit redemption as described in “Right to Limit Redemptions”. To safeguard the interests of the Unitholders from loss or theft of their redemption cheques, SEBI has made it mandatory for applicants to mention their bank account numbers in their application for purchase or redemption of Units. Investors are required to provide the name of their bank, branch address and account number in the Application. Redemption cheques will be sent in accordance with such information. Exchanges/Switch Investors can, subject to any applicable restriction (such as lien/lock -in) exchange investments from one scheme of Templeton to another (e.g. Franklin Internet Opportunities Fund to Franklin India Prima Fund), and one plan to another (i.e. from Dividend plan to Growth plan) at the applicable public offering price provided that a. b. c. there is no book closure in either of the schemes/plans the investment sought to be exchanged is not under any lock-in period the amount sought to be exchanged is equal to or higher than minimum investment amount required for opening an account in the other scheme/plan However, such increase/decrease/introduction would be subject to the limits prescribed under the Regulations. The addendum detailing the changes may be attached to offer documents and abridged offer documents. The addendum may be circulated to the distributors/brokers so that the same can be attached to all offer documents and abridged offer documents already in stock and the same can be uploaded in the website. For this purpose the units of that scheme/plan will be redeemed at the applicable repurchase price and the amount shall be invested in the other scheme/plan at the applicable public offering price. In the event of book closure in any of the schemes, the relevant exchange will be effected on the working day immediately following the end of the book closure period. 61 All the switches / exchanges will be treated as redemption in one scheme and subscription in the other scheme with the entry load / exit load as may be applicable. The Trustee/AMC reserve the right to alter/vary the terms of exchanges. SWITCH FACILITY: 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 that is available for investment at that time. The switch will be effected by way of redemption of units (with appropriate exit load) and a re-investment (with appropriate entry load) of the redemption proceeds in another scheme(s)/plan(s). To effect the switch a unit holder must provide clear instruction to the fund such instructions may be provided by completing a form and lodging the same on any business day with any of the ISCs. An account statement reflecting new holdings will be dispatched to the unit holder. Right to close an Investor’s Account The Mutual Fund may close out an investor’s account whenever, due to redemptions, the value of the account falls below the minimum account balance of Rs.1,000/ -, and the investor fails to purchase sufficient Units to bring the value of the Account upto the minimum amount or more, after written notice is sent by the Mutual Fund. Right to Limit Redemptions The Trustee may, in its sole discretion in response to unforeseen circumstances or unusual market conditions, limit the total number of Units which may be redeemed on any Business day to 5% of the total number of Units then in issue (or such higher percentage as the Trustee may determine in any particular case). In addition, the Trustee reserves the right, in its sole discretion, to limit redemptions with respect to any single account to an amount of Rs.1 crore in a sin gle day. Any Units which, by virtue of these limitations, are not redeemed on a particular Business Day will be carried forward for redemption on the next following Business Day in order of receipt. Redemptions carried forward will be made at the NAV in effect on the subsequent Business Day(s) on which the condition for redemption request is fulfilled. To the extent multiple redemptions are being satisfied in a single day under these circumstances, such payments will be made pro-rata based on the size of each redemption request. Under such circumstances, redemption cheques may be mailed out to investors within a reasonable period of time and will not be subject to the normal response time for redemption cheque mailing. SUSPENSION OF SALE OR REDEMPTION OF UNITS With the approval of the Boards of Directors of the Trustee and the Asset Management Company, the sale or redemption of Units may be suspended temporarily or indefinitely when any of the following conditions exist: i. The debt market stops functioning or trading is restricted; ii. Periods of extreme volatility in the debt market, which, in the opinion of the Investment Manager, is prejudicial to the interest of the investors; iii. When there is a strike by the banking community or trading is restricted by RBI or other authority 62 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 to the interest of the scheme’s investors. v. As and when directed by the Government of India or RBI or SEBI to do so or conditions relating to natural calamity/external aggression/internal disturbances etc. arises, so as to cause volatile movements 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 in the scheme is continued. vi. Break down in the information processing/communication systems affecting the valuation of investments/processing of sale/repurchase request vii. Natural calamity; viii. SEBI or RBI, by order, so directs. ix. Any other circumstances which in the opinion of the Board of Directors of AMC and Trustee is prejudicial to the interest of the scheme’s investors. The approval from the Boards of AMC / Trustee giving details of circumstances and justification for the proposed action shall also be informed to SEBI. The Board of Trustees reserves the right in its sole discretion to withdraw sale of Money Market Account units temporarily or indefinitely, if the AMC views that increasing the size further may prove detrimental to the existing shareholders of the fund. An order to purchase Money Market Account units is not binding on, and maybe rejected by the AMC, until it has been confirmed in writing by the AMC and payment has been received. UNCLAIMED REDEMPTION / DIVIDEND AMOUNT The unclaimed redemption and dividend amount may be deployed by the mutual fund in call money market or money market instruments only and the investors who claim these amounts during a period of three years from the due date shall be paid at the prevailing Net Asset Value. After a period of three years, this amount may be transferred to a pool account 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 purpose of investor education. The AMC would make a continuous effort to remind the investors through letters to take their unclaimed amounts. The investment management fees charged by the AMC for managing unclaimed amounts will not exceed 50 basis points. 13. ASSOCIATE TRANSACTIONS 1. The Schemes of Templeton Mutual Fund, from the date of their inception, till the date of this offer document, have not underwritten any issue lead managed by the associate companies. 2. Templeton Mutual Fund has not utilized the services of associate companies for purchase-sale of securities. 3. Templeton Mutual Fund has utilized the services of the associates as given below: (Rs. in millions) For the year ended Associate Company 31-03-2001 31-03-2002 31-03-2003 Spur Cable and Datacom TIGF *The Investment Trust Of India Ltd. (ITI) *ITI Capital Markets ITI Financial Services 1.80 029 23.05 0.91 0.04 7.18 0.16 0.82 2.36 0.20 63 *An associate of Pioneer ITI AMC Ltd. prior to August 30, 2002, ITI have been replaced by ITI Financia l Services since August 30, 2002. 4. The AMC may, subject to SEBI regulations, utilize the services of the associate companies for the following: • Purchase or sale of securities; • Marketing, sale and distribution of the units of the Schemes of Templeton Mutual Fund. However, the AMC shall ensure that brokerage paid to affiliate broker will be in line with what will be paid to non-affiliate broker and the quantum of business shall be subject to the limits prescribed by SEBI. 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 same rates offered to the other distributors. 5. The AMC may, subject to the regulations, may subscribe on behalf of the Schemes in the Government securities issued and lead managed by any of the associate. The AMC shall ensure that investments in such issues will be in line with the investment objectives of the Scheme. 