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A Happy Tenth for Private Funds

Franklin Templeton celebrates ten years of its Bluechip and Prima funds, which also marks ten years of private mutual funds in India

Franklin Templeton is celebrating ten years of its Bluechip and Prima funds. Of course, these funds—which are two of the best that investors can find—may be ten years old but their ownership isn't. These funds started life with the erstwhile Kothari Pioneer AMC, which then metamorphosed into Pioneer ITI which was then acquired by Franklin Templeton just last year. Interestingly, these Kothari Pioneer was India's first private sector AMC and these two were its first funds.

To celebrate the 10th anniversary of both these schemes, Franklin Templeton mutual fund has announced special dividends. The amount of dividend is still to be decided but is expected to be a handsome one considering a high NAV of both these schemes. The NAV of Franklin India Bluechip (under the dividend plan) was Rs 24.56 and that of Franklin India Prima was Rs 36.74 as on January 8, 2003. The record date for the declaration of dividend is set as January 20, 2004 for Franklin India Prima Fund and February 3, 2004 for Franklin India Bluechip Fund.

However, one should not be overjoyed by these dividend announcements. Dividends are nothing but a way for the fund to distribute profits. And after each dividend payout, the NAV of the fund declines by the same amount. The only advantage here is that all dividends from equity mutual funds are currently tax-free.

Both these schemes were launched in November 1993. Franklin India Prima was India's first open-end private sector scheme, while Franklin India Bluechip was launched as a 3-year closed-end scheme, and continued as an open-end diversified equity scheme after the completion of three years. Over the last ten years, both schemes have weathered market cycles to provide superior risk-adjusted returns to investors. While Franklin India Prima has given a 10-year annualised return of 23 per cent, Franklin India Bluechip has posted a handsome annualised return of 29 per cent. This is a remarkable achievement, which no other funds in the category (equity diversified) can match.

Moreover, this performance has helped these schemes grow in stature and size. Franklin India Bluechip has become the largest private sector diversified equity fund in India, with net assets of Rs 1,489 crore as on December 31, 2003. Till date, only two funds from UTI, Mastergain '92 and Mastershare had net assets of over Rs 1,000 crore. Franklin India Prima to has grown to Rs 633.45 crore in size as on December 31, 2003.

So far, both Franklin Indian Bluechip and Franklin India Prima funds have come up to investors' expectation. But the real litmus test lies ahead, as the fund manager would now have to manage a larger portfolio.

Franklin Indian Bluechip -- Not going overboard on any particular sector and getting perturbed by sudden developments are central to Franklin India Bluechip's investment philosophy. The result: In its ten full calendar years of existence, Franklin India Bluechip has outperformed the benchmark Sensex in nine years and garnered a top quartile standing in 6 out of 10 years. In the roaring bull market of 2003, the fund gained 120.6 per cent.

Franklin Indian Bluechip has not only done well in the rising market but has also managed bear markets well. In 2000, the fund stuck to the large cap IT stocks were relatively less hurt and non-IT stocks like ITC, HDFC and Ranbaxy helped cushion the impact of a falling market. In 2001 too, when markets crashed, the fund nearly mirrored the index's returns.

Franklin India Prima – This fund, apart from being the longest-serving mid-cap fund, has a track record of solid performance and raises the bar for new entrants in the category. It has ended 2003 on the top of the diversified equity funds chart with a gain of 177 per cent. Though mid-caps by their very nature are volatile, this fund's returns have more than made up for volatility. An awesome five-year annualised return of 45 per cent has been the reward for investors who have been able to sit out the fund's volatility.

The fund manager looks for companies with rapid growth potential and the ability to become market leaders. Since mid-cap stocks are relatively illiquid, Franklin India Prima takes a small exposure in a large number of companies. This fund holds on to stocks for long and has benefited from this buy-and-hold strategy. Financial services, chemicals, engineering and lately auto stocks have been this fund's favourite hunting grounds. At the same time, it is relinquishing exposure to technology, healthcare and FMCG sectors.

Note: There will be a two-day book closure for the dividend in Franklin India Prima Fund on January 21 and January 22, 2004 and the scheme will reopen for fresh purchases and redemptions on January 23, 2004. In the case of Franklin India Bluechip, there will be a two-day book closure on February 4 and February 5, 2004 and the scheme will reopen for fresh purchases and redemptions on February 6, 2004.