Franklin India Smaller Companies Fund - NFO -

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Franklin India Smaller Companies Fund - NFO
Take A Small Step…Into India’s Bright Future

Issue opens: November 16, 2005 Issue closes: December 14, 2005

Franklin Tempelton Investments (India), one of the leading fund houses* in the country in launching a new equity fund called – Franklin India Smaller Companies Fund (FISCF). It is a 5 – year closed end fund that seeks to provide long-term capital appreciation by investing in mid and small cap stocks. The initial issue period at Rs .10 will be from November 16, 2005 to December 14, 2005, and the fund will provide fro liquidity every six months.

‘The India Growth ‘ story has been gaining wide spread acceptance in India as well as the world, on the back of strong economic and corporate fundamentals. Smaller companies (those with a market capitalization lower than the 100th stock in S & P CNX 500) in particular are expected to benefit from the structural economic shift being witnessed in recent years. However, given the liquidity levels and the stages of business cycle these companies belong to, one needs to take a long-term view to reap the complete benefits of potential growth. FISCF through its closed end nature and focus on smaller companies help investors do exactly that. We believe that this unique fund should be part of every investor’s equity portfolio given the advantage that it offers

Typically one of the problems faced while investing in mid and small cap companies is the lack of adequate research. The investment team in Templeton has built an extensive research database of smaller companies over the past decade or so which will come I handy while managing FISCF. The rich experience of managing one of the largest * and oldest mid cap funds (Franklin India Prima Fund) will be available to investors in the new fund.

Why invest in FISCF?
Smaller companies offer higher potential growth: Historical evidence suggests that stocks of smaller companies (mid & smaller cap) exhibit higher growth over the long term, compared to large firms. Moreover, smaller companies are not as widely researched as their larger counterparts, which mean there are opportunities to uncover companies at an early stage in their development, before they are discovered by the markets.

The closed end advantage: The closed –end nature of the fund would mean that the investment team can take a long-term perspective, without getting impacted by asset flow in and out of the fund. This is especially useful while investing in smaller companies, given the possible volatility in earnings over short term and consequently their share prices. There is an option to withdraw investments in part or in full every six months during a pre –determined 7-day period, to meet any urgent needs (subject to applicable charges).

Equities deliver: There is a growing global consensus about India’s potential to become one of the largest economies in the world. The recent strong economic growth places India amongst the fastest growing economics in the world and key drivers such as –investment led by corporate India & infrastructure spending, increased consumption driven by positive demographics and global outsourcing, are expected to help sustain this growth.

This can help corporate India in sustaining the robust earnings growth witnessed in recent times, which will reflect in their stock prices. As a result, equities as an asset class are expected to provide superior risk –adjusted returns over the long term, not withstanding the short-term volatility.

Tax Benefits: The absence of any long-term capital gains tax is a key advantage for long-term equity investors (however, investors are liable to pay Securities Transaction Tax as applicable.)

While the over all investment philosophy of FISCF will be in line with this, the main difference would be that the investment team can make decisions without the pressure of dealing with constant fund cash flow considerations. In that sense, Templeton Mutual Fund will be looking to take advantage of the closed –end nature of the fund to focus on long term opportunities in the mid and small cap space – companies that are strategically placed to take advantage of the closed –end nature of the fund to focus on long term opportunities in the mid and small cap space – companies that are strategically placed to take advantage of robust economic growth in India and the global outsourcing trend. We believe that such a product would be ideal for investors looking to participate in the potential rapid growth of smaller companies.

Over the years, Franklin Tempelton has used a disciplined and process –driven approach to investing that has helped us in identifying companies with good long term potential and in providing consistent returns to our investors for over 11 years. Franklin Tempelton is one of India’s leading mutual funds with over Rs. 16,513 crores of assets under management and an investor base close to 11,00,000 (as of October 31, 2005). It manages one of the most comprehensive ranges of mutual funds (33) catering to varied investor requirements, and offering different investment styles to choose from. It has offices in 33 locations across the country.

Summing Up
Smaller companies offer the potential for higher growth, but one needs to choose the right companies with a long-term perspective. Franklin India Smaller Companies Fund does this for you in single investment. To invest, or find out more about this fund, call your investment advisor or nearest Investor Points, today.
Key Facts about the NFO
Min. Investment Amount :Rs. 5000
Load Structure :Entry –Nil.

CDSC –On redemption /Repurchase /Switch-out before maturity of the fund.
Redemption period (from the Date of allotment)
As % of NAV
Upto 12 months 4 %
After12 months but upto 24 Months 3%
After 24 months but upto 36 Months 2%
After 36 months but upto 48 Months 1%
After 48 months but upto 54 Months 0.5%


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