how mutual funds work

8/9/2019 How Mutual Funds Work

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How Mutual Funds Work

These days you are hearing more and more about mutualfunds as a means of investment. If you are like mostpeople, you probably have most of your money in a bank

savings account and your biggest investment may beyour home. Apart from that, investing is probablysomething you simply do not have the time or knowledgeto get involved in. You are not the only one. This is whyinvesting through mutual funds has become such apopular way of investing.What is a Mutual Fund?

A mutual fund is a pool of money from numerousinvestors who wish to save or make money just like you.Investing in a mutual fund can be a lot easier than buyingand selling individual stocks and bonds on your own.

Investors can sell their shares when they want.Professional Management. Each fund's investments arechosen and monitored by qualified professionals who usethis money to create a portfolio. That portfolio couldconsist of stocks, bonds, money market instruments or acombination of those.Fund Ownership. As an investor, you own shares of themutual fund, not the individual securities. Mutual fundspermit you to invest small amounts of money, howevermuch you would like, but even so, you can benefit frombeing involved in a large pool of cash invested by other

people. All shareholders share in the fund' s gains andlosses on an equal basis, proportionately to the amountthey've invested.Mutual Funds are Diversified

By investing in mutual funds, you could diversify yourportfolio across a large number of securities so as tominimise risk. By spreading your money over numeroussecurities, which is what a mutual fund does, you neednot worry about the fluctuation of the individualsecurities in the fund's portfolio.Mutual Fund Objectives

There are many different types of mutual funds, eachwith its own set of goals. The investment objective is thegoal that the fund manager sets for the mutual fund whendeciding which stocks and bonds should be in the fund'sportfolio.For example, an objective of a growth stock fund mightbe: This fund invests primarily in the equity markets withthe objective of providing long-term capital appreciation


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towards meeting your long-term financial needs such asretirement or a child' s education.Depending on investment objectives, funds can bebroadly classified in the following 5 types:

Aggressive growth means that you will be

buying into stocks which have a chance fordramatic growth and may gain value rapidly. Thistype of investing carries a high element of riskwith it since stocks with dramatic priceappreciation potential often lose value quicklyduring downturns in the economy. It is a greatoption for investors who do not need their moneywithin the next five years, but have a more long-term perspective. Do not choose this option whenyou are looking to conserve capital but ratherwhen you can afford to potentially lose the value

of your investment. As with aggressive growth, growth seeks to

achieve high returns; however, the portfolios willconsist of a mixture of large-, medium- andsmall-sized companies. The fund portfoliochooses to invest in stable, well established, blue-chip companies together with a small portion insmall and new businesses. The fund manager willpick, growth stocks which will use their profitsgrow, rather than to pay out dividends. It is amedium - long-term commitment, however,looking at past figures, sticking to growth fundsfor the long-term will almost always benefit you.They will be relatively volatile over the years soyou need to be able to assume some risk and bepatient.

A combination ofgrowth and income funds,also known as balanced funds, are those thathave a mix of goals. They seek to provideinvestors with current income while still offeringthe potential for growth. Some funds buy stocksand bonds so that the portfolio will generateincome whilst still keeping ahead of inflation.They are able to achieve multiple objectiveswhich may be exactly what you are looking for.Equities provide the growth potential, while theexposure to fixed income securities providestability to the portfolio during volatile times inthe equity markets. Growth and income fundshave a low-to-moderate stability along with a


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moderate potential for current income andgrowth. You need to be able to assume some riskto be comfortable with this type of fundobjective.

That brings us to income funds. These funds will

generally invest in a number of fixed-incomesecurities. This will provide you with regularincome. Retired investors could benefit from thistype of fund because they would receive regulardividends. The fund manager will choose to buydebentures, company fixed deposits etc. in orderto provide you with a steady income. Eventhough this is a stable option, it does not gowithout some risk. As interest-rates go up ordown, the prices of income fund shares,particularly bonds, will move in the opposite

direction. This makes income funds interest ratesensitive. Some conservative bond funds may noteven be able to maintain your investments'buying power due to inflation.