6. No investment shall be made in any unlisted security of an associate or group company of the sponsor; or any security issued by way of private placement by an associate or group company of the sponsor. The Scheme may however invest in the listed securities of group companies of the sponsor provided that such investments are not in excess of 25% of the net assets of all the Schemes of the Fund. 7. From time to time, subject to the Regulations, the Sponsors, the Mutual Funds managed by them, their affiliates-associates, the Sponsors and the AMC may acquire a substantial portion of the Scheme’s units and collectively constitute a majority investor in the Scheme. 14. UNITHOLDER INFORMATION ACCOUNT NUMBER Every investor will have an Account number. The number of Units issued to an investor or redeemed by an investor will be reflected in his or he r Account and a statement to this effect will be issued to the Unitholder. JOINT NAME APPLICANTS In the event an Account has more than one registered owner, the first-named holder (as determined by reference to the original Application Form) shall receive all notices and correspondence with respect to the Account, as well as the proceeds of any redemption requests or dividends or other distributions. The Fund shall have no liability in this regard to any Account Owner other than the first named holder of Units. See “Redemption of Units”. In addition, such holder shall have the voting rights, if any, associated with such Units. Such holder shall also have the power to make redemption requests and requests to choose, or to revoke a choice of, automatic reinvestment of dividends with respect to Units, provided however that, such requests are signed by all joint holders. All the joint holders should necessarily sign the requisite documentation needed to fulfill the above requests. ACCOUNT STATEMENTS Each Unitholder will receive an Account Statement each time additional purchases or redemptions of Units are made, or dividends or other distributions in respect of Units are declared and paid. The Unitholders can also obtain an Account Statement on request from any of the ISCs. 64 Investors may note that while account statements will be issued for purchases / redemptions, the account statements for Bonus units if any will be issued once in six months / at the time of redemptions. The entry/exit load may be disclosed in the account statement issued after the introduction of such load. DUPLICATE ACCOUNT STATEMENT The Asset Management Company may, subject to compliance with such requirements as it deems necessary, issue duplicate Account Statement/Unit Certificate(s) should it be lost, stolen, destroyed, defaced etc. RESPONSE TIMES The fund will endeavor to adhere to the following response times with regard to various investor services from the time of receipt of correct and complete request at Chennai. Activity Account Statement Mailing Redemption cheque mailing Address change Ownership transmission From date of receipt 4 working days 4 working days 3 working days 4 weeks Regulatory limits 6 weeks 10 working days 30 days These response times do not include postal delivery time, acts of God or disruptions beyond the control of the AMC. NAV, REDEMPTION AND ISSUE PRICES The disclosure on valuation norms, computation and publication of NAV, repurchase and sale price, accounting policies, investment restrictions and publication of half yearly accounts shall conform to the relevant provisions of SEBI (Mutual Funds) Regulations, 1996, and are subject to change from time to time in conformity with changes made by SEBI. Following are the statutory provisions governing the repurchase and resale prices of units of Mutual Funds: a) The Mutual Fund, in case of open-ended scheme, shall publish in a daily newspaper of all India circulation, the NAV, sale and repurchase price of units on a daily basis. b) While determining the prices of the units, the scheme shall ensure that the repurchase price is not lower that 93% of the Net Asset Value and the sale price is not higher that 107% of the Net Asset Value. Provided further that the difference between the repurchase price and the sale price of the unit shall not exceed 7% calculated on the sale price. c) The price of units shall be determined with reference to the last determined Net Asset Value unless, − the scheme announces the Net Asset Value on a daily basis; and − the sale price is determined with or without a fixed premium added to the future NAV. The Scheme shall comply with Regulations 48 and 49 of SEBI Regulations regarding computation and publication of NAV, redemption and re-sale prices. Notwithstanding what is contained in the foregoing paragraph the Fund would compute NAV, redemption and issue prices daily and make press releases every day to newspapers widely circulated for publication. 65 The publishing of NAV and redemption and Issue Prices as outlined above are as per the extant SEBI Regulations and are subject to change from time to time. ANNUAL FINANCIAL REPORTS As required by the SEBI Regulations, the Fund will publish, as soon as practical after 31st March each year but not later than six months thereafter, as the Trustee may decide, accounts relating to its affairs for the period ending 31st March. The Fund will also mail an abridged scheme-wise annual report to all the unitholders. The full annual report of the Fund will be furnished to the Unitholders upon a written request and will be available at the Head Office of the Investment Manager for inspection. The Fund will make all disclosures required by the SEBI Regulations, including information about the entire portfolio held by the Fund under this Scheme. HALF YEARLY DISCLOSURES 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 unaudited financial results, containing details specified in Regulation 59 read with Twelfth Schedule of SEBI Regulations, in one English newspaper circulating in the whole of India and in one regional newspaper circulating in the region where the head office of the Fund is situated. In addition, the Scheme shall mail or publish the complete portfolio to the investors before the expiry of one month from March 31 and September 30 each year. These shall also be displayed on the web site of the mutual fund and that of AMFI. DISCLOSURE UNDER REGULATION 25(11) OF SEBI (MF) REGULATIONS, 1996 Disclosure as to whether any company has invested more than 5% of the NAV of any Templeton Mutual Fund scheme and investment made by that scheme or any other Templeton Mutual Fund scheme in that company or its subsidiaries (as on October 31, 2003). Templeton Mutual Fund made the following investments in Companies which hold / have held units in excess of 5% of the Net Assets of any scheme of the Fund. Total Aggregate investment Franklin Templeton's made during Outstanding# as at scheme/s which have the period 0131-Oct -2003 at invested in the Investor April- 2003 to Market /Fair Value 31-Oct -2003 @ Company (Rs. in Crores) at cost (Rs. in Crores) FIBCF, FIPP, TIPP, FIT open, FIOF Investor Company Scheme/s invested in Asian Paints (India) Ltd. TILF 3.32 13.08 Bharti Televentures Ltd. STIP, TITMA, TIIBA TILP, TFIF - S & TFIF - L -Institutional Plan TITMA FIBF, FIIF, FITF & TMIP- E 140.50 131.51 Britannia Industries Ltd. Grasim Industries Ltd. 12.60 67.55 14.22 200.94 TFIF - S, TFIF - L & FIBF, FIIF, FITF, TMIP-E TGSF 66 HCL Technologies Ltd. TFIF - S, TISTIP, TITMA HDFC Ltd. TILF HDFC Bank Ltd. TILF, TITMA, TISTIP FIBCF, FIPP, FIT 95, FIT 96, FIT98, FIF, FIT99, FIT open, FTIBF, FIOF, FTIMIP, FTIIF- Nse Nifty, FTIIF- Bse Sensex, FTIPERF TIGF, FIGF FIIF, FI TF TIIBA, TISTIP, FIGF, FIIF, FITF, TIIF, TILF, TILP FIPP, TIPP, FIT open, FIOF, FTIAAF- Equity, FTIIF- Nse Nifty, FTIPERF, FIGF, FIIF, FITF 79.06 118.56 274.14 144.58 23.43 47.83 Hero Honda Motors Ltd. TMIP, TGSF, TILF, FTIIF- Nse Nifty, FTIIFTFIF - S TITMA, Bse Sensex, FTIPERF, TIIBA -Institutional TIGF FIIF, FITF Plan 28.04 38.43 Hindalco Industries Ltd. TFIF- S, TIIBA Institutional Plan, TITMA FIBCF, FIPP, FIT 95, FIT 96, FIT 97, FIT98, FIT99, FIT open, TIPP, FTIBF, FTIMIP, FTIIF- Nse Nifty, FTIAAF - Equity, FTIIFBse Sensex, FTIPERF, TITMA, TISTIP, TIIBA, TIIBA - Institutional Plan, FIBF, FIIF, FITF, TMIPEquity FIBCF, FIPP, TIPP, FIVF, FFF, FIT open, FTIBF, FTIIF- Nse Nifty, FTIAAF - Equity, FTIIF- Bse Sensex, FTIPERF, FIGF, FIIF, FITF 118.09 312.72 Hindustan Lever Ltd. TILF, TFIF-S, TITMA, TIIBA Institutional Plan, T IS TIP 60.35 30.02 ICI India Ltd. TITMA TIGF 3.36 3.76 ICICI Bank Ltd. TILF TITMA, TISTIP, FIBCF, FIPP, TIPP, FIT Open, FIOF, FTIIF-Nse Nifty, FTIIF - Bse Sensex, TIGF, FIGF, FIIF, FITF, TFIF- S, TFIF-L, TILF 449.21 569.14 IDBI IDFC IL&FS Ltd. Indian Aluminium Co. Ltd. Indian Rayon & Industries Ltd. Indo Gulf Fertilizers