ANALYSIS OF THE CUSTOMER ATTITUDE, PREFERENCE AND SATISFACTION LEVEL TOWARDS MUTUAL FUND INVESTMENT WITH REFERENCE TO FRANKLIN TEMPLETON INDIA PVT LTD, VISAKHAPATNAM.

A project report submitted in partial fulfillment of the requirements of the award of the degree ofMASTER OF BUSINESS ADMINISTRATION Submitted by

M. LALIT KUMAR(Reg no: - 1225109417) Under the esteemed guidance of

MS. S. ANJANI DEVI

Asst. Prof

GITAM INSTITUTE OF MANAGEMENT (NAAC Accredited A Grade institution) (GITAM University, Visakhapatnam.) (2009-2011)

DECLARATION

I hereby declare that the project report title Analysis of the customer attitude, preference and satisfaction level towards mutual funds investments is done and submitted by me is a genuine work. And it is not submitted to any other university or published at any time before. The project work is partial fulfillment of the requirements for the award of M.B.A Degree by the GITAM INSTITUTION OF MANAGEMENT, GITAM UNIVERSITY, VISAKHAPATNAM.

Place:-Visakhapatnam. Date:/ /2011 the student 09417) Signature of M. Lalit Kumar (12251 GITAM Institutions of Management, GITAM University, Visakhapatnam.

CERTIFICATE

This is to certify that the project report entitled Analysis of the customer attitude, preference and satisfaction level towards mutual funds investments with reference to

Franklin

Templeton

Investments

India

Pvt

Ltd,

Visakhapatnam, is a bonafied, work carried out by M. Lalit Kumar under my guidance in partial fulfillment for the award of degree of MASTER OF BUSINESS ADMINISTRATION during the period 2009-2011.

Place: - Visakhapatnam. Date:/ /2011 DEVI INSTITUTE OF MANAGEMENT

MS. S. ANJANI Asst. Prof. GITAM GITAM UNIVERSITY, VISAKHAPATNAM

PREFACEGive a man a fish, he will eat it. Train a man to fish, He will feed his family.The above saying highlights the importance of Practical knowledge. Practical training is an important part of the theoretical studies. It is of an immense importance in the field of management. It offers the student to explore the valuable treasure of experience and an exposure to real work culture followed by the industries and thereby helping the students to bridge gap between the theories explained in the books and their practical implementations. Project plays an important role in future building of an individual so that he/she can better understand the real world in which he has to work in future. The theory greatly enhances our knowledge and provides opportunities to blend theoretical with the practical knowledge. I have done my Project on Customer attitude, preference and satisfaction level towards investment of mutual fund. I have tried to cover each and every aspect related to the topic with best of my capability. I hope this study would help many people in the future. (Lalit Kumar) (1225109417)

ACKNOWLEDGEMENTI am thankful to Prof. K. Shiva Ramakrishna, Principal of GITAM Institute of Management, Prof. P. Sheela, Vice Principal of GITAM Institute of Management, and Associate Prof K. Uma Devi, Program Co-ordinator, GITAM Institute of Management, GITAM University, Visakhapatnam, for providing me the opportunity to do my project.

I express my sincere thanks to Ms. S. Anjani Devi, whose supervision, valuable guidance and help, enabled me to complete this project work. This project is a result of the hard work and sincere effort put by my hands. And I am grateful to Mr. Shivaram Pandey (Sales head Andhra Pradesh) for giving me this opportunity to do my project work in Franklin Templeton Investments India Pvt Ltd, Visakhapatnam. I convey my sincere thanks to Mr. Suresh Kumar Sela, Pavan Patnaik and Sumitha Nair for the constant advice and encouragement. I also wish to express my sincere thanks to all the customers of Franklin Templeton Investments India Pvt

Ltd, Visakhapatnam, who have directly or indirectly help me in completing my project work.

CONTENTSChapter 1 Page No. Meaning of Mutual Funds Classification of Mutual Fund Performance of Mutual Funds in India - 15 Other Important Concepts - 33 Chapter 2 Need of the study Objectives of the study Scope of the study Methodology Presentation of the study Limitation Chapter 3 Profile Industry Profile - 47 Organization Profile Product Profile at Franklin Templeton - 82 Chapter 4

02 - 07 08 - 12 13 16

34 35 36 37 38 39

40 48 - 62 62

Analysis of Study 107 Chapter 5 Findings 110 Suggestions 113 Conclusion 115 Bibliography Annexure

83

-

108 111 114

-

116

List of Tables

No.

Title Page No.Savings Plan Investment plans Age consideration Period of investment Interested in Mutual Fund Anticipation of Risk Primary Goal Risk with Return Expected Age combination Factors to consider Service providers Satisfaction Level 83 85 87 89 91 93 95 97 99 102 104 106

1.1 1.2 1.3 1.4 1.5 1.6 1.7 1.8 1.9 1.10 1.11 1.12

List of Graphs2.1 Savings Plan 83

2.2 2.3 2.4 2.5 2.6 2.7 2.8 2.9 2.10 2.11 2.12

Investment plans Age consideration Period of investment Interested in Mutual Fund Anticipation of Risk Primary Goal Risk with Return Expected Age combination Factors to consider Service providers Satisfaction Level

85 87 89 91 93 95 97 99 102 104 106

INTRODUCTIONMutual funds are basically financial intermediaries, which collect the savings of investors and invest them in a large and well-diversified portfolio of securities such as money market instruments, corporate and government bonds and equity shares of joint stock companies. A mutual fund is a pool of common funds invested by different investors, who have no contact with each other. Mutual funds are conceived as institutions for providing small investors with avenues of investments in the capital market. Since small investors generally do not have adequate time, knowledge, experience and resources for directly accessing the capital market, they have to rely on an intermediary, which undertakes informed investment decisions and provides consequential benefits of professional expertise. The raison of mutual funds is their ability to bring down the transaction costs. The advantages for the investors are reduction in risk, expert professional management, diversified portfolios, liquidity of investment and tax benefits. By pooling their assets through mutual

funds, investors achieve economies of scale. The interests of the investors are protected by the SEBI, which acts as a watchdog. Mutual funds are governed by the SEBI (Mutual Funds) Regulations, 1996.

MUTUAL FUND OPERATIONS FLOW CHARTThe flow chart below describes broadly the working of a Mutual Fund:

THE OF MUTUAL FUND

GOAL

The goal of a mutual fund is to provide an individual to make money. There are several thousand mutual funds with different investments strategies and goals to chosen from. Choosing one can be over whelming, even though it need not be different mutual funds have different risks, which differ because of the funds goals fund manager, and investment style. The fund itself will still increase in value, and in that way you may also make money therefore the value of shares you hold in mutual fund will increase in value when

the holdings increases in value capital gains and income or dividend payments are best reinvested for younger investors Retires often seek the income from dividend distribution to augment their income with reinvestment of dividends and capital distribution your money increase at an even greater rate. When you redeem your shares what you receive is the value of the share.

ORGANISATION OF A MUTUAL FUNDThere are many entities involved and the diagram below illustrates the organizational set up of a mutual fund:

HISTORICAL VIEW:History and Structure of Indian Mutual Fund IndustryThe mutual fund industry in India started in 1963 with the formation of Unit Trust of India, at the initiative of the Government of India and Reserve Bank. The history of mutual funds in India can be broadly divided into four distinct phases:

First Phase 1964-87:Unit Trust of India (UTI) was established on 1963 by an Act of Parliament. It was set up by the Reserve Bank of India and functioned under the Regulatory and administrative control of the Reserve Bank of India. In 1978 UTI was de-linked from the RBI and the Industrial Development Bank of India (IDBI) took over the regulatory and administrative control in place of RBI. The first scheme launched by UTI was Unit Scheme 1964. At the end of 1988 UTI had Rs.6, 700 crores of assets under management.

Second Phase 1987-1993 (Entry of Public Sector Funds):1987 marked the entry of non- UTI, public sector mutual funds set up by public sector banks and Life Insurance Corporation of India (LIC) and General Insurance Corporation of India (GIC). SBI Mutual Fund was the first non- UTI Mutual Fund established in June 1987 followed by Can-bank Mutual Fund (Dec 87), Punjab National Bank Mutual Fund (Aug 89), Indian Bank Mutual Fund (Nov 89), Bank of India (Jun 90), Bank of Baroda Mutual Fund (Oct 92). LIC established its mutual fund in June 1989 while GIC had set up its mutual fund in December 1990. At the end of 1993, the mutual fund industry had assets under management of Rs.47, 004 crores.