The most cautious investor should opt for themoney market mutual fund which aims atmaintaining capital preservation. The wordpreservation already indicates that gains will notbe an option even though the interest rates givenon money market mutual funds could be higherthan that of bank deposits. These funds will posevery little risk but will also not protect your initialinvestments' buying power. Inflation will eat upthe buying power over the years when yourmoney is not keeping up with inflation rates.They are, however, highly liquid so you wouldalways be able to alter your investment strategy.

Closed-End FundsA closed-end fund has a fixed number of sharesoutstanding and operates for a fixed duration (generallyranging from 3 to 15 years). The fund would be open forsubscription only during a specified period and there isan even balance of buyers and sellers, so someone wouldhave to be selling in order for you to be able to buy it.Closed-end funds are also listed on the stock exchange soit is traded just like other stocks on an exchange or overthe counter. Usually the redemption is also specifiedwhich means that they terminate on specified dates whenthe investors can redeem their units.Open-End Funds


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An open-end fund is one that is available for subscriptionall through the year and is not listed on the stockexchanges. The majority of mutual funds are open-endfunds. Investors have the flexibility to buy or sell anypart of their investment at any time at a price linked to

the fund's Net Asset Value.

Getting Started

The old adage, "Don't put all your eggs in one basket, "isn't just a clich. But with so many investmentoptions, where do you start?

Start with your financial needs

People have different investment needs depending on their financial goals, tolerance for risk and time framewhen they need the money they invested.

Our mutual funds are created with these needs in mind-we start with you. Before you choose investments,

think about your financial goals, risk tolerance and time frame. Then choose investments that match them.For more information about these topics, see the Relevant Links box to the right.The investment pyramid

At Franklin Templeton we offer a wide variety of mutual fund options to meet the equally wide variety ofinvestment needs of our investors. The investment pyramid below shows fund categories that are suitable fordifferent time frames, with the longest time frames at the top and the shortest at the base of the pyramid.


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Investment experts recommend growth investments such as stocks and stock funds for long-term goals,where you won t need to sell your investment for 5 years or more. For short-term goals, where you mightsell your investment in 1 year or less, they recommend fixed income funds and other liquid investments. Ofcourse , their specific recommendations will depend on your comfort with risk.

Benefits of mutual funds

Stocks, bonds, money market instruments-as an investor, you have a wide variety of choices, and it would bedifficult to find one type of investment vehicle that effectively takes advantage of all of to day investmentoptions. That's why you may want to consider diversifying your portfolio over a variety of investment vehiclesas mutual funds do for you.

In addition to providing you with the flexibility to create an investment plan based on your individual goals,mutual funds offer many otheradvantages such as professional management, affordability anddiversification.

Mutual Fund Advantages

As an investor, you would like to get maximum returns on yourinvestments, but you may not have the time to continuously study thestock market to keep track of them. You need a lot of time andknowledge to decide what to buy or when to sell. A lot of people take achance and speculate, some get lucky, most don t. This is where mutual
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funds come in. Mutual funds offer you the following advantages :

Professional management. Qualified professionals manage yourmoney, but they are not alone. They have a research team thatcontinuously analyses the performance and prospects of companies.They also select suitable investments to achieve the objectives of thescheme. It is a continuous process that takes time and expertise whichwill add value to your investment. Fund managers are in a better

position to manage your investments and get higher returns.Diversification. The clich, "don't put all your eggs in one basket"really applies to the concept of intelligent investing. Diversificationlowers your risk of loss by spreading your money across variousindustries and geographic regions. It is a rare occasion when all stocksdecline at the same time and in the same proportion. Sector fundsspread your investment across only one industry so they are lessdiversified and therefore generally more volatile.More choice. Mutual funds offer a variety of schemes that will suit yourneeds over a lifetime. When you enter a new stage in your life, all youneed to do is sit down with your financial advisor who will help you torearrange your portfolio to suit your altered lifestyle.