Ltd. TGSF, TILF, TFIFS, TISTIP, TITMA, TITMA, TIIF, TFIF- S, TIIBA -Institutional TFIF-L, TILF, TMIP - E Plan TGSF, TFIF- S, TIIF TITMA, STIP, FIT FIIF TGSF TITMA, TFIF - S TILF, TFIF- S, TIIBA -Institutional Plan TILF,TFIF - S TILF, TFIF - S FIGF FIPF, FIPP, FIT 95, FIT 96, FIT 97, FIT open, TIPP, FTIMIP, FIBF, FIGF 568.81 494.14 14.87 178.34 35.00 21.65 10.79 68.58 83.84 0.00 49.78 0.00 67 ITC Ltd. Larsen & Toubro Ltd. Mahindra & Mahindra Ltd. Maruti Udyog Ltd. Motor Industries Co. Ltd. Nestle India Ltd. Tata Chemicals Ltd. Tata Industries Ltd. Tata Power Co. Ltd. Tata Sons Tata Tea Ltd. Tata Motors Ltd. TELCO Const Equipment Co Ltd TISCO Ltd. Tata Telecom UTI BANK LTD. Videsh Sanchar Nigam Ltd. WIPRO LTD. FIBCF, FIPP, FIVF, TILF, TFIF - S, FTIIF-NSE Nifty, FTIIFTFIF-L, TITMA, BSE Sensex, FTIPERF, TISTIP, TIIF, TIIBA FIBF, FIGF FIIF, FITF, -Institutional Plan TMIP-E FIGF, FIIF, FITF, TILF& TILF, TGSF TMIP- E FIIF, FITF FIPF, FTIIFTFIF - S NSE Nifty, FTIPERF, TISTIP FIBCF, FIPF, FIT 95, FIT 96, FIT 97, FIT98, FIT 99, TITMA, TISTIP, FIT open, TIPP, FIVF, TIIBA -Institutional FTIBF, FTIMIP, FTIAAF Plan &TILF - Equity,FIBF,FIGF,TMIP -E TILF TIGF, FIGF, FIBF TITMA FTIIF-Nse Nifty, FTIIF Bse Sensex, FIIF, FITF 71.62 141.07 114.09 48.81 91.44 42.82 61.49 73.91 3.25 3.79 0.09 25.00 34.52 28.50 13.92 0.67 20.00 24.72 0.61 44.09 0.17 13.84 31.50 3.29 10.47 25.00 70.17 28.50 2.62 10.32 20.00 29.21 0.00 54.70 0.39 24.03 TGSF, TILF, TFIF-S, FTIIF - NSE Nifty, FIIF, TIIBA-Institutional FITF Plan TILF TISTIP, TITMA TILF TILF TILF TILF TILF TILF, TITMA TILF TILF TISTIP, TITMA, TIIBA, TFIF - S TILF, TITMA, TISTIP, TFIF - S FIBCF, FIPP, FTIIF-NSE Nifty, FIGF, FIIF, FITF TITMA FIBF, FIIF, FITF FIIF, FITF TFIF - S FIIF, FITF FIPF TILP FTIIF - NSE Nifty, FTIIF Bse Sensex, FIIF, FITF FIF, FIT99, FIOF, FTIIFNSE Nifty, FIIF, FI T F @ This is the aggregate of all investments made during the seven months 31-Oct-2003 in accordance with Regulation 25(11) without considering sale/redemptions and interscheme transactions, which might have occurred. # Outstanding value of investments indicates the current value of all the investments in the company. These investments have been made because of their value at these prices in case of equity shares and for high credit quality for comparable yield for the investment in fixed income instruments, the investments made are in accordance with the investment objectives of the scheme. NOMINATION & TRANSFER FACILITY SEBI has inserted a new Regulation 29A in the SEBI (Mutual Fund) Regulations 1996 vide its circular MFD/CIR/ 07/213/2002 dated July 2, 2002 permitting the Asset Management Company to provide an option to the investor for nomination as follows: a) The unit holder may nominate a person in whom the units held by him shall vest in the event of his death. b) In case where more than one person holds the units jointly, the joint unit holders may together nominate a person in whom all the rights in the units shall vest in the event of death of all the joint unit holders. 68 Further the following regulations have to be complied with b the unit holder/joint unit holders who y wish to nominate a person in whom the units held by him/them shall vest in the event of his/their death: 1. The nomination can be made only by individuals applying for/holding units on their own behalf singly or jointly 2. Non-individuals including society, trust, body corporate, partnership firm, Karta of Hindu Undivided Family, holder of Power of Attorney cannot nominate. If the units are held jointly, all joint holders will sign the nomination form. 3. A minor can be nominated and in that event, the name and address of the guardian of the minor nominee shall be provided by the unit holder. 4. A non-resident Indian can be a Nominee subject to the exchange controls in force, from time to time. 5. Nomination in respect of the units stands rescinded upon the transfer of units. 6. Transfer of units in favour of a Nominee shall be valid discharge by the asset management company against the legal heir. 7. The cancellation of nomination can be made only by those individuals who hold units on their own behalf singly or jointly and who made the original nomination. 8. On cancellation of the nomination, the nomination shall stand rescinded and the asset management company shall not be under any obligation to transfer the units in favour of the Nominee. However, the investors should be aware that the nominee may not acquire title or beneficial interest in the property by virtue of the nomination and that neither the Mutual Fund or the Investment Manager 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 nominee’s entitlement to the units. If the Mutual Fund or the Investment Manager or the Trustee were to incur, suffer or any claim, demand, liabilities, proceedings or actions are 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 absolutely for any loss, expenses, costs, and charges that any of them may suffer or incur absolutely from the investor’s estate. The following documents are required in the case of Death: a. b. c. d. Death certificate Identity of the nominee Proof of guardianship in case the nominee is a minor and or an unsound person Indemnity in the prescribed format Receiving Account Statement / Unit Certificates / Correspondence by e -mail The Mutual Fund will encourage the Unit holder to provide their e-mail addresses for all correspondence. The Mutual Fund’s Website would facilitate request for Account Statement by Unit holders. The Mutual Fund will endeavour to send Account Statement and any other correspondence using e-mail as the mode of communication. The Unit holder will be required to download and print the Account Statement after receiving e-mail from the Mutual Fund. Should the Unit holder experience any difficulty in accessing the electronically delivered Account Statement, the Unit holder shall promptly advise the Mutual Fund to enable the Mutual Fund to make the delivery through alternate means. Failure to advise Templeton Mutual Fund or 69 the Registrar of such difficulty within 24 hours after receiving the e-mail, will serve as an affirmation regarding the acceptance by the Unit holder of the Account Statement. It is deemed that the Unit holder is aware of all security risks including possible third party interception of the Account Statement and content of the Account Statement becoming known to third parties. Subject to the consent of the Unitholder, the mutual fund will endeavour to send the account statement, annual report, half yearly portfolio statement to the unitholder by e-mail. Alternately, the AMC may also send an e-mail to the investor giving the link to the website of the Mutual Fund for the aforesaid statements. INVESTMENTS BY NRIS, PIOS, FIIS The following summary outlines the various provisions related to investments by Non-Resident Indians ('NRIs'), Persons of Indian Origin ('PIOs') and Foreign Institutional Investors ('FIIs') in the Schemes of the Mutual Fund and is based on the relevant provisions of the Income-tax Act, 1961 ('the Act'), regulations issued under the Foreign Exchange Management Act, 1999 and the Wealth-tax Act, 1957 (collectively called 'the relevant provisions'), as they stand on the date of this abridged Offer Document. THE FOLLOWING INFORMATION IS PROVIDED FOR GENERAL INFORMATION ONLY. HOWEVER, IN VIEW OF THE INDIVIDUAL NATURE OF THE IMPLICATIONS, EACH INVESTOR IS ADVISED TO CONSULT WITH HIS OR HER OWN TAX ADVISORS/AUTHORISED DEALERS WITH RESPECT TO THE SPECIFIC TAX AND OTHER IMPLICATIONS ARISING OUT OF HIS OR HER PARTICIPATION IN THE SCHEMES. PURCHASE APPLICATIONS: NRIs and other overseas investors can invest in Templeton Schemes on Repatriable/Non-Repatriable basis as per the provisions of Schedule 5 of the Foreign Exchange Management (Transfer or issue of Security by a Person Resident Outside India) Regulations, 2000 ('the Regulations') as explained below. A Common Application Form duly completed together with cheques or bank drafts should be remitted through Investor Service Centres ('ISC'). All cheques/demand drafts accompanying the application form must be made in favour of "Templeton India Money Market Account" and crossed "A/c payee" only and should be made payable at a city where the application is accepted by any Templeton ISC. Repatriable Basis - NRIs, PIOs In case of NRIs and PIOs seeking to apply for purchase of units on a repatriable basis, payments may be made by way of inward remittances, or by way of cheques drawn on the NRE/FCNR Account of the investor [Clause 3(2) of the Regulations] payable at the city where the application form is accepted by any Templeton