Third Phase 1993-2003 (Entry of Private Sector Funds):With the entry of private sector funds in 1993, a new era started in the Indian mutual fund industry, giving the Indian investors a wider choice of fund families. Also, 1993 was the year in which the first Mutual Fund Regulations came into being, under which all mutual funds, except UTI were to be registered and governed. The erstwhile Kothari Pioneer (now merged with Franklin Templeton) was the first private sector mutual fund registered in July 1993. The 1993 SEBI (Mutual Fund) Regulations were substituted by a more

comprehensive and revised Mutual Fund Regulations in 1996. The industry now functions under the SEBI (Mutual Fund) Regulations 1996. The number of mutual fund houses went on increasing, with many foreign mutual funds setting up funds in India and also the industry has witnessed several mergers and acquisitions. As at the end of January 2003, there were 33 mutual funds with total assets of Rs. 1, 21,805 crores. The Unit Trust of India with Rs.44, 541 crores of assets under management was way ahead of other mutual funds.

Fourth Phase since February 2003:In February 2003, following the repeal of the Unit Trust of India Act 1963 UTI was bifurcated into two separate entities. One is the Specified Undertaking of the Unit Trust of India with assets under management of Rs.29, 835 crores as at the end of January 2003, representing broadly, the assets of US 64 scheme, assured return and certain other schemes. The Specified Undertaking of Unit Trust of India, functioning under an administrator and under the rules framed by Government of India and does not come under the purview of the Mutual Fund Regulations. The second is the UTI Mutual Fund Ltd, sponsored by SBI, PNB, BOB and LIC. It is registered with SEBI and functions under the Mutual Fund Regulations. With the bifurcation of the erstwhile UTI which had in March 2000 more than Rs.76, 000 crores of assets under management and with the setting up of a UTI Mutual Fund, conforming to the SEBI Mutual Fund Regulations, and with recent mergers taking place among different private sector funds, the mutual fund industry has entered its current phase of consolidation and growth. As at the end of September, 2004, there were 29 funds, which manage assets of Rs.1, 53, 108 crores under 421 schemes.

CLASSIFICATION OF MUTUAL FUND SCHEMES:Any mutual fund has an objective of earning income for the investors and/ or getting increased value of their investments. To achieve these objectives mutual funds adopt different strategies and accordingly offer different schemes of investments. On this basis the simplest way to categorize schemes would be to group these into two broad classifications:

OPERATIONAL AND PORTFOLIO CLASSIFICATION:Operational classification highlights the two main types of schemes, i.e., open-ended and close-ended which are offered by the mutual funds. Portfolio classification projects the combination of investment instruments and investment avenues available to mutual funds to manage their funds. Any portfolio scheme can be either open ended or close ended.

Operational Classification: Open Ended Schemes: As the name implies the size of the

scheme (Fund) is open i.e., not specified or pre-determined. Entry to the fund is always open to the investor who can subscribe at any time. Such fund stands ready to buy or sell its

securities at any time. It implies that the capitalization of the fund is constantly changing as investors sell or buy their shares. Further, the shares or units are normally not traded on the stock exchange but are repurchased by the fund at announced rates. Open-ended schemes have comparatively better liquidity despite the fact that these are not listed. The reason is that investors can any time approach mutual fund for sale of such units. No intermediaries are required. Moreover, the realizable amount is certain since repurchase is at a price based on declared net asset value (NAV). No minute to minute fluctuations in rates haunt the investors. The portfolio mix of such schemes has to be investments, which are actively traded in the market. Otherwise, it will not be possible to calculate NAV. This is the reason that generally open-ended schemes are equity based. Moreover, desiring frequently traded securities, open-ended schemes hardly have in their portfolio shares of comparatively new and smaller companies since these are not generally traded. In such funds, option to reinvest its dividend is also available. Since there is always a possibility of withdrawals, the management of such funds becomes more tedious as managers have to work from crisis to crisis. Crisis may be on two fronts, one is, that unexpected withdrawals require funds to maintain a high level of cash available every time implying thereby idle cash. Fund managers have to face questions like what to sell. He could very well have to sell his most liquid assets. Second, by virtue of this situation such funds may fail to grab favorable opportunities. Further, to match quick cash payments, funds cannot have matching realization from their portfolio due to intricacies of the stock market. Thus, success of the open-ended schemes to a great

extent depends on the efficiency of the capital market and the selection and quality of the portfolio. Close Ended Schemes: Such schemes have a definite period

after which their shares/ units are redeemed. Unlike openended funds, these funds have fixed capitalization, i.e., their corpus normally does not change throughout its life period. Close ended fund units trade among the investors in the secondary market since these are to be quoted on the stock exchanges. Their price is determined on the basis of demand and supply in the market. Their liquidity depends on the efficiency and understanding of the engaged broker. Their price is free to deviate from NAV, i.e., there is every possibility that the market price may be above or below its NAV. If one takes into account the issue expenses, conceptually close ended fund units cannot be traded at a premium or over NAV because the price of a package of investments, i.e., cannot exceed the sum of the prices of the investments constituting the package. Whatever premium exists that may exist only on account of speculative activities. In India as per SEBI (MF) Regulations every mutual fund is free to launch any or both types of schemes.

Portfolio Classification of Funds:Following are the portfolio classification of funds, which may be offered. This classification may be on the basis of (A) Return, (B) Investment Pattern, (C) Specialized sector of investment, (D) Leverage and (E) Others.

Return based classification:To meet the diversified needs of the investors, the mutual fund schemes are made to enjoy a good return. Returns expected are in

form of regular dividends or capital appreciation or a combination of these two.1. Income Funds: For investors who are more curious for

returns, Income funds are floated. Their objective is to maximize current income. Such funds distribute periodically the income earned by them. These funds can further be spitted up into categories: those that stress constant income at relatively low risk and those that attempt to achieve maximum income possible, even with the use of leverage. Obviously, the higher the expected returns, the higher the potential risk of the investment.2. Growth Funds: Such funds aim to achieve increase in the

value

of

the

underlying

investments

through

capital

appreciation. Such funds invest in growth oriented securities which can appreciate through the expansion production facilities in long run. An investor who selects such funds should be able to assume a higher than normal degree of risk.3. Conservative Funds: The fund with a philosophy of all things

to all issue offer document announcing objectives as: (i) To provide a reasonable rate of return, (ii) To protect the value of investment and, (iii) To achieve capital appreciation consistent with the fulfillment of the first two objectives. Such funds which offer a blend of immediate average return and reasonable capital appreciation are known as middle of the road funds. Such funds divide their portfolio in common stocks and bonds in a way to achieve the desired objectives. Such funds have been most popular and appeal to the investors who want both growth and income. Investment Based Classification:

Mutual funds may also be classified on the basis of securities in which they invest. Basically, it is renaming the subcategories of return based classification.1. Equity Fund: Such funds, as the name implies, invest most of

their investible shares in equity shares of companies and undertake the risk associated with the investment in equity shares. Such funds are clearly expected to outdo other funds in rising market, because these have almost all their capital in equity. Equity funds again can be of different categories varying from those that invest exclusively in high quality blue chip companies to those that invest solely in the new, unestablished companies. The strength of these funds is the expected capital appreciation. Naturally, they have a higher degree of risk.2. Bond Funds: such funds have their portfolio consisted of

bonds, debentures, etc. this type of fund is expected to be very secure with a steady income and little or no chance of capital appreciation. Obviously risk is low in such funds. In this category we may come across the funds called Liquid Funds which specialize in investing short-term money market instruments. The emphasis is on liquidity and is associated with lower risks and low returns.3. Balanced Fund: The funds, which have in their portfolio a

reasonable mix of equity and bonds, are known as balanced funds. Such funds will put more emphasis on equity share investments when the outlook is bright and will tend to switch to debentures when the future is expected to be poor for shares. Sector Based Funds:

There are number of funds that invest in a specified sector of economy. While such funds do have the disadvantage of low diversification by putting all their all eggs in one basket, the policy of specializing has the advantage of developing in the fund managers an intensive knowledge of the specific sector in which they are investing. Sector based funds are aggressive growth funds which make investments on the basis of assessed bright future for a particular sector. These funds are characterized by high viability, hence more risky.

PERFORMANCE OF MUTUAL FUND IN INDIAThe performance of mutual funds in India from the day the concept of mutual fund took birth in India. The year was 1963 Unit Trust of India invited investors or rather to those who believed in savings, to park their money in UTI Mutual Fund. For 30 years it ranked top without a single second player. Though the 1988 year saw some new mutual fund companies, but UTI remained in a monopoly position. The performance of mutual funds in India in the initial phase was not even closer to satisfactory level. People rarely understood, and of course investing was out of question. But yes, some 24 million shareholders was accustomed with guaranteed high returns by the beginning of liberalization of the industry in 1992. This good record of UTI became marketing tool for new entrants. The expectations of investors touched the sky in profitability factor. However, people were miles away from the preparedness of risks factor after the liberalization. The Assets under Management of UTI was Rs. 67bn. by the end of 1987. Let me concentrate about the performance of mutual funds in India through figures. From Rs. 67bn. the Assets under Management

rose to Rs. 470 bn. in March 1993 and the figure had a three times higher performance by April 2004. It rose as high as Rs. 1,540bn. The net asset value (NAV) of mutual funds in India declined when stock prices started falling in the year 1992. Those days, the market regulations did not allow portfolio shifts into alternative investments. There were rather no choices apart from holding the cash or to further continue investing in shares. One more thing to be noted, since only closed-end funds were floated in market, the investors disinvested by selling at a loss the in the secondary market. The performance of mutual funds in India suffered qualitatively. The 1992 stock market scandal, the losses by disinvestments and of course the lack of transparent rules in the whereabouts rocked confidence among the investors. Partly owing to a relatively weak stock market performance, mutual funds have not yet recovered, with funds trading at an average discount of 1020 percent of their net asset value. The supervisory authority adopted a set of measures to create a transparent and competitive environment in mutual funds. Some of them were like relaxing investment restrictions into the market, introduction of open-ended funds, and paving the gateway for mutual funds to launch pension schemes.