Affordability. As a small investor, you may find that it is not possible tobuy shares of larger corporations. Mutual funds generally buy and sellsecurities in large volumes which allow investors to benefit from lower

trading costs. The smallest investor can get started on mutual fundsbecause of the minimal investment requirements. You can invest with aminimum of Rs.500 in a Systematic Investment Plan on a regular basis.Tax benefits. Investments held by investors for a period of 12 monthsor more qualify for capital gains and will be taxed accordingly (10% ofthe amount by which the investment appreciated, or 20% after factoringin the benefit of cost indexation, whichever is lower). These investmentsalso get the benefit of indexation.Liquidity. With open-end funds, you can redeem all or part of yourinvestment any time you wish and receive the current value of theshares. Funds are more liquid than most investments in shares, depositsand bonds. Moreover, the process is standardised, making it quick andefficient so that you can get your cash in hand as soon as possible.Rupee-cost averaging. With rupee-cost averaging, you invest aspecific rupee amount at regular intervals regardless of the investment'sunit price. As a result, your money buys more units when the price is lowand fewer units when the price is high, which can mean a lower average

cost per unit over time. Rupee-cost averaging allows you to disciplineyourself by investing every month or quarter rather than makingsporadic investments.The Transparency. The performance of a mutual fund is reviewed byvarious publications and rating agencies, making it easy for investors tocompare fund to another. As a unitholder, you are provided with regularupdates, for example daily NAVs, as well as information on the fund'sholdings and the fund manager's strategy.Regulations. All mutual funds are required to register with SEBI(Securities Exchange Board of India). They are obliged to follow strictregulations designed to protect investors. All operations are alsoregularly monitored by the SEBI.


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Why should I invest in mutual funds?These days between work, family, and friends, most of us do not have the time to makeor monitor personal investment decisions on a regular basis. Mutual funds have qualifiedprofessionals who do all this for you. This is the reason why, the world over, they havebecome the most popular means of investing.

Mutual funds minimise risk by creating a diversified portfolio while providing thenecessary liquidity. Additionally, you benefit from the convenience of not having tobother with too much paperwork or repeat transactions. It is our belief that investorsdiffer in their investment needs based on their personal financial goals.It is recommended that you should, at the very beginning, identify your own financialgoals, be it planning for a comfortable retired life or children's education. After definingthe financial goals, you need to plan for them in an organised manner and look atinvestments that help achieve these goals.Mutual funds vary in their investment objectives, thus providing you with the flexibilityto create an investment plan based on individual financial goals. Investment expertsrecommend growth investments such as equity funds and stocks as a good choice for

funding needs that are five years or more away, income funds to meet medium-termneeds and liquid funds for short-term requirements.

Why should I invest in Franklin Templeton Mutual Funds?

Franklin Templeton is one of the largest financial services groups in the world, based inSan Mateo, California, USA. Franklin Templeton has over 50 years of experience ininvestment management and with offices in over 28 countries, it provides investmentmanagement and advisory services to a client base of over 10 million shareholderaccounts.It is our belief that investors differ in their investment needs based on their personalfinancial goals. It is recommended that you should, at the very beginning, identify yourown financial goals, be it planning for a comfortable retired life or children's education.After defining the financial goals, you need to plan for them in an organised manner andlook at investments that help achieve these goals. Franklin Templeton has a wide range ofmutual funds that can help you towards fulfilling your investment objectives.

Is there a guaranteed return on the mutual funds?No, we do not give any guarantees on the returns on any of our funds. SeeAssured returnschemes for additional information.

Are mutual funds insured?

No. Mutual fund units are not insured by the government, or any government agency, anddo not have any other type of insurance, unlike certain types of checking or savings

accounts and certificates of deposit. There is no guarantee that when you sell your shares,you will receive what you paid for them. However, because mutual fund investments aremore risky than insured investments, they generally offer potential for higher long-termreturns.

What should I look for in an investment? Are the investments I have now the right

ones for me?
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Investors differ in their investment needs based on their personal financial goals. It isrecommended that you should, at the very beginning, identify your own financial goals,be it planning for a comfortable retired life or children's education. After defining thefinancial goals, you need to plan for them in an organised manner and look at investmentsthat help achieve these goals.

To build a successful investment strategy, you should carefully structure your investmentplan so that you can achieve your goals without taking more risk than you can afford orare comfortable with. You also need to consider how much time you have to reach yourdifferent goals and your personal circumstances.Investment experts recommend that growth investments, such as equity funds and stocks,are a good choice for funding needs that are 5 years or more away, income funds to meetmedium-term needs, and liquid funds for short-term requirements. SeeGetting started foradditional information.

