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Request for Interpretative letter - Franklin Templeton Asset Management (India) Pvt. Ltd - Reply from SEBI

May 14, 2004
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Informal Guidance

GENERAL MANAGER
INVESTMENT MANAGEMENT DEPARTMENT

IMD/SG/9901/04

May 14, 2004

Franklin Templeton Asset Management (India) Pvt. Ltd.

Sakhar Bhawan, 1st Floor,

230 Bombay Reclamation,

Nariman Point,

 

Mumbai - 400 021.

 

Dear Sir,

 

Re: Your request for interpretive letter under SEBI (Informal Guidance) Scheme 2003

 

This has reference to your letters dated December 5, 2004 and January 15, 2004 and subsequent discussions in the captioned matter seeking ‘interpretive letter’ under SEBI (Informal Guidance) Scheme 2003.

The clarification is sought by you on the issue whether the logic on load applied by Templeton Asset Management (India) Pvt. Ltd. in case of Fund of Funds schemes launched by it i.e. not charging any load (entry/exit) by underlying schemes on the investments made by Fund of Funds schemes, can be applied to the investments made by FT India Offshore Funds Limited (OFF), a limited liability company proposed to be incorporated under the laws of Mauritius that would invest in India as a sub – account under the Foreign Institutional Investor route and which would invest substantially all of its assets in, initially, two underlying schemes of Templeton Mutual Fund.

Without necessarily agreeing with your analysis given in your above mentioned letters, our interpretation on the above query is as under –

  1. Regulation 2(ma) of the SEBI (Mutual Funds) Regulations, 1996 defines "funds of funds scheme" as a mutual fund scheme that invests primarily in other schemes of the same mutual fund or other mutual funds" .

    2.  

  2. On the basis of facts represented by you and in the light of the above provision, it is found that FT India Offshore Funds Limited will be a sub-account to Templeton Asset Management Limited, Singapore which is registered with SEBI as an FII under the Securities & Exchange Board of India (Foreign Institutional Investors) Regulations, 1995 and will not be a Mutual Fund Scheme and specifically not a Funds of Fund scheme, since in this case, the investment in the schemes of Mutual Fund is not being made by a scheme of mutual fund but by a sub-account . In view of the

above facts, waiver cannot be granted in the present case from charging load on the investments made by FT India Offshore Funds Limited in Franklin Templeton Mutual Fund Schemes.

This position is based on the representation made to the Department in your aforesaid letters. Different facts or conditions might require a different interpretation. It may be noted that this letter does not express decision of the Board on the questions referred.

 

Yours faithfully,

SURESH GUPTA