The measure was taken to make mutual funds the key instrument for long-term saving. The more the variety offered, the quantitative will be investors. At last to mention, as long as mutual fund companies are performing with lower risks and higher profitability within a short span of time, more and more people will be inclined to invest until and unless they are fully educated with the dos and donts of mutual funds

MUTUAL FUNDS FOR WHOM?These funds can survive and thrive only if they can live up to the hopes and trusts of their individual members. These hopes and trusts echo the peculiarities which support the emergence and growth of such insecurity of such investors who come to the rescue of such investors who face following constraints while making direct investments: Limited resources in the hands of investors quite often take them away from stock market transactions. Lack of funds forbids investors to have a balanced and diversified portfolio. Lack of professional knowledge associated with investment business unable investors to operate gainfully in the market. Small investors can hardly afford to have ex-pensive investment consultations. To buy shares, investors have to engage share brokers who are the members of stock exchange and have to pay their brokerage. They hardly have access to price sensitive information in time. It is difficult for them to know the development taking place in share market and corporate sector. Firm allotments are not possible for small investors on when there is a trend of over subscription to public issues.

WHY MUTUAL FUNDS?Mutual Funds are becoming a very popular form of investment characterized by many advantages that they share with other forms of investments and what they possess uniquely themselves. The primary objectives of an investment proposal would fit into one or combination of the two broad categories, i.e., Income and Capital gains. How mutual fund is expected to be over and above an individual in achieving the two said objectives, is what attracts investors to opt for mutual funds. Mutual fund route offers several important advantages. Diversification: A proven principle of sound investment is diversification, which is the idea of not putting all your eggs in one basket. By investing in many companies the mutual funds can protect themselves from unexpected drop in values of some shares. The small investors can achieve wide diversification on his own because of many reasons, mainly funds at his disposal. Mutual funds on the other hand, pool funds of lakhs of investors and thus can participate in a large basket of shares of many different companies. Majority of people consider diversification as the major strength of mutual funds. Expertise Supervision: Making investments is not a full time assignment of investors. So they hardly have a professional attitude towards their investment. When investors buy mutual fund scheme, an essential benefit one acquires is expert management of the money he puts in the fund. The professional fund managers who supervise funds portfolio take desirable decisions viz., what scrips are to be bought, what investments are to be sold and more appropriate decision as to timings of such buy and sell. They have

extensive research facilities at their disposal, can spend full time to investigate and can give the fund a constant supervision. The performance of mutual fund schemes, of course, depends on the quality of fund managers employed. Liquidity of Investment: A distinct advantage of a mutual fund over other investments is that there is always a market for its unit/ shares. Moreover, Securities and Exchange Board of India (SEBI) requires the mutual funds in India have to ensure liquidity. Mutual funds units can either be sold in the share market as SEBI has made it obligatory for closed-ended schemes to list themselves on stock exchanges. For open-ended schemes investors can always approach the fund for repurchase at net asset value (NAV) of the scheme. Such repurchase price and NAV is advertised in newspaper for the convenience of investors. Reduced risks: Risk in investment is as to recovery of the principal amount and as to return on it. Mutual fund investments on both fronts provide a comfortable situation for investors. The expert supervision, diversification and liquidity of units ensured in mutual funds reduces the risks. Investors are no longer expected to come to grief by falling prey to misleading and motivating headline leads and tips, if they invest in mutual funds. Safety of Investment: Besides depending on the expert supervision of fund managers, the legislation in a country (like SEBI in India) also provides for the safety of investments. Mutual funds have to broadly follow the laid down provisions for their regulations, SEBI acts as a watchdog and attempts whole heatedly to safeguard investors interests. Tax Shelter: Depending on the scheme of mutual funds, tax shelter is also available. As per the Union Budget-2003, income earned through dividends from mutual funds is 100% tax-free at the hands of the investors.

Minimize Operating Costs: Mutual funds having large invisible funds at their disposal avail economies of scale. The brokerage fee or trading commission may be reduced substantially. The reduced operating investors. Investing in securities through mutual funds has many advantages like option to reinvest dividends, strong possibility of capital appreciation, regular returns, etc. Mutual funds are also relevant in national interest. The test of their economic efficiency as financial intermediary lies in the extent to which they are able to mobilize additional savings and channeling to more productive sectors of the economy. costs obviously increase the income available for

TYPES OF RETAIL INVESTORSThe Economic Times survey on retail equity investors in the secondary market has identified different categories of investors based on their characteristics. Many questions are raised about the behavior of the small investor under different circumstances. The answers to many of these questions and similar others is not difficult to interpret once we identify the different types of retail investors in the stock markets.

The survey shows that there are five different kinds of retail investors: Intellectuals Cavaliers Reactivates Opportunists Gamblers This classification is based on the attitudes of investors towards secondary market investments. Lets explain each type of investor and understand their investment psyche and behavioral patterns.

INTELLECTUALS:This retail investor group forms around 17% of the total retail investment class. They are the intelligent investors who follow an intelligent, individualist approach to investment planning and a welldefined and deliberate strategy for stock investment. These investors are self reliant good stock pickers and try to monetize market knowledge. Giving proof of their intelligence, they consider low-risk; lowgain guaranteed return avenues as pass. Also, they believe in and work towards a well-planned. Asset allocation and seek the right mix of stability and reliability of returns. The intellectuals are unaffected by shortterm fluctuations and prefer longterm investments. Moreover, they are disciplined enough to observe profit targets which they have set for themselves. And as they invest for the long term, they are not concerned with short term losses. They manager their money themselves and understand the industry/sector before investing.

CAVALIERS:

As high as 49% of the small retail equity investors are cavaliers. They are those who have lost money in fly-by night schemes. Therefore, much of their investments are driven by the desire to recover past losses and make profits in the future. As such, they invest aggressively into equities, mostly in volatile sectors in order to make big gains. However, they will also invest in FDs and insurance as a precautionary measure. They get tempted to speculate in the secondary market and once in a while, they actually speculate but with smaller amounts. The cavaliers try to gather all available information and compare it with opinions from experts in the media, but will trust their own judgment before making decisions.

REACTIVISTS:About 5% of the retail equity investors fall under this category. These investors basically short-term investors, are impulsive info addicts who are vulnerable to external influences and as such, they have no specific investment patterns, They believe that dynamic and ad hoc investments will result in better profits and are prompted to act on popular opinion rather than systematic planning. As they lack in confidence, experience and expertise, they constantly rely on advice from in the know people such as brokers and analysts. They are extremely anxious about price fluctuations or short-term declines. They are very skeptical and believe that small declines can lead to larger losses if not reacted upon immediately. Therefore, the reactivists constantly seek new information about stocks in which they are currently invested in, to ensure a feeling of security. Moreover, their investments apart from equities are solely for taxsaving purposes.

OPPORTUNISTS:This class of investors account for 10% of the retail equity investor universe. This category is defensively pessimistic and prefers to take only familiar risks. As they have a low risk tolerance, they are wary

of volatility in the equity market. They invest into equities by imitating larger trends rather than with their individual analysis and consider equity investment as a gamble. They want to be in the black all the time and as such, prefer popular stocks with immediate profit potential. Opportunists need positive price movements to encourage their investments into equities and they will not hunt for bargains of invest on price declines. But before investing into equities. They prefer to build a critical mass of fixed income instruments as they find fixed income options a reassuring way of safe bets. The opportunistschoice of investments as they find fixed income options a reassuring way of safe bets. The opportunists choice of investment is biased towards well known and previously owned securities, including equities. This investor class is wary of investing into equities when the market has moved up too high too soon. So, if you have not invested in the current market, you are probably an opportunist.

