Equity Overview

1
Click anywhere to start the presentation
2
Franklin India
High Growth Companies Fund
An equity fund with a high growth focus
3
Agenda

• The India Story
• Why focus on Growth ?
• Franklin India High Growth Companies Fund
• Why Franklin Templeton ?

4
India Economy Past
Share of World GDP ()
India
China
Europe
US
India and China starting to pick up
Source Source Angus Maddison, The World
Economy Historical Statistics, OECD 2003.
5
India Economy Present
GDP Real GDP growth
One of the fastest growing economies
Source CSO, RBI, Ministry of Finance, Citigroup
estimates (March end)
6
India Economy Economic Power of the future

• India to be among the biggest economies

Source Economist
7
India Economy Relatively insulated to global
upheavals
Share of Exports as a of GDP
Source Citigroup
Low export to GDP ratio compared to other Asian
markets, but high forex reserves
Source CRIS INFAC
8
Macro drivers Increasing affluence leads to
higher consumption
Source Mckinsey Global Institute
9
Macro Drivers Potential Services Capital of
the world

• Services are tradable India has cost and skill
  set advantages
• India has the 2nd largest pool of scientists and
  engineers in the world
• Gap in price of labor between India and the rest
  of the world plus a young population are the main
  drivers

Source Citigroup
10
Macro Drivers Infrastructure spending on the rise
 

• Driven by -
• Government Infrastructure spending especially in
  the rural areas
• Port/airport modernization/expansion
• Cross-country road corridors
• Upstream/midstream investments
• Significant capacity additions driven by rising
  demand and utilization
• Rising telecom demand driven by lower handset
  prices and newer technologies

Rs in bn FY03-07 FY 08-12
Roads 1,020 2,150 110.8
Ports 125 560 348.0
Railways 606 2,340 286.1
Power 1,800 3,720 106.7
Total 3,551 8,770 147.0
Source CLSA - expected investments in
10th/11th plans
GDP growth could be 2-3 higher with proper
infrastructure backbone
Source CRIS INFAC
11
Macro Drivers Corporate India is a value creator
Source CLSA
12
LiquidityIndia dedicated funds

• Sharp rise in assets and number of India funds -
  34 billion

Fund Domicile Launch Assets (US Mln)
HSBC GIF-Indian Equity-Ad Luxembourg 23-Jan-96 6115
JPMorgan F-India Fund-A Luxembourg 31-Aug-95 3970
Fidelity Fund-India Focus-AGBP Luxembourg 23-Aug-04 3370
India Fund Inc USA 23-Feb-94 1913
PCA India Equity Open Japan 30-Sep-04 1293
Aberdeen Gl-India Opportu-A2 Honk Kong 28-Mar-06 1269
HSBC India Open Japan 30-Nov-04 1268
Eaton Vance Greater India-B USA 02-May-94 1082
Nomura Indian Stock Fund Japan 22-Jun-05 1055
Blackrock India Stock Fund Japan 13-Dec-05 1022
 
Source Bloomberg, Apr 07
13
LiquidityDomestic savings

• Vast pool of untapped household savings can
  provide support to equity markets
• Financial savings accounting for 16.8 of GDP
  148.03 bln
• Available savings pool if household accumulations
  
• are assumed at 6-7 years savings
  888 - 1036 bln
• Equity inflows at different levels of
  allocation

Allocation USD Bln Rs. Crores
2 17.76 20.72 82,567 95,849
5 44.41 51.81 205,392 239,624
10 88.82 103.60 410,783 - 479,247
Source RBI data-FY06, 1 USD Rs.45.25
14
Why High Growth ?
15
Economy and investment styles
Different styles are pertinent for the various
stages of the economic/business cycle
1 year 10 years
Developed Economy
MSCI USA Growth 9.84 5.31
MSCI USA Value 16.23 6.51
Emerging Economy
MSCI India Growth 29.04 16.03
MSCI India Value 27.20 9.82
Source MSCI (Compounded Annualised returns as
on April 30, 2007 and in US terms)
16
What is Growth Style?MSCI measures