How do I enrol in the Systematic Investment Plan?You can participate in the Systematic Investment Plan (SIP) of Franklin TempletonFunds by investing a minimum of Rs.500/- or more either on a monthly or quarterly basisby providing us with post-dated cheques (dated the 1st or the 7th of each month) for atleast one year. The cheques may be made payable anywhere in India. You may also givecheques in 2 lots of 6 cheques each. We would present the cheques at the datesmentioned and add units to you account (subject to the realisation of cheques) at theprices prevailing either on the 1st or the 7th as may be applicable. You would receive astatement of account for each such transaction.Existing investors of Franklin Templeton Funds keen to start with SIP should just fill inthe appropriate box on their Account Statement and mail it along with the post-datedcheques to their Investor Service Centre. You will receive a letter confirming that yourname has been included in the SIP.

How do I enrol in the Systematic Withdrawal Plan?Franklin Templeton offers you a facility to plan for your retirement and other regularmonthly income needs through the Systematic Withdrawal Plan (SWP). Depending onyour needs for monthly or quarterly income, you can then choose to withdraw wither afixed sum per month or quarter, or the capital appreciation in the Net Asset Value of yourinvestment.

When is the right time to invest in equities?No matter how hard we try, it is rarely possible to predict the short-term movements inthe equity market and therefore it is difficult to determine the right time to invest.However, "Rupee-Cost Averaging" could help you even out your investment costs and

hence use the short-term market fluctuations to your advantage.

What is the procedure for NRIs who wish to invest?

Click here for information concerning NRIs.

What is the procedure for redeeming fund units?
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All Franklin Templeton funds are open-ended, which means that you can get your moneyback anytime you wish. All you need to do is fill in the detachable redemption request onthe account statement and deposit it with any of our Investor Service Centers.The redemption price per unit is the net asset value per unit on the relevant day, withoutany discount.

We provide you with quick service. Your redemption cheques will normally be mailedwithin 48 hours of receiving your request at any of our Investor Service Centres.

What are tax implications to resident unitholders?

(As per laws currently in force)A) Tax Implications To UnitholdersThe following summary outlines the key tax implications applicable to unit holders basedon the relevant provisions under the Income-tax Act, 1961 ('Act'), the Wealth-tax Act,1957 and the Finance Act, 2006 (collectively called 'the relevant provisions').The following information is provided for general information only. However, in view

of the individual nature of the implications, each investor is advised to consult with his

or her own tax Advisors/Authorised dealers with respect to the specific tax and other

implications arising out of his or her participation in the schemes.Under The Income-Tax Act, 1961The following summary outlines the key tax implications applicable to unit holders basedon the relevant provisions under the Act, taking into account the amendments made bythe Finance Act, 2006.The tax implications of the following income received by the investors are discussedbelow:

Income on units (other than sale/redemption); Income on sale/redemption of the units

Taxability of income on units (other than sale). The income received by an investor(other than income on sale/redemption) in respect of units of a mutual fund specifiedunder Section 10(23D) of the Act, is exempt under the Act.As the income is exempt from tax, no tax is withheld by the Mutual Fund upondistribution of such income.Taxability of income on sale/redemption of units. The taxability of the income onsale/redemption of units and the rates at which such income is taxed is discussed below:If the units are held as stock-in-trade. If the units are held by an investor as stock-in-trade of a business, the said income will be taxed at the rates at which the normal incomeof that investor is taxed. The rates applicable to different investors are discussed at lengthin Note 1.On sale of the units of an equity oriented fund (as defined below) on a recognised stockexchange or to the Mutual Fund, the investor will also be charged with securities

transaction tax ('STT') as per the rates specified in para 15.5, provided the transaction isalso considered as a taxable securities transaction. In other cases, STT is not levied.Further, the investor is not allowed any deduction of STT paid for the purposes ofcomputing his business income. However, a rebate under section 88E of the Act isavailable in respect of STT paid. The rebate is available in form of a deduction of theSTT paid from the tax payable on the income from the taxable securities transaction. Thetax payable on the income from taxable securities transaction is computed by applyingthe average rate of income-tax on the total income. The rebate in respect of STT paid
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cannot, however, exceed the tax payable. Also, this rebate can be claimed by an investoronly if appropriate evidences are furnished in Form No. 10DB along with the Return ofIncome.If the units are held as investments:If the units are held as investments, the tax rates applicable will depend on whether the

gain on sale of units is classified as a short term capital gain or a long term capital gain.As per section 2(42A) of the Act, units of the scheme held as a capital asset, for a periodof more than 12 months immediately preceding the date of transfer, will be treated aslong-term capital assets for the computation of capital gains; in all other cases, theywould be treated as short-term capital assets.The tax rates applicable on short term or long term capital gains arising on transfer ofunits of a scheme, being an equity oriented fundare stated in the following table:

Nature of income Tax rate$

Short-term capital gainson sale either to the

Mutual Fund or on arecognised stockexchange

Capital gains tax payableat 10 percent* [applicable

to all investors includingForeign InstitutionalInvestors (FII)]

Long- term capital gainson sale either to theMutual Fund or on arecognised stockexchange

No capital gains taxpayable by any investor.

* plus surcharge and education cess as may be applicable (refer Note 2). In case of non-

resident investors, the above rates would be subject to applicable treaty relief. $Additionally, STT would be payable at the rates specified in para Securities TransactionTax."Equity oriented fund" is defined to mean a fund -

Where the investible funds are invested by way of equity shares in domesticcompanies to the extent of more than sixty five percent of the total proceeds ofsuch fund; and

Which has been set up under a scheme of a Mutual Fund specified in section 10(23D) of the Act.

The tax rates applicable on short term or long term capital gain arising on transfer of unitsof ascheme, not being an equity oriented fundas discussed above are stated in the

following table:Nature of income Tax rate

Short-term capital gains In case of FIIs, 30percent* For others, taxedat normal tax rates (asexplained in Note 1).


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Long-term capital gains In case of FII's, 10percent* (withoutindexation) In case ofothers, 20 percent* (withindexation) or, 10 percent*

(without indexation),whichever less.

* plus surcharge and education cess as may be applicable (refer Note 2). In case of non-resident investors, the above rates would be subject to applicable treaty relief.# no indexation benefit for non-resident investors if investment made is in foreigncurrency.The withholding tax implication (i.e. TDS) in respect of the capital gains explained aboveis discussed below

Resident Investors: No tax is required to be deducted at source from capital

gains arising to resident investors at the time of repurchase or redemption of theunits.

Non-Resident Investors: As per the provisions of Act [Section 195], tax isrequired to be deducted at source from the sale proceeds or redemption proceedspaid to non-resident investors. This withholding is in addition to the STT payable,if any, by the investor. The rates are:

1. Foreign Institutional Investors: No tax has to be deducted on redemption/saleproceeds [Section 196D(2)].2. Non-Resident Indian ('NRI') / Person of Indian origin ('PIO'): Tax on shortterm capital gains arising out of redemption of units is deducted at the rate of 10%

(plus surcharge) for an equity oriented fund and at 30% (plus surcharge) for a nonequity oriented fund. Tax, on long term capital gains is deducted at the rate of20% (plus surcharge). However, in case of long term capital gains on redemptionof units of an equity oriented fund, no tax would be deducted. For administrativepurpose the Fund will deduct 10% surcharge.3. Non-Resident Corporates: Tax is deducted at the rate of 40 percent on shortterm capital gains and 20 percent on long-term capital gains. The said rates atwhich capital gains are charged to tax would be further increased by theapplicable surcharge and education cess stated in Note 2 below. No tax would,however, be deducted in case of long term capital gains on redemption of units ofan equity oriented fund.

All the above non-resident investors may also claim the tax treaty benefits available, ifany. For details of applicability and eligibility of such benefits, the investors arerequested to consult their tax advisors.Provisions regarding Dividend income and Bonus. According to the provisions ofSection 94(7) of the Act, losses arising from the sale/redemption of units purchasedwithin 3 months prior to the record date (for entitlement of dividends) and sold within 9months after such date, is disallowed to the extent of income on such units (other than onsale/redemption) claimed as tax exempt.