GAMBLERS:19% the retail investor population is made up of not actual investors. But gamblers. They are the typical thrill seeking traders who link profitability to personal achievement. They experiment a lot, mostly driven by instinct and self confidence; as such their stock selection is more a random exercise that lacks rationale. This class perceives all securities as tradable commodities to be bought and sold in the short term. However, they know completely about the risk factors and therefore, have a tendency to invest only as much as they are willing to lose. As a part, of the game and this does not act as a hindrance for future investments. They do not trust brokers, but will secretly verify their suggestions for fear of missing an opportunity. They ascertain fair value of stocks on gut feeling rather than any financial analysis and use sudden downward fluctuations as buying opportunities.

MARKETING STRATEGIES ADOPTED BY THE MUTUAL FUNDSThe present marketing strategies of mutual funds can be divided into two main headings: Direct marketing Selling through intermediaries. Joint Calls

Direct Marketing:This constitutes 20 percent of the total sales of mutual funds. Some of the important tools used in this type of selling are: Personal Selling: In this case the customer support officer or Relationship Manager of the fund at a particular branch takes appointment from the potential prospect. Once the appointment is fixed, the branch officer also called Business Development Associate (BDA) in some funds then meets the prospect and gives him all details about the various schemes being offered by his fund. The conversion rate in this mode of selling is in between 30% - 40%. Telemarketing: In this case the emphasis is to inform the people about the fund. The names and phone numbers of the people are

picked at random from telephone directory. Some fund houses have their database of investors and they cross sell their other products. Sometimes people belonging to a particular profession are also contacted through phone and are then informed about the fund. Generally the conversion rate in this form of marketing is 15% - 20%. Direct mail: This one of the most common method followed by all mutual funds. Addresses of people are picked at random from telephone directory, business directory, professional directory etc. The customer support officer (CSO) then mails the literature of the schemes offered by the fund. The follow up starts after 3 4 days of mailing the literature. The CSO calls on the people to whom the literature was mailed. Answers their queries and is generally successful in taking appointments with those people. It is then the job of BDA to try his best to convert that prospect into a customer. Advertisements in newspapers and magazines: The funds regularly advertise in business newspapers and magazines besides in leading national dailies. The purpose to keep investors aware about the schemes offered by the fund and their performance in recent past. Advertisement in TV/FM Channel: The funds are aggressively giving their advertisements in TV and FM Channels to promote their funds. Hoardings and Banners: In this case the hoardings and banners of the fund are put at important locations of the city where the movement of the people is very high. The hoarding and banner generally contains information either about one particular scheme or brief information about all schemes of fund.

Selling through intermediaries:Intermediaries contribute towards 80% of the total sales of mutual funds. These are the people/ distributors who are in direct touch with the investors. They perform an important role in attracting new customers. Most of these intermediaries are also involved in selling

shares and other investment instruments. They do a commendable job in convincing investors to invest in mutual funds. A lot depends on the after sale services offered by the intermediary to the customer. Customers prefer to work with those intermediaries who give them right information about the fund and keep them abreast with the latest changes taking place in the market especially if they have any bearing on the fund in which they have invested. Regular Meetings with distributors: Most of the funds conduct monthly/bi-monthly meetings with their distributors. The objective is to hear their complaints regarding service aspects from funds side and other queries related to the market situation. Sometimes, special training programs are also conducted for the new agents/ distributors. Training involves giving details about the products of the fund, their present performance in the market, what the competitors are doing and what they can do to increase the sales of the fund.

Joint Calls:This is generally done when the prospect seems to be a high net worth investor. The BDA and the agent (who is located close to the HNIs residence or area of operation) together visit the prospect and brief him about the fund. The conversion rate is very high in this situation, generally, around 60%. Both the fund and the agent provide even after sale services in this particular case. Meetings with HNIs: This is a special feature of all the funds. Whenever a top official visits a particular branch office, he devotes at least one to two hours in meeting with the HNIs of that particular area. This generally develops a faith among the HNIs towards the fund.

Advantages:

Portfolio diversification: - Mutual Funds invest in a well-diversified portfolio of securities which enables investor to hold a diversified investment portfolio (whether the amount of investment is big or small) Professional management: - Fund manager undergoes through various research works and has better investment management skills which ensure higher returns to the investor than what he can manage on his own. Less risk: - Investors acquire a diversified portfolio of securities even with a small investment in a Mutual Fund. The risk in a diversified portfolio is lesser than investing in merely 2 or 3 securities. Low transaction cost: - Due to the economies of scale (benefits of larger volumes), mutual funds pay lesser transaction costs. These benefits are passed on to the investors. Liquidity: - An investor may not be able to sell some of the shares held by him very easily and quickly, whereas units of a mutual fund are far more liquid.

Choice of scheme: - Mutual funds provide investors with various schemes with different investment objectives. Investors have the option of investing in a scheme having a correlation between its investment objectives and their own financial goals. These schemes further have different plans/options Transparency: - Funds provide investors with updated information pertaining to the markets and the schemes. All material facts are disclosed to investors as required by the regulator. Flexibility: - Investors also benefit from the convenience and flexibility offered by Mutual Funds. Investors can switch their holdings from a debt scheme to an equity scheme and vice-versa. Option of systematic (at regular intervals) investment and withdrawal is also offered to the investors in most open-end schemes. Safety: - Mutual Fund industry is part of a well-regulated investment environment where the interests of the investors are protected by the regulator. All funds are registered with SEBI and complete transparency is forced.

Disadvantages:-

Cost control not in the hands of Investors: - Investor has to pay investment management fees and fund distribution costs as a percentage of the value of his investments (as long as he holds the units), irrespective of the performance of the fund. No customized portfolio: - The portfolio of securities in which a fund invests is a decision taken by the fund manager. Investors have no right to interfere in the decision making process of a fund manager, which some investors find as a constraint in achieving their financial objectives. Difficulty in selecting a suitable fund scheme: - Many investors find it difficult to select one option from the plethora of funds/schemes/plans available. For this, they may have to take advice from financial planners in order to invest in the right fund to achieve their objectives.

Load structure:-

Load Funds Mutual Funds incur various expenses on marketing, distribution, advertising, portfolio churning, fund manager's salary etc. Many funds recover these expenses from the investors in the form of load. These funds are known as Load Funds. A load fund may impose following types of loads on the investors:1. Entry Load - Also known as Front-end load, it refers to the load

charged to an investor at the time of his entry into a scheme. Entry load is deducted from the investor's contribution amount to the fund.

2. Exit Load - Also known as Back-end load, these charges are

imposed on an investor when he redeems his units (exits from the scheme). Exit load is deducted from the redemption proceeds to an outgoing investor. 3. Deferred Load - Deferred load is charged to the scheme over a period of time. 4. Contingent Deferred Sales Charge (CDSC) - In some schemes, the percentage of exit load reduces as the investor stays longer with the fund. This type of load is known as Contingent Deferred Sales Charge. No-load Funds All those funds that do not charge any of the above mentioned loads are known as No-load Funds.

Tax exemption:Tax-exempt Funds Funds that invest in securities free from tax are known as Taxexempt Funds. All open-end equity oriented funds are exempt from distribution tax (tax for distributing income to investors). Long term capital gains and dividend income in the hands of investors are taxfree. Non-Tax-exempt Funds Funds that invest in taxable securities are known as Non-Tax-exempt Funds. In India, all funds, except open-end equity oriented funds are liable to pay tax on distribution income. Profits arising out of sale of units by an investor within 12 months of purchase are categorized as short-term capital gains, which are taxable. Sale of units of an equity oriented fund is subject to Securities Transaction Tax (STT). STT is deducted from the redemption proceeds to an investor.

Risk Hierarchy of Different Mutual Funds:-

Thus, different mutual fund schemes are exposed to different levels of risk and investors should know the level of risks associated with these schemes before investing. The graphical representation hereunder provides a clearer picture of the relationship between mutual funds and levels of risk associated with these funds:

LITERATURE REVIEWLiterature on mutual fund performance evaluation is enormous. A few research studies that have influenced the preparation of this paper substantially are discussed in this section. Sharpe, William F. (1966) suggested a measure for the evaluation of portfolio performance. Drawing on results obtained in the field of portfolio analysis, economist Jack L. Treynor has suggested a new predictor of mutual fund performance, one that differs from virtually all those used previously by incorporating the volatility of a fund's return in a simple yet meaningful manner. Michael C. Jensen (1967) derived a risk-adjusted measure of portfolio performance (Jensens alpha) that estimates how much a managers forecasting ability contributes to funds returns. As indicated by Statman (2000), the e SDAR of a fund portfolio is the excess return of the portfolio over the return of the benchmark index, where the portfolio is leveraged to have the benchmark indexs standard deviation.