• Growth investment style characteristics
• Long-term forward earnings per share 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
• Companies with above average revenue
  growth/potential and ROE
• Value investment style characteristics
• Book value to price ratio
• 12-month forward earnings to price ratio
• Dividend yield
• Out-of-favour stocks/sectors with good
  fundamentals, turn-around opportunities and
  undervalued

17
Growth Drivers

• India is undergoing a paradigm shift due to
  changing lifestyles and dynamics
• Industry-specific investment themes are used to
  identify sectors/companies with above-average
  market growth

18
High Growth Companies

• Companies expanding sales as well as earnings at
  a much higher rate than that of the general
  economy.
• Because these companies tend to grow earnings at
  a fast pace, they will typically have higher
  valuations (P/E)
• Enjoy competitive advantages
• Proprietary intellectual property
• Strong management
• Distribution/cost advantages
• Entry barriers specific to the respective sector

19
High Growth strategy

• How the strategy would have worked with a focus
  on high growth companies

May 02 Apr 07 Q1 Q II Q III Q IV Q V
Earnings Revision Ratio 51.9 51.0 39.4 35.1 23.5
Long Term PEG Ratio 54.2 45.0 50.1 29.0 26.3
Source Citigroup investment research (compounded
and annualised as on April 30, 2007). Quintile-I
being the top 20 and Quintile-V the bottom 20
of the group. The table denotes Annualised
Compounded returns over the specified period on a
portfolio of companies constructed based on the
following two parameters. Earnings Revision Ratio
(ERR) the number of upward revisions (of
estimates of company's earnings by analysts) over
the past month minus the number of downward
revisions over the past month divided by the
total number of estimates. Long Term Price /
Earnings to Growth (PEG) Ratio Trailing P/E
ratio divided by Annualised Mean Earnings Growth
Rate over the company's Next Business Cycle,
usually 3 to 5 yrs. Annualised Mean Earnings
Growth Rate is the Mean value of Growth forecasts
of all contributing analysts. The companies
considered are forming part of the SP Emerging
markets global indices.
20
High Growth Companies

• Some well known examples from the last decade - .

1 year 3 years 5 years 7 years 10 years
Infosys 29.0 47.1 34.7 10.6 56.9
Bharti Airtel 99.1 68.5 87.4 - -
ABB 31.3 73.5 72.6 58.3 20.3
HDFC 26.5 40.8 38.5 32.1 26.4
Kotak Mahindra Bank 74.7 90.3 72.0 68.0 49.9
BSE Sensex 17.1 34.8 32.9 16.9 13.7
CNX Midcap 4.5 31.3 N.A N.A N.A
SP CNX 500 12.1 30.9 34.3 17.8 17.0
For illustrative purposes only. Source DB
Research. Compounded and annualised returns as on
April 30, 2007. Please note that this should not
be construed as an investment advice.
21
High Growth Companies Infosys
Rs. in Crs
1996 2006 CAGR
Sales 89 9028 58.8
PBIDT 34 3146 57.2
PAT 21 2421 60.8
Market Cap 359 81830 72.1
RONW () 29.53 39.89

• Industry IT Services
• Opportunity To deliver software services
• in a cost effective manner remotely.
• US Europe became target markets
• Macro drivers Global offshoring trend and
  friendly regulatory environment
• Competitive Advantages Strong team, flexibility
  to reinvent itself along with market
  opportunities, Ability to build long-term drivers
  of cost efficiency, brand name, High quality of
  services, Corporate Governance
• Management Quality/Execution Built capable
  stable management attracted new and skilled
  talent with strong retention policies, delivered
  de-risked growth without dilution in
  profitability, followed shareholder friendly
  practices

22
High Growth Companies Bharti Airtel

• Industry Telecom Services
• Opportunity New market for mobile telephony
  with evolving regulatory environment
• Macro drivers Changing lifestyles and
  aspirations helped in rapid growth for the sector
  
• Competitive Advantages Spearheaded a unique
  business model which competitors took time to
  catch up with, Presence in wider geographic
  segment providing scale benefits, Innovative
  service packages, Brand equity
• Management Quality/Execution Entrepreneurial
  and highly innovative, exhibited ability to
  generate consistently high growth rates,
  trend-setting financial management and leadership

23
High Growth Companies ABB
Rs. in Crs

• Industry Engineering capital goods
• Opportunity Huge demand for Power
• Urban infrastructure
• Macro drivers Infrastructure spending
• and capex
• Competitive Advantages World class product and
  services, Higher-end technology, Dependable
  execution, Strong support of the parent
• Management Quality/Execution High quality
  management with strong track record, sound
  financial management, consistent ability to
  introduce new products and deliver growth.