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According to the provisions of Section 94(8) of the Act, if an investor purchases unitswithin 3 months before the record date (for entitlement of bonus) and sells/redeems theunits within 9 months after that date, and by virtue of holding the original units, hebecomes entitled to bonus units, then the loss arising on transfer of original units shall beignored for the purpose of computing his income chargeable to tax. In fact, the loss so

ignored will be treated as cost of acquisition of such bonus units.Note 1. The individuals (including NRIs/PIOs) and HUFs, are proposed to be taxed inrespect of their total income at the following rates:

Slab Tax rate *

Total income uptoRs.1,00,000#

Nil

More than Rs.100,000#but upto Rs.150,000

10 percent of excess overRs.100,000

More than Rs.150,000but upto Rs.250,000

20 percent of excess overRs. 150,000 + Rs.5,000$

Exceeding Rs.250,00030 percent of excess overRs 250,000 +Rs.25,000$.

* plus surcharge and education cess as may be applicable (refer Note 2). # for femalesbelow sixty-five years of age, Rs. 100,000 has to be read as Rs. 135,000 and for seniorcitizens above sixty-five years of age, Rs. 100,000 has to be read as Rs. 185,000.$for females below sixty-five years of age, Rs. 5,000 has to be read as Rs. 1,500 and Rs25,000 has to be read as Rs 21,500. Similarly for senior citizens above sixty-five years ofage, Rs. 5,000 has to be read as nil and Rs 25,000 has to be read as Rs. 13,000.

The corporate tax rate for domestic companies is 30 per cent [plus applicable surcharge(as per note 2) and education cess]. However, the tax rate applicable to foreign companiesis 40 per cent [plus applicable surcharge and education cess (as per note 2)].Note 2

Assessee

Rate of Surcharge

Applicable

Individuals (includingNRIS/ PIOs), HUFs,Non-Corporate FIIswhere the taxable

income is up to Rs.1,000,000 per annum

A surcharge by way ofeducation cess of 2percent is payable on thetotal amount of tax

Individuals (includingNRIs/ PIOs), HUFs andNon-corporate FIIswhere the taxableincome is in excess ofRs. 1,000,000 per

10 percent basicsurcharge. An additionalsurcharge by way ofeducation cess of 2percent is payable on thetotal amount of tax plus


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annum surcharge.

Domestic Companies 10 percent basicsurcharge. An additionalsurcharge by way ofeducation cess of 2percent is payable on thetotal amount of tax plussurcharge.

Foreign Companies(including corporateFII)

2.5 percent basicsurcharge. An additionalsurcharge by way ofeducation cess of 2percent is payable on the

total amount of tax plussurcharge.

Under The Wealth-Tax Act, 1957Units are not to be treated as assets as defined under Section 2(ea) of the Wealth-Tax Act,1957 and hence will not be liable to wealth-tax.B) Tax Implications On Mutual FundIncome Earned Or Received By The Mutual Fund. Franklin Templeton Mutual Fundis registered with SEBI and as such, the entire income of the Fund is exempt from incometax under Section 10(23D) of the Act. In view of the provisions of Section 196(iv) of theAct, no income tax is deductible at source on the income earned by the mutual fund.

Income Distributed By The Mutual Fund. As per provisions of the Act (Section 115R),Franklin Templeton Mutual Fund will be required to pay dividend distribution tax('DDT') as follows:

No DDT to be paid on equity oriented funds DDT to be paid on other funds at the following rates:

1. at 14.025 percent (including a surcharge of 10 percent and an additionalsurcharge by way of education cess of 2 percent on the amount of tax plussurcharge) on dividend distributed to individuals and HUFs; and2. at 22.44 percent (including a surcharge of 10 percent and an additionalsurcharge by way of education cess of 2 percent on the amount of tax plus

surcharge) on dividend distributed to persons other than individuals and HUFs,for instance, corporates.

Securities Transaction Tax. Franklin Templeton Mutual Fund, is liable to pay asecurities transaction tax as follows:


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Sr.No

Taxable securities

transaction

Rate

(per cent)

1 Purchase of an equity sharein a company or a unit of an

equity oriented fund, where(a) the transaction of suchpurchase is entered into in arecognised stock exchange;and(b) the contract for thepurchase of such share orunit is settled by the actualdelivery or transfer of suchshare or unit

0.125

2 Sale of an equity share in a

company or a unit of anequity oriented fund, where(a) the transaction of suchsale is entered into in arecognized stock exchange;and(b) the contract for the saleof such share or unit issettled by the actual deliveryor transfer of such share orunit