ISC. Non-Repatriable Basis - NRIs, PIOs In case of NRIs/PIOs seeking to apply for units on a non-repatriable basis, payments may be made by way of inward remittances, or by way of cheques/demand drafts drawn on the NRE/FCNR/NRO/NRSR account of the investor [Clause 3(3) of the Regulations], payable at the city where the application form is accepted by any Templeton ISC. 70 FII Investors FIIs may pay for their subscription amounts out of funds held in Foreign Currency Account or Nonresident Rupee Account maintained in a designated branch of an authorised dealer [Clause 3(1) of the Regulations]. Payments may be made by way of cheques payable at a city where the application is accepted by any Templeton ISC. Similarly, in case of an application under a Power of Attorney or by an FII, the original Power of Attorney or the relevant resolution/authority to make the application (or a duly notarised certified true copy thereof), along with a certified copy of the Memorandum and Articles of Association and/or bye laws and Certificate of Registration should be submitted to the Mumbai ISC within 7 days from the date of the application. The officials should sign the application under their official designation. The NRIs/PIOs/FIIs shall also be required to furnish such other documents as may be desired by the Fund in connection with the investment in the Schemes. REDEMPTIONS & INCOME DISTRIBUTION Redemption proceeds/repurchase price and/or dividend or income earned (if any) will be payable in Indian Rupees only. The Scheme will not be liable for any loss on account of exchange fluctuations, while converting the rupee amount in US Dollar or any other currency. Investments made on Repatriable Basis The investments shall carry the right of repatriation of capital invested and capital appreciation so long as the investor continues to be a resident outside India. In the case of an FII, the designated branch of the authorised dealer may allow remittance of net sale/maturity proceeds (after payment of taxes) or credit the amount to the Foreign Currency account or Non-resident Rupee account of the FII maintained in accordance with the approval granted to it by the RBI [Clause 5(i) of the Regulations]. In any other case, where the investment is made out of inward remittance or from funds held in NRE/FCNR account of the investor, the maturity proceeds/repurchase price of units (after payment of taxes) may be credited to NRE/FCNR/NRO/NRSR account of the non-resident investor maintained with an authorised dealer in India [Clause 5(ii) of the Regulations]. Investments made on Non-Repatriable Basis Where the purchase of units is ma de on a non-repatriable basis, the maturity proceeds/repurchase price of units (after payment of taxes) will not qualify for repatriation out of India and the same may be credited to the NRO/NRSR account of the non-resident investor [Clause 5(ii) of the Regulations]. Where the investment is made out of funds held in a NRSR account, the maturity proceeds/ repurchase price of units (after payment of taxes) may be credited to the NRSR account maintained by the investor with an authorised dealer in India [Clause 5(ii) of the Regulations]. Similarly, investments in units purchased in Rupees while the investor was resident of India and becomes non-resident subsequently will not qualify for repatriation of repurchase proceeds of units. The entire income distribution on investment will however qualify for full repatriation. Investors are advised to contact their banks/tax consultants if they desire remittance of the income distribution on units abroad. 71 15. TAX BENEFITS (As per laws currently in force) TAX IMPLICATIONS TO NON -RESIDENT UNITHOLDERS The following summary outlines the key tax implications applicable to Non-resident Indian (‘NRI’)/ Persons of Indian origin (‘PIO’) / Foreign Institutional Investor (‘FII’) based on the relevant provisions under the Income-tax Act, 1961 (‘Act’) and Wealth-tax Act, 1957 (collectively called ‘the relevant provisions’), subsequent to the amendments enacted by the Finance Act 2003. THE FOLLOWING INFORMATION IS PROVIDED FOR GENERAL INFORMATION ONLY. HOWEVER, IN VIEW OF THE INDIVIDUAL NATURE OF THE IMPLICATIONS, EACH INVESTOR IS ADVISED TO CONSULT WITH HIS OR HER OWN TAX ADVISORS/AUTHORISED DEALERS WITH RESPECT TO THE SPECIFIC TAX AND OTHER IMPLICATIONS ARISING OUT OF HIS OR HER PARTICIPATION IN THE SCHEMES. Tax on inco me in respect of units As per the provisions of Section 10(35) of the Act, income received in respect of units of a mutual fund specified under Section 10(23D) of the Act is exempt from income tax in the hands of the recipient unitholders. TAX ON CAPITAL GAINS As per section 2(42a) of the act, units of the scheme held as a capital asset, for a period of more than 12 months immediately preceding 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 a short -term capital asset. Also, sub-section 7 of section 94 of the act provides that losses arising from the sale/transfer of units (including redemption) purchased up to 3 months prior to the record date and sold wihin 3 months after t such date, will be disallowed to the extent of income distribution (excluding redemptions) on such units claimed as tax exempt by the unitholder. NRIs/ PIOs Long-term and short-term capital gains arising to NRIs/PIOs from the transfer of units of the Scheme, will be taxable at the following rates: Nature of income Short-term capital gains Long-term capital gains Tax rate* Rate applicable as per the prescribed slabs in the case of NRIs/PIOs (refer Note 1) 20 percent with the cost inflation index benefit or 10 percent without the cost inflation index benefit, whichever is beneficial * plus surcharge as may be applicable (refer Note 2). 72 FIIs As per the provisions of Section 115AD of the Act, long-term capital gains on sale of units would be taxed at 10(plus surcharge as applicable) percent and short -term capital gains would be taxed at 30(plus surcharge as applicable) percent. The said rates would be subject to applicable tax treaty relief. The gains, in either case, would be calculated without indexation of cost of acquisition. TAX DEDUCTED AT SOURCE Income in respect of units As per the proviso to Section 196A(1) of the Act, no tax shall be deducted at source from any income credited or paid to non-resident unitholders in respe ct of units of a mutual fund specified under Section 10(23D) of the Act. Capital gains As per the provisions of Section 195 of the Act, in respect of short-term capital gains, tax is required to be deducted at source at the rate of 30(plus surcharge as applicable) percent if the payee is a NRI/PIO. In respect of long-term capital gains, tax is required to be deducted under Section 195 of the Act at the rate of 20(plus surcharge as applicable) percent in case of NRIs/PIOs. No tax would be deductible at source from the capital gains (whether long-term or short-term) arising to an FII on repurchase/redemption of units in view of the provisions of Section 196D(2) of the Act. The above rates would be subject to applicable tax treaty relief. Note 1: Currently, NRIs/PIOs are liable to tax in respect of their total income at the following rates: Slab Total income not exceeding Rs 50,000 Rs 50,001- not exceeding Rs 60,000 Rs 60,001 - not exceeding Rs 150,000 Tax rate * Nil 10 percent of excess over Rs 50,000 20 percent of excess over Rs 60,000 + Rs 1,000 Exceeding Rs 150,000 30 percent of excess over Rs 150,000 + Rs 19,000 * plus surcharge as may be applicable (refer Note 2). Note 2: ASSESSEE NRIS/ PIOS/ NON-CORPORATE FIIS WHERE THE TAXABLE INCOME IS UP TO RS 850,000 PER ANNUM NRIS/ PIOS/ NON-CORPORATE FIIS WHERE THE TAXABLE INCOME IS IN EXCESS OF RS 850,000 PER ANNUM CORPORATE FIIS RATE OF SURCHARGE APPLICABLE NIL 10 PERCENT 2.5 PERCENT 73 WEALTH TAX BENEFITS Units are not to be treated as assets as defined under Section 2(ea) of the Wealth-Tax Act, 1957 and hence will not be liable to wealth-tax. TAX IMPLICATIONS TO RESIDENT UNITHOLDERS The following summary outlines the tax implications to resident unitholders of the Schemes and is based on relevant provisions under the Income-tax Act, 1961 (‘the Act’) and Wealth-tax Act, 1957 (collectively called ‘the relevant provisions’), subsequent to the amendments enacted by the Finance Act 2003. TAX ON INCOME IN RESPECT OF UNITS AND TAX ON CAPITAL GAINS (SAME AS MENTIONED IN THE SECTION OF NON-RESIDENT UNITHOLDERS) Long-term and short-term capital gains arising to resident unitholders from the transfer of the units of the Scheme will be taxable at the following rates: Nature of income Short-term capital gains Long-term capital