1999 2006 CAGR
Sales 776 4274 27.6
PBIDT 75 560 33.2
PAT 37 340 37.2
Market Cap 1036 15729 47.5
RONW () 9.16 32.88
24
High Growth Companies HDFC
Rs. in Crs
1996 2006 CAGR
Sales 970 4208 15.8
PBIDT 931 4074 15.9
PAT 196 1257 20.4
Market Cap 3859 33342 24.1
RONW () 16.52 30.11

• Industry Home Loan Mortgages
• Opportunity Rising middle-income households
• and their need for affordable housing
• Macro drivers Strong economic growth
• and rising income levels
• Competitive Advantages Strong brand name,
  competitive pricing, customer-friendly practices,
  Reliability and stability, Efficient management
  of balance sheet, Low cost structure Focus
• Management Quality/Execution Stable management
  team with strong corporate philosophy, Shows
  consistent ability to understand the environment
  well, willingness to forego unprofitable growth,
  Minimal dilution to fund growth.

25
High Growth Companies Kotak Bank
Rs. in Crs
2002 2006 CAGR
Sales 122 694 54.4
PBIDT 134 542 41.8
PAT 55 118 21.4
Market Cap 845 8598 78.6
RONW () 10.90 14.75

• Industry Financial Services
• Opportunity Growing affluent middle class
• with high savings and need for comprehensive
• financial services
• Macro drivers Changing financial landscape
• Competitive Advantages Complete range of
  services under one brand, Customer-focused
  approach, competitive pricing, Unique business
  model, Brand Equity
• Management Quality/Execution Strong and
  aggressive team, Highly entrepreneurial, Stable
  and confident top management, Have shown ability
  to build a large retail franchise without
  dilution of quality

26
Franklin India High Growth Companies Fund
Benefit from the fastest growing companies in
India
27
Franklin India High Growth
Companies Fund

• An open end diversified equity fund that seeks to
  achieve capital appreciation through investments
  in Indian companies/sectors with high growth
  rates or potential

• Investment style is growth Blend of top-down
  and bottom-up approach of investing

• Asset Allocation

Type of instruments Normal Allocation
Equity Equity Linked Instruments 70 - 100
Debt securities and Money Market Instruments 0 - 30
including investments in foreign securities as
may be permitted by SEBI/RBI up to 35 of the net
assets of the scheme, exposure in derivatives up
to a maximum of 50. including securitised debt
upto 30
28
Investment Style

• Primary focus will be to identify high growth
  companies, especially in sectors witnessing
  above-average growth.
• Blend of top-down (macro analysis to identify
  sectors) and bottom-up approach (micro analysis
  to pick stocks within these sectors)
• The top-down considerations will include an
  analysis of
• Domestic and global economic drivers
• Macro factors such as interest rates, inflation,
  regulatory environment, political environment and
  global market dynamics
• Identification of sectors based on the above and
  relative valuations liquidity

29
Investment Process

• Identify key trends based on various economic
  drivers
• Analyze and ascertain the nature, certainty and
  predictability of such growth trends
• List companies that provide exposure to these
  growth themes
• Research further for
• Management quality, business strengths,
  competitive
• advantages, financial strength
• Value these businesses through appropriate
  measures

30
High Growth High returns

• The impact of an extra 5 on an initial
  investment of Rs.1 lakh

returns 1 year 3 years 5 years 7 years 10 years
10 1.10 1.33 1.61 1.95 2.59
15 1.15 1.52 2.01 2.66 4.05
20 1.20 1.73 2.49 3.58 6.19
25 1.25 1.95 3.05 4.77 9.31
(Please note that this is for illustrative
purpose only and the actual returns would depend
on the market conditions and the performance of
the fund)
31
Longer the horizon, higher the potential

• Volatility is part parcel of stock market
  investing. Staying invested for a longer period
  reduces the risks

