The Hindu Business Line : Franklin Templeton suspends sales in Prima Fund for 6 months

FRANKLIN Templeton Investments has decided to suspend fresh sales in Franklin India Prima Fund (FIPF), a diversified fund that invests chiefly in mid and small cap stocks. The suspension, effective February 4, will be in force for six months.

A press release issued by the company has quoted Mr Sukumar Rajah, Director & CIO - Equity, who has referred to "considerable inflows" into FIPF over the last few years. The fund size, which was Rs 633 crore in end 2003, has grown into Rs 2,226 crore in December 2005.

Given the size, it is prudent to cap fresh inflows until there is a certainty about the stability and liquidity levels in the mid and small cap segments, the release said, adding that closing the fund, which has provided 58.3 per cent over the past year, will enable Franklin Templeton to protect the interests of existing unitholders. However, Franklin Templeton's view on the longer-term potential of mid and small cap companies remains the same.

The closure period may be extended or reduced in future. Systematic investment/transfer plans, dividend transfer plan and Fund of Funds investments will remain effective. Units to investors registered under the dividend re-investment plan will be issued.

The move brings a temporary halt to the sale of one of India's oldest funds in the private sector. FIPF, launched in December 1993, currently has an investor base of over 1.67 lakh. It has provided 26.66 per cent since inception.

The decision of Franklin Templeton can draw a parallel with a similar step taken in July 2005 by Reliance MF with regard to Reliance Growth Fund (RGF). The increase in RGF's size was seen as detrimental to existing unitholders.