gains Tax rate* Rate applicable as per the prescribed slabs in the case of resident individuals (refer Note 3) and at 35 percent in the case of resident corporates 20 percent with the cost inflation index benefit or 10 percent without the cost inflation index benefit, whichever is beneficial * plus surcharge as may be applicable (refer Note 4) TAX DEDUCTED AT SOURCE As per the provisions of Section 194K of the Act, no tax should be withheld or deducted at source, where any income is credited or paid by a mutual fund. Further, no tax is required to be deducted at source from capital gains arising at the time of repurchase or redemption of the units. Note 3: Currently, resident individuals are liable to tax in respect of their total income at the following rates: Slab Total income not exceeding Rs 50,000 Rs 50,001 ~ not exceeding Rs 60,000 Rs 60,001 ~ not exceeding Rs 150,000 Exceeding Rs 150,000 Tax rate * Nil 10 percent of excess over Rs 50,000 20 percent of excess over Rs 60,000 + Rs. 1,000 30 percent of excess over Rs 150,000 + Rs. 19,000 * plus surcharge as may be applicable (refer Note 4) 74 Note 4: ASSESSEE RESIDENT INDIVIDUALS WHERE THE TAXABLE INCOME UP TO RS 850,000 PER ANNUM RESIDENT INDIVIDUALS WHERE THE TAXABLE INCOME IN EXCESS OF RS 850,000 PER ANNUM RESIDENT CORPORATES RATE OF SURCHARGE APPLICABLE NIL 10 PERCENT 2.5 PERCENT TAX IMPLICATIONS ON MUTUAL FUND Templeton Mutual Fund is registered with SEBI and as such, the entire income of the Fund is exempt from income tax under Section 10(23D) of the Act. In view of the provisions of Section 196(iv) of the Act, no income tax is deductible at source on the income earned by the mutual fund. TAX IMPLICATIONS ON BONUS UNITS Where the income generated by the fund is capitalized to each unitholder’s Money market Account as bonus units the bonus units thus allotted shall result in an increase of a corresponding amount of the unit capital held by the unitholder (Please refer para on distriution of income also). When the unitholder redeems the units the amount will be taxed at short-term or long-term capital gains depending upon whether the unit is held for less than 12 months or more than 12 months respectively. The amount of dividend distributed (whether by cheque or by reinvestment) will be exempt from tax in the hands of all investors under section 10 (33) of the Income Tax Act. The fund will pay a distribution tax. DISTRIBUTION TAX 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 Mutual Fund shall be liable to pay income tax at the rate of 12.8125 percent (including a surcharge of 2.5 percent). However, these provisions will not be applicable to any income distributed by an open-ended equity oriented fund (where more than 50 percent of total proceeds of the mutual fund are invested in equity shares of domestic companies as defined in Section 115T of the Act) for a period of one year commencing from April 1, 2003. RELIGIOUS AND CHARITABLE TRUSTS Investments in the units of the Fund by Religious and Charitable Trusts is an eligible investment under Section 11(5) of the Act, read with Rule 17C of the Income-tax Rules, 1962. 16. INVESTOR SERVICES To resolve investor queries, the fund has set up an Investor Service Cell that ensures prompt response to all investors complaints. The number of complaints received and redressed for the last two financial years are detailed below: 75 Scheme TIGF FIGF FIIF FIBF TIIF TMIP TGSF TILF FITF TILP TFIF FIPF FIPP FIT95 FIT96 FIT97 FIT98 FIT99 FIT FIBCF TIGIP TIMMA TIPP TIIBA TICAP TITMA FIVF FIF FPF FFF FIMF FTIBF FIOF FTIMIP FISIP FTIIF FTIGF TISTIP FTIPERF FTIAAF Received 29 21 13 3 124 41 33 6 2 0 6 140 296 131 63 14 6 13 322 343 1 5 48 205 10 4 1 228 66 36 1 92 291 33 0 6 17 0 13 4 01.04.2003 to 31.10.2003 Redressed 29 21 13 3 124 41 33 6 2 0 6 140 296 131 63 14 6 13 322 343 1 5 48 205 10 4 1 228 66 36 1 92 291 33 0 6 17 0 13 4 Pending NIL NIL NIL NIL NIL NIL NIL NIL NIL NIL NIL NIL NIL NIL NIL NIL NIL NIL NIL NIL NIL NIL NIL NIL NIL NIL NIL NIL NIL NIL NIL NIL NIL NIL NIL NIL NIL NIL NIL NIL 76 FINTF Others 0 54 0 54 NIL NIL Scheme TIGF FIGF FIIF FIBF TIIF TMIP TGSF TILF FITF TILP TFIF FINTF FIPF FIPP FIT95 FIT96 FIT97 FIT98 FIT99 FIT FIBCF TIGIP TIMMA TIPP TIIBA TICAP TITMA FIVF FIF FPF FFF FIMF FTIBF FIOF FTIMIP FISIP FTIIF 01.04.2001 to 31.03.2002 Received Redressed Pending 130 130 Nil 6 6 Nil 12 13 Nil 8 8 Nil 845 849 Nil 266 267 Nil 164 164 Nil 11 11 Nil 3 3 Nil 0 Nil NA Nil Nil Nil Nil Nil Nil Nil 183 95 1 3 42 71 14 6 Nil 64 16 5 Nil 25 93 10 Nil 5 0 Nil NA Nil Nil Nil Nil Nil Nil Nil 183 95 1 3 42 71 14 6 Nil 64 16 5 Nil 25 93 10 Nil 5 Nil Nil NA Nil Nil Nil Nil Nil Nil Nil Nil Nil Nil Nil Nil Nil Nil Nil Nil Nil Nil Nil Nil Nil Nil Nil Nil Nil 01.04.2002 to 31.03.2003 Received Redressed Pending 53 52 1 6 6 Nil 6 6 Nil 9 9 Nil 568 566 2 195 194 1 191 190 1 2 2 Nil 3 3 Nil 0 13 0 26 65 55 20 5 0 6 84 56 1 1 5 59 10 0 2 68 9 3 0 17 55 11 0 1 0 13 0 26 65 55 20 5 0 6 84 56 1 1 5 59 10 0 2 68 9 3 0 17 55 11 0 1 Nil Nil Nil Nil Nil Nil Nil Nil Nil Nil Nil Nil Nil Nil Nil Nil Nil Nil Nil Nil Nil Nil Nil Nil Nil Nil Nil Nil 77 FTIGF TISTIP FTIPERF FTIAAF 1 1 Nil Nil 1 1 Nil Nil Nil Nil Nil Nil 4 0 7 4 4 0 7 4 Nil Nil Nil Nil As on October 31, 2003 there are no SEBI complaints pending. Investor Relations Officer: Mr. S Rajagopalan Investor Services Century Centre 75, TTK Road, Alwarpet Chennai 600 018. Ph : 2467 9200, Fax : 2498 7790 Email : services@templeton.com Most queries were related to general / additional information on the fund. Complaints regarding non-receipt of certificates were resolved by issuing duplicate certificates and arranging for duplicate cheques/DDs in cases where redemptions were not received. 17. GENERAL INFORMATION DISTRIBUTION OF INCOME All distribution of earnings will be out of distributable surplus and at the discretion of the Trustee. Such distribution may be by way of bonus units or by way of dividends which will be reinvested automatically. BONUS UNITS The Fund will compute its net earnings (income less expenses) on all working business days and if this is positive, the Fund will capitalize these earnings in the form of bonus units to its unitholders. On those working days when net earnings are negative, there will be no capitalization of Bonus units to its unitholders. Since there will be a daily computation of bonus units, there is no record date. DIVIDEND REINVESTMENT The Trustee may also consider distributing the earnings by way of dividend reinvestment units. For the purpose of such dividend reinvestment, the dividend that may be declared will be reinvested automatically. Upon introduction of distribution by way of dividend reinvestment, investors will be given an option to choose the mode of receiving thd distribution (bonus units or dividend reinvestment). Where no option is communicated by the investor, within the time specified, it will be presumed that the investor has chosen the capitalisation (bonus units allotment) option. The dividend reinvested shall be construed as payment of dividends to the unitholder and construed as receipt of the same amount from each unitholder for reinvestment in units. 78 UNDERWRITING Subject to Templeton Mutual Fund obtaining the necessary approval-registration under the Securities and Exchange Board of India (Underwriters) Regulations, 1993 and the Securities and Ex change Board of India (Underwriters) Rules, 1993, the Scheme may accept obligations for underwriting issue of Securities consistent with its investment objectives. POWER TO MAKE RULES Subject to the prior approval of SEBI, if required, the Trustee may, from time to time, prescribe such terms and make such rules for the purpose 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 and rules that may be framed from time to time. POWER TO REMOVE DIFFICULTIES If any difficulty arises in giving effect to the provisions of this Scheme, the Trustee may do anything not inconsistent with such provisions, which appear to them to be necessary, desirable or expedient, for the purpose of removing the difficulty. SCHEME TO BE BINDING ON THE UNITHOLDERS The Trustee may, from time to time, add to or otherwise vary or alter all or any of the features, investment plans and terms of this Scheme after obtaining the prior approval of SEBI and the Government of India where necessary and the Unitholders in accordance with the SEBI Regulations, and the same shall be binding on each Unitholder and any person or persons claiming through or under him as if each Unitholder or such person expressly agreed that such features, plans and terms should be so binding. DURATION OF THE SCHEME The duration of the Scheme is perpetual. However, in terms of the SEBI Regulations, the Scheme may be wound up if: i. There are changes in the capital markets, fiscal laws or legal system, or any event or series of events occurs, which, in the opinion of the Trustee, requires the Scheme to be wound up; or ii. 75% of the Unitholders of the Scheme pass a resolution that the Scheme be wound up; iii. SEBI directs the Scheme to be wound up in the interests of the Unitholders; or Where a Scheme is to be wound up pursuant to the above, the Trustee shall give notice of the circumstances leading to the winding up of the Scheme i. to SEBI; and ii. in two daily newspapers having circulation all over India and also in a vernacular newspaper circulating at the place where the Fund is established. PROCEDURE AND MANNER OF WINDING UP i) The Trustee shall call a meeting of the Unitholders to consider and pass necessary resolutions by simple majority of the Unitholders present and voting at the meeting for authorizing the Trustees or any other person to take steps for winding up the Scheme/plan. ii) a) The Trustee or the person authorized as above, shall dispose off the assets of the Scheme concerned in the best interest of the Unitholders of that Scheme. 