Simulation for Bluechip Fund
Maximum returns Minimum returns Average of rolling returns Possibility of making money Possibility of losing money
1 Year 199.4 -36.4 34.9 75.6 24.4
3 Year 81.0 -9.6 29.7 86.3 13.7
5 Year 50.9 14.0 28.2 100.0 0.0
7 Year 41.1 9.5 27.2 100.0 0.0
9 Year 40.9 16.0 28.4 100.0 0.0
Past performance may or may not be sustained in
future. Annualised compounded returns based on
growth plan NAV Period - Inception date
(1.12.1993) to 30.4.2007 Sales load has not been
taken into consideration. Dividends are assumed
to be reinvested and bonus is adjusted. BSE
Sensex rolling returns for the same period
Maximum returns, Minimum returns, Average
returns, Possibility of making money, Possibility
of losing money 1 Year, 101.7, -41.3, 13.8,
57.8, 42.2 3 Year, 62.2, -18.5, 9.9, 64.1,
34.9 5 Year, 36.4, -7.8, 7.1, 71.1, 28.9
7 Year, 20.4, -7.6, 5.8, 71.5, 28.5 9 Year,
17.9, -2.9, 7.2, 82.1, 17.9. Sales load has
not been taken into consideration. Dividend/Bonus
are adjusted. As the investment time horizon
increases, the numbers change in favour of
investors... the possibility of losing money
reduces and so do the minimum returns.
32
Equity investing is attractive

• No long term capital gains tax for investments
  over a 1-year period

• Short term capital gains are only 10

• Dividends are totally tax-free in the hands of
  the investors and no dividend distribution tax is
  required to be paid by the Fund

However investors are liable to pay securities
transaction tax (STT). As per current tax laws

33
Why Franklin Templeton ?
34
Franklin Templeton Worldwide

• More than 50 years of experience in global
  investing

• Extensive international presence and breadth of
  product line with offices in 29 countries,
  supported by over 450 investment professionals

• Over US 601.1 billion assets under management
  over 17.1 million billable investor accounts
  world-wide

• Offers more than 200 investment solutions under
  the Franklin, Templeton, Mutual Series, Bissett,
  Fiduciary Trust and Darby names globally

As on April 30, 2007
35
Franklin Templeton in India

• Established office in 1996 and currently one of
  the leading fund houses in India. Manages
  Rs.24,510 crores for over 21 lakh shareholder
  accounts

• One of the largest equity assets in India

Assets Under Management Asset Mix (in Rs. Crs)
24510
23060
18492
17435
13403
8193
Source AMFI Website (as on April 30, 2007)
36
Rich Experience Product innovation

• Manages 4 equity funds with a track record of
  over 10 years
• Manages 3 of the 15 largest equity funds in the
  country
• First to launch an open end private sector fund
  Prima Fund
• First to launch a value fund - Templeton India
  Growth Fund
• Indias first Infotech/Pharma Fund
• Indias first fund of funds FT India Dynamic PE
  Ratio Fund of Funds
• Category starters Franklin India Flexi Cap
  Fund, Franklin India Smaller Companies Fund
• First Capital Protection Fund
• Templeton India Equity Income Fund

Source AMFI Website (April 30, 2007)
37
Equity team - Key strengths

• People Continuity and depth of experience of the
  team.

• Contacts and Presence Constant company visits
  and frequent meetings with industry people help
  in forming independent views.

• Local and Global Team focused on local needs, at
  the same time, tuned in to global trends.

• Discipline Consistent adherence to investment
  objectives and philosophy.

• Global standards Disclosure and compliance with
  independent dealing desk. Constant interaction
  with risk management team to gauge risk-adjusted
  performance.