S.Narayan Rao, evaluated performance of Indian mutual funds in a bear market through relative performance index, riskreturn analysis, Treynors ratio, Sharpes ratio, Sharpes measure , Jensens measure, and Famas measure. The study used 269 open-ended schemes (out of total schemes of 433) for computing relative performance index. Then after excluding funds whose returns are less than risk-free returns, 58 schemes are finally used for further analysis. The results of performance measures suggest that most of mutual fund schemes in the sample of 58 were able to satisfy investors expectations by giving excess returns over expected returns based on both premium for systematic risk and total risk. Bijan Roy, et. al., conducted an empirical study on conditional performance of Indian mutual funds. This paper uses a technique called conditional performance evaluation on a sample of eighty-nine Indian mutual fund schemes .This paper measures the performance of various mutual funds with both unconditional and conditional form of CAPM, Treynor- Mazuy model and Henriksson-Merton model. The effect of incorporating lagged information variables into the evaluation of mutual fund managers performance is examined in the Indian context. The results suggest that the use of conditioning lagged information variables improves the performance of mutual fund schemes, causing alphas to shift towards right and reducing the number of negative timing coefficients. Mishra, et al., (2002) measured mutual fund performance using lower partial moment. In this paper, measures of evaluating portfolio performance based on lower partial moment are developed. Risk from the lower partial

moment is measured by taking into account only those states in which return is below a pre-specified target rate like risk-free rate. Kshama Fernandes (2003) evaluated index fund implementation in India. In this paper, tracking error of index funds in India is measured .The consistency and level of tracking errors obtained by some well-run index fund suggests that it is possible to attain low levels of tracking error under Indian conditions. At the same time, there do seem to be periods where certain index funds appear to depart from the discipline of indexation. K. Pendaraki et al. studied construction of mutual fund portfolios, developed a multi-criteria methodology and applied it to the Greek market of equity mutual funds. The methodology is based on the combination of discrete and continuous multi-criteria decision aid methods for mutual fund selection and composition. UTADIS multi-criteria decision aid method is employed in order to develop mutual funds performance models. Goal programming model is employed to determine proportion of selected mutual funds in the final portfolios.

NEED FOR THE STUDY To study the investors intention with regard to the products in

mutual funds and their features. To study awareness level of customers. To study the preference and satisfaction level of investors. To apprehend mutual funds movement in the market. To analyze how it benefited to investors. With the awareness that is increasing day by day regarding investing in secondary market and speculation, the comfort and flexibility the customers seeking, there is a definite requirement to study. In the fast growing competitive market scenario it is always required to have an idea of changes that are taking place in the market from time to time. Without which one cant serve their customers properly.

OBJECTIVES OF THE STUDY

1. 2.

To enhance our knowledge about the subject. Evaluate Perception towards risk involved in mutual funds in comparison to other financial avenues.

3.

How

effectively

investment

houses

are

reaching

their

customers. 4. To have a vivid picture of major players in Mutual Fund Industry in India. 5. To study how the promotional activities of Mutual Fund products in India. 6. To study the pattern of consumer behavior within the available investment options and to test awareness among the consumer about the various mutual fund houses.

SCOPE OF THE STUDY

In today's complex financial environment, investors have unique needs, which are derived from their risk appetite and financial goals. Mutual manage funds the (customized investments portfolios) recognize to this, and professionally achieve specific

investment objectives, and not to forget, relieving the investors from the day-to-day hassles which investment require. It is offers professional management of equity and debt diversified investment of the investor with an aim to deliver consistent return with an eye on risk. Identify the key sectorial stocks in each portfolio.

To look out for new prospective customers who are willing to invest in Mutual Funds of Franklin Templeton, Visakhapatnam. To find out the Franklin Templeton Investments, Mutual Funds effectiveness in the current market situation. It also covers the scenario of the Investment Philosophy of a Fund Manager.

RESEARCH AND METHODOLOGYCOLLECTION OF DATA:Primary data: - Employees of Franklin Templeton India Pvt Ltd, Visakhapatnam, & customers of Franklin Templeton, and other investor out of Franklin Templeton (by personally in touch with them, and by asking queries to them). Methods: - Personal interaction. Secondary data: Web site of Franklin Templeton India, brochures, textbooks and other web sites etc.. Mainly the data was collected by interacting with people working at various levels in Franklin Templeton and outside investors and websites.

RESEARCH METHODOLOGY:Sample Method Sample Size Sources of Data : : Non-Probability Sampling 100

Primary Data Secondary Data

: :

Structured Non-Disguised Questionnaire Reference from distributors.

The whole study is based upon primary and secondary data. Therefore, information has been collected from interacting with different investors and from various magazines, journals, websites, and bulletins.

PRESENTATION OF THE STUDY:The study has been presented in the organized structure or the format which has been provided by the respective authority. In the first chapter under the theoretical framework the concept of finance has been described in detail with its meaning, definition, evolution and the various modern and the traditional approaches in the field of finance. In the column of topic related concepts there was a detailed description about the topic of study, which is study on customer attitude, preference and satisfaction level towards mutual fund investment. In its context it was detailed allot the process and the importance of customer satisfaction in the organization as well as industry. In the column of review of literature the relation and the importance of the customer satisfaction with the company, investors value, etc has been presented with the reviews of the various scholars in the field of finance. There was a clear description about the importance and the scope of study and the main objectives for the purpose of conducting the study were made clear. The research design adopted with different methods and tables and there was clear presentation of the limitations of the study.

In chapter three the overview of the whole industry at global level and also at the country level has been mentioned with actual facts which were done same in the case of the company profile. Once the topic profile in the organisation was made clear the study was supported with clear analysis of data and the fair presentation of the findings, suggestion and the conclusion at the end of the details presented for the study.

LIMITATIONS The study is limited to Visakhapatnam city only. The time constraint was one of the major problems. The study is limited to the different schemes available under

the mutual funds selected. All the customers are online so only a few customers were in contact. As all the information is given by the customers it may be biased. Most of the customers were not ready to reveal the data about their investments. Most of clients unaware of these options so that they didnt responded well. The lack of information sources for the analysis part.

INDUSTRY PROFILEThe capital markets perform an important function in mobilization of resources liquidity of the stock markets is an important factor effecting growth. Many profitable projects require long term finance; however investors do not relinquish their savings for a long time. Capital market is a group of interrelated markets in which capital is raised in financial form, is lent and borrowed (or) raised in a varying time periods (such as short term and long term). In a developing economy, the business of capital market is the movement of capital to the point of highest yield. A liquid stock market ensures a quick exit without incurring heavy losses (or) costs. Stock market is a vehicle through which long term finance is characterized for the various needs of industry, commerce, government and local authorities. Thus development of financial markets is necessary for creating conductive climate for investment and economic growth. The tone of capital market largely depends on the economy of the country and therefore, depends on the

available

savings

and

investments

on

one

hand

the

performances of the industry on the other. Among other factors that would influence the tone of the capital and stock market are the monsoon, the agriculture, the industry growth and in particular the performance of the corporate sector, as they too have a controlling effect on the economy of the country. In particular the performance of the corporate sector, as they too have a controlling effect on the economy of the country. In particular the government policy, the psychological expectation and host of other factors play a very prominent role in influencing the capital markets.

The capital market in India can be categorized into two types: Organized UnorganizedThe funds for long term capital come from individual investors, corporate savings, government savings, foreign investments, banks, financial institutions, investments trusts, Life Insurance Corporation and international financial agencies, industry, government and semi government institutions are the potential users in the organized sector itself. Since the supply of funds for unorganized sector falls short of demand, the interest rates are kept high. The economic progress of a country is largely influenced by the availability of savings for investment and hence there is a need for the mobilization of the savings for investment and hence there is a need for the mobilization of savings for investment and hence on a massive scale. Indigenous bankers

in town and money lenders in rural areas supply long term finance in the UN organized sector. There is no link between the organized and unorganized sector (or) within the unorganized sector itself. There is a need for the mobilization savings on a massive scale. The economic progress of a country is largely influenced by the availability of savings for investment and hence there is need for the mobilization of savings for investment and hence on a massive scale. Indigenous bankers in town and money lenders in rural areas supply long term finance in the unorganized sector. There is no link between the organized and unorganized sector (or) within the unorganized sector itself. There is a need for the mobilization savings on a massive scale. In developing countries like India, there is a great set back in mobilization process due to various reasons. The attitude of the public; their affiliation to traditional investment in land and property, bullions and hoardings and above all the risk of uncertainty are some of the reasons. The fiscal commission (1949-50) recognized the fact that in India there is an acute of long term capital for industrial ventures. But it was not until 1954-55 that the central board of directors of the reserve bank permitted established business house to raise their new capital by issue of debentures at comparatively high rate of interest. Since the capital market is a place where the private savings are kept for a very long period, it is highly necessary to protect the interests of these investors, if the capital market has to grow.