79 b) The proceeds of the sale made in pursuance of the above, shall, in the first instance be utilized towards discharge of such liabilities as are properly due under the Scheme and after making appropr iate provision for meeting the expenses connected with such winding up, the balance shall be paid to the Unitholders in proportion to their respective interest in the assets of the Scheme as on the date when the decision for the winding up was taken. iii) On the completion of the winding up, the Trustee shall forward to the Board and the Unitholders, a report on the winding up containing particulars such as circumstances leading to the winding up, the steps taken for disposal of assets of the Fund before winding up, expenses of the Fund for winding up, net assets available for distribution to the Unitholders and a certificate from the Auditors of the Fund. iv) Notwithstanding anything contained herein, the application of the provisions of the SEBI Regulations in respect of disclosures of half-yearly reports and annual reports shall continue to apply. After the receipt of the report referred to above under ‘Procedure and Manner of Winding Up’, if SEBI is satisfied that all measures for winding up of the Scheme have been completed, the Scheme shall cease to exist. UNITS WITH DEPOSITORY Units of the respective Plans may, if decided by the AMC, be held with a Depository. Under such circumstances, Units will be transferable in accordance with the provisions of Depositories Act, 1996 and the Securities and Exchange Board of India (Depositories and Participants) Regulations, 1996 as may be amended from time to time. ELECTRONIC CLEARING SERVICE (ECS) ECS is a facility offered by RBI, for facilitating better customer service by direct credit of dividend/redemption to an investor’s bank account through electronic credit. This helps in avoiding loss of dividend/redemption warrant in transit or fraudulent encashment. The Mutual Fund will endeavour to arrange such facility for payment of dividend/redemption proceeds to the Unit holders. However, this facility is optional for the investors. It may be noted that there is no commitment from the Mutual Fund that this facility will be made available to the Unit holders for payment of dividend/redemption proceeds. While the Mutual Fund will endeavour in arranging the facility it will be dependent on various factors including sufficient demand for the facility from Unit holders at any centre, as required by the authorities. In places where such a facility is not available or if the facility is discontinued by the Scheme for any reason, the AMC shall despatch to the Unit holders the dividend warrants within 30 days of the declaration of the dividend and the redemption proceeds within 10 business days. CLIENT INFORMATION The Mutual Fund shall presume that the identity of the investor and the information disclosed by him is true and correct. It will also be presumed that the Funds invested by the investor in the schemes of the Mutual Fund come from legitimate sources/ manner and the investor is duly entitled to invest the said funds. The Mutual Fund is not, in any way, responsible for correctness of the information provided by the investor to the Mutual Fund, as to his identity or any other information, and also his sources of income. The Mutual Fund is not under any obligation to carry out any investigation/ inquiry as to the identity of 80 the investor and the sources of the moneys invested by the investor into the schemes of the Mutual Fund. The Fund shall not undertake any such investigation/ inquiry since it does not possess adequate resources to undertake such activity. Where the funds invested are for the benefit of a person (beneficiary) other than the person in whose name the units are issued and registered, the Mutual Fund shall assume that the investor holding the Units in his name is legally authorized / entitled to invest the said funds in the Units of the Mutual Fund, on behalf of the beneficiaries. WEBSITE The webs ite of Templeton Mutual Fund is intended solely for the use of Resident Indians, Non Resident Indians, persons of Indian Origin and Foreign Institutional Investors registered with Securities and Exchange Board of India. It should not be regarded as a solicitation for business in any jurisdiction other than India. In particular the information is not for distribution and does not constitute an offer to sell or the solicitation of an offer to buy securities in any jurisdiction where such activity is prohibited including the United States of America. Any persons resident outside India who nevertheless intend to respond to this material must first satisfy themselves that they are not subject to any local requirements, which restrict or prohibit them from so doin g. Information other than that relating specifically to Templeton Asset Management (India) Pvt. Ltd., Templeton Mutual Fund and its products, is for information purposes only and should not be relied upon as a basis for investment decisions. Templeton Asset Management (India) Pvt. Ltd. cannot be responsible for any information contained in any website linked from this website. Franklin Templeton makes no representations whatsoever about any such website which the user may access through this site. A lin k to a non-Franklin Templeton website does not mean that Franklin Templeton endorses or accepts any responsibility for the content, or the use, of such website. It is the responsibility of the user to take precautions to ensure that whatever is selected for use is free of such items as viruses and other items of a destructive nature. The investors are requested to read the Terms and Conditions given on the website carefully before using the website. By using the site, the investor will be deemed to have agreed that the Terms and Conditions specified apply to the use of the investor of the site, any information obtained from the site, and our products and services. If the investor does not agree to the specified Terms, the investor may not use the site or download content from it. WEB TRANSACTIONS In the new era of liberalisation and modernisation, the Fund wishes to take optimum advantage of the modern techniques of communication and transactions to serve its investors in a more efficient manner. As 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 other transaction such as change in address, change in bank details, change in mode of payment etc. An investor availing this facility will be able to subscribe for and redeem Units of the Fund or carry out other transactions through web-based transaction links. Online transactions will save cost & time of the investor and will also enable the Fund to serve its clients in a faster and efficient way. However investors intending to take benefit of the web-based transaction facility should note that the investor may use this service at their own risk. The Fund, the AMC, the Trustee, along with its directors, employees and representatives shall not be liable for any damages or injuries arising out of or in connection with the use of the website or its non-use including non-availability or failure of 81 performance, loss or corruption of data, loss of or damage to property (including profit and goodwill), work stoppage, computer failure or malfunctioning, or interruption of business; error, omission, interruption, deletion, defect, delay in operation or