• Long Term The longevity of the team has led to
  combined experience of market cycles which has
  inculcated a long term perspective and the
  ability to take out emotions out of investing

38
Investment process
Portfolio and Risk Management
Portfolio Construction
Stock Recommendations
Idea Generation
39
Fund Facts

• New Fund Offer May 31, 2007 to June 29, 2007

• Minimum Investment Amount Rs.5000/1

• New Fund Offer Price Rs.10 plus applicable load

• Load Structure - Entry ltRs.5 Crs 2.25, gtRs.5
  Crs Nil Exit Load ltRs.5 Crs 0.5 (for
  redemption within 6 months of allotment), gtRs.5
  Crs 1 (for redemption within 1 year of
  allotment)

• Options Growth Dividend Plan (Payout
  Reinvestment options)

• Fund Managers Sivasubramanian K.N Anand
  Radhakrishnan

• Systematic Investment Plan Rs.1000 or more for
  atleast 12 months all installments should be
  for the same amount (Only through ECS/Direct
  debit)

40
Summing up

• Participate in Indias robust economic growth

• Access the potential of Indias fastest growing
  companies in terms of revenue and earnings

• Benefit from FTs rich investment experience in
  the Indian equity markets for over a decade

• You can do all of this with a single investment
  in Franklin India High Growth Companies Fund

41
Thank You
42
The information contained in this commentary is
not a complete presentation of every material
fact regarding any industry, security or the fund
and is neither an offer for units nor an
invitation to invest. This communication is meant
for use by the recipient and not for
circulation/reproduction without prior approval.
The views expressed by the portfolio managers are
based on current market conditions and
information available to them and do not
constitute investment advice. Scheme
classification and investment objective Franklin
India Bluechip Fund (FIBCF) is an open end growth
scheme with an objective to primarily provide
medium to long term capital appreciation. Entry
Load 2.25, Exit Load Nil. FIHGCF is an
open-end diversified equity fund that seeks to
achieve capital appreciation through investments
in Indian companies/sectors with high growth
rates or potential. Asset allocation Equity and
Equity Linked Instruments 70 - 100, Debt
securities and Money Market Instruments 0 -
30. including investments in Foreign Securities
as may be permitted by SEBI/RBI up to 35 of the
net assets of the scheme, exposure in derivatives
up to a maximum of 50 including securitised
debt up to 30. Terms of the offer The Units are
being offered at Rs.10 per unit plus applicable
load during the NFO and NAV based prices upon
reopening. Risk Factor All investments in mutual
funds and securities are subject to market risks
and the NAV of the scheme may go up or down
depending upon the factors and forces affecting
the securities market. There can be no assurance
that the schemes investment objectives will be
achieved. The past performance of the mutual fund
managed by the Franklin Templeton Group and its
affiliates is not necessarily indicative of
future performance of the schemes. The above is
only the name of the scheme and does not in any
manner indicate the quality of the scheme, its
future prospects or returns. The Mutual Fund is
not guaranteeing or assuring any dividend under
the scheme and the payment of the dividend is
subject to availability of distributable surplus.
The investments made by the schemes are subject
to external risks. Please read the offer document
carefully before investing. Offer Documents /
Application Form are available free of cost at
any of the Investor Service Centres or
distributors or from the website
www.franklintempletonindia.com. Statutory
Details Franklin Templeton Mutual Fund in India
has been set up as a trust by Templeton
International Inc. (liability restricted to the
seed corpus of Rs.1 lac) with Franklin Templeton
Trustee Services Pvt. Ltd. as the Trustee
(Trustee under the Indian Trusts Act, 1882) and
Franklin Templeton Asset Management (India) Pvt.
Ltd. as the Investment Manager.
43
Product Positioning
Product Positioning Investment Style
Franklin India Bluechip Fund Invests in large cap stocks Blend, bottom up
Franklin India Prima Fund Invests in mid and small cap stocks Blend, bottom up
Franklin India Prima Plus Primarily large cap fund, with a marginal small/mid cap exposure Blend, bottom up
Franklin India Opportunities Fund Takes concentrated stock exposure based on four themes Blend, bottom up
Franklin India Flexi Cap Fund Invests in companies across market caps Blend, bottom up
Templeton India Growth Fund Value fund, investing predominantly in large cap stocks Value, bottom up
Templeton India Equity Income Fund Focuses on Indian/overseas stocks that are attractive from a dividend yield perspective Value, bottom up
Franklin India High Growth Companies Fund (FIHGCF) Invests in high growth companies across market caps Growth, mix of top-down (macro analysis to identify sectors) and bottom-up approach (micro analysis to pick stocks within these sectors)
44
Product Positioning