To safe guard the investors interest, government has to enacted laws such as: The securities act , 1938 ( together with the life insurance corporation act 1956 ) The capital issues (control and regulation act, 1943). The banking companies act, 1949. The provident fund act and the rules, 1957. The Indian companies act, 1956. The deposit insurance scheme, 1960. The monopolies and restrictive trade practices act, 1969. A new era in the capital market in India was ushered in July, 1991 with the starting of a new process of financial and economic deregulation. Beginning With the devaluation of rupee by about 20% in July, 1991, industrial policy was totally reshaped to dispense with licensing of all industries except 18 scheduled industrial groups. Further, removal MRPT limit on assets of Companies, dilution of FERA (Foreign Exchange Regulation Act). And foreign trade liberalization etc, were some of the other reforms. Fiscal Policy was rationalized to reduce the central budget deficit and public Sector under takings were freed from government controls by professionalizing their management , giving greater autonomy to them and by disinvestment of their shares in favor of the public.

ESTABLISHMENT OF SEBI

The Securities and Exchange Board of India was established on April 12, 1992 in accordance with the provisions of the Securities and Exchange Board of India Act, 1992. PREAMBLE The Preamble of the Securities and Exchange Board of India describes the basic functions of the Securities and Exchange Board of India as ..to protect the interests of investors in securities and to promote the development of, and to regulate the securities market and for matters connected therewith or incidental thereto

BOMBAY STOCK EXCHANGESThe 'BSE SENSEX' is a value-weighted index composed of 30 stocks and was started on January 1, 1986. The Sensex is regarded as the pulse of the domestic stock markets in India. It consists of the 30 largest and most actively traded stocks, representative of various sectors, on the Bombay Stock Exchange. These companies account for around fifty per cent of the market capitalization of the BSE. The base value of the Sensex is 100 on April 1, 1979, and the base year of BSESENSEX is 1978-79. A governing board comprising of 9 elected directors, 2 SEBI nominees, 7 public representatives and an executive director is the apex body, which decides the policies and regulates the affairs of the exchange.

The BSE SENSEX consists of the following companies:

Bajaj Auto Limited, Bharti Airtel Ltd., Bharat Heavy Electricals Ltd., Cipla Ltd., DLF Ltd., HDFC, HDFC Bank Ltd., Hero Honda Motors Ltd., Hindalco Industries Ltd., Hindustan Unilever Ltd., ICICI Bank Ltd., Infosys Technologies Ltd., ITC Ltd., Jaiprakash Associates Ltd., Jindal Steel & Power Ltd., Larsen & Toubro Ltd., Mahindra & Mahindra Ltd., Maruti Suzuki India Ltd., NTPC Ltd., ONGC Ltd., Reliance Industries Ltd., Reliance Communications Ltd., Reliance Infrastructure Ltd., State Bank of India, Sterlite Industries (India) Ltd., Tata Motors Ltd., Tata Power Company Ltd., Tata Steel Ltd., Tata Consultancy Services Ltd., Wipro Ltd. At regular intervals, the Bombay Stock Exchange (BSE) authorities review and modify its composition to be sure it reflects current market conditions. The index is calculated based on a free float capitalization method; a variation of the market cap method. Instead of using a company's outstanding shares it uses its float, or shares that are readily available for trading. The free-float method, therefore, does not include restricted stocks, such as those held by promoters, government and strategic investors. Initially, the index was calculated based on the full market capitalization method. However this was shifted to the free float method with effect from September 1, 2003. Globally, the free float market capitalization is regarded as the industry best practice. As per free float capitalization methodology, the level of index at any point of time reflects the free float market value of 30 component stocks relative to a base period. The Market Capitalization of a company is determined by multiplying the

price of its stock by the number of shares issued by the company. This Market capitalization is multiplied by a free float factor to determine the free float market capitalization. Free float factor is also referred as adjustment factor. Free float factor represent the percentage of shares that are readily available for trading. The Calculation of Sensex involves dividing the free float market capitalization of 30 companies in the index by a number called Index divisor. The Divisor is the only link to original base period value of the Sensex. It keeps the index comparable over time and is the adjustment point for all Index adjustments arising out of corporate actions, replacement of scrips, etc. The index has increased by over ten times from June 1990 to the present. Using information from April 1979 onwards, the long-run rate of return on the BSE Sensex works out to be 18.6% per annum, which translates to roughly 9% per annum after compensating for inflation.

NATIONAL STOCK EXCHANGE:The NSE was incorporated in Now 1992 with an equity capital of Rs 25 crore. The International securities consultancy (ISC) of Hong Kong has helped in setting up NSE. ISE has prepared the detailed business plans and installation of hardware and software systems. The promotions for NSE were financial institutions, insurances companies, banks and SEBI capital market ltd, Infrastructure leasing and financial services ltd and stock holding corporation ltd.

It

has

been

set

up

to

strengthen

the

move

towards

professionalisation of the capital market as well as provide nation wide securities trading facilities to investors. NSE is not an exchange in the traditional sense where brokers own and manage the exchange. A two tier administrative set up involving a company board and a governing aboard of the exchange is envisaged. NSE is a national market for shares PSU bonds, debentures and government securities since infrastructure and trading facilities are provided. NSE-NIFTY: The NSE on April 22, 1996 launched a new equity Index. The new index, which replaces the existing NSE-100 index, is expected to serve as an appropriate Index for the new segment of futures and options. Nifty means National Index for Fifty Stocks. The NSE-50 comprises 50 companies that represent 20 broad Industry groups with an aggregate market capitalization of around Rs. 1,70,000 crs. All companies included in the Index have a market capitalization in excess of Rs 500 crs each and should have traded for 85% of trading days at an impact cost of less than 1.5%. The base period for the index is the close of prices on Nov 3, 1995, which makes one year of completion of operation of NSEs capital market segment. The base value of the Index has been set at 1000.

ORGANIZATION PROFILEFranklin Templeton Investments has grown from being recognized as one of the best small companies in America to being considered a premier global investment management organization. We offer clients a valuable perspective shaped by

our six decades of experience, investment expertise and growing global reach. Franklin Templeton GLOBALFranklin Resources, Inc. is a global investment management organization known as Franklin Templeton Investments. We have an extensive global presence, including offices in over 30 countries and clients in more than 150. Our common stock is listed on the New York Stock Exchange under the ticker symbol BEN and is included in the Standard & Poor's 500Index. As of December 31, 2010, we manage over $670 billion in investment vehicles for individuals, institutions, pension plans, trusts, partnerships and other clients.

A PREMIER GLOBAL INVESTMENT MANAGEMENT ORGANIZATION World-Class Investment Management A pure investment management organization Multi-manager structure encompassing well-known brands across multiple asset classes 94% of U.S.-registered fund assets ranked in top two Lipper

quartiles for 10-year period ended December 31, 20101

Extensive Global Presence A pioneer in global investing. Clients in 150+ countries. 22 countries/regions with over U.S. $1 billion in AUM. Largest cross-border fund manager.

More than 500 investment professionals who speak over 25

languages.

Financial Strength Diversified by investment objective, client type, and geographical region Strong balance sheet Excellent credit ratings

Values-Based Culture Put clients first Build relationships Work with integrity

Franklin Templeton INDIAFranklin Templeton's association with India dates back to more t han a decade as an investor. As part of the group's major thrust on investing in markets around the world, the India office was set up in 1996 as Templeton Asset Management India Pvt. Limited. It flagged off the mutual fund business with the launch of Templeton India Growth Fund in September 1996, and since then the business has grown at a steady pace.

A Long term commitment:Since starting its operations in India, Franklin Templeton has invested a considerable amount of time, effort and resources towards investor and distributor education, the belief being - to be successful in the long term, the fundamentals need to be corrected, at whatever cost! This has resulted in various advertising campaigns aimed at educating investors, participation in seminars and distributor training programs. Franklin Templeton has played a

pivotal role in steering the industry to its current stage, and as long term players, we continue to strive to achieve the objective of 'making mutual funds an investment of choice' for both individual and institutional investors. In July 2002, Franklin Templeton India acquired Pioneer ITI, another leading fund house in India to create an organization with rich investment experience over market cycles, one of the most comprehensive product portfolios, footprint across the country and an in-house shareholder servicing function. The huge synergies that existed in the two organizations have helped the business grow at a rapid pace, catapulting the company to among the top two fund houses in India.

Our VisionTo be the premier global investment management organization by offering high quality investment solutions, providing outstanding service and attracting, motivating and retaining talented individuals.

Investment philosophyOur investment philosophy that follows a disciplined approach to investing with a strong focus towards process orientation is the common thread running through all our schemes. The key guiding principle to our investment philosophy is - maximize the riskadjusted returns for our investors in the respective asset classes, and create wealth for them over the long-term. We have successfully demonstrated the ability to achieve this in the past, and are confident that our process-oriented investment approach will help us sustain the same in the years to come.

Equity

While broad economy and sector trends serve as a broad guideline, Franklin Templeton portfolio managers are essentially 'bottom-up' investors, focusing more on individual stocks and their potential to deliver long term capital appreciation. While quantitative analysis using proprietary research model serves as a first stage filter, the research team and portfolio managers speak with key management and observe operations onsite to get a meaningful insight into a company's ability to translate vision into reality.