transmission, computer virus, communication line failure, unauthorised access or use of information. PERSONAL IDENTIFICATION NUMBER (PIN) The PIN facility will be made available to every unitholder to facilitate transactions through the website of the Fund. The Fund will despatch to the Unitholder, the Unitholder's HPIN by p to his/her address ost recorded with the Fund, entirely at the risk of the Unitholder. The Unitholder shall use the HPIN first to generate a user name and password with which to carry out transactions over the Internet at a future date. The web transactions shall be carried out against his bank account, the details of which are provided by the unitholder to the Fund. The unitholder shall be required to generate his user name and password, using his HPIN, within 30 days of the receipt of the HPIN. In case the unitholder fails to generate the same, the HPIN will be disabled/inactivated automatically by the Fund or its registrars. It may be noted that it shall be the Unitholder's responsibility to confirm receipt of the HPIN to the Fund, forthwith notify the Fund in the event of evidence of tampering with the HPIN in the course of post, or non-receipt of the HPIN, as the case may be, and to ensure adequate protection and the confidentiality of the user name and password as well as the HPIN and any disclosure thereof to any other person shall be entirely at the Unitholders risk including for the service of viewing a family portfolio. The norms prescribed by the Fund to issue an HPIN will have to be adhered to from time to time. In the interest of the unitholder, the Unitholder will be asked to enter his/her/its user name and password and any other transaction specific details before any instructions are accepted on behalf of Fund. Further, the Registrar may request a fax confirmation of the instructions and any additional information the Fund may require. The Fund shall not be bound to act on instructions received until the said fax confirmation and additional information is received from the Unitholder. The Registrar may, in its discretion decide not to carry o any such transaction where the Registrar or ut the Fund has reason to believe that the instructions are not genuine or are unclear or such as to raise a doubt or are otherwise improper and cannot be put into effect. The decision of the Registrar on this matter will be final. The Unitholder shall be fully and solely liable to the Fund for every transaction entered into using the Facility, whether with or without the knowledge of the Unitholder. Although the Fund agrees to take best efforts to protect security of the data placed on the Internet, neither the Fund nor the Registrar shall be liable at all for any misuse if any, of any data placed on the Internet, by third parties "hacking" or unauthorized accessing the server. The Fund/Registrar will not be liable for any failure to act upon instructions or to provide any facility for any cause that is beyond the Fund/Registrars’ control. TRANSACTION BY DISTRIBUTOR Franklin Templeton may introduce a facility for distributors to transact on the web on behalf of their clients, provided the client has authorised the distributors to do so by executing a Power of Attorney (PoA) in favour of the distributor for this purpose. In such event, the Power of Attorney should be submitted to the Fund. 82 BROKERS The Fund intends to utilize the services of select financial intermediaries for distribution and may pay brokerage depending upon the efficiency and other factors as may be decided by the AMC. The Investment manager is the sole authority to select such financial in termediary/intermediaries who would distribute the product. Further, the AMC may appoint one or more exclusive distributors, at its discretion, based on the parameters decided by the AMC. The Fund may use the services of associate brokers or take the sale of its units into account when allocating brokerage. However, the brokerage paid to Associate Brokers shall be at the same rate offered to any other broker who procures subscription. BOOKS AND RECORDS The books and records of the Fund will be maintained at the Registered Office of the Investment Manager. The fiscal year of the Fund ends on 31st March in each year. The Register of Unitholders of the Scheme shall be maintained at the Registered office of the Investment Manager along with that of the Registrars at their office at Century Centre 75, TTK Road, Chennai 600 018 and such other places as the Trustees may decide. DOCUMENTS AVAILABLE FOR INSPECTION The following documents will be available for inspection by the prospective investors between 11.00 a.m. and 1.00 p.m. on any day (excluding Saturdays, Sundays and public holidays), at the office of the Fund: • • • • • • • • • • • • Copy of Registration Certificate from SEBI Copy of the Trust Deed and Supplementary Trust Deed Copy of Investment Management Agreement Copy of Memorandum & Articles of Association of Trustee Copy of Memorandum & Articles of Association of the Investment Manager Copy of the Custodian Agreement Consent of Registrar and Transfer Agents to act in the said capacity Consent of Auditors to act in the said capacity A copy of this Offer Document SEBI (Mutual Funds) Regulations, 1996 Copy of Indian Trust Act, 1882 Annual Report of the Asset Management Company 18. PENDING LITIGATION OR PROCEEDINGS • All cases of penalties awarded by SEBI under the SEBI Act or any of its regulations against the Sponsor of the Mutual Fund or any company associated with the Sponsor in any capacity including the Asset Management Company, Trustee Company/Board of Trustees, or any of the directors or key personnel specifically the fund managers) of the Asset Management Company and Trustee Company. The nature of the penalty must be disclosed. For Sponsor and its associates, other than the penalties as mentioned above, the penalties awarded by any financial regulatory body, including stock exchanges, for defaults in respect of shareholders, debentureholders and depositors shall also be disclosed. Additionally, penalties awarded for any economic offence and violation of any securities laws shall be disclosed: 83 SEBI had in January 2000 referred to adjudication certain allegations relating to non-disclosure of three items in the abridged offer documents of Balanced Fund, Pharma Fund, FMCG Fund and Taxshield and non-filing of the abridged offer document of Balanced Fund. The adjudicating officer by his order dated 14th June 2001 levied a penalty of Rs.2 lakhs against the Asset Management Company (erstwhile Pioneer ITI AMC Ltd.) and the same was paid. • Any pending material litigation proceedings incidental to the business of the Mutual Fund to which the Sponsor of the Mutual Fund or any company associated with the Sponsor in any capacity including the AMC, Board of Trustees /Trustee Company or any of the directors or key personnel is a party. Any pending criminal cases against the Sponsor or any company associated with the Sponsor in any capacity including the AMC, Board of Trustees/Trustee Company or any of the directors or key personnel should also be disclosed separately: International Operations: • Three individual plaintiffs filed a consolidated class action and derivative complaint captioned, In re: Templeton Securities Litigation (Civil Action No. 98-6059), in the U.S. District Court for the Southern District of Florida, against Templeton Vietnam Opportunities Fund, Inc. (now known as Templeton Vietnam and Southeast Asia Fund, Inc.) (hereafter, the “Fund”); Templeton Asset Management, Ltd., an indirect wholly -owned subsidiary of Franklin Resources, Inc. (“FRI”) and the investment manager of the closed-end investment company; certain of the fund’s officers and directors; FRI; and Templeton Worldwide, Inc., an FRI subsidiary. On April 3, 2002, the Court provided final approval of a settlement agreement entered into among the parties, which had been preliminarily approved by the Court on November 15, 2001. Under the terms of the settlement agreement, the plaintiffs and defendants agreed to resolve all claims for $6.5 million, including plaintiffs’ attorneys fees and the costs of administering the settlement; it is expected that the Fund will receive a minimum of $2 million, which has been reflected in the Fund's net asset value as of April 3, 2002. The defendants have agreed to the settlement to avoid the expense and inconvenience of further proceedings. The settlement does not contain, and specifically denies, any admission of wrongdoing or violation of law by any of the defendants. • Templeton International Inc. is involved from time to time in litigation relating to claims arising in the normal course of business. Management is of the opinion that the ultimate resolution of such claims will not materially affect Franklin Templeton Investments' business or financial position. Indian Operations: • One of the investors under Templeton India Growth Fund had made investment to the tune of Rs.1,00,00,001/ - under Section 54EB of the Income Tax Act, 1961. In accordance 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. 