0.125

3 Sale of a derivative, wherethe transaction of such sale isentered into in a recognizedstock exchange

0.017

4 Sale of unit of an equityoriented fund to the MutualFund

0.25

The value of a taxable securities transaction will be as follows:

in the case of a taxable securities transaction relating to "option in securities", theaggregate of the strike price and the option premium of such "option in securities"

in the case of taxable securities transaction relating to "futures", the price at whichsuch "futures" are traded; and

in the case of any other taxable securities transaction, the price at which suchsecurities are purchased or sold

"Taxable securities transaction" means a transaction of -


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purchase or sale of an equity share in a company or a derivative or a unit of anequity oriented fund, entered into in a recognised stock exchange; or

sale or an equity oriented fund to the Mutual Fund

What is net asset value?

Net asset value (NAV) represents the market value of all assets per unit, held by the fund.For an investor, it simply signifies the current value of his or her investment in the fund.The NAVs of all the Templeton Funds are determined at the end of every business day.The NAV is computed by dividing the fund's net assets by the number of unitsoutstanding on the validation date and is illustrated below:Market value of the fund's investment + Other current assets + Deposits - All

Current Liabilities except Unit Capital, Reserves and Profit & Loss Account

No. of Units outstandingSince the value of the various securities keep changing, the NAV also changes on a dailybasis. NAVs are updated daily on our website and are available from any of the Investor

Service Centres or you can Subscribe to receive daily NAVs through e-mail.In-person purchase or redemption requests received up to 3 p.m on any business day willbe priced on the basis of the same day's closing NAV. Requests received after 3 p.m willbe treated as having been received on the next business day, and will therefore be pricedbased on the next business day's NAV.Purchase or redemption requests received by mail will be priced based on the closingNAV of the day on which the request was received.

What do I get as proof of my holdings?

You get an "account statement" which is similar to a bank passbook. The accountstatement is a non-transferable document which shows details of all purchases and sales,along with the price at which the purchase or sale was made. It will also show the,amount invested and redeemed to date and the number of units held, helping you trackyour investments.A fresh account statement will be sent to you reflecting the updated holdings of theunitholder after every transaction. Under normal circumstances, the account statementwill be sent to you within 3 working days after the date of receipt of the purchase orredemption request at any of the Investor Service Centres. If an applicant so desires, theAsset Management Company can issue a non-transferable unit certificate to the applicantwithin 6 weeks of the receipt of request for the Certificate.

Can I follow my investments in the daily paper?

Yes. Most mutual funds and publicly traded stocks are listed in the business section of

your local newspaper or in financial publications such as theEconomic Times. Mutualfunds are listed in a separate section and are categorised by the stock exchange on whichthey trade (e.g. the BSE Sensex).

Will I have a switching facility between funds?

Unitholders will have an option to switch all or part of their investment in one fund toanother which is available for investment at that time. The Asset Management Companywould currently not charge any fees for such switching.
https://www.franklintempletonindia.com/GeneralAccess/SubscriptionMailback/Gac_GeneralUserSubs.asphttp://www.franklintempletonindia.com/india/jsp_cm/funds/mutual_fund_faq.asp#top%23tophttp://www.franklintempletonindia.com/india/jsp_cm/funds/mutual_fund_faq.asp#top%23tophttp://www.franklintempletonindia.com/india/jsp_cm/funds/mutual_fund_faq.asp#top%23tophttp://www.franklintempletonindia.com/india/jsp_cm/funds/mutual_fund_faq.asp#top%23tophttps://www.franklintempletonindia.com/GeneralAccess/SubscriptionMailback/Gac_GeneralUserSubs.asp


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To process a switch, a unitholder must provide clear instructions. Such instructions maybe provided by completing a form and lodging it on any business day with any of theInvestor Service Centres or the office of the Registrar and Transfer Agent. The form mayalso be sent by post.An account statement reflecting the new holdings will be sent to the unitholder within 3

days of completion of the transaction.

Tax implications for the mutual fund

Tax benefit to the Fund. Templeton Mutual Fund is registered with SEBI and as such,the entire income of the Fund is exempt from income-tax under Section 10(23D) of theAct and is entitled to receive income without any deduction of tax at source.
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