DebtThe overall objective is to minimize both liquidity and credit risk. Our fixed income team looks to arrive at a general maturity/duration range for the portfolio in relation to the market based on its interest rate outlook, which is arrived after a rigorous and close monitoring of various macro variables. The shifts within this range are then determined by short term cyclical trends in the economy. They look to manage interest rate risk across different asset class and duration buckets, in order to optimise risk-adjusted returns. All the investment options are thoroughly analysed to ensure that credit risk is kept at the minimum level. Any major shifts in portfolio strategy are based on long-term trends, as opposed to short-term aberrations in interest rates.

ORGANIZATIN STRUCTUREName Charles B. Johnson Rupert H. Johnson, Jr. Gregory E. Johnson Vijay C. Advani Designation Chairman of the Board Vice Chairman Chief Executive Officer President

Executive Vice President - Global Advisory Services Jennifer M. Executive Vice President Chief Operating Johnson Officer Kenneth A. Lewis Executive Vice President Chief Financial Officer John M. Lusk Executive Vice President - Investment Management Craig S. Tyle Executive Vice President General Counsel William Y. Yun Executive Vice President - Alternative Strategies

FRANKLIN TEMPLETON ASSET MANAGEMENT INDIA VISAKHAPATNAM

PVT LTD,

Name and address Franklin Templeton Asset management India pvt ltd. 204, First floor, Eswar plaza, Dwarakanagar. Bata Showroom Visakhapatnam. -16. Name and designation: Suresh Kumar Sela (Branch Manager)

No of Persons employed: Two Name of the industry: Mutual Funds Whether seasonal: No Date of Opening: 30th Aug 2002. Details of Head Offices/branches: Franklin Templeton Asset management India pvt ltd Level 4, wockhardt towers, Bandra-Kurla complex, Bandra East, Mumbai 400051. No of employees: 424 Person responsible to receive the notice on behalf of employees under payment of gratuity act 1972 and the rules framed there under. Authorized person Karan Kapadia VP & Regional sales head.

HISTORY AND OVERVIEW OF FRANKLIN TEMPLETONIn the year 1940:The company was founded in 1947 in New York by Rupert H. Johnson, Sr., who ran a successful retail brokerage firm from an office on Wall Street. He named the company for U.S. founding father Benjamin Franklin because Franklin epitomized the ideas of frugality and prudence when it came to saving and investing. The company's first line of mutual funds, Franklin Custodian Funds, was a series of conservatively managed equity and bond funds designed to appeal to most investors.

In the year 1950:After Rupert Sr. retired, his son, Charles B. Johnson (Charlie), took over as president and chief executive officer in 1957 at age 24. There were only a handful of employees at that time and the funds had total assets under management of $2.5 million. Franklin was swimming against the tide because insurance companies dominated the middle class investing markets, but Charlie was convinced that he had a good story to tell.

In the year 1960:By the early 1960s Charlie and his team's persistence was paying off and the company was growing albeit slowly. It was a struggle to keep up with the day-to-day demands of the business and Charlie continued to wear many hatsmutual fund manager, wholesaler accountant. Rupert Johnson, Jr., Charlie's brother, joined the company in 1965 and also took on multiple roles.

In the year 1970:Franklin went public in 1971, which gave Charlie and team the capital needed to grow the business and position it for the future. In 1973, the company acquired Winfield & Company, a San Mateo, California-based investment firm, and moved Franklin's offices from New York to California. The combined organization had close to $250 million made in it assets Franklin's under first management billion-dollar and fund approximately and launched 60 the employees. In 1979, Franklin Money Fund began a growth surge that company's tremendous asset growth in the 1980s. In the year 1980: Starting in 1980, the company's total assets under management doubled (or nearly doubled) every year for the next six years. The company's stock began trading on the New York Stock Exchange in 1986 under the ticker symbol "BEN". In the same year, the company

opened its first office outside North America in Taiwan. In 1988, Franklin acquired L.F. Rothschild Fund Management Company. Assets under management for Franklin grew from just over $2 billion in 1982 to more than $40 billion in 1989 (the crash of 1987 had little impact on Franklin's income and bond funds). Not one to rest on their laurels, management was concerned about Franklin's heavy emphasis on fixed income investments that had become the company's bread and butter.

In the year 1990:Strategic acquisitions in the 1990s helped Franklin diversify its investment management capabilities beyond fixed income and also expand its global footprint throughout Europe and Asia. In 1992, after striking a deal with famed global investor Sir John Templeton for acquisition of Templeton, Galbraith & Hansberger Ltd., Charlie was named Fund Leader of the Year for spearheading what was then the largest merger of an independent mutual fund company in history. Templeton gave the company a strong portfolio of international equity funds as well as the expertise of emerging markets guru Dr. Mark Mobius, who currently leads a team of emerging markets analysts and manages emerging markets portfolios. Dr. Mobius has spent more than 30 years working in emerging markets all over the world. Then in 1996, in an effort to broaden its line of domestic equity products, Franklin Templeton bought Heine Securities Corporation, investment advisor to Mutual Series Fund, Inc., from Wall Street icon Michael Price.

In the year 2000:Several more key acquisitions solidified the company's position as a premier global investment management organization: Bissett in

2000, Fiduciary Trust in 2001 and Darby in 2003. In 2005, Gregory E. Johnson (Greg), Charlie's son, became chief executive officer, assuming overall responsibility for leading Franklin Templeton Investments. Greg had grown up in the business and worked his way through the organization beginning on the trading desk at age 24 in 1985.

Fundamental ApproachOur investment decisions are guided more by what we believe in, less by what the market thinks. That is the reason once we buy into a stock, or take a maturity position in a debt portfolio based on our fundamental research and analysis, we stick to our position without paying heed to market rumours and whisper estimates. We believe that while technical can rule the roost in the short term, it is the fundamentals that prove rewarding over time.

Long Term OrientationFranklin Templeton's portfolio managers are strong believers in consistently delivering good performance. The key word is consistency. We believe that it is not important to be top performer at any time and we attach more importance to being among the top quartile in the peer group consistently, and this requires taking a long-term view, even at the cost of temporary underperformance.

Team ApproachWhile individual portfolio managers are the ultimate decision makers for the scheme they manage, the belief is that working together can achieve greater results than acting alone. That is why every stock that is researched by the analysts is discussed intensively at regular investment team meetings, and the analysis is available to all

investment team members on a common platform. Moreover, the high degree of interaction between investment team members across the globe helps share and learn from each other's experience and expertise. The regular awards and top ratings accorded to Franklin Templeton schemes are recognition of their consistently superior performance across asset classes, and through market and economic cycles. They also reflect Franklin Templeton's long cherished values of choosing the long-term, disciplined and team approach to managing its funds and business.

Highlights of the Quarter Record assets under management of $670.7 billion and longterm sales of $54.9 billion. Long-term net new flows of $3.4 billion, net of the previously announced advisory account redemption of $12.0 billion. Tax-free fixed-income funds experienced net outflows of $2.0

billion, but almost half of that was exchanged into other Franklin Templeton funds. Announced a new strategic relationship with Pelagos Capital Management and the acquisition of Rensburg Fund Management, a U.K. equity manager.

Earning per share

These Corporate Governance Guidelines (the Guidelines) have been adopted by the Board of Directors (the Board) of Franklin Resources, Inc. (the Company or Corporation) in connection with its oversight of the Companys management and business affairs. Independence of Directors: A majority of directors must be independent directors in accordance with the corporate governance listing standards.

CORPORATE GOVERNANCE GUIDELINES

Director

Qualifications and Selection: The Corporate Governance Committee of the Board is responsible for establishing a policy setting forth the specific, minimum qualifications that the Corporate Governance Committee believes must be met by a nominee recommended by the Corporate Governance Committee for a position on the Board. term limits for its members. The Board recognizes the value of continuity of directors who have experience with the Company and who have gained over a period of time a level of understanding about the Company and its operations

Term Limits: The Board does not believe that it should establish

Meetings and Preparation: Directors are expected to regularly

attend Board meetings and meetings of committees on which they serve, to spend the time needed in preparation for such meetings and to meet as frequently as they deem necessary to properly discharge their responsibilities. Meeting

Agendas: The Chairman of the Board and the Corporate Secretary will establish and disseminate the agenda for each Board meeting. Each Board member is free to suggest the inclusion of items on the agenda. Each Board member is free to raise at any Board meeting subjects that are not on the agenda for that meeting. Performance Evaluation: The Board, through its delegation of oversight to the Corporate Governance Committee, shall annually review its own performance in such manner as it deems appropriate to determine whether the Board and its committees are functioning effectively. Governance review and determine recommend approval. Committee, as appropriate, shall periodically reassess the adequacy of these Guidelines to whether any changes are appropriate and to the Board any such changes for the Boards

Annual

Review of Corporate Governance Guidelines: The Corporate

TOPIC PROFILE IN THE ORGANIZATION Equity Funds

Open-end diversified Open-end sector Fixed Income Funds Open-end income/liquid Closed-end

Hybrid Funds Open-end balanced Open-end fund of funds Closed-end

Investment Styles What are growth and value styles?