1 0247 dated December 19, 1996, the units had to be locked-in for a period of seven years from the date of investment. However, the investor had disputed this stand and had filed a writ petition in the High Court of Delhi seeking the direction of the court for premature redemption of units, with Templeton Mutual Fund as one of the respondents. The Honourable Delhi High Court vide its order dated 3rd August 2000 directed SEBI to dispose off the representation filed by the investor. The investor then filed a representation with SEBI. After hearing the petitioner and the respondents, SEBI rejected the representation vide order dated September 4, 2000 upholding the stand of the Mutual Fund. 84 Subsequently, the investor had filed a Memorandum of Appeal with the Securities Appellate Tribunal, Mumbai against the SEBI order dated September 4, 2000. The Tribunal dismissed the appeal vide its order dated February 15, 2001 and upheld the stand of the Mutual Fund. The investor has now filed a petition in the Delhi High Court challenging the order of the Securities Appellate Tribunal and challenging the Central Board of Direct Taxes (CBDT) order. • Cases of penalties awarded by SEBI under the SEBI Act or any of its regulations against the Sponsor of the Mutual Fund or any company associated with the Sponsor in any capacity including the Asset Management Company, Trustee, or any of the directors or key personnel (specifically the fund managers) of the Asset Management Company and the Trustee company. Penalties awarded against the Sponsors and its associates by any financial regulatory body, including stock exchanges, for defaults in respect of shareholders, debentureholders and depositors, penalties awarded for any economic offence and violation of any securities laws. One of the investor under Templeton India Income Builder Account (TIIBA) has filed a compliant against Templeton Asset Management (India) Private Limited (AMC) regarding wrongful withdrawal of funds from its investment accounts. The AMC has filed a compliant in this regard against an ex-employee of the company and others before the Sub Divisional Judicial Magistrate at Bhubaneshwar. The Honourable Court has given direction to the Police to register and investigate the case. The investigation is in progress. The investor had also filed a Writ Petition against AMC / SEBI and other Government agencies at the High Court of Orissa at Cuttack. The above litigation, including the complaint by the investor with SEBI, and the Writ Petition arise out of the wrongful redemption made to third parties aggregating the sum of Rs. 46 lacs. Since these wrongful redemptions pertain to the ex -Pioneer ITI mutual fund schemes, and most of these transactions were done before the acquisition of the said fund by Franklin Templeton, the AMC has retained sufficient amount (from the ex-shareholders of Pioneer ITI AMC Ltd.) in an escrow account to meet such contingencies. Under no circumstances, will the loss be passed on to the fund. • Any deficiency in the systems and operations of the Sponsor of the Mutual Fund or any company associated with the sponsor in any capacity including the AMC or the Trustee Company which SEBI has specifically advised to be disclosed in the offer document, or which has been notified by any other regulatory agency, shall be disclosed: Nil • Any enquiry/adjudication proceedings under the SEBI Act and the Regulations made thereunder, that are in progress against the Sponsor of the Mutual Fund or any company associated with the Sponsor in any capacity including the AMC, Board of Trustees/Trustee Company or any of the Directors or key personnel of the Asset Management Company shall be disclosed: Nil The above information has been disclosed in good faith as per the information available to the AMC. 85 Notwithstanding anything contained in the offer document, the provisions of the SEBI (Mutual Funds) Regulations, 1996 and the Guidelines thereunder shall be applicable. This Offer Document is an updated version of the same in line with the current laws / regulations and other developments. FOR TEMPLETON ASSET MANAGEMENT (INDIA) PVT. LTD. INVSETMENT MANAGER: TEMPLETON MUTUAL FUND Ravi Mehrotra President Date : October 31, 2003 Place : Mumbai 86 Franklin Templeton Branch Offices 1. Mumbai 72/73 Free Press House, 7th Floor, Free Press Journal Marg Nariman Point, Mumbai - 400 021. Tel : 56325820-29, 56325830-36. Fax : (022) 22810923 Ahmedabad 1001 Abhijit-II, Mithakhali Six Roads, Navrangpura Ahmedabad 380009. Tel : 6470057 Fax : (079) 6401945 Bangalore Niton Compound 11, Palace Road, Bangalore 560052 Tel : 2385612/13/14 Fax : (080) 2385886 Baroda 103, 1st floor, Paradise Complex, Sayajigunj Vadodara 390005. Tel : 2225426 Telefax : (0265) 2225427 Bhubaneswar 77, Kharavel Nagar, Unit III, Janpath Bhubaneswar 751001. Tel : 2535141, 2531745 Fax : (0674) 2531026 Chandigarh S.C.O. 371-372, I Floor Sector 35 - B (above HDFC Bank) Chandigarh 160 022. Tel : 662136, 622341, 613371 Fax : (0172) 622341 Chennai Century Centre, 75 TTK Road, Chennai 600 018 Tel : 24679200 Fax : (044) 24987790 Cochin 36/1696-A, II Floor, N.H.Road, Kaloor, Ernakulam Cochin 682017. Tel : 2334824, 2335096 Fax : (0484) 2334865 Coimbatore 424-C Red Rose Towers, II floor, D. B. Road R.S.Puram, Coimbatore 641002. Tel : 2474616 Telefax : (0422) 2470277 Dehradun Shop no. 44, Meedo Arcade, 28 Rajpur Road Dehradun 248001 Tel : 2743268/2748306 Fax : (0135) 2748306 87 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. Hyderabad 501 Regency House, Somajiguda, Hyderabad 500 082. Tel : 55665915 / 55665916 Fax : (040) 55665770 Indore 303, Silver Sanchore Castle, 7, RNT Marg Indore 452 001. Tel : 2526710 Telefax : (0731) 2526711 Jaipur 250 Ganpati Plaza, M I Road, Jaipur 302 001. Tel : (0141) 2377904, 2377905 Fax : (0141) 2388737 Jalandhar Rachnaa Chambers, Next to Hotel Centre Point BMC Chowk, G.T. Road, Jalandhar -144001 Tel : 5080784, 2456033 Telefax : (0181) 5080783 Kanpur Room No 307, Third Floor, 15/63 Krishna Tower, Kanpur 208001. Tel : (0512) 305367 Kolkatta 2D & 2E Landmark Building, 228-A A.J.C. Bose Road, Calcutta 700020. Tel : 22826517, 22824171 Lucknow 2 Uttam Palace, I Floor, 3 Sapru Marg, Lucknow 226 001 Tel : 285301 Telefax : (0522) 285172 Ludhiana SCO-37, II Floor, Feroze Gandhi Market Ludhiana 141 001 Tel : 406198 Telefax : (0161) 406191 Madurai 24 A Pechiamman Padithurai Road, Madurai 625001 Tel : (0452) 2343008, 2350144. Mangalore IV Floor, Sanu Palace, Kodialbail, Mangalore 575 003 Tel : 2492796 Telefax : (0824) 2493749 12. 13. 14. 15. 16. 17. 18. 19. 20. 88 21. Nagpur 126, FarmLand, Ramdas Peth, Opp SBI Bank, Nagpur 440 010. Tel : 2555074 Telefax : (0712) 2553794 Nasik S-4, Suyojit Trade Centre, Opp Rajiv Gandhi Bhavan Sharanpur Road, Nasik 422 002 Tel: 2574329 Telefax : (0253) 2574327 New Delhi 93-D Him alaya House, IX Floor, 23 Kasturba Gandhi Marg, New Delhi 110001. Tel : 3722786, 3752017 Telefax : (011) 3353213. Patna 505 Ashiana Hariniwas Apartments, Dak Bungalow Road, Patna 800 001. Tel : 2212277 Fax: (0612) 2213170 Pune 1306, ‘Kamalja’, Shivajinagar, Rokdoba Mandir Path, Near MSEB office, Off Jangli Maharaj Road, Pune 411005 Tel : 5533140/5533141/5513660 Telefax : (020) 5513661 Rajkot 5th Floor, Star Plaza, Phulchhab Chowk, Rajkot - 360 001 Tel: 2471395 Telefax : (0281) 2294204 Raipur Office No.244, Second Floor, Rishabh Complex, M.G. Road, Raipur 492 001. Tel : 5033244 Telefax: (0771) 5033614. Salem 1/31-A Anna Salai, I Floor, Swarnapuri, Salem 636004 Tel : 2446854, 2430506 Fax : (0427) 2446854 Surat 404-405, Lalbhai Contractor Complex, Opp. Library, Nanpura, Surat - 395 001. Tel : 2473766 Telefax : (0261) 2473744. 89 22. 23. 24. 25. 26. 27. 28. 29. 30. Trichy Jenne Plaza Ground Floor 5/C, 28 Bharathiar Salai Cantonment, Trichy 620001. Tel : 2464022 Fax : (0431) 2414691. Varanasi IV Floor, Kuber Complex, Rathyatra crossing, Varanasi 221010. Tel : 403584 Telefax : (0542) 403255 Vijayawada White House I Floor, Room # 2 M.G. Road, Vijayawada 520 010. Tel : 2472594, 5561301 Fax : (0866) 2472594. Visakhapatnam C-9 Pavan Palace, Dwaraka Nagar Visakhapatnam 530 016. Tel : 5565351, 2704705 Fax : (0891) 5566806. 31. 32. 33. 90