EQUITY FUNDS Open-end diversifiedFund FIOP Product Positioning Takes concentrated stock/sector exposure based on four themes. Invests in companies/ sectors with high growth rate. Invests in small and mid cap companies Invests in mid and small cap stocks Invests in companies benefiting from the building blocks of the economy Style Blend, bottom up Growth combination of top down and bottom up. (Micro and macro analysis) Blend, bottom up Blend, bottom up Blend, bottom up with a top down overlay Investment horizon 3-5 years or more

FIHGCF

3-5 years or more

FISCF FIPF FBIF

3-5 years or more 3-5 years or more 3-5 years or more

FIFCF

FIT

FIPP

FIIF FIBCF TIGF

TIEIF

FAEF

Invests in companies across the market cap range Invests in companies across sectors and market cap range, offering tax benefits under Sec 80 C. Primarily a large cap fund with some allocation to small/mid cap stocks that have high long-term potential. Passively managed index fund Invest in large cap stocks Invests predominantly in large cap stocks a value fund Focuses on Indian and emerging market stocks a value fund taking into account dividend yield of stocks Invests in Asian Companies/ sectors with long term potential across the market cap range.

Blend, bottom up Blend, bottom up

3-5 years or more

3-5 years or more

Blend, bottom up

3-5 years or more

Passive, indexing Blend, bottom up Value, bottom up Value, bottom up

3-5 years or more 3-5 years or more 3-5 years or more

3-5 years or more

Growth combination top down and bottom up. Micro and macro within countries stock.

3-5 years or more

Open-end SectorFIF Invests in companies in the information technology sector. Blend, bottom up 3-5 years or more

Equity fundsTempleton India Growth Fund (TIGF) Franklin India Prima plus (FIPP) Franklin India Prima fund (FIPF) Franklin India Flexi Cap Fund (FIFCF) Franklin India High Growth Companies Fund (FIHGCH). Franklin Asian Equity Fund (FAEF) Franklin India Opportunity Fund (FIOF) Templeton India Equity Income Fund (TIEIF) Franklin Build India Fund (FBIF) Franklin India Tax-shield (FIT) Franklin India Index Fund (FIIF) Franklin InfoTech Fund (FIF)

FIXED INCOME FUNDS Open-end income/liquidFund TGSF Product Positioning Invests primarily in Indian govt securities with different plans. A long bond fund investing in quality fixed income instruments across segments Primarily a corporate bond fund with medium term portfolio duration Focused on high accrual paper towards the short end of the curve including PTCs Invests in short term corporate bonds including PTCs Invests in a mix of money market and short term debt instrument Invest in a mix of floating and fixed income securities Invests in short term debt and money market securities Invests in money market and short term investments Invests in money market securities Style Composite plan/ PF Plans/ LT Plan Treasury 3 to 6 months 1 to 2 years Investment horizon Composite plan/ PF Plans/ LT Plan high Treasury plans: Low to moderate Moderate to high

TIIBA

TIIF

1 to 2 years

Moderate

TIIOF

18 months and above

Moderate

TISTIP

9 to 18 months

Moderate

TILDF

3 to 6 months

Moderate

TFIF-LT TIUBF

1 to 6 months Upto 3 months

Moderate Low

TICMA TITMA

3 days to 3 months 1 month

Low Low

Closed-endTFHF Invests in high quality fixed income securities in line with the portfolio 3 months to 5 years Varies/low due to buy-hold strategy.

duration.

Income & LiquidTempleton India Income Fund (TIIF) Templeton India Income Builder Account (TIIBA) Templeton India Income Opportunity Fund (TIIOF) FT India Monthly Income Plan (FTIMIP) Templeton India Government Securities Fund (TGSF) Templeton Floating Rate Income Fund (TFIF) Templeton India Short Term Income Plan (TISTIP) Templeton India Ultra-Short Bond Fund (TIUBF) Templeton India Treasury Management Account (TITMA) Templeton India Low Duration Fund (TILDF)

HYBRID FUNDS Open-end balancedFund FTIBF Product Positioning Invests both in stocks and fixed income instruments offering a balanced exposure to the asset classes Ideal avenue for investing for childrens future Education Plan: Invests in equities and in debt securities Invests in equities (Upto 40%) and the balance in high quality fixed income instruments a retirement product offering tax benefits with a lock-in An MIP investing predominantly in debt instrument with a marginal exposure to equities. (Equity exposure: upto 20%) Style Balanced Equity: Blend and bottom up Fixed Income: Similar to long bond fund Balanced Equity: Blend and bottom up Fixed Income: Similar to long bond fund Balanced Equity: Blend and bottom up Fixed Income: Similar to long bond fund Balanced Equity: Blend and bottom up Fixed Income: Similar to short bond fund Investment horizon 3 to 5 years or more

TICAP

TIPP

At least 4 years and until the child turns 18 years of age/ Gift plan: Moderate to high. Education plan: Low to moderate At least 3 years and until the age of 58 years/ Moderate to High

FTIMIP

1 to 3 years/ Moderate

Open-end fund of fundsFund FTDPEF Product Positioning A Fund of fund offering tactical allocation between an equity and debt fund, based on (PE Ratio) A fund of fund offering life stage solutions with different plans of varying asset allocation. Product Positioning Invests in high quality fixed income sec in line with the portfolio duration and provides marginal equity exposure upto 30% Invests in mix of debt and equity Style Tactical Allocation Investment horizon 3 to 5 years/ High

FTLF

Strategic/Tactica Varies as per the l Allocation plan/ Moderate to high

Closed-endFund FTFTF Style Balanced, bottom up approach Investment horizon Varies/ Moderate to low

FTCPOF

Balanced, bottom up approach

Varies/ Moderate to low

HybridFT India Dynamic PE Ratio Fund of Funds (FTDPEF) FT India Life Stage Fund of Funds (FTLF) FT India Balanced Fund (FTIBF) Templeton India Pension Plan (TIPP)

INVESTMENT STYLES What are Growth and Value styles?As per MSCI, the growth investment style has the following characteristics Long-term forward earnings per share (EPS) growth rate Short-term forward EPS growth rate Current Internal growth rate Long-term historical EPS growth trend

Long-term historical sales per share growth trend In other words, companies with above average revenue growth/ potential and ROE The value investment style has the following characteristics Book value to price ratio 12-month forward earnings to price ratio Dividend yield In other words, out-of-favor stocks/sectors with good fundamentals, turn-around opportunities and undervalued.

Risk factors: All investments in mutual funds and securities aresubjective to market risks and the NAV of the scheme may go up or down depending upon the factors and forces affecting the securities market including the fluctuations in the interest rates. There can be no assurance that the schemes investment objectives will be achieved.

PRODUCT FEATURESWhat is Franklin India Bluechip Fund (FIBCF)? FIBCF is an open-end diversified equity fund that seeks to achieve capital appreciation through investments in large-cap companies. It was launched in 1993 as a 3 years closed end fund and was converted into an open end fund from January 1997, with declaration of a 20% dividend. In the 90's it used to have a graded load structure going upto 6%. The name Bluechip has its origin in poker from US blue chips typically had the highest value in the game poker and have come to represent stocks f companies that are large/mature and dominate their respective industries. Thus the term blue chip refers to stocks with large market capitalization (established companies).

What are large cap companies and how have the stocks performed? The phrase "large cap" is in reference to the S&P CNX 500 index. This provides a dynamic and realistic picture of the capitalization ranges, given the growing Indian markets. Any stock whose market cap is higher than the 100th stock in S&P CNX 500 will be considered a

large cap stock and the latest break up is given below. Large cap companies have a relatively stable business model and scale of operations and ability to attract best of talents helps them sustain their growth. Stock of such companies are well researched, constantly in demand and highly liquid. Typically, the scale and size of these companies makes them less prone to external shocks, usually demonstrating better resilience during volatile periods. Some well known names in the large cap space in India include Reliance Industries, Hindustan Lever, SBI and Infosys. History suggests that large cap stocks provides stable and consistent returns and typically do relatively well during down turns or volatile environment.

What is the investment strategy of FIBCF? The fund follows a bottom-up approach to stock selection based on fundamental research with a medium to long term perspective and ignores momentum stocks.

The companies

that

the

fund

seeks to invest in (A) are well managed: (B) generate high ROCE and (C) demonstrate the ability to deliver sustainable growth in earnings. Our approach has been to construct a well diversified portfolio of large cap stocks with a medium to long term perspective. We adopt a buy-hold strategy and our average holding